[Senate Hearing 116-284]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 116-284
 
           REAUTHORIZATION OF THE SBA'S CONTRACTING PROGRAMS

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                          AND ENTREPRENEURSHIP
                          UNITED STATES SENATE

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 12, 2019

                               __________

      Printed for the use of the Committee on Small Business and 
                            Entrepreneurship
                            
                            
                            
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        Available via the World Wide Web: http://www.govinfo.gov
        
        
        
        
                          ______                      


             U.S. GOVERNMENT PUBLISHING OFFICE 
38-342 PDF            WASHINGTON : 2020         
        
        
        
        
            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                     ONE HUNDRED SIXTEENTH CONGRESS

                              ----------                              
                     MARCO RUBIO, Florida, Chairman
              BENJAMIN L. CARDIN, Maryland, Ranking Member
JAMES E. RISCH, Idaho                MARIA CANTWELL, Washington
RAND PAUL, Kentucky                  JEANNE SHAHEEN, New Hampshire
TIM SCOTT, South Carolina            EDWARD J. MARKEY, Massachusetts
JONI ERNST, Iowa                     CORY A. BOOKER, New Jersey
JAMES M. INHOFE, Oklahoma            CHRISTOPHER A. COONS, Delaware
TODD YOUNG, Indiana                  MAZIE K. HIRONO, Hawaii
JOHN KENNEDY, Louisiana              TAMMY DUCKWORTH, Illinois
MITT ROMNEY, Utah                    JACKY ROSEN, Nevada
JOSH HAWLEY, Missouri
             Michael A. Needham, Republican Staff Director
                 Sean Moore, Democratic Staff Director
                 
                 
                            C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page

Rubio, Hon. Marco, Chairman, a U.S. Senator from Florida.........     1
Cardin, Hon. Benjamin L., Ranking Member, a U.S. Senator from 
  Maryland.......................................................     3

                               Witnesses
                                Panel 1

Wong, Mr. Robb, Associate Administrator, Office of Government 
  Contracting and Business Development, U.S. Small Business 
  Administration, Washington, DC.................................     4
Shear, Mr. William, Director, Financial Markets and Community 
  Investment, U.S. Government Accountability Office, Washington, 
  DC.............................................................    11

                                Panel 2

Marino, Ms. Vicki, Founder and President, Kenmar General 
  Contracting, Key West, FL......................................    41
Dzirasa, Mr. Delali, Founder and President, Fearless Solutions, 
  Baltimore, MD..................................................    51
Sayles, Ms. Laurie, President and CEO, Civility Management 
  Solutions, Greenbelt, MD.......................................    68

                          Alphabetical Listing

Cardin, Hon. Benjamin L.
    Opening statement............................................     3
COLSA Corporation
    Letter dated June 17, 2019...................................   129
Dzirasa, Mr. Delali
    Testimony....................................................    51
    Prepared statement...........................................    53
    Responses to questions submitted by Senator Hirono...........   123
Employee-owned Contractor Roundtable
    Statement dated June 25, 2019................................   131
Fearless
    Comments dated June 12, 2019.................................   136
Ho-Chunk, Inc.
    Comments dated June 12, 2019.................................   141
Management Solutions, LLC
    Letter dated June 25, 2019...................................   144
Marino, Ms. Vicki
    Testimony....................................................    41
    Prepared statement...........................................    43
    Responses to questions submitted by Senator Hirono...........   120
Montgomery County Chamber of Commerce
    Comments dated June 12, 2019.................................   145
Native American Contractor's Association
    Testimony dated June 12, 2019................................   148
Rubio, Hon. Marco
    Opening statement............................................     1
Sayles, Ms. Laurie
    Testimony....................................................    68
    Prepared statement...........................................    70
    Responses to questions submitted by Senator Hirono...........   127
Shear, Mr. William
    Testimony....................................................    11
    Prepared statement...........................................    13
    Responses to questions submitted by Senators Hirono, Kennedy, 
      and Duckworth..............................................   116
Wong, Mr. Robb
    Testimony....................................................     4
    Prepared statement...........................................     7
    Responses to questions submitted by Chairman Rubio, Ranking 
      Member Cardin, and Senators Hirono, Kennedy, and Duckworth.    90


           REAUTHORIZATION OF THE SBA'S CONTRACTING PROGRAMS

                              ----------                              


                        WEDNESDAY, JUNE 12, 2019

                      United States Senate,
                        Committee on Small Business
                                      and Entrepreneurship,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 3:15 p.m., in 
Room 428A, Russell Senate Office Building, Hon. Marco Rubio, 
Chairman of the Committee, presiding.
    Present: Senators Rubio, Risch, Scott, Ernst, Young, 
Romney, Hawley, Cardin, Cantwell, and Hirono.

OPENING STATEMENT OF HON. MARCO RUBIO, CHAIRMAN, A U.S. SENATOR 
                          FROM FLORIDA

    Chairman Rubio. Today's hearing on the Senate Committee on 
Small Business and Entrepreneurship will come to order. Thank 
you for your patience. We have six votes and we made a wise 
decision, I believe, the Ranking Member and I, that it would be 
better to just ride through the six than to try to do the back-
and-forth, and I think we probably saved time in the long run. 
So I want to thank you for being here and for your patience.
    For small businesses and entrepreneurs around the country, 
securing a contract with the Federal Government can mean 
instant growth in the marketplace. In 2018, the Federal 
Government obligated $560 billion in contracts for goods, 
services, research, and development. More than $100 billion of 
that total went to small business contractors.
    The Contracting Office at the SBA administers several 
targeted programs, authorized by Congress, that seeks to help 
entrepreneurs access these procurement opportunities with the 
Federal Government, a Federal Government, by the way, which is 
required to spend 23 percent of all Federal contracting dollars 
with small businesses.
    The four primary programs which are the focus of today's 
hearing provide participants with access to compete within a 
smaller pool of contracts that are set aside for small 
businesses. The first, the Small Business and Capital Ownership 
Development Program, which is commonly referred to as 8(a) 
because of its location within the Small Business Act, also 
provides small businesses with procurement training, technical 
assistance, and the ability to be paired with a mentor 
business.
    In addition to the classic small businesses that 
participate in this program, for up to nine years before they 
graduate out, 8(a) also gives businesses that are communally 
owned, by Alaska Native corporations, Native Hawaiian 
organizations, Indian tribes, or community development 
corporations the ability to participate in the program 
indefinitely.
    The Historically Underutilized Business Zone program, or 
HUBZone, which works to stimulate economic development and 
create jobs in the areas of the country that need it the most, 
was created in 1997. The program uses set-aside contracts and a 
price preference to bring opportunity to distressed inner 
cities and rural communities where joblessness is often 
rampant.
    The Women-Owned Small Business Program and Service-Disabled 
Veteran-Owned Small Business Program give two very important 
small business groups the chance to compete for set-aside 
contracts.
    In addition to the government-wide goal of awarding 23 
percent of contracts to small businesses, Congress has set 
goals of 5 percent each for 8(a) and women-owned businesses, 
and 3 percent for service-disabled veteran-owned small 
businesses and HUBZone-certified businesses.
    The Federal Government, by the way, could easily exceed 
these goals if small businesses were given more guidance on the 
difficult and complex world of Federal procurement, and if 
agency contracting specialists were better informed on how to 
make compliant set-aside and sole-source awards to small 
businesses.
    Unfortunately, as a result of fraud across the board in the 
SBA programs, as reported from multiple government 
accountability office investigations, businesses that do not 
qualify, or should not be qualifying for these specific 
category programs are often taking the contracts that are 
intended for these groups.
    For example, a 2018 audit by the Office of Inspector 
General looked at 56 sole-source awards made to firms in the 
Women-Owned Small Business Program and it found that 18 
contracts, valued at $11.7 million, were awarded to firms that 
had no documentation; 32 contracts, valued at $40.5 million, 
were awarded to firms with incomplete documentation; and 50 
contracts, valued at $52.2 million, were not awarded in 
compliance with Federal regulations. The 2019 GAO study of this 
program showed that the SBA still had not developed a process 
to identify when ineligible awards were made under this 
program.
    Too many agency contracting officers also do not know how 
to work with the contracting programs. A 2018 GAO study found 
the SBA's procurement scorecard to assess agency compliance 
with small business contracting was not effectively measuring 
agency performance or promoting opportunities for small 
businesses.
    The facts are simple. The small businesses' contracting 
goals are aspirational and unenforceable, so if we do not make 
contracting with small businesses easy for Federal agencies it 
is not going to happen. The SBA should be an ally for small 
business contractors, not an additional and frustrating hurdle 
to overcome. The disparities amongst the prime contracting 
programs have made it difficult for small businesses to even 
know where to start. Each program is an entirely different 
system, even for the initial certification process, not to 
mention the different forms of training, types of awards, award 
amounts, price preferences that are made available to each 
group.
    In 2015, Congress passed a law requiring that the SBA set 
up a certification process for the then self-certified Women-
Owned Small Business Program. Unfortunately, four years later, 
the SBA has yet to comply with that law. In 2018, Congress 
passed a law to measure a business revenue for five years, 
instead of three, when determining if that business is small 
and if they can compete for set-aside contracts. But the SBA 
has frankly refused to comply with that law.
    While the prime contracting programs are the most well-
known parts of the SBA Contracting Office, the subcontracting 
program is increasingly important, as the government moves 
towards consolidated purchasing and larger, multi-award 
contracts.
    It is important that we find ways for small businesses to 
continue to work with the government, even as the government is 
changing its purchasing habits to rightfully use taxpayer money 
more efficiently. Innovations and unique solutions from small 
businesses in the private sector help to support our soldiers, 
protect our national security, enhance government operations, 
and make the Federal bureaucracy more efficient.
    To keep this contracting cycle going we must reduce fraud, 
streamlining the Contracting Office at the SBA, and provide 
more opportunities for small businesses to grow and prosper, 
and I look forward to discussing ways to accomplish these goals 
today.
    With that I turn it over to you, the Ranking Member.

OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, RANKING MEMBER, A 
                   U.S. SENATOR FROM MARYLAND

    Senator Cardin. Well, thank you very much, Mr. Chairman, 
and I thank you for convening this hearing. This is our sixth 
hearing on the reauthorization of the Small Business Act, and 
today we will focus on the contracting programs with SBA that 
help level the playing field for starkly disadvantaged business 
owners. These programs include the 8(a) Business Development 
Program, the Women-Owned Small Business Program, Service-
Disabled Veteran-Owned Small Business Program, and the 
Historically Underutilized Business Zones, HUBZones, program.
    The motivation behind my commitment to ensuring a fair 
Federal contracting process is twofold. First, the Federal 
Government is the largest consumer of goods and services on the 
planet, and Federal contracting is a vital part of the economy 
in my home State of Maryland. In fact, Federal Government 
contracting spending accounts for about 8 percent of Maryland's 
annual GDP, and supports thousands of jobs that help the 
families and bolster the middle class.
    Second, Congress passed the Small Business Act to ensure 
the preservation and expansion of opportunities for small 
businesses because doing so is basic not only to the economic 
well-being but the security of our country. Those words were 
true 65 years ago when the law was passed and it is even more 
true today.
    The Small Business Act sets a goal for Federal Government 
to spend 23 percent of all contracting dollars with small 
businesses. While I am pleased that we are meeting this goal, I 
am troubled that the data shows that we have a shrinking base 
of contractors rather than an expanding base of contractors. A 
recent report by Bloomberg Government found that the number of 
Federal contractors working on unclassified, prime contracts is 
at a 10-year low, despite a steady rise in government contract 
spending over the same period.
    This means that while contracts are getting bigger and 
bigger, we are creating an insular club with fewer and fewer 
businesses successfully competing for government contracts, 
creating a less-competitive marketplace and reducing 
opportunities in the process, and that is contrary to what 
these set-asides and programs are all about, and that is 
encouraging new small businesses that can bring innovation and 
job growth to our economy and help our Nation.
    This trend is being driven by the largest agency. Since 
fiscal year 2009, the number of companies working on contracts 
with the Department of Defense has declined by 24,000. 
Similarly, the General Services Administration has seen an 
8,000-company decline. The Department of Veterans Affairs and 
Interior are both contracted with 13,600 fewer companies. These 
are very troubling figures. Predictably, our Nation's small 
businesses are bearing the brunt of this decline. According to 
the same Bloomberg report, the Federal Government did business 
with 32 percent fewer small vendors in fiscal year 2018 than it 
did in fiscal year 2009. For comparison, the number of large 
vendors fell by only 4 percent.
    This trend is a cause of great concern in my home State of 
Maryland, where the Federal Government spent $33 billion in 
Federal contract dollars in fiscal year 2018, including $11 
billion to small businesses. We want to create contracting 
where small, innovative businesses are encouraged, not shut 
out.
    So today I am looking forward to speaking with our 
witnesses from SBA and GAO about how we can improve 
opportunities for our Nation's small businesses to contract 
with the Federal Government. I am also looking forward to 
hearing from small business owners here today about the support 
they need from the Federal Government to remain competitive and 
compete in the marketplace.
    I want to thank all of our witnesses for joining us and I 
look forward to hearing your testimony and innovative ideas for 
improving the SBA contracting programs and the Federal 
Government small business contracting procedures.
    Chairman Rubio. All right. We will move to our first panel. 
Robb Wong is the Associate Administrator of the Office of 
Government Contracting and Business Development at the SBA, and 
Mr. William Shear is the Director of Financial Markets and 
Community Investment at the U.S. Government Accountability 
Office.
    Mr. Wong, thank you for being here. We will start with you.

  STATEMENT OF ROBB WONG, ASSOCIATE ADMINISTRATOR, OFFICE OF 
  GOVERNMENT CONTRACTING AND BUSINESS DEVELOPMENT, U.S. SMALL 
            BUSINESS ADMINISTRATION, WASHINGTON, DC

    Mr. Wong. Good afternoon, and thank you for the opportunity 
to testify and talk about the contracting and business 
development programs provided by SBA.
    Since March 2017, I have served as the Associate 
Administrator for the Office of Government Contracting and 
Business Development. This is my second time at SBA, previously 
having worked before in the agency's Office of General Counsel, 
where I wrote many of the rules and regulations in the previous 
state.
    In my current role, I administer programs and services that 
assist small businesses in meeting the requirements to receive 
government contracts. The Federal Government spends nearly $500 
billion a year on goods and services through contracting, and 
there are government-wide goals for awards to small businesses 
that the SBA helps to foster and support.
    Since rejoining the agency over two years ago, my focus has 
been on Federal contracting officers across the Federal 
Government, and my goal has been simple--to make SBA-certified 
companies a better option for the contracting officer so that 
they will increase the supply of government contracts to small 
business.
    We have looked at barriers that contracting officers may 
face in hitting their percentage goals. We want to grow the 
ecosystems by increasing the number of companies in that 
system, and we want to improve the quality of contracts. Again, 
it will help the contract officer to continue to award 
contracts to small business.
    As a foundation, SBA established and continues to refine 
our online platform, Certify.gov. Working with our CIO, Maria 
Roat, we brought the governance of the platform in-house. Our 
next steps are to improve its functionality and interactivity, 
not only for the public but also for our SBA analysts and 
staff. This should help create a reliable tool to support the 
transition of the women-owned small business certifications as 
well as for any future considerations with certifying service-
disabled veteran-owned small businesses.
    Right now, the agency certifies over 10,000 companies in 
our 8(a) and HUBZone programs. The woman-owned and service-
disabled certifications total over 20,000. Adding that amount 
of volume and responsibility to our existing staff, without 
additional funding, is something the agency continues to 
wrestle with.
    Adding to these challenges are aspects of the self-
certification process that my GAO colleague, Mr. Shear, has 
highlighted. We have also been testing a unified application 
process to help standardize the way that the public applies and 
also how SBA reviews both eligibility and continuing 
eligibility. All of this must occur before we add the volume of 
new cases from the WOSB Program, Women-Owned Small Business 
Program. Excuse me.
    Next, let me update you on an issue that I know is of 
interest to the members of the Committee. In late December, SBA 
released an information notice to stakeholders regarding the 
Runway Extension Act. Since then, we have worked to develop a 
rule which was sent to the Federal Register on Monday. When 
published, this will further advise stakeholders and will begin 
a public comment period to receive their input.
    I wanted to close by mentioning a few items that our 
program office continues to assess and that might lead to 
further discussion with the Committee.
    We continue to look at the Federal appropriations cycle and 
any effect it may have on contracting officers. We continue to 
review category management and whether it is hurting contract 
availability. We also continue to assess sole-source thresholds 
and whether they need to be adjusted.
    I connect these items back to my main goal, to help the 
contracting officers and to make small businesses a better 
option for them. In my view, these items impair the 
government's mission, as well as those people who help to 
accomplish it. These are all important factors in keeping small 
businesses in our Federal contracting programs, as every time a 
small business drops out it hurts our industrial base.
    Thank you again for the opportunity to testify, and I look 
forward to working with you.
    [The prepared statement of Mr. Wong follows:]
    
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    Chairman Rubio. Thank you. Mr. Shear.

  STATEMENT OF WILLIAM SHEAR, DIRECTOR, FINANCIAL MARKETS AND 
 COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE, 
                         WASHINGTON, DC

    Mr. Shear. Chairman Rubio, Ranking Member Cardin, and 
members of the Committee, I am pleased to be here this 
afternoon to discuss our recent work on SBA's contracting 
programs and SBA's progress in implementing our 
recommendations.
    My testimony today is based primarily on three reports we 
issued between September 2018 and March 2019, and also a report 
we issued in October of 2014. I will discuss SBA's progress on 
implementing our prior recommendations on first, its women's 
procurement program, second, its HUBZone program in Puerto 
Rico, and third, SBA's Procurement Scorecard. In the interest 
of time, I will largely focus on our work on the women's 
procurement program in my oral statement.
    SBA has not fully addressed deficiencies we have previously 
identified for the women's procurement program, and these 
deficiencies are affected by SBA's ongoing implementation of 
changes to the program authorized by the National Defense 
Authorization Act of 2015. SBA implemented one of the three 
changes to the program authorized in the 2015 NDAA when it 
published a final rule to implement sole-source authority, 
which became effective October 2015. The two other changes, 
authorizing SBA to implement its own certification process, and 
requiring SBA to eliminate the option for firms to self-certify 
that they are eligible for the program, have not been 
implemented.
    In addition, SBA has not fully addressed program oversight 
deficiencies described in our March 2019 report, and first 
identified in our October 2014 report. We recommended that SBA 
establish comprehensive procedures to monitor and assess the 
performance of the third-party certifiers in accordance with 
their agreements with SBA and program regulations.
    SBA conducted a compliance review of certifiers in 2016, 
but SBA officials said, in June 2018, that SBA had no plans to 
conduct further compliance reviews until the final rule 
implementing the new certification process was completed. SBA 
also has not fully addressed deficiencies related to 
eligibility exams. The exams identified high rates of 
potentially ineligible businesses. SBA does not collect 
reliable information on the results of its annual eligibility 
exams and continues to have no mechanism to look across exams 
for common eligibility issues to inform the program.
    With respect to SBA's HUBZone program, we have a large body 
of work over a period of time addressing the program. In our 
September 2018 report, that focused on Puerto Rico, we 
identified internal control deficiencies related to the 
certification and recertification process that were generally 
consistent with the deficiencies identified in previous work. 
We are awaiting documentation from SBA related to the agency's 
planned changes to the certification and recertification 
process.
    Finally, SBA has taken some steps to address recommendation 
of our September 2018 report about its Procurement Scorecard. 
SBA made revisions to address requirements specified in the 
NDAA for fiscal year 2016. Among other actions in response to 
our recommendations, SBA has proposed a two-phase program 
evaluation of the scorecard.
    Phase 1 would include a report to Congress, planned to be 
issued in September 2019, on the impact of the small business 
procurement goal program for Chief Financial Officers Act 
agencies and to provide a recommendation on continuing, 
modifying, expanding, or terminating the scorecard program. In 
Phase 2, SBA plans to conduct a program evaluation that 
investigates the effectiveness of the Small Business 
Contracting Scorecard on Federal agencies, small business 
contracting goal achievement.
    Chairman Rubio, Ranking Member Cardin, and members of the 
Committee, this completes my prepared statement. I look forward 
to your questions.
    [The prepared statement of Mr. Shear follows:]
    
