[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
THE 8(a) PROGRAM: OVERVIEW AND NEXT STEPS
TO PROMOTE SMALL BUSINESS SUCCESS
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HEARING
BEFORE THE
SUBCOMMITTEE ON CONTRACTING AND INFRASTRUCTURE
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
MARCH 2, 2022
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 117-047
Available via the GPO Website: www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
46-931 WASHINGTON : 2022
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
JARED GOLDEN, Maine
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
MARIE NEWMAN, Illinois
CAROLYN BOURDEAUX, Georgia
TROY CARTER, Louisiana
JUDY CHU, California
DWIGHT EVANS, Pennsylvania
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANDY KIM, New Jersey
ANGIE CRAIG, Minnesota
BLAINE LUETKEMEYER, Missouri, Ranking Member
ROGER WILLIAMS, Texas
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
CLAUDIA TENNEY, New York
ANDREW GARBARINO, New York
YOUNG KIM, California
BETH VAN DUYNE, Texas
BYRON DONALDS, Florida
MARIA SALAZAR, Florida
SCOTT FITZGERALD, Wisconsin
Melissa Jung, Majority Staff Director
Ellen Harrington, Majority Deputy Staff Director
David Planning, Staff Director
C O N T E N T S
OPENING STATEMENTS
Hon. Kweisi Mfume................................................ 1
Hon. Maria Salazar............................................... 3
WITNESSES
Mr. Darryl K. Hairston, Retired, Small Business Advisor,
Woodbridge, VA................................................. 5
Ms. Jackie Robinson-Burnette, Chief Executive Officer, Senior
Executive Strategic Solutions, Woodbridge, VA.................. 7
Mr. Arshdeep Khurana, President & Chief Executive Officer, Avosys
Technology Inc., San Antonio, TX............................... 8
Ms. Qin Li, President, Soliel, LLC, Vienna, VA................... 10
APPENDIX
Prepared Statements:
Mr. Darryl K. Hairston, Retired, Small Business Advisor,
Woodbridge, VA............................................. 23
Ms. Jackie Robinson-Burnette, Chief Executive Officer, Senior
Executive Strategic Solutions, Woodbridge, VA.............. 35
Mr. Arshdeep Khurana, President & Chief Executive Officer,
Avosys Technology Inc., San Antonio, TX.................... 50
Ms. Qin Li, President, Soliel, LLC, Vienna, VA............... 60
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Ho-Chunk Incorporated........................................ 67
THE 8(A) PROGRAM: OVERVIEW AND NEXT STEPS TO PROMOTE SMALL BUSINESS
SUCCESS
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WEDNESDAY, MARCH 2, 2022
House of Representatives,
Committee on Small Business,
Subcommittee on Contracting and Infrastructure,
Washington, DC.
The Subcommittee met, pursuant to call, at 11:00 a.m., in
Room 2360 of the Rayburn House Office Building, and via Zoom,
Hon. Kweisi Mfume [Chairman of the Subcommittee] presiding.
Present: Representatives Mfume, Carter, Salazar, Stauber,
Meuser, and Fitzgerald.
Chairman MFUME. Good morning, everyone. I would like to
officially call this hearing to order.
And without objection, the Chair is authorized to declare a
recess at any time.
I would like to begin by noting some important
requirements. Let me begin by saying the standing House and
Committee rules and practice will continue to apply during this
hybrid proceeding. All Members are reminded that they are
expected to adhere to these rules, including decorum.
House regulations require Members to be visible through a
video connection throughout the proceeding, so please, if you
are on a video connection, keep your cameras on. Also, please
remember to remain muted until you are recognized to minimize
background noise.
In the event that a Member encounters technical issues that
prevent them from being recognized for their questioning, I
will then move to the next available Member of the same party
and will recognize that Member at the next appropriate time
slot provided that they have returned to the proceeding.
I want to again thank all of our witnesses who are here
today. I appreciate your time and your effort to get here and I
have a few comments.
Throughout our history, small businesses, especially those
owned by socially and economically disadvantaged individuals,
have faced real challenges when it comes to participating on
equal footing in the American economy, and specifically in the
federal procurement space. Disadvantaged businesses often
navigate obstacles like discriminatory lending practices, and
fewer mentorship and business opportunities as they seek to
grow their businesses and, of course, to serve their customers.
Recognizing the struggles that disadvantaged businesses
face, Congress created the Small Business and Capital Ownership
Development Program known as 8(a) that was done in 1978. I take
particular pride in the landmark program because my
predecessor, Parren J. Mitchell was the author of that and we
are reminded of him by his picture which hangs down at the far
end of this hearing room.