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    Chairman Rubio. Thank you. I will just start with--in the 
interest of time and for our members that have other places as 
well, because we started late, so I am just going to ask two 
questions and they are related.
    Mr. Wong, in 2015, Congress passed that law requiring the 
SBA to set up the certification program for the Women-Owned 
Small Business Programs. It has been four years. They have yet 
to comply. What authority does the SBA have not to comply with 
law, and why has it not complied?
    Mr. Wong. The answer to your first question, we do not have 
that authority to not comply, and the reason that we have not 
complied was certainly brought to my attention, and it is 
something I have worked on since the first month that I have 
been here. I am a lawyer by trade, so being out of compliance 
with the law is absolutely unacceptable.
    The challenge we have had, sir, is basically this. We have 
an ecosystem that we have looked at, that we have certain 
responsibilities with our certifications to make sure that the 
right companies get into our program that are qualified, but 
then we also have to make sure, before they get a contract, we 
hold the public trust to make sure that anyone who is awarded a 
contract with an SBA certification is actually eligible to 
receive it. Then we have to make the process easier to make 
sure that we can help the contracting officer with the supply 
of contracts.
    As you noted in your statement earlier, we are dealing with 
a system where we had, for 8(a) and for HUBZone, and then 
potentially WOSB--excuse me, Women-Owned Small Businesses--we 
had three different silos. So literally what happened was if 
you--we--if you gave the element of ownership to three 
different people, they had three different systems on how to 
evaluate this program. That is unacceptable as well.
    So when we were looking at WOSB, one of the first things I 
looked at was I realized that when I looked at the volume of 
applications we had and the number of existing companies that 
we had, we realized that we had three times the volume for the 
potential WOSB program that we had for any of our other 
programs, particular the 8(a) program, which has been around 
for 30 years.
    Chairman Rubio. Just on this topic, I know you have been 
there a month so you are trying to comply now. Correct?
    Mr. Wong. Yes. Absolutely.
    Chairman Rubio. Do you have any explanation? In the month 
that you have been there, have you discovered why nothing has 
happened in the last four years?
    Mr. Wong. Yes. So--and just to clarify, I have been here a 
little bit over two years, but within one month of me being 
there, two years ago, I tried to get a handle on what was going 
on.
    The short version of what we are trying to do is we should 
be processing all of our applications the same way, to the 
extent possible. So what we have done is we have re-engineered 
all of these processes to match. In short, we have 8(a), which 
is our historically best program. We broke that down into 
elements of eligibility, which there are 11. Then we realized 
with HUBZone there are six. And then we even went into each 
element of eligibility and we determined the process of how you 
actually determine if someone is qualified under each----
    Chairman Rubio. What I am just trying to wrap my mind 
around----
    Mr. Wong. Yes, sir.
    Chairman Rubio [continuing]. You have been there two years. 
Within a month of getting there you started looking at this.
    Mr. Wong. Yes.
    Chairman Rubio. You have now been there for over two 
years----
    Mr. Wong. Yes.
    Chairman Rubio [continuing]. And you are still going 
through this process of trying to organize it so you can 
address it.
    Mr. Wong. Yes. Originally, what we had done was we had come 
back to Congress----
    Chairman Rubio. It does not take two years to do that, and 
it has not yet happened.
    Mr. Wong. Yes, because we had to try three times now to 
come up with a solution that we thought would be palatable for 
Congress. Yes, sir.
    Chairman Rubio. Okay. Well, let me--Mr. Shear, let me ask 
you. You have seen--well, the--they failed to implement the 
mandates from the 2015 NDAA on the Women-Owned Small Business 
Program. Will the new proposed rule really fix the 
certification program?
    Mr. Shear. A new rule, whether the one proposed or another 
rule, is not going to fix the problem. The question is how does 
SBA implement this? We have seen a situation where SBA is not 
vigilant on either overseeing third-party certifiers or of 
collecting accurate information when there are businesses that 
do not seem to be eligible participating in the program, and 
following up and looking for the underlying reasons.
    We have made recommendations to SBA in a self-certified 
environment that we think not only are relevant for the self-
certified environment but the environment that would be created 
by a new certification process. We also think that our 
recommendations would help inform that process.
    So our concern----
    Chairman Rubio. Are those recommendations reflected in the 
proposed rule?
    Mr. Shear. In the proposed rule, the proposed rule which I 
do not want to get into, third-party certifiers versus the use 
of SBA on its own, but what they all have in common is that 
there is a lack of understanding and a lack of focus, like on 
following up.
    In 2016, there was a review of third-party certifiers, 
which not only could inform what job are they doing but could 
help inform what makes for good certification process. They had 
a recommendation having to do with eligibility exams, where 
they seemed to be starting, in 2016, to start looking at the 
underlying causes. But both of those seem to have been 
suspended for a rulemaking and we really cannot understand why.
    And it is also a mystery to us, just as I think it is 
something that you raised, which is a very good point. Why has 
it taken so long to--you know, without getting into the merits 
of the proposed rule, why has it taken so long to get this 
proposed rule out? We really do not understand. When we first 
asked for a timeline, a project plan for how they were going to 
get from A to B, they have never been able to produce that. So 
that raises another concern for us.
    Chairman Rubio. Well, the concern that I have is all those 
women-owned small businesses that should have qualified and 
could have qualified but were bumped out of the queue by the 
ones that should not have, because of the inaction that has 
taken so long to get even to this point.
    Ranking Member.
    Senator Cardin. Quite frankly, this is not acceptable. We 
have a certification process right now for the 8(a) program and 
HUBZone, so it is not like SBA does not know how to do 
certifications. It is hard for us to understand why the women-
owned small businesses have not progressed. So do we have a 
target date when we are going to--when you are going to be able 
to give us something specific on this, when that date is?
    Mr. Wong. The target--it should be contemporaneous with the 
WOSB rule. I misstated this in the hearing we had a couple of 
weeks ago, as 2021, but it should be contemporaneous with the 
rule in July 1st of 2020.
    Senator Cardin. Okay. So it will be another year.
    Mr. Wong. Yes, but that--the rule is about as far as we can 
push it, but we want to make sure. What I have told our staff 
is we need to make sure that----
    Senator Cardin. That is not really--that is not acceptable. 
So we will look at what we can do to--you know, it is 
challenging for us. We passed a statute and we expect it to be 
implemented.
    Mr. Wong. I agree.
    Senator Cardin. And I think what the Chairman said is 
absolutely accurate. These are extremely important programs. We 
want to make sure that qualified companies can benefit from it. 
I think we all agree that SBA certification is where we need to 
be----
    Mr. Wong. Yes.
    Senator Cardin [continuing]. And we are not there. So it 
is--it remains a matter of frustration.
    We will look at whether we cannot give you a little bit 
more directive way to speed this up. I understand rulemaking 
takes time. Believe me I do. But this is unacceptable.
    I want to get to the point in my opening statement on the 
number of small businesses and the decline in the number of 
small businesses participating, and talk a little bit about why 
we do not have a larger supply base, why SBA has not encouraged 
that. We have category management, as I understand it, on 
procurement, which aims at larger contracts, which is a 
disadvantage for small companies, particularly if their only 
entry is through subcontracting.
    So what strategies can be deployed to get new small 
companies involved in government procurement to counter the 
trends that we have seen over the last several years?
    Mr. Wong. In my opinion, sir, there are two things that we 
could do. If we could exempt small business programs from 
category management--if you look at what we do, we represent 
the underserved. We represent 23 percent. We fight every year 
to make 23 percent.
    Senator Cardin. I am sorry. I was listening. I was just 
telling my staff to--whether you need legislative authority to 
exempt from category management?
    Mr. Wong. Probably.
    Senator Cardin. Well, why don't we find out whether you 
need statutory authority or whether you can do that 
administratively.
    Mr. Wong. Even still, the specter of category management I 
think is a good idea. Efficiency is always important. However, 
the way that it is being applied now to small businesses has a 
deleterious effect. The MAC report that came out even proves 
that we are losing small businesses on both ends for two 
different reasons, in my opinion.
    What happens is that we just have, even as recently as last 
Friday, we get calls from small businesses, for example, in our 
8(a) program. With our 8(a) program you get a certification, 
but we tell you that you have to do your own marketing and that 
will determine the success of your own business. Well, we have 
people that are relying on that and they are working really 
hard, and they win these contracts, and they win these large 
contracts and then they call us and they say, ``The government 
is taking our contract away, putting it into a category 
management vehicle, and we do not qualify for that vehicle. So 
we worked hard to get this exactly like you said and now you 
took it away from us.''
    And for the small businesses, a lot of small businesses--
and I have been a small business owner for 20 years before 
this, and I have worked with is industry for at least 30 years. 
They do not have lots of contracts to replace that with, and 
often if that is their mainstay contract they lose faith in the 
program, they lose faith in government contracting, so they 
quit. So we lose people from----
    Senator Cardin. I understand what you are saying. I might 
also say the Army Futures Command in procurement also raises an 
issue whether that is going to be another hurdle that works to 
the disadvantage of small companies. I want to explore the 
exemption issues that you are talking about, because I think 
that does not make some sense.
    I also would hope that we could work on reporting 
information on prime and subcontracting so that we have a 
better understanding of how we can get direct business for 
smaller companies rather than having to work as prime 
contractors.
    Mr. Wong. Absolutely.
    Senator Cardin. And one last point, and that is the Small 
Business Roadway Extension Act. You mentioned that a rule is 
being promulgated, I think today or yesterday, in your 
testimony. That is already late. I would urge you to make sure 
that is implemented as quickly as you are able to do it. It 
does not seem that complicated, quite frankly, and we want to 
make sure that the intent of our statute is carried out.
    Mr. Wong. Yes, sir. You know, two--may I address that 
issue?
    Chairman Rubio. Yes.
    Mr. Wong. Okay. So I also talk to people in Maryland. I 
live in Maryland.
    Senator Cardin. If I knew that ahead of time I would not 
have given you a hard time.
    [Laughter.]
    Mr. Wong. I had an Asian dad, sir. That is not hard. It is 
okay.
    But, sir, here is what happened. When we got the Runway 
Extension Act, okay, we understood what the intent was with 
Congress. And I tried to be helpful, I tried to be proactive, 
and I said, you know, we took a look at it, and what happened 
was we got calls from people, and here is what was interesting. 
We got calls from small businesses that this would help. It 
says if we can count five years instead of three years, we can 
still remain small. What is surprising is that we also got 
calls that said, if this is active now, we have had some bad 
years, so if we include five years it will actually hurt us.
    So between the program office and between the attorneys, we 
took a look at it, and we determined that the question about 
whether or not--which contracts would be affected, was a 
legitimate question. And so we decided that despite--instead of 
waiting we would do what we could do, as much as we could do. 
So we started with rulemaking to make sure that the intent of 
the Runway Extension Act, to affect the small business programs 
at our agency and every agency, was affected. The most power 
that we had, though, was to do it through a rule, and we have 
done that as quickly as possible. That one should be commencing 
around January of 2020.
    We also understand that there is another track that 
Congress is taking, but at the end of the day we are both 
trying as quickly as we can to make sure that Congress' intent 
was fulfilled. We tried to do it collaboratively and 
cooperatively, as quickly as we could.
    Senator Cardin. Thank you.
    Chairman Rubio. Senator Ernst.
    Senator Ernst. Yes. Thank you, Mr. Chair, and thank you to 
the witnesses for being here today.
    The SBA's contracting programs role in ensuring small 
businesses have opportunities to compete as Federal contractors 
is of significant importance, and I will address some of the 
issues I am really concerned about. I am glad that we have an 
opportunity to discuss ways to improve these programs, so 
again, thank you for being here.
    And, Mr. Wong, I will start with you. In March, Senator 
Tammy Duckworth and I introduced a bill called the Expanding 
Contracting Opportunities for Small Businesses Act, and it 
eliminates a discrepancy that puts women and service-disabled 
veterans who own small businesses at a disadvantage when 
competing for contracts by setting the contract manufacturing 
threshold at $7 million for businesses certified under each 
program.
    Can you speak to the impact that you think this would have 
and what further steps we could do to support women and 
veteran-owned small businesses? Any ideas that you have would 
be welcomed.
    Mr. Wong. So I will caveat that the suggestions that I have 
are my own, having been a small business owner.
    What I would suggest is the 8(a) program, if you look at 
this, this has been the backbone of our agency and it has been 
the favorite contract vehicle of contracting officers for 
years, particularly if you look at things where we have been 
operating in an environment where we work with continued 
resolutions.
    Senator Ernst. Right.
    Mr. Wong. I talk to everyone as much as we can. And if you 
look at, sometimes, a lot of these agencies, they have 55 