The 8(a) program is, as we all know, a 9-year program that
offers small businesses owned by ``socially and economically
disadvantaged individuals'' training, technical assistance, and
contracting opportunities. 8(a) participants are eligible, as
we also know, for 7(j) training, which offers valuable
counseling and training opportunities in financing, management,
accounting, bookkeeping, marketing, and identifying new
business opportunities.
The federal government has also established a statutory
goal of awarding 5 percent of all eligible contracting and
subcontracting dollars to small and disadvantaged business
concerns, including those that are not currently participants
in the 8(a) program where there is still more needed support.
That is why I applaud President Biden's goal of increasing the
share of contract awards to small and disadvantages from 5
percent to 15 percent by the year 2025.
For over 40 years, socially and economically disadvantaged
businesses have relied on the 8(a) program to help them compete
and innovate in the federal marketplace. When small businesses
win federal contracts, they grow, create jobs, and they support
our communities.
While the 8(a) program helps thousands of small businesses
annually, participants have reported and are still reporting
ongoing challenges. For example, many business owners have
reported concerns with the duration of the 8(a) program. So,
when a small firm, as we know, is admitted, it typically takes
a couple of years to receive its first award, which hinders the
development of program participants and really raises the
question of whether or not those enterprises are ready for
graduation when they are expected to exit the program.
8(a) businesses have also expressed concern with the
program's technical assistance and training through the 7(j)
program. And today, we will ask the question of whether the
training provided to 8(a) participants is, in fact, adequately
preparing small contractors for graduation, in addition to how
to improve the 8(a) program to better support disadvantaged
businesses.
And lastly, we will examine how trends within the
contracting space impact small 8(a) firms particularly. For
years, the size and scope of contracts have been on the rise.
That has excluded, as we know, many 8(a) firms that may not
have the capacity to take on larger contracts. At the same
time, sole-source contract thresholds have remained unchanged
over the years and over time, resulting in fewer 8(a) sole-
source contracts. Before this Committee, the Full Committee, we
have tackled the question of category management in the past
and it is something to keep in mind as we look at reasons as to
why there has not been growth in this sole source area.
Consolidation in procurement has limited the ability of
8(a) firms to compete for contracts, ensuring a level playing
field for small contractors is one of the utmost importance to
our economy.
So, I hope that today's hearing will allow us to explore
actions our Committee can take to improve legislatively and to
modernize the 8(a) program, a program that all of us support
and many of us are still concerned with as it relates to the
challenges that many of you as small business owners and many
others who are viewing this hearing still find yourself
confronted with.
With that said, I would like to yield to the distinguished
Ranking Member, the gentlewoman from Florida for her opening
statement, Ms. Salazar.
Ms. SALAZAR. Thank you, Mr. Chairman. Wonderful to be here
for the first time in person right next to each other. And
thank you to all the witnesses.
As you said, contracting with the federal government is the
American dream. And today's hearing is a perfect example of
this work this Committee must perform on behalf of America's
small business contractors. We owe it to them.
Congress is at its best when we are making laws that
protect the interests of all small businesses. And let me
repeat that. We must help all small businesses. Congress made a
point to give special recognition to socially and economically
disadvantaged entrepreneurs through the Small Business Act as
you mentioned, the Minority Small Business and Capital
Ownership Development Program, also known as the 8(a) program.
This program creates a space for entrepeneurs to grow, to
compete, and to be productive contributors to our nation's
workforce. The law mandates that 5 percent of the federal
government spending on goods and services must go towards
small, disadvantaged businesses.
But, according to the SBA, this goal was succeeded in
fiscal year 2021 at approximately 10 percent or close to $60
billion. That is what the SBA is saying. But I have doubts
about these numbers, and also, we cannot ignore issues that
continue to plague the 8(a) program. For instance,
unfortunately, we are seeing that fewer small businesses are
winning bigger and bigger rewards and that is a very big
problem. Let me translate this for you. This means less
diversity, less competition, more costs for our taxpayers, and
more importantly, less money in the pockets of small business
owners.
We have to increase participation within all of SBA's
contracting programs and enhance diversity of awards so that
all small businesses can succeed and not just a few, the
selected ones that know how to work the system. And the SBA's
role is ensuring the success of its 8(a) participants is key.
The SBA has the responsibility to make this program work.
Recently, and unfortunately, I need to report that the
Inspector General found that the SBA is failing to accurately
measure the effectiveness of this program. So that means that
we are allocating money but we do not know if that money that
is being allocated is doing what it needs to do. It is
effectively going to enhance and to help those small business
owners. The program is as effective as its ability to root out
waste, fraud, and abuse. So, the agency must aggressively
tackle potential fraud and abuse within all of its programs.
Every dollar going to the wrong firm is an American taxpayer
dollar that is wasted and abused.
So, what do we need to do? We need to ensure that the SBA
is operating the program at optimal levels. That no level of
fraud or abuse is acceptable. That the federal government
awards the widest range of contracts to as many small firms as
possible. That is the American way and that is why I am here
and all of us to ensure that this occurs.
I thank you. I yield back, Mr. Chairman.
Chairman MFUME. The Ranking Member yields back. Thank you
very much for your statement.
I would like to take an additional moment to explain how we
will proceed with the hearing today. Each witness will have 5
minutes to provide a statement, and each Committee Member will
have 5 minutes for questions. Please ensure if you are with us
through the hybrid setup that your microphone is on when you
begin speaking and that you return to mute when finished.
I would like to introduce our witnesses beginning with Mr.
Darryl K. Hairston. Mr. Hairston serves as a small business
advisor. He has assisted small businesses for more than 35
years as a dedicated employee of the Small Business
Administration where he has held senior level positions,
including acting administrator of the SBA and deputy associate
administrator for the Office of Government Contracting and
Business Development. Mr. Hairston, again, thank you very much
for being with us.
Our next witness is Ms. Jackie Robinson-Burnette, the CEO
of Senior Executive Strategic Solutions, a consulting firm. And
she is also a former federal senior executive having served in
multiple positions, most recently in the SBA as the deputy
associate administrator of the Office of Government Contracting
and Business Development in 2016. Prior to joining the SBA, Ms.
Robinson-Burnette served more than 20 years in the Department
of Defense, both as a contracting officer and leading small
business programs. Ms. Robinson-Burnette, thank you again, and
welcome.
Our third witness is Mr. Arshdeep Khurana, president and
CEO of AVOSYS Technology, Inc., located in San Antonio, Texas.
AVOSYS Technology is an 8(a) and HUBZone certified small
business that offers information technology and management
consulting services. Mr. Khurana founded AVOSYS in 1998 and
that company will be graduating from the program this year. So,
I want to thank you, sir, for your insight in advance because
your graduation is a part of the issues that we are talking
about. Not yours specifically, but the amount of time and the
people who are, in fact, graduating.
I would like to yield to the Ranking Member, the
gentlewoman from Florida, to introduce our final witness. Ms.
Salazar?
Ms. SALAZAR. Our final witness is Ms. Qin Li. Welcome. She
is the president of Soliel, a small business technology company
providing innovative and cutting-edge technical engineering and
development services to the United States Government. Ms. Li's
work in government contracting began in 2010 out of a need for
greater career flexibility. When an opportunity arose to
subcontract to a large firm, Ms. Li took it. Good for her. And
now the company is celebrating her 12th year and it is in the
7th year in the SBA 8(a) program. Under Ms. Li's leadership,
Soliel has invested heavily in technology and quality
operations, successfully holding many high level cybersecurity
and technological certifications necessary to compete for
difficult and complex government contracts. A testament to her
success, Soliel has successfully served many government
customers such as the United States Navy, the United States
Army, and the Defense Counterintelligence and Security Agency.
Ms. Li, it is a pleasure having you to testify before this
Committee, and I look forward to the valuable insights I know
you will provide today. Welcome. I yield back.
Chairman MFUME. Thank you. I join with the Ranking Member,
Ms. Li, in saying welcome to you also. Thank you for being
here. We look forward to your testimony.
The Chair would now recognize Mr. Hairston, if you are
prepared, and if so, you are recognized for 5 minutes. Go right
ahead.
STATEMENTS OF DARRYL K. HAIRSTON, RETIRED, SMALL BUSINESS
ADVISOR; JACKIE ROBINSON-BURNETTE, CHIEF EXECUTIVE OFFICER,
SENIOR EXECUTIVE STRATEGIC SOLUTIONS; ARSHDEEP KHURANA,
PRESIDENT & CHIEF EXECUTIVE OFFICER, AVOSYS TECHNOLOGY INC.;
QIN LI, PRESIDENT, SOLIEL, LLC
STATEMENT OF DARRYL K. HAIRSTON
Mr. HAIRSTON. Good morning, Chairman Mfume, Ranking Member
Salazar, and other distinguished Members of this Committee. I
am pleased to present testimony in support of your examination
of how the SBA's 8(a) Business Development Program currently
works, the resources it provides, and to identify ways to
modernize and improve the program's effectiveness.