percent of their spending is done after April, in some of these 
years. That is not enough time to run competitions, okay? So 
that is why 8(a) is such a great vehicle. If we want to spur 
more small business growth into this ecosystem, my suggestion 
would be this, several things. First and foremost, we fix 
HUBZone, which we are trying to do, because I think that 
program could be just as powerful as 8(a). Next, what I think 
we should do--the suggestion would be is to increase the 
capacity or increase the thresholds. Because of category 
management and consolidation you are getting larger contracts 
and more complex contracts. The problem is that the thresholds 
have been set 20 years ago, in 1990. They have been set a while 
ago, and that might be more than 20.
    So the problem is that, you know, the joke that I say to 
people is what do you have that is 30 years old today, other 
than your spouse, that is just as good today as it was 30 years 
ago? Well, we need to update the SBA limits for 2019 and 
beyond, particularly because we have things like category 
management, which is compressing things.
    So right now, as an example, if you look at the way current 
thresholds work, we have a limit on a basic 8(a) company of $4 
million, divided by the number of option years. Four million 
divided by 5, people tell me, is $800,000 a year. Right now, 
though, the basic contracts, for a contracting officer, that is 
not very much help to a contracting officer. That becomes like 
if they have a big pile of sand, of trying to get it off the 
desk with a teaspoon.
    I want to turn that teaspoon into a shovel, and the way we 
do that, to--you know, at the end of the day, if we fix that 
for the contracting officer, they are the guardians of the 
supply of government contracts. If you can increase the 
capacity at which--or the thresholds at which these sole-source 
awards are awarded, the government contracting officer will 
love that. I have learned that anecdotally through 
conversations with them.
    So finally what we do, if we can exempt category 
management--or small business from category management, here is 
another thing. If you take the added capacity, now, if you look 
at what is going into category management, these are all large 
contracts. They are over $1 million. But if you give the 
capacity to the contracting officer, with up to $4 million a 
year, as an example, for each of the 8(a)s, the government 
contracting officer has two weapons in its arsenal. They can 
make that award, they can allow the small business to 
participate because a lot of the contracting officers like 
those contracts. So when those contracts are removed into 
category management we have many disappointed parties.
    So if you increase the threshold for that, the government 
can keep those contracts working with small businesses, and 
even with--we have worked with OMB, or OFPP. They have a 
directive on category management. They kept something in there 
in footnote 31 that says meeting a small business goal is 
justification not to use category management. So if we can do 
that.
    And the final thing that I personally would recommend is 
that we give the contracting officer, and say to him or her 
that if you have missed one of your socioeconomic goals in the 
previous year, SBA will temporarily give you 8(a)-like sole-
source direct authority for every socioeconomic category you 
have missed. And I think that what that will do is that will 
keep--excuse me. Last important thing, sorry. As long as you 
hit your 8(a) goal first.
    So what I think that will do, from an ecosystem point of 
view, you are going to have government procurement hitting that 
8(a) goal first. It is still special because it operates 
differently than the other programs, but it will also make it 
capable, and it will make it more attractive for women-owned, 
for HUBZones, and for service-disabled to use our products. We 
will bring people into the ecosystem, reward them because they 
have higher capacity, and it will be able to abut some of the 
problems that we have with category management.
    If we remove small businesses from category management, at 
least temporarily, learn how that works efficiently with the 
other 77 percent. So when you take a large contract from a 
large company they have more. But when you take it from a small 
business that only has that, they quit. And even if you are one 
of the lucky ones that gets into category management, for a 
small business, you make so much money you size out, and so you 
do not quit but you have to leave.
    Senator Ernst. Yes, no. I think it is very good and I 
appreciate it. I am sorry. We have gone over time. But it was 
really great information and I do think we need to look at 
these for the 8(a)s.
    And just a comment that I think there is only one program 
that actually teaches people how to do government contracting, 
and so that is something that we need to focus on as well, so 
that we do have more women business owners, more minority 
business owners, more of those service-connected disabled 
veterans that are engaging in this area as well.
    So thank you very much. I appreciate it.
    Mr. Wong. Ma'am, to your point, Stanley Jones, Jr. is in 
the audience with us. He is responsible for that. He had a 
great idea that instead of delivering one-on-one capability to 
people we are trying to do one-to-all. The directive we are 
trying to do has become more relevant to the 30 million small 
businesses out there. So what we are trying to do is come up 
with modules that teach all businesses how to identify, pursue, 
capture, and execute business opportunities, whether it is 
government or not. But that is a great suggestion.
    Chairman Rubio. Senator Shaheen.
    Senator Shaheen. Thank you, Mr. Chairman, and thank you 
both for being here.
    Mr. Shear, do you think what Mr. Wong is proposing is a 
good idea?
    Mr. Shear. When it comes to statutory changes we do not 
have work that provides a basis to comment on those. But let me 
go to looking at the issue, concerns with category management, 
for example. Let me start with that.
    Senator Shaheen. Okay. Why don't you start with explaining 
what category management is.
    Mr. Shear. Thank you. With category management, the idea is 
that you have aggregation of different types of procurements so 
that you are limiting the number of businesses that compete. So 
it tends to lead to kind of larger, you know, larger 
procurements, and this can have an adverse effect on small 
businesses.
    So what I am going to----
    Senator Shaheen. Give me an example.
    Mr. Shear. It has been used, for example--I am trying to 
remember what the eagle program is called that GSA had, but it 
comes down to it can be as simple as providing office products 
per se, that you are limiting the number of firms that can 
compete to provide through those vehicles. So it can lead to a 
smaller number of small businesses that might be able to 
participate.
    So let me start with category management, if you can take--
I am sorry my definition is not more specific than that--but 
let me take that as an example. We now are initiating, on a 
large engagement, looking at category management, including 
impacts on small businesses, but in doing that we are going to 
jump back, as a starting point, what the processor was, 
strategic sourcing a number of years ago. And what we find, 
with these types of vehicles, that there are certain provisions 
of the Small Business Act that become even more important in 
ensuring that small businesses really have the opportunities 
they should be having.
    So, for example, we have the Offices of Small and 
Disadvantaged Business Utilization. We have done work that 
shows many agencies are not in compliance with the requirements 
to make sure that what are called the OSDBUs really have the 
stature in the agency and the roles in the agency that are 
necessary for them to represent small business interests. And 
when we look back at strategic sourcing we saw a definite 
distinction between agencies where the OSDBUs really had a seat 
at the table and those where they did not.
    So looking at those Small Business Act provisions through 
the roles of the OSDBUs, you know, the procurement center 
representatives at SBA, it becomes more important to try to 
identify how, in this environment, we can still provide 
contracting opportunities for small businesses. So I wanted to 
draw attention to that.
    Just on the other thing, on women's procurement and 
service-disabled veteran-owned small business, SBA has talked 
for years about trying to bring technology into its oversight 
of the program and technology to try to make these programs 
more user-friendly for contract officers and for the firms that 
are participating in it. And so we certainly--our 
recommendations are very much geared toward the idea of 
bringing that type of technology, as far as a solution, to try 
to not only make sure ineligible firms are not participating 
but that these programs become more accessible for contract 
agencies.
    Senator Shaheen. So is there anybody that you would cite 
who is doing this well, that either you or Mr. Wong would cite, 
any agencies within the Federal Government that you think are 
doing a good job?
    Mr. Shear. The agency that stands out for me, in terms of 
the role of the OSDBU director, in terms of identifying, you 
know, opportunities for set-asides and other things, in this 
environment where we have, let's say, strategic sourcing, which 
we have looked at, and category management we have looked at, 
would be the Department of Homeland Security.
    Senator Shaheen. And how about with women-owned small 
businesses, and what are they doing that makes them stand out? 
How are they doing a good job?
    Mr. Shear. With women-owned small businesses, I think, 
really, the ball is in SBA's court to come up with a system 
that contract officers can really use, where the certification 
really means something that has some confidence for them, that 
they feel confident in using, you know, women-owned small 
business set-asides.
    Senator Shaheen. So you--neither of you can recommend any 
agency within the Federal Government that is doing a good job 
with contracting out to women-owned small businesses, that is 
meeting their--the 5 percent target regularly, that has 
practices in place that you think are good at reaching out to 
those businesses?
    Mr. Wong. I think--I think that there--sorry.
    Mr. Shear. No. go ahead.
    Mr. Wong. I think that there are several. DHS is certainly 
one of those.
    So I had an opportunity, for example, to talk to Kevin 
Boshears, who is actually retiring next week. Maybe you could 
call him and tell him not to.
    Senator Shaheen. Um, so----
    Mr. Wong. But they do it by looking at every single 
procurement. They work with their procurement shop to do that. 
It is to their credit, however, the system that they have is 
very different than other agencies. And there are other 
agencies that do hit their women target sporadically. I could 
get you a list. I do not have that off the top of my head. 
But----
    Senator Shaheen. Is there a list posted on the website of 
the SBA?
    Mr. Wong. I do not think that there is a historical one, 
but I can get you everything that you need.
    Senator Shaheen. Well, I am out of time, but just a follow-
up. Is the issue having an individual in that position who is 
committed to it and who does a good job, or is the issue having 
a process in place that actually makes it happen?
    Mr. Shear. You have to have an agency that is willing to 
give the stature to their director. So, I mean, you have two 
people--you know, you have a director that is involved and you 
have an agency, but you have certain agencies that have 
facilitated this more complete role. Now, you know, both of us 
know Kevin Boshears well. He is one that has been given that 
stature and he has earned that stature, so it goes hand-in-
hand.
    Senator Shaheen. Thank you, Mr. Chairman.
    Chairman Rubio. Senator Cantwell.
    Senator Cantwell. Thank you, Mr. Chairman, and thank you 
for holding this important hearing on SBA's contracting 
programs.
    I wanted to ask about an important issue for continuing to 
give women access to Federal contracts. The current law 
provides that women-owned businesses must have unconditional 
ownership by women of 51 percent interest in their company to 
maintain that SBA certification. I will just note that the 
Federal Government never met its 5 percent goal until we 
changed the sole-source contracting element, so when we changed 
that in 2015, we made our goals. We may have slipped, but I 
just think we have to keep peeling back the issues that are 
prohibiting us. And, obviously, with 50 percent of the society 
coming up with ideas we definitely want to make sure that they 
are getting access to capital to do so.
    So one thing I am working with Chairman Rubio on, and I 
appreciate his attention to this and I am happy to work with 
him on this, is to make sure women-owned businesses can get 
equity investments that they need to grow and still be able to 
compete for those government contracts. This is an important 
aspect of their business and also important for winning 
contracts.
    So do either of you have any concern or opposition about 
that language, making sure that women-owned businesses are not 
penalized from investment from venture capitalists at all?
    Mr. Wong. Ma'am, the only challenge we might have is that 
generally we--the issue we have that is in the 8(a) program is 
a control issue, okay. But assuming that we can make sure that 
the ownership is there and that the control rests with women-
owned companies, I have no problem with that. I mean, we are a 
different--you know, when these rules came out, venture capital 
was not--that was something that only elite companies did. Now 
everybody is doing it.
    So I think that if we set our minds to it--and this is my 
personal opinion--that, you know, investment at certain ages is 
almost a necessary prerequisite, or at least an avenue. At the 
end of the day, I think that investment makes a better company. 
If they are a better company, they have better quality. If they 
have better quality, then that goes hand-in-hand, because that 
is how we make awards. We want stronger companies. So I like 
that idea.
    Senator Cantwell. Okay.
    Mr. Shear.
    Mr. Shear. We have not done work analyzing that issue to 
opine one way or the other.
    Senator Cantwell. Okay. Well, I thank the Chairman for his 
leadership on this, and I think it just--you know, when we are 
looking at this issue of why we do not have more success in 
women-owned businesses, we have to look at what are the 
stumbling blocks, and I would consider this one of the 
stumbling blocks, and we should just proceed and knock it down, 
and allow women to have more investment and still have these 
government contracts.
    So thank you, Mr. Chairman.
    Chairman Rubio. Thanks for the work you have done, and 
the--fixed the VC investments are a key part. You cannot, in 
the 21st century, in any century, really, but you cannot really 
prosper as a business if you do not have access to investment, 
which is increasingly steering away from small business writ 
large, but in particular, among those owned by minorities and 
those owned by women. So I am grateful for all the work you 
have put in.
    Senator Hirono. You can use this time, as well, to announce 