As noted, Congress enacted Public Law 95-507 in 1978 to
provide statutory authority to an existing program that was
previously created by Executive Order for socially or
economically disadvantaged individuals. The law shifted the
program's focus to Business Development and required program
participants to be at least 51 percent owned and controlled by
socially and economically disadvantaged individuals. Since
1978, there have been several additional amendments to the law
aimed at achieving the unfulfilled goals of Public Law 95-507
by addressing abuses and improving its effectiveness.
Additionally, the SBA's Office of the Inspector General and the
General Accounting Office have also noted instances of fraud
and the lack of quality and consistent SBA monitoring and
oversight. Based on my experience, I believe the following
recommendations for 8(a) business development program
improvements will have a significant impact on the program's
administration and effectiveness.
First, while the associate administrator for 8(a) business
development is responsible for the oversight of all matters
related to the 8(a) Business Development Program, the business
opportunity specialists who are defined by statute are the
primary face of the SBA to an 8(a) participant and are
responsible for delivering the programs and services of the
program to participants. They work in district offices under
the supervision of district management who report to SBA's
Office of Field Operations. It in my view that this overlapping
organizational structure creates programmatic challenges.
Without the cooperation and the leadership of the Office of
Field Operations, the associate administrator for business
development has little to no control over the implementation of
program, policies, and procedures, the hiring and selection
process and no input into the performance review process.
Consequently, I recommend a written agreement should be
developed between the Office of the Associate Administrator for
Business Development and the Associate Administrator for the
Office of Field Operations delineating the roles and
responsibilities associated with the district offices and the
delivery of the 8(a) program.
Additionally, the annual performance goals of the associate
administrator for Business Development should be shared by the
associate administrator for the Office of Field Operations and
should be incorporated in his or her annual performance
standards as well as those of the district directors and/or
business opportunity specialists.
7(j) resources should be allocated to the development and
delivery of specific programs and curriculums for new and
transitioning program participants. For new program
participants, training should focus on preparing them to
compete in the federal acquisition environment as small
businesses and 8(a) program participants. Similarly, for
transitioning companies, this coursework might include focus on
long-term planning and consideration for market expansion and
diversification. Such training for new firms in their beginning
stage may help alleviate the lag that many experience in
receiving their first contract opportunity.
Public Law 100-656 amended Section 7(a) of the Small
Business Act to include an 8(a) Loan Program. Specifically, the
administration was empowered to make loans either directly or
in cooperation with banks and other financial institutions. I
have no recollection that it was ever implemented. The
implementation of this program will provide a source of
critical financing for 8(a) program participants.
Under Section 8a)(12) of the Act, participants are required
to annually prepare and submit to SBA a capability statement.
Those statements are to be disseminated to executive agencies
and used during their annual contract forecasting to identify
simple contracts to support the 8(a) program. I am not aware of
adherence to this requirement. Adherence to this requirement
would greatly improve the likelihood of a new 8(a) program
participant receiving contract assistance earlier in its 8(a)
program participation.
And finally, there should be a focus on preparing
transitional stage firms to become mentors. The Mentor-Protege
program is an excellent opportunity for transitional 8(a)
participants to continue their growth and development. To
ensure the effectiveness of this program and validate that its
objectives are being met, SBA must improve its oversight to be
certain that both mentors and proteges are adhering to the
Mentor-Protege Agreement and that program regulations are being
followed.
Thank you for the opportunity to testify in connection with
this Committee's hearing on SBA's 8(a) program. I am happy to
answer any questions you may have.
Chairman MFUME. Thank you, sir.
Ms. Burnette-Robinson, you are now recognized for 5
minutes. If I can ever get your first name in front of your
second name and do this correctly before the hearing is over I
will have made a major accomplishment. Ms. Robinson-Burnette,
go right ahead.
STATEMENT OF JACKIE ROBINSON-BURNETTE
Ms. ROBINSON-BURNETTE. Good morning, Chairman Mfume and
Ranking Member Salazar and other distinguished Members of the
Committee. Thank you for all that you do for citizens like me,
giving us a voice and a chance to be heard. I am humbled and
honored to be here before you.
My husband, this handsome man sitting behind me is a
retired Army officer. We have two daughters serving as Army
officers and one just signed her Army Cadet Command contract
last week. We are a family committed to serving this nation.
The 8(a) program expands our ability to easily tap into all
the smart people in different corners of our country to help
tackle the nation's most pressing challenges as we engage in
humanitarian efforts or defend our great country, within our
borders and across the globe.