our Hawaii party at five today.
    Senator Hirono. Yes. All of you are invited to Hawaii--a 
Taste of Hawaii on the Hill, consisting mainly of small 
businesses from Hawaii.
    A lot of us are very supportive of the socioeconomic groups 
that we want to have awarded these huge--well, not the huge, 
but their share of government contracts. So with regard to the 
Department of Defense, which has a lot of contracts, the so-
called Section 809--this is for Mr. Wong--809 Panel released 
recommendations to eliminate most small business set-asides at 
the Department of Defense.
    So I have heard from small businesses in Hawaii, including 
our Native Hawaiian-owned businesses, who are seriously 
concerned about what these recommendations, if implemented, 
would mean for small businesses in the United States. And, of 
course, set-asides have been an important tool for Federal 
Government departments and agencies like DoD to meet their 
small business contracting goals, especially for small, 
disadvantages businesses, women-owned small businesses, 
service-disabled veteran-owned small businesses, Native 
Hawaiian small businesses, and others.
    So, Mr. Wong, can you elaborate on the importance of small 
business set-asides for Federal Government departments and 
agencies in meeting their contracting goals?
    Mr. Wong. Yes, ma'am, I can. If you want to talk--in terms 
of the--you were talking about the Native programs, 
particularly in Hawaii----
    Senator Hirono. Well, the concern has been raised by the 
Native Hawaiian-owned businesses because a number of them did 
contract with the Department of Defense and suddenly that 
number has plummeted.
    Mr. Wong. We heard about that on Friday. Yep, I absolutely 
agree.
    Your first point, the 809 Panel is certainly an efficient 
panel, but, by the same token, it is diametrically opposed to 
our mission.
    Senator Hirono. Yes.
    Mr. Wong. We are all about, and we support the mission of 
maximum practicable opportunity for small business.
    Senator Hirono. Yes. I share that.
    Mr. Wong. Small businesses, by their nature, are not the 
most efficient, but they are important, and they are important 
to develop--to our industrial base.
    Senator Hirono. Mm-hmm.
    Mr. Wong. What I like about the Native companies, 
particularly the Hawaiian companies as well----
    Senator Hirono. Mm-hmm.
    Mr. Wong [continuing]. Is that they are power users with 
8(a). They allow, again, this shovel for a contracting officer 
to help them to deliver the work.
    The other thing that I think that is noble about the Native 
companies is that they have a responsibility that is much 
greater than just running a small business. You know, as you 
know, and as we have discussed, they have to take care of past, 
present, and future generations, and that is a concern that 
almost no other business in the United States has.
    Senator Hirono. Yes. They have, basically, like a social 
public good kind of a requirement for them that is not applied 
to any other small business.
    Mr. Wong. That is correct. And so I think that when the 809 
Panel, when they are talking about reducing set-asides, I 
absolutely would not agree with that.
    Senator Hirono. So has SBA voiced their concerns?
    Mr. Wong. Absolutely. I went----
    Senator Hirono. And what has been the reaction?
    Mr. Wong. So when I first got there I went over with Ken 
Dodds, who is also in our audience right now, and when we were 
there--we went over there, I think, for the third time, and I 
think it was Mr. Drabkin, who was the head of this, said, ``Mr. 
Wong, you look like a nice fellow, but we are not aligned.'' 
But he says that, so--he says, ``That is okay, but our job is 
to make these recommendations.''
    The 809 Panel, similar to category management, in my 
opinion, has the effect of destroying the industrial base. If 
you look at SBA, our history, our creation was founded on 
replenishing and strengthening that industrial base. That is 
why our mission of maximum practicable opportunity is there.
    Senator Hirono. And, by the way, you know, I sit on the 
Armed Services Committee, and for so many of our large 
contractors they need a huge, thousands of people in their 
supply chain. And if this recommendation by the Section 809 
Panel disrupts that chain and starts to--and if it starts to 
result in thousands of the people who are in the chain go out 
of business, that is bad----
    Mr. Wong. It hurts our country.
    Senator Hirono [continuing]. For our large contractors 
also. So what can we all do? Can this Committee weigh in? Is 
there something we can do to say, ``Wait a minute. This is not 
the way to go, DoD?''
    Mr. Wong. If we could work collaboratively, I would love to 
work collaboratively with you to help raise our voice with the 
809 Panel and with Congress. But I think we should fight this.
    Senator Hirono. I hope that this is something, Mr. 
Chairman, that we can pursue.
    So I do have some other concerns. Yeah, I hear the concerns 
regarding the support for women-owned businesses, because we 
are not hitting our goals. Can you clarify something for me? 
Does every Federal department have to reach these--the 20 
percent contracting goals? Every department--DoD, Homeland 
Security, everybody?
    Mr. Wong. So the technical answer is no, but the way I 
would like to describe it is, if you have a pie that represents 
100, we have to eat 23 percent, and we have to go to each of 
the agencies, who, if some can eat more in certain portions 
then they eat more, and we negotiate that with them.
    Senator Hirono. So it would seem that we are not going to 
require every department to meet these goals, because some can 
exceed those goals. Why don't we make every department meet 
these goals?
    Mr. Wong. Because I think that for some--depending on how 
you look at the buys--the short version is that every agency 
does not treat--does not buy from the same sources for the 
things that they need, so we are mindful of that.
    Senator Hirono. Do you think that kind of approach still is 
reasonable now, or have there not been some changes?
    Mr. Wong. My personal feeling is that--and I will give you 
a lawyer's answer; we are both lawyers--is under the rules that 
we have we have exceeded that 23 percent for the sixth year in 
a row, but more importantly, in terms of number of dollars, 
which translate directly into jobs, no matter who gets those 
contracts, we have increased this market by about 21 percent.
    So despite the misgivings that we have, we are hitting the 
goals that we have, but this is also why, when we are talking, 
you know, one of the things that is inherent to me is that when 
the government hits a goal and we task somebody specifically in 
the government to achieve it, they tend to achieve it. And the 
person and people who are responsible, in this case for 
government contracts, is the contracting officer. They have the 
most power to do that, because they are the ones that are 
delegated by their leadership--you have got to hit these goals, 
right?
    So that is why I am generally saying make it easier for 
them, using SBA programs, and they will hit that goal.
    Senator Hirono. Thank you, Mr. Chairman, for letting me go 
over.
    Chairman Rubio. Just as a point of information, I believe 
Senator Duckworth has filed a Sense of the Senate to the NDAA 
bill----
    Senator Hirono. Oh, thank you.
    Chairman Rubio [continuing]. That would add--that would 
oppose the recommendation to remove the DoD set-aside. I think 
the Armed Services Committee has a different opinion, so we 
will see how that plays itself out.
    Senator Romney, you would be next. You just arrived. I 
can--I am going to buy some time, or--I can ask a question, 
actually.
    Senator Romney. Why don't you go ahead and let me take a--
--
    Chairman Rubio. It is a short question.
    Senator Romney. Okay.
    Chairman Rubio. Just on the issue that you talked about, 
Mr. Wong, and that is the importance of small business to our 
industrial base, do you think that, when it comes to government 
contracting it is an enormous customer, particularly in the 
Department of Defense field but across the board. And this is 
more of a 50,000-foot-level question, but is it your sense that 
in addition to having laws in place that require certain 
behavior that there is an opening here to also have a broader 
national conversation about the importance of a domestic 
subcontractor and/or manufacturing supply chain that is capable 
of delivering certain steps along the process?
    So obviously, in the realm of DoD, it is a little different 
because of the security elements that are built into these 
contracts, but there are plenty of industries now in which we 
believe that large multinationals who are headquartered in the 
United States dominate a field without any sort of national 
recognition of the fact that many of the subcontracts and 
component activities underneath that big umbrella are 
oftentimes having to be outsourced to other countries, because 
we no longer have the domestic capacity to do certain things.
    And this becomes concerning when you begin to realize that, 
in many of these fields, that are outside the realm of DoD, but 
whether it is telecommunications or any of these other critical 
industries, for our future, we are not engaged in a business-
to-business competition. These have become national 
competitions, oftentimes in the case of China, against 
companies fully backed by a large and powerful government.
    So it appears to me that that sort of notion needs to find 
itself into this conversation as well.
    Mr. Wong. Yes, sir, I agree. You did mention China, and so 
I would just simply say that one of the phenomena that they 
have is they could be sitting in a room, they come up with an 
idea that makes sense, they can implement it in a matter of 
weeks. Our rules and regulations still require months, years.
    So I think that if there is a way to entertain that 
conversation, absolutely. If you could include us in that we 
would be happy to work with you on that.
    Chairman Rubio. Senator Romney.
    Senator Romney. Thank you, Senator. I must begin by saying 
I am not a hostile questioner, but partially so in that I do 
not like the idea of set-asides generally, or requirements that 
people purchase, or that the government purchases from 
institutions that are either high cost or less efficient. It 
strikes me that small businesses that have the best prospects 
come out with better products at lower cost, and that the world 
would beat a path to their door. But that requiring the 
government to acquire products based upon other requirements 
other than the quality, price, and efficiency of the product 
being sold is a mistake.
    I will put that comment aside for a moment and turn to 
something else which is the--with regards to the program 
associated with the net worth limit, particularly for those 
programs helping disadvantaged women. The net worth has to be 
less than $750,000, as I understand it, and given the fact that 
the median net worth in the country is $97,000, it strikes me 
that if you are an individual with a net worth of $750,000, 
excluding your home, you are probably in the top 1 percent of 
the country. This hardly strikes me as being a program for 
underprivileged individuals.
    Should we not reconsider what net worth is appropriate to 
justify investment in such a small enterprise owned by a person 
of that nature?
    Mr. Wong. Senator, thank you for the question. If I could 
clarify, the $750,000 is a ceiling. It is not a floor. And so 
what we do is we limit people, that if they get into business 
and then they get up to a certain level then we kick them out.
    Senator Romney. Right. Right. But kicking them out--
$750,000 is well above what I would consider a person that is 
disadvantaged and needs help. If the number were $50,000 or 
$100,000 I might not, in my head. But the median in the country 
is $97,000. Why would a number like $97,000 not be the better 
number to use, or half that? But to say that a person can have 
$700,000 in personal net worth, excluding their home, that is 
going to be a relatively small cohort of individuals who would 
have a net worth at that level.
    Mr. Wong. So, anecdotally, this is my opinion. I think 
that--and I have dealt with many businesses over the last 30 
years, and I have run 16 of them. I think that people with 
$97,000 of personal net worth do not tend to hire many people. 
And so with somebody--you know, if somebody has $750,000, I 
agree, it is a higher number than the average national net 
worth, but it has been something that we have been using with 
the 8(a) program for over 30 years. We have created a lot of 
jobs. We have created a lot of businesses with that program, 
sir, and I think that it works.
    Senator Romney. I would suggest that you are not creating 
the jobs, that people who begin those enterprises are creating 
the jobs, their potential to find capital from other sources. 
If they have got a great business idea and a net worth of 
$700,000, they are going to be able to begin that business and 
create the jobs without the help of the government. So having 
Federal dollars, having average taxpayers in America provide 
subsidy, in effect, to individuals who have a net worth of as 
much as $750,000, excluding their home, strikes me as being 
excessive and not really targeted to the people we are focused 
on helping, which are people of very modest or disadvantaged 
circumstances.
    I guess I will stop there, Mr. Chairman, other than to say 
that I think with regards to each of these programs, we need to 
re-evaluate whether we are really helping people who could not 
get help from the private sector, and whether we are wise to 
direct the government, in its purchasing process, to favor the 
purchase from an enterprise that is not as competitive as the 
alternatives.
    Chairman Rubio. Great. Thank you very much.
    Thank you both for being here. Do we have anything else? 
Thank you both for being here. I am going to call up the second 
panel. Thank you for your time and for your patience, given the 
vote schedule and the delay in our start.
    Mr. Shear. Thank you very much.
    Chairman Rubio. So as we kind of accommodate the transition 
here in the panel, let me introduce them, give them a few 
seconds.
    All right. I want to introduce our second panel.
    Vicki Marino is the Founder and President of Kenmar General 
Contracting, in Key West, Florida. She started Kenmar in 2002. 
She became the first female licensed general contractor in 
Monroe County, Florida. For those of you not familiar with 
Monroe County, Florida, that is the world-famous Florida Keys.
    Delali Dzirasa is the Founder and President--is that 
correct? Did I say that, Dzirasa?--Dzirasa is the Founder and 
President of Fearless, a digital services firm in Baltimore, 
Maryland, with a HUBZone certification.
    And Laurie Sayles is the Founder and CEO of Civility 
Management Solutions in Hyattsville, Maryland. Her company 
provides professional consulting services and is certified as 
an 8(a), Women-Owned, Economically Disadvantaged, Women-Owned, 
and Service-Disabled Veteran-Owned small business. She spent 
seven years of active duty in the Marine Corps and is the first 
female veteran officer on the Veteran Entrepreneurial Task 
Force.
    Thank you, all three, for being here. Ms. Marino, we will 
begin with you.