In the simplest terms, the 8(a) program offers a small,
disadvantaged business a chance to learn how to win a federal
government contract or subcontract, perform the work with their
own money or an SBA loan, and if the work is deemed acceptable
and timely, then expect payment. When I arrived at the SBA in
December 2014, I found the pool of firms shrinking. As an
inclusive leader, I brought my team around the table and asked
for solutions. I wish I could say the excitement and the shift
in operations that later led the team to win the highest-
ranking award at the SBA was due to how smart I was. But it
turns out, if you bring smart people around the table and
support them, you have a win.
I would like to share my thoughts today. Unfortunately, a
considerable amount of 8(a) firms graduate and they struggle to
stay in business 5 years after graduation. I recommend giving
8(a) graduate mentors priority with the Mentor-Protege program
application process. It is a low-cost and effective way to help
them quickly transfer their knowledge to a new 8(a). It would
increase the competitiveness of a protege and build longevity
for the graduate.
For months, the Office of Federal Procurement Policy and
GSA and contracting executives from multiple federal agencies
met to create and implement category management. However, there
were no small business executives at the table with an
equivalent seat. The SBA had a seat but no voice and SBA
regulations lagged behind for years without inclusion in the
federal acquisition regulation like the similarly situated
rule. I would suggest that Congress require OFPPs for our
counsel to consider its regulations in tandem with the SBA's
rulemaking. I also recommend a full-time senior executive at
the Office of OFPP who understands contracting and values the
contributions of small businesses. They would have a seat at
the table where the discussion is category management,
priorities for updates to the FAR or the next acquisition
reform.
I ran into a retired Army Lieutenant Colonel West Point
graduate and he said he has tried unsuccessfully since 2016 to
get 8(a) certification. He was a Special Forces officer. He
trained Army and Foreign Services. He won a 5-year contract
with the Special Operations Command. He shared with me his
letter of rejection. One, his Board of Directors meeting
minutes where he elected himself as president, treasurer, and
secretary had errors in it. The other, he had 93 percent of his
revenues from Special Operations Command. These issues are
irrelevant to eligibility. I am not advocating for dismissing
eligibility rules, but there must be a shift in the SBA culture
to ensure that the program is accessible for eligible firms.
I also recommend the SBA develop justification to
significantly increase their 7(j) budget, and I know that
Congress historically provides the funds based on it and I
would ask you to support the increase.
The 8(a) program typically has vacant positions for the
8(a) BOS and the business development specialists. I know that
the SBA is considering virtual support and I would recommend
that the SBA also bring on an HR professional from another
agency under detail to help assist objectively look at the
allocations. I also think the 8(a) sole source threshold should
be raised from $8 million for services and $10 million for
manufacturing. I understand the simplified acquisition
threshold is not within your jurisdiction but I would like it
to be increased. I would recommend an increase from $250,000 to
$1 million.
Finally, I know that the smart SBA employees in our federal
agencies will raise the bar and support President Biden's goal
of increasing contracts to small, disadvantaged businesses. His
goal is bold but it is very achievable. I urge you to take my
suggestions today to further strengthen the program. Thank you.
Chairman MFUME. Thank you, very much, Ms. Robinson-
Burnette. And Mr. Burnette, welcome to you also.
Mr. Khurana, you are recognized for 5 minutes, sir.
STATEMENT OF ARSHDEEP KHURANA
Mr. KHURANA. Chair Mfume, Ranking Member Salazar, and
Members of the Subcommittee, thank you for the opportunity to
testify before you today. My name is Arshdeep Khurana, and?I am
the president and CEO of AVOSYS Technology, headquartered in
San Antonio, Texas. AVOSYS provides enterprise IT support,
information assurance, software development, healthcare
staffing, biomedical research and support services to the
federal government's clients. Established in 1998, I have grown
the company from a one-man operation, to currently servicing
over 50 commercial and government contracts across 14 states.
When I immigrated to United States, I was in pursuit of
higher education and had the American dream of becoming an
entrepreneur. After naturalization, I started my business from
my apartment with a single dial-up server connection with a
server. For over a decade, I serviced several small and mid-
sized businesses as a trusted chief information officer. My
business was 100 percent commercial when I was accepted to the
SBA's 8(a) program in 2011. Through the program, my company has
been able to grow and become highly successful in the federal
marketplace. I am particularly proud of the multimillion dollar
competitive contract I was awarded to provide clinical
healthcare support services to the Air Force base clinic to
service our men and women in uniform. It is an incredible honor
to provide these services, and my company would not have been
here today without the 8(a) program, tremendous support from my
family, and the ever gracious, the Almighty Lord.