   TESTIMONY OF VICKI MARINO, FOUNDER AND PRESIDENT, KENMAR 
               GENERAL CONTRACTING, KEY WEST, FL

    Ms. Marino. Good afternoon, Chairman Rubio, Ranking Member 
Cardin, and members of the Committee. My name is Vicki Marino. 
I own Kenmar General Contracting in Key West, Florida, and am 
testifying on behalf of Women Impacting Public Policy, a 
national, nonpartisan organization advocating on behalf of 
women entrepreneurs. My company is 8(a) certified, as well as 
EDWOSB certified. Thank you for inviting me to testify today.
    In 2011, I landed my first Federal contract after success 
in the commercial marketplace as the first licensed woman 
general contractor in Monroe County, Florida. Working with SBA 
and a large company, through the SBA Mentor Protege Program, 
afforded me access to the resources necessary to build past 
performance and become a successful Federal contractor.
    I want to take a moment to give a special shout-out to a 
contracting officer, Paula Claudio. Paula shepherded my 
company's WOSB, sole-source award through SOUTHCOM, making it 
one of the first to be awarded to a woman-owned construction 
company. I cannot tell you how important this action was to 
further our Federal presence and to potentially earn another 
exceptional past performance rating. Due to this effort, I am 
in the process of opening an office in Puerto Rico to help with 
the rebuilding effort.
    Despite working as hard as I could to make my 8(a) 
certification productive, it took me all of nine years to hit 
my stride as a Federal contractor. Had it not been for WIPP's 
procurement expertise, receptive contracting officers, and 
support from the SBA, I would not have been able to get much 
traction. I would like to share a few recommendations and 
observations which I hope the Committee will find helpful.
    Given the complexity of Federal contracting and the length 
of time it takes to build a CPARS exceptional evaluation 
rating, I recommended adding a transition time for 8(a) firms, 
as we transition to competing in a larger pool of small 
businesses. SBA's contracting resources should also be expanded 
to include support for businesses at this stage.
    We encourage this Committee to look at changing 
socioeconomic programs to better reflect the trends in Federal 
buying and overcome the reluctance of agencies to use these 
programs. WIPP members tell us that contracting officers do not 
understand the WOSB/EDWOSB program, requiring the WOSB small 
business owners to come armed with specific instructions on how 
to use the program. We recommend streamlining small business 
programs and requiring education for contracting officers.
    Further, we suggest changing sole-source rules to make them 
uniform. For example, while 8(a) companies can obtain sole-
source contracts at $4 million or $6.5 million, without market 
research or justification, women-owned small businesses, 
HUBZones, and service-disabled veteran-owned small businesses 
require that a contracting officer must justify, through market 
research, that not two or more offers at a reasonable price are 
expected, leading to exceedingly few sole-source awards. WIPP 
recommends Congress put all socioeconomic contracting programs 
on equal footing.
    Certification for the WOSB/EDWOSB programs should be 
streamlined. In addition, all WOSBs who are willing to 
participate in the Federal market should be certified, even if 
they do not intend to utilize the set-aside program. Certifying 
to SBA would discourage fraudulent behavior. A critical 
component of certification is a site visit, so we suggest 
utilizing third-party certifiers.
    With respect to what qualifies a woman as EDWOSB, we urge 
the Committee to change the definition of ``net worth.'' Before 
the age of 59\1/2\, retirement accounts do not count toward net 
worth calculation. If the retirement account has early 
withdrawal penalties, it does not count toward asset total. 
However, retirement funds lift those penalties at age 59\1/2\. 
Women who are above this age must count retirement funds, often 
resulting in disqualification for EDWOSB status, putting older 
female entrepreneurs at a disadvantage.
    In addition, the current definition of what constitutes a 
woman-owned or a minority-owned firm includes a requirement 
that ownership must be unconditional, leading to a lack of 
equity investment in these firms. Given the size of contracts, 
this is a barrier to growth that should be removed.
    Lastly, I want to thank this Committee for passing the 
Runway Extension Act last year. This new law will greatly 
assist businesses experiencing growth in the Federal 
marketplace. WIPP urges the Committee to continue holding SBA 
accountable as they begin the rulemaking process to expedite 
implementation.
    In conclusion, small business contracting programs are 
critical to the ability for small companies like mine to obtain 
Federal contracts, but they need revamping to meet today's 
buying realities. In addition, we should be taking what is 
working from each program and apply it to all the other 
programs.
    I urge you to take steps that will increase Federal buying 
from small businesses so that the government can meet the 
modest goals set for women, veterans, 8(a), and HUBZone 
certified companies.
    This concludes my testimony and I am happy to answer any of 
your questions. Thank you.
    [The prepared statement of Ms. Marino follows:]
    
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    Chairman Rubio. Thank you.
    Mr. Dzirasa.

 TESTIMONY OF DELALI DZIRASA, FOUNDER AND PRESIDENT, FEARLESS 
                    SOLUTIONS, BALTIMORE, MD

    Mr. Dzirasa. I got a text from a friend earlier and it said 
``be sure not to embarrass the family, friends, or the 
country,'' so I will do my best today.
    Chairman Rubio, Ranking Member Cardin, and members of the 
Committee, thank you for your time and opportunity to testify 
today. My name is Delali Dzirasa and I have a confession to 
make, that I do not belong here. You know, this was not 
supposed to be my path and my role, so how did I end up here? I 
had a mother that really invested in work ethic, and taught us 
as young boys you had to work hard and accomplish your dreams. 
And what she said was she believed in the power of human 
potential, that the power of tomorrow--that tomorrow can always 
be better than it is today.
    And my dad had some lessons to learn also. We had a 
software company. We worked for him as kids, and learned two 
things. One, I love technology, and two, that I would never, 
absolutely ever work for my dad again.
    So based on those lessons learned, I started a company. I 
founded Fearless in 2009. We are a digital services firm, and 
we say our mission is to build software with a soul. And we 
really envision a world where good software ought to power 
things that matter, and so all of that commercial innovation 
that you see, we want to have the power harvest within the 
Federal Government to be a benefit to the American people at 
large.
    Growing up as a kid, I watched my father grow a small 
business. Today, my small business powers SBA.gov, the digital 
face of the Small Business Administration, where millions of 
Americans can grow and start their businesses and obtain 
funding.
    I watched my mother as she cared for aging individuals. 
Today, CMS uses our technology to allow every Medicare 
beneficiary in the country to better share patient records 
securely and easily.
    Fearless also powers Login.gov and Search.gov, the Federal 
Government's search engine.
    These lessons along the way taught me in the belief of 
potential, but I also needed an opportunity, and the SBA 
programs provided that opportunity for me. So I am here 
testifying on behalf of the HUBZone Council, a nonprofit trade 
organization that supports the HUBZone program, because I got 
that opportunity, and the Council would like to thank the 
Committee for their commitment to small businesses across the 
country.
    Our relationship with the HUBZone program is a bit unique. 
I heard about the program early on in our history and it was 
about economic development communities and neighborhoods that 
needed it. We were passionate about it, excited about it, so 
much so that I moved our family from the suburbs into 
Baltimore. Baltimore is a tale often of two cities, right, one 
where there is plenty of opportunity but also where almost a 
quarter of the population lives below the Federal poverty line.
    As I walk to work from day to day, I see individuals, 
whether laying on the street, and recently, a couple of weeks 
ago, there was a kid that was struck by a car, one of the 
``Squeegee boys'' they call them, washing windshields, trying 
to make a couple of bucks on the way to school. These are the 
very people the HUBZone program was meant to support, and so 
you can imagine how I was completely heartbroken to know that 
the HUBZone program has not met its goal, ever, in the history 
of the program. And so all of that funding, we calculated, was 
over $7 billion that were ineligible for these communities that 
need it most were not getting there.
    So we took it as a labor of love to figure out why and how 
we could fix the problem. So on one end you had $7 billion. On 
the other hand you had lots of people unemployed, that were 
looking for opportunities, not handouts, to get jobs.
    So that is the map at that point. We realized technology 
needed some updates. We realized there were two major issues--
technology and policy. On the tech side, we are a software 
company, so what did we do? We ended up taking SBA's data--the 
map was dated, reporting the wrong information. We scraped it 
on our own. We built our own map, and what we thought the map 
ought to be. That eventually got the attention of SBA, which 
then called us and awarded us a contract to modernize all of 
the HUBZone technology nationwide.
    So we are here to testify to say we have helped to support 
and fix some of the technology, and now we are here because we 
need support to fix the policy.
    On the policy side, we think there are lots of incremental 
changes that can be made within the program, but above 
incremental changes, we think big, bold changes are needed, and 
the bold changes that also were included in how these 
certification programs began in the first place, are needed at 
this time.
    The HUBZone program is unique in how it provides and 
supports communities, and so we ask for two things. One, we 
have heard streamline the sole-source opportunities for HUBZone 
companies and all the certification programs to be on parity 
with the 8(a) program, and two, up the small business goal, in 
general, across the board. Small businesses are often called 
the backbone of the economy, and so it is odd that they control 
and create the majority of the jobs, but yet they are a 
fraction of the percentage of revenue that goes out.
    And why is this important now? You have recently passed 
legislation around opportunity zones, and so investment is 
going into a lot of these same communities. And so if you pair 
it with the Jobs Creation Act through the HUBZone program, we 
think we can multiply the effect.
    So we live in a city where the ZIP code might determine as 
much as a 20-year discrepancy in life expectancy, and so we 
need bold change now. And so if today is not the chance, the 
time for that bold change, the question really is when, and 
when is it going to be right?
    Thank you for the opportunity and the time for my 
testimony.
    [The prepared statement of Mr. Dzirasa follows:]
    
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    Chairman Rubio. Thank you.
    Ms. Sayles.