The past 2 years have been difficult for small businesses,
and 8(a) firms are no exception. I was thrilled when this
Committee added an extra year to the 8(a) program as part of
the pandemic response. This lifeline helped companies like mine
save jobs and stay afloat. While this extension was incredibly
impactful, the pandemic has unfortunately impacted operations
not just for 1, but for 2 years. Recovery did not truly begin
until the current fiscal quarter, leaving many 8(a) companies
approaching graduation without feeling like they had their full
time in the program. For companies like mine to truly succeed,
adding an additional year extension would make all the
difference.
Given the increasingly complex and competitive procurement
environment, I also recommend extending the 8(a) program to 10
years permanently. The decline in the number of 8(a) firms has
caused concerns across the program.
According to the SBA, in August 2021, there were about
4,906 program participants, while in 2010, there were about
roughly about 7,000. I believe this is happening for a number
of reasons and I suggest the following changes to the 8(a)
program in order to increase the number of successful
participants and dollars flowing to small, disadvantaged
businesses.
First, limiting the sole source awards to individually
owned 8(a) firms and other socioeconomic set asides are too
small. I suggest the Committee to increase the sole source
threshold as you did in the 116th Congress by eliminating the
option years and allowing the amount of $4.5 million and $7.5
million each year for services and manufacturing, respectively.
Group-owned 8(a) firms have seen huge success with the raising
of their sole source threshold five times to $100 million
without justification. Therefore, individual firms would also
welcome this important change with similar five times increase
from the current threshold amount.
Second, multiple 8(a) procurements are being bundled and
consolidated with scope additions making their follow-on
contracts too large for the individual 8(a) companies' current
direct award threshold level. Data on these awards remains too
broad; therefore, I suggest SBA break down their annual
scorecard spend into four subcategories. Mapping of the impact
of these dollars would assist the administration in identifying
contracts that could be set aside or directly awarded to
individually owned 8(a) firms.
Third, changing the business activity target requirements
is necessary to the developmental stage of the program. It
should start with the award of the first contract instead of
right away. Additionally, 8(a) competitive dollars should be
considered as small business competitive dollars meaning the
Business Activity Target (BAT) restrictions would only apply to
sole source revenue. Similarly, other program continuity ratios
including the audit requirement threshold should be at least
adjusted two to three times.
I cannot express the appreciation I have for the 8(a)
program and how it has dramatically changed my business after a
tough survival in both the 2001 and 2008 recessions. I am
sincerely thankful for the excellent support obtained from the
San Antonio Small Business Administration office and the many
SBA specialists on officers who are working hard for the
thousands of 8(a) business like myself. Not only does AVOSYS's
success impact me but it also impacts more than 200 employees I
have hired around the country as a result.
Thank you for holding this important hearing and I look
forward to answering your questions.
Chairman MFUME. Thank you, sir.
We will get to questions in just a moment, but I want to
make sure that we go to Ms. Li for her 5 minutes of testimony
and to say welcome again. Thank you.
STATEMENT OF QIN LI
Ms. LI. Thank you, Chair Mfume, Ranking Member Salazar, and
other Members of the Subcommittee. I am really thrilled to be
here to testify today.
My name is Qin Li. I am the president of Soliel, LLC.
Soliel is headquartered in the D.C. area in Vienna, Virginia,
and we bring innovative technical solutions to our customers to
help them develop and transform and modernize their IT systems
and infrastructure.
So originally from China, I came here and got my Master of
Science degree from George Washington University 25 years ago.
And I have called the D.C. area home since then.
Soliel's adventure into the government contracting is also
out of necessity. When I was seeking treatment for my middle
child, who has a very rare chromosome abnormality. So, when the
opportunity to subcontract arose, I took that risk and that is
how Soliel started in government contracting. And 12 years
later, today, we very proudly support a number of DoD agencies,
including DISA, Army, Navy, and DCSA. And that success is
really a testimony to our commitment and investment in
innovation and technology, as well as the contributions from
our team.
It is also remarkable if you think about only 9 percent of
women-owned businesses are Asian American owned, and only 6
percent of the science and engineering employees in the United
States are Asian. So, it is really a remarkable and very
humbling experience for me. And again, I want to really thank
this Committee to advance policies that will further advance
the interests for this Committee, especially the 8(a) program.