    TESTIMONY OF LAURIE SAYLES, PRESIDENT AND CEO, CIVILITY 
              MANAGEMENT SOLUTIONS, GREENBELT, MD

    Ms. Sayles. Good afternoon, Chairman Rubio, Ranking Member 
Cardin, and members of the Committee. My name is Laurie Sayles. 
I am a veteran who served 10 years in the United States Marine 
Corps and am now the founder and owner of Civility Management 
Solutions, a professional consulting firm working within both 
the government and commercial space, and located in Greenbelt, 
Maryland. I am a member of Women Impacting Public Policy and 
VET-Force, both organizations who have assisted in my growth.
    Civility provides program, project, financial, and grants 
management, training, conference logistics, call center, and 
administrative support for several Federal agencies to include 
subcontracts.
    I am passionate to testify because my company was able to 
obtain such clients due to Small Business Administration's 
certification program. I am certified economically 
disadvantaged and woman-owned small business, VA-verified 
service-disabled veteran-owned, and certified 8(a) 
headquartered in a HUBZone office. Like others, I have 
experienced this with SBA and the Department of Veterans 
Affairs to acquire certifications.
    My testimony today will address these contract programs 
with the hope of providing recommendations to the Committee 
that will assist during the reauthorization process, as well as 
enable the SBA to increase assistance to veteran and women 
small business owners.
    I have always been an entrepreneur. As a Marine, 
leadership, integrity, teamwork, and persistence became a way 
of life, which is essential in business. I earned the respect 
as an African-American woman in a man's world, and now am an 
outspoken advocate for veterans as I was elected as the first 
woman officer on the VET-Force Committee. In this role, I 
listen to many veteran small business owners on their 
frustrations to ascertain VA certifications and opportunities 
within the VA.
    Returning to civilian life can be difficult. It is a 
process, it takes to adjust, and working with government 
agencies can become frustrating, especially understanding the 
many regulations and rules. While a change in the 2017 NDAA 
made much-needed improvements to the verification of veterans, 
significant issues of concern still remain. They are detailed 
in my written statement, but to name a few they are the 
requirements around military spouse participation and veterans 
not being located within a reasonable commute from job sites. 
There is a rebuttal presumption that he or she does not control 
the firm. However, I am very grateful for the VIP program in 
Maryland that trains military veterans in government 
contracting which Barbara Ashe spearheaded.
    While I am also a woman-owned business, my fellow panelists 
already touched on this program, so I will use the remaining 
time to talk about the 8(a) business development program.
    Civility obtained the 8(a) certification after being in 
business for four years. I utilized my local SCORE chapter for 
support. Do note, though, that the SBA Office of the Inspector 
General reported that since 2010, there has been a consistent 
decline in the number of small business owners participating in 
the 8(a) program. There are many potential reasons for the 
decrease in participation, but I would like to highlight a few 
changes that would help.
    The first is the requirement of the administrator to 
approve the sale of an 8(a) firm, or transfer of 8(a) contracts 
to another eligible 8(a) concern. This should be removed. 
Obtaining the administrator's approval seems burdensome and 
unnecessary. Unfamiliarity and--my apologies.
    Recently, Civility was accepted in a pilot program referred 
to as the 8(a) Accelerator, that was established by the Bowie 
BIC University in Prince George's County, Maryland, to help 
train up 8(a) firms, and the SBA Washington District office 
collaborated in its development. The Business Opportunity 
Specialists can only provide procurement assistance to 8(a) 
firms, and Congress should explore expanding their portfolios 
to include all SBA certifications, and the government would see 
tangible results.
    I lost a page and I am going to have to just move on.
    Creating a pathway forward for all certified companies to 
thrive in their businesses is important. However, 
accountability and proper implementation of SBA's contracting 
programs is necessary, and to ensure a level playing field. The 
government met its 5 percent goal of contracting with women 
once, and has never met its HUBZone goals. I urge the Committee 
to think big when it comes to reauthorizing contracting 
programs in order to strengthen small business growth.
    This concludes my testimony and I am happy to answer any 
questions.
    [The prepared statement of Ms. Sayles follows:]
    