So, Soliel started in 2010 as a second-tier subcontractor
as I mentioned earlier. And then we became a first-tier
subcontractor. Gradually, we started bidding for small business
prime contracts. So, we received our 8(a) designation in June
of 2015. That is 5 years after we started our government
contracting business. So, the first 5 years we were
subcontractors and really building up our performance and
qualifications. The 8(a) program is really a game changer that
provided Soliel a critical, if not the only contract to really
prime and be successful. So, I am very passionate and I am
sincerely grateful for the program.
While it has allowed me to find a successful way forward, I
also just want to outline some thoughts on specific elements of
the program that can be further improved.
So, one of the challenges as mentioned earlier is for the
graduating and successful 8(a) companies to minimize the
potential loss in revenue once they graduate from the program
and they are no longer an 8(a). So, I believe greater
assistance from the SBA is much needed in this transition
period out of the program. For example, it would be very
helpful for the SBA to consider allowing contracts performed by
a graduated woman-owned or HUBZone company after they graduate
for that contract to be solicited as either a HUBZone or woman-
owned instead of just an 8(a) contract. This way, it aligns
with the SBA's overall goal as the Ranking Member has mentioned
to really advocate for the entire small business community, not
just 8(a) or HUBZone or woman-owned. So, it is fully aligned
with that if the graduating 8(a) is still a small business. But
it also allows the graduating 8(a) companies to minimize the
revenue loss and still retain their revenue.
The other thing that we could use a lot of help from the
SBA is oversight of the Mentor-Protege program. It is a very
powerful program and Soliel has been in that since the second
year we were admitted to the 8(a) program. While there is a lot
of structured paperwork and very good oversight during the
initial formation of the JV, there is not as much SBA
supervision in the later stage, especially in the execution
stage of the JV. So, there is also very limited recourse if the
mentor is not fulfilling its commitment. And so, giving the SBA
greater power with respect to the enforcement of the JV will
really help 8(a) companies like ours, the Mentor-Protege
program greatly.
So again, I really appreciate the opportunity to be here
today. It is very much an honor and I look forward to answering
questions.
Chairman MFUME. Ms. Li, thank you very, very much. And my
thanks to all of the witnesses who are with us this morning.
I would like to call your attention to the fact that we
have been joined by the distinguished gentleman from
Pennsylvania, Mr. Meuser, and welcome him, obviously, to this
hearing as well.
We have got some questions. You have all had great comments
and great suggestions. One of the things I know I can say on
behalf of myself and the distinguished gentleman from Florida,
our Ranking Member, is that we passionately want to make the
8(a) program much better. It is not something that divides us.
It is something that unites us. And I think beyond this
hearing, we have got to go directly to the administrator of the
SBA to figure out what can be done in the time that we have.
And I tell you, I speak out of a little bit of frustration.
I joined this Committee in 1987 when I first got elected to
the Congress. Served for 10 years, Chaired the Subcommittee,
went away for 24 years, came back, and many of the problems and
the issues and the suggestions that we were listening to then
have languished. They are still before us today. So, it is a
passion and there is absolute unanimity between the Ranking
Member and myself to try to find a way to get something done
legislatively with every bit of strength that we have.
So let me recognize myself for 5 minutes and we will
proceed with the Ranking Member and the order of Members as
they appear.
Mr. Hairston, we all know the 8(a) program is a 9-year
program divided into two phases--an initial 4-year development
stage and a final 5-year transition stage. You have heard from
some of our witnesses today with respect to changing that,
restructuring it because 9 years is not enough. Can you speak
to this 9-year timeframe? Give us from your own experience a
sense as to whether or not you believe, like many do, that it
is just not enough time for a small firm to develop the skills
needed to adequately compete in this economy, and by the time
they do they are out the door.
Mr. HAIRSTON. Thank you for that question. I listened to
those comments with interest. Several years ago, we developed a
proposal to redesign the 8(a) program along the lines that were
mentioned by the witnesses. One of the things that we talked
about was the fact that most firms coming into the program were
truly eligible for the program, had little experience in the
federal marketplace, and found it difficult to navigate the
federal system early on and their ability to achieve contact
assistance was hampered to an extent and sometimes they were 3
or 4 years in the program before they actually realized some
success in achieving that. The question around whether or not 9
years is long enough, I think the timeframe is highly dependent
upon how successful firms are coming into the program and how
well they take off with the benefits that are available to them
in the program. My thinking along those lines is that the
program should be a 9-year program. I think the way it is
structured though and how that term is implemented is what is
important. I honestly believe that when a firm first comes into
the program it should be provided targeted resources for
learning how to do business in the federal environment. They
should be given assistance in understanding acquisition trends,
understanding how to respond to solicitations, understanding
how to develop relationships and market themselves. And when I
think of marketing, I do not speak of marketing generally. I
speak of marketing and how that is actually done effectively in
the federal system. I think a firm's term should be dedicated
to receiving assistance under the 7(j) program targeted to
developing its ability to do business in the federal
government. If after that 1 year it does not receive a
contract, its term may start. Or, if it receives a contract
during that 1 year, maybe its term starts in that 1 year. I
would look at structuring a program in phases that allow for
business development to lead the way to success in the program.