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    Chairman Rubio. Thank you. I am going to defer to the 
Ranking Member.
    Senator Cardin. Let me thank all of our witnesses. Very, 
very helpful. I am glad that you are here, by the way. You 
belong here. I had a chance to be with Fearless Solutions and 
the work that you do in helping SBA with the HUBZones is an 
important contribution, and it is great to see a small business 
owner doing that.
    And it is good to see a graduate from the VIP program that 
is here. One of the things that we talk about, Mr. Chairman, is 
providing the technical help and assistance so that, whether it 
is a veteran-owned business or whether it is a women-owned 
business or whether it is a disadvantaged 8(a) business, that 
they have the technical help in order to understand how 
entrepreneurship can work to their advantage and they can get 
contracts. The VIP program, which started in Montgomery County, 
by the Chamber, in which Ms. Sayles is a graduate, has been 
now, I think, a national model, and the SBA is working with 
them to be able to give that type of technical assistance to 
veterans so that they understand how they can use the tools 
that are available under the SBA.
    But I want to get to the issues that all three of you have 
raised, one way or the other, and that is how these programs 
are working. The rule of two, which does not apply to 8(a) but 
does apply to the women-owned small businesses, HUBZones, and 
to the veteran businesses, Ms. Marino, I think you said that is 
a real impediment to the programs that require the rule of two. 
Are you all finding that to be the case, that because of the 
requirements of having at least two businesses that it prevents 
sole-source from really working for its intended purpose?
    Mr. Sayles. I would like to speak on this, sir. When I 
started Civility Management Solutions I had managed 128 
employees, about $11.5 million, through seven different 
agencies. I had great relationships. They knew that I brought 
great work, that I could manage staff. However, as a woman-
owned small business that had no added value for me. It took me 
to obtain, actually, the 8(a) program, of certified within four 
years, that opened up the door, because they could not get to 
me, even though there was the opportunity through the Woman-
Owned Small Business with a sole source. But yet I did not have 
the past performance to compete, so that is when the 
opportunity actually opened, was when I got 8(a), not because I 
was woman-owned.
    Mr. Dzirasa. I would like to echo that sentiment as well. 
Saying we are HUBZone, both HUBZone and 8(a), received our 
HUBZone certification prior to our 8(a) certification, we have 
had the same issue, where 8(a) just becomes the easy path, 
right. When there is a requirement and they need to get a 
requirement done very quickly, it becomes a very fast way for 
them to get the requirement awarded. And so even with the 
HUBZone, people still, in lieu of that, would do the 8(a) award 
and then double-count and get credit for both the 8(a) and 
HUBZone, but not doing the HUBZone direct.
    Ms. Marino. I was awarded a rather good-sized sole-source 
contract from the U.S. Army out of the 410 Contracting Command 
out of San Antonio, Texas, for SOUTHCOM. It was a $1.8 million 
sole-source project. And the only reason that I was awarded 
that is because I brought information to the contracting 
officer, and taught her what the FAR allowed her to do, and I 
was the only company that could perform, because I live in Key 
West and my company is in Key West, from Key West to Miami. 
There were no other companies that could meet this requirement. 
It was a mechanical contract, air conditioning.
    And she had pushback from her command in San Antonio, you 
know, telling her that she could not award this sole source to 
a woman-owned small business. And she said, ``Yes, I can. Here 
is the FAR and I am going to do it.'' And so she really had to 
educate her command on the regulations that she had the 
authority to do this, and they agreed, and she did award it. 
But had there been another woman-owned mechanical company with 
the same capacity and past performance that I had in my town, 
then she probably would not have been able to award it to me on 
a sole-source basis.
    So, yeah, there isn't one because we are a small town, but 
that would hurt.
    Senator Cardin. And under the set-aside, the sole source 
under 8(a) does not have that same burden.
    Ms. Marino. That is correct. That is correct. She has the 
authority.
    Senator Cardin. So when you say you want uniformity, I take 
it you would like uniformity based upon the 8(a) rules on----
    Ms. Marino. Well, for all of the socioeconomic set-aside.
    Senator Cardin. Right.
    Ms. Marino. Why are they different?
    Senator Cardin. But you want us to comply to the standard 
8(a) on sole source. Is that----
    Ms. Marino. Yes. That is what we are saying, and that would 
help with certification too. It is already there. It would 
streamline everything. We all agree.
    Senator Cardin. And another matter we are looking at is 
increasing the dollar thresholds and to remove the option years 
in the calculation. Do you find that to be an impediment in 
regards to the benefits of these programs?
    Ms. Marino. Can you--I do not understand the question.
    Senator Cardin. The thresholds that are there----
    Ms. Marino. Right.
    Senator Cardin [continuing]. Apply to each year and the 
option years, so, therefore, if you have a five-year potential 
contract the threshold is actually one-fifth of the full 
amount. There is interest in increasing that threshold because 
of the dollar amounts of these contracts. I did not know if 
that affected any of your businesses or not.
    Mr. Dzirasa. I think so. We have seen that particular 
issue, where obviously 8(a)s are easier to award. And if they 
can stretch them out then they just have to go back and 
continue to renew option after option after option. And so the 
ability to have a larger threshold allows them to give more 
room and more capacity on particular contracts.
    We have found, in some cases, they just say the ceiling 
just is not large enough. We have to put it on a different 
vehicle, or we have to compete it, and so that delays their 
process. So I do think it would greatly help with the increase 
of capacity and the value of contracts.
    Senator Cardin. I would think there might also be a problem 
with a smaller number of year contract in order to comply with 
the cap, whereas if the option years do not count towards the 
cap you do have the predictability of a longer-term commitment 
without being penalized, because of the dollar amount.
    Thank you all very much.
    Ms. Marino. Thank you.
    Chairman Rubio. Thank you. All right. Ms. Marino, let me 
ask you. I understand you were the person to be awarded a sole-
source contract under the Women-Owned Program.
    Ms. Marino. Well, out of the U.S. Army, from SOUTHCOM. I do 
not think it was the first sole-source contract ever awarded, 
but for that agency and that contracting command it was.
    Chairman Rubio. How were you able to win that award, and 
what can SBA or Federal agencies do to help more women-owned 
businesses win these types of awards?
    Ms. Marino. Well, I had to educate the contracting officer 
as to the clauses in the FAR that allowed her the authority to 
sole-source this to my firm, and I got that information from 
being a member of WIPP. They supported all the women-owned 
small businesses, gave us basically instructions on what to 
tell the contracting officer and show them their authority in 
the FAR. So the contracting officer was not really aware of it, 
so education, I think, for the contracting officers would be 
helpful.
    There was pushback, as I mentioned before, from the 
command, the contracting command. Even they did not realize 
that there was sole-source authority for the contracting 
officer. So they did not realize it either.
    I think it would also be helpful, not only education for 
the contracting officers but also reward for the contracting 
officers for achieving the goals, the Federal goals. There does 
not seem to be any way to recognize contracting officers that 
are doing a great job and hitting all the goals. There is 
just--it is sort of--it does not seem to be any system of 
rewarding that contracting officer for doing a good job.
    Chairman Rubio. I think it just touches on something we 
mentioned earlier, is that the contracting officers of the 
various agencies and Federal entities are not even aware----
    Ms. Marino. Right.
    Chairman Rubio [continuing]. Of the opportunity to do this, 
which is obviously an impediment to the program moving forward.
    I think, more broadly, I guess just as a broad question, 
you know, why is it important to be certified--for you, for 
your business to have been certified in these two women-owned 
small business categories? I think you have already answered 
this somewhat in describing this opportunity, but did it 
increase contracting opportunities or unique resources?
    Ms. Marino. Being certified 8(a) opened up a world of 
opportunity for me through the Small Business Administration. 
Small Business Administration guaranteed my loans. The Small 
Business Administration helped me with guaranteeing my bonds, 
which is required in construction contracting. They provided 
training. There was so much that I got from the SBA by being an 
8(a) contractor.
    I think it is important that WOSB contractors are also 
certified by the SBA to not only get SBA support, which is just 
critical for growth and for success, but also it eliminates 
fraud. I think that the same sort of rigorous background check 
that the woman is really running the company, working day-to-
day, signing the contracts, signing the checks, getting in the 
field, doing the work is critical. It is not just a front for 
another business. So I think certification is really critical.
    Chairman Rubio. Mr. Dzirasa, we have talked in this 
Committee, in previous hearings, about deficiencies in 
technology broadly hampering the SBA's ability to manage 
programs, but in particular the HUBZone program. In 2004, the 
GAO found that the HUBZone map, the SBA's primary way of 
communicating HUBZone locations to the public, was out of date. 
It was inaccurate. In 2013, the inspector general also found 
discrepancies in the historical map data, which the SBA keeps 
on a series of Excel spreadsheets. So think about that for a 
moment.
    I just ask, how were you able to figure out that you were 
located in a HUBZone?
    Mr. Dzirasa. Yeah. So interestingly enough, when we were 
first certified the map was reporting bad data in that 
particular case as well. The pin was on the wrong side of the 
street, and we knew it was a HUBZone. So we had to go justify--
--
    Chairman Rubio. The pin was on the wrong side?
    Mr. Dzirasa. Yeah. So it would show that it was not, but we 
knew that it was----
    Chairman Rubio. The pin, like an actual pin?
    Mr. Dzirasa. Yes, on the legacy map, did not show that--so 
the address was--there is a HUBZone kind of a square, and the 
building was clearly in there, but the pin when you put in the 
address would put it here and say you are not qualified, and it 
would not allow you to move forward within the process.
    That has been fixed, so we actually know that well. We were 
one of the things that helped to fix that for SBA. But at that 
point it was difficult. I mean, you had to push back.
    Chairman Rubio. You had to go find whoever was in charge of 
the pins and----
    Mr. Dzirasa [continuing]. And move the pin. That is right. 
Yeah. We had to get the pin moved.
    Chairman Rubio. Our work here is done then.
    [Laughter.]
    Mr. Dzirasa. But in that particular case, right, if you do 
not push back, the system would not allow you to move forward, 
and it would not even allow you to start the application at 
that time. And that has been cleaned up. It has taken, well, 
obviously from 2004, that you mentioned, to we were awarded a 
contract in 2016, and by 2017, in six months, we had the first 
modernization MVP out the door. And so I think some of those 
things are starting to trend in the right direction.
    Chairman Rubio. Yeah. And Ms. Sayles, within the four prime 
contracting programs at SBA there are different processes for 
becoming certified for participation, as we have talked about. 
You are in a unique experience of having--you have had 
experiences with three of these four programs.
    Mr. Sayles. Yes, sir.
    Chairman Rubio. I am curious to know which of the three did 
you find to be the easiest and which one was the hardest?
    Mr. Sayles. Actually, the Department of Veterans Affairs 
has improved theirs, because they are also online, but the 
Certify.SBA.gov site has been fabulous. And as an 8(a) firm, 
even going in and doing the self-certification for the woman-
owned and economically woman-owned small business, they are 
able to pull that information that is already in the system 
from me being an 8(a) certified company and apply it to the 
process.
    So some of the questions were ``Are you an 8(a) firm?'' 
Yes. And based off of that I answered less questions to get 
through that certification process.
    So, yes, and may I add that a lot of veteran service 
organizations are in agreement with the VA certification going 
over to the SBA office, so that they are all housed within the 
same place, which should also add more simplification to the 
certification process.
    Chairman Rubio. We talked also, earlier in the hearing, 
about the statutory award goal of 23 percent of contracts to 
small businesses. The Scorecard is supposed to measure how well 
agencies are complying with this goal, but as you may have 
heard and seen and probably knew before, GAO reports found some 
issues with this. In your opinion, having experience with 
these, what does the Scorecard get right and what needs 
improvement?
    Mr. Sayles. Are you speaking to me, sir? My apologies. 
Actually, I am not as well versed. I just do know that a lot of 
community, as a whole, in the small business, do question 
whether or not the Small Business Administration Scorecard is 
accurate.
    Chairman Rubio. Based on their interaction with these 
agencies and in terms of knowing what they know about the way 
these agencies perform----
    Mr. Sayles. That is correct, and how the data is collected 
and how it is produced for us all to review it. There are a lot 
of entities of businesses, as well as organizations, that do 
question whether or not the data is correct.
    Mr. Dzirasa. Yeah. I would like to echo. I also think there 
are questions about the double counting. So if you award a 
contract to a particular entity that has multiple 
certifications, they are allowed to count that they have 
received credit for all of them, and so it is not clear. If 
someone is woman-owned, HUBZone, and 8(a) and they do an 8(a) 
sole-source, they get a triple count. So I am unclear if that 
then bubbles up into all of those numbers, as far as them 
meeting the goals or not. So it is unclear how factual that 
data might be.
    Chairman Rubio. And you are not in, obviously, a great 
position to see every contract that is going out, but I know 
that there is skepticism among many in the small business 
community about whether, in fact, the numbers that are being 
reflected are the ones that these agencies are meeting. And as 
you have heard here in the testimony today, because that is a 
holistic number. So if some agency is doing 33, then somebody 
else can do less, and it often times depends on the types of 
contracts they are awarding.
    But I know we have heard great skepticism across that, that 
even some of the reported numbers are not accurate, which is 
why the transparency part of the Scorecard is important, so 
people have confidence that these are the sort of priorities 
that are being met and addressed.
    Senator Risch, did you have questions?
    Senator Risch. No, I did not. Thank you for holding this 
hearing. It is an important hearing, and I know there are 
issues being raised. I appreciate you doing this so we can 
explore them. Thank you.
    Chairman Rubio. I did want to ask one more question of Ms. 
Marino. You are a participant in the 8(a) program. You have 
access to--you have talked about this a little bit, all the 
different components on the bonding capacity and so forth that 
have made you eligible for. You also have access to training, 
technical assistance, in addition to being able to compete for 
the set-aside.
    Since you are active in the small business community as 
well, would this same type of training, in your view--on the 
training part of it, which you may or may not have availed 
yourself of heavily, but, I do not know. Maybe you did. But 
would that be useful to other contractors that you know from 
Florida or through the Women Impacting Public Policy?
    Ms. Marino. So I did participate in 7(j) training, webinar-
based training that the SBA provides at no charge, and I found 
that that training was sort of elementary. And really what 
helped me move forward in my career and really gain contracts, 
which is the object, right, was really more one-on-one 
training, and, in particular, the Mentor Protege Program was 
really, really helpful to me. I was in the program for two 
years with a large Federal contractor, and in that two-year 
period I learned what to do and what not to do, as a Federal 
contractor, and I gained from them all sorts of documentation 
that I needed moving forward, to be a successful Federal 
contractor.
    And the SBA really held my mentor's feet to the fire, to 
make absolutely sure that they were giving me the tools that I 
needed and really training me and bringing me along so that I 
could succeed. And after two years in the program, sort of 
little by little I started to fly on my own with small job--
$50,000, $100,000--that just sort of grew over time. It took a 
long time but that meant the protege program was really the 
best education for me, as a Federal contractor.
    Chairman Rubio. And I would also imagine that these 
contracts have a cumulative effect, in essence, each time you 
complete one it sort of opens the door to other ones----
    Ms. Marino. Yes.
    Chairman Rubio [continuing]. Either by reputation on the 
commercial side, outside of the government contracting----
    Ms. Marino. Yes.
    Chairman Rubio [continuing]. The building capacity, or the 
ability to gain the confidence of those awarding these 
contracts that you can actually do the work.
    Ms. Marino. Exactly. If you do a good job----
    Chairman Rubio. I think that is probably true for all of 
you.
    Ms. Marino. Yeah. Good evaluations are everything.
    Chairman Rubio. Well, I want to thank you guys for being 
here and for your patience. We had votes today and we made the 
decision to ride it out until 3:00 p.m. Otherwise, you would 
have seen people running in and out all the time. But we are--
is this our last hearing or do we have another reauthorization? 
We have two more. Lucky me.
    [Laughter.]
    And you do not have to come to those. You can watch. It is 
on like C-SPAN 14, whatever. But as we work through this 
reauthorization it has really also been very educational to 
kind of get into the structure of the agency and all of its 
different programs, and find what it does well, hear these 
stories about how these programs are making a difference, but 
also to identify deficiencies and look for ways to authorize 
them.
    In a time when obviously there are a lot divisive issues in 
American politics, small business is one that is not, and I 
hope you sense from the questions here today and some of the 
comments that I think we have a unique opportunity to do 
something here that can actually pass, because it does not 
really have a partisan component to it, or even an ideological 
one. And it is something that the vast majority of Americans, 
certainly members of the Senate, are supportive of. Everybody 
has a small business in their state, more than one, obviously, 
and many come from small business backgrounds as well. So I am 
grateful for your input today because it will make a 
difference.
    The hearing record for this will remain open for two weeks. 
Any statements or questions for the record should be submitted 
by Wednesday, June 26th, at 5:00 p.m. It is possible that some 
of the members that were not here or had to leave early might 
have a written question. If you can answer it, it would be 
great. It could be part of our record, and we can point back to 
it as we do our work. Thank you so much.
    With that the hearing is adjourned.
    [Whereupon, at 4:58 p.m., the Committee was adjourned.]

                      APPENDIX MATERIAL SUBMITTED
                      
                      
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