Chairman MFUME. Okay. Thank you, Mr. Hairston.
Ms. Robinson-Burnette, I would like to just turn to you
quickly before yielding.
As was previously mentioned, the president has a goal of
increasing the share of federal contracting dollars to small
and disadvantaged firms from 5 to 15 percent by 2025. In your
experience, are there any specific steps that the SBA should be
taking and that we should be holding them accountable for to
ensure that the initiative results in agencies reserving more
opportunities for the 8(a) program and not less?
Ms. ROBINSON-BURNETTE. Thank you, Chairman, for that
question.
When I was a contracting officer years ago, in accordance
with the Federal Acquisition Regulation and my contract
training, my first step was to conduct market research for any
acquisition that came across my desk to determine if the rule
of two could be met. Can two or more small businesses do the
work? And if so, I would set the work aside for small
businesses or I would find an indefinite delivery contract or
GWAC, one of these multiple award contracts that would allow
set-asides for small businesses. With the shrinking acquisition
workforce and the new increase in use of GWACs and category
management, contracting officers are picking a contract vehicle
first, bypassing the small business staff, and saying that
contract does not require them to set aside for small business.
Even if an incumbent is the small business that would be
devastated with the loss of this work, or if the program was in
the 8(a) program, they pull it out and put it into these
contracts, I think the SBA must get more depth and more depth
engaged with the OSDIBU and the small business directors at
these agencies to learn what is really happening at their level
in terms of the challenges they have with getting contracting
officials to abide by the rule of two.
The OFPP memo, the White House Memo M2203, Advancing Equity
and Procurement, now requires OFPP and SBA and the OSDIBUs to
work together on category management. I think it is important
that they look across the government and engage in every level.
Our contracting officials abiding by the rule of two. When
small businesses can do the work, is the work going to small
business? Thank you.
Chairman MFUME. Thank you, very much.
My time has expired. I want to yield to the Ranking Member,
the gentlewoman from Florida, Ms. Salazar, and I want to call
your attention to the fact that we have been joined by the
gentleman from Wisconsin, Mr. Fitzgerald, who is also a Member
of this Committee. Thank you, sir.
Ms. Salazar?
Ms. SALAZAR. Thank you, Mr. Chairman. And I agree with you
that we have the bipartisan spirit in trying to find solutions
for this program because we are all, at least I consider myself
part of the American dream. And Ms. Li said it specifically and
the other witnesses as well. And thank you, Ms. Robinson-
Burnette, for your service. Not only yours but the handsome
husband behind you and the children that are joining the Armed
Forces of the United States. Very laudable. So, thank you.
I think I have a question for all of you but I am going to
start with Ms. Li. In very simple terms, if there is something
that you need to fix with the 8(a) program that you are saying
that helped you so much and it put you where you are right now,
what would it be? What would you do if you had the power to fix
that 8(a) program?
Ms. LI. Number one, thank you for that question. Thank you.
Number one would be to raise the threshold as echoed by my
fellow witnesses. The current threshold of $4 million for
services is way too small. Time has moved on. Contracting has
moved on. Everything has moved on but that threshold stayed.
And what that does is it really is an impairment to regular
individual 8(a) companies. And Soliel, my company, had multiple
times for our 8(a) contracts to be taken away because there is
not enough threshold. Either they were given to 8(a) companies
that can attain or support $100 million threshold or they were
being put on other contract vehicles due to the consolidation,
category management, all those reason to be put on an IDIQ
contract as a task order. So that is our number one.
Ms. SALAZAR. Number one. Okay. Okay. Let me give the
opportunity to Mr. Khurana. One thing that you would do, that
you would fix with this program?
Mr. KHURANA. Ma'am, I would echo Ms. Li's comments as well.
The threshold is way too limiting. It deserves the same
increase as the group-owned 8(a)s, up to at least $22 million
for the individual 8(a) owned. This will make a significant
impact on the competitiveness for the business as they get
ready for the competitive non-8(a) small business awards as
well.
The second would be to really enhance measures to the
scorecard goals that is set for the agencies to recognize what
really makes the bottom line difference to more than 99 percent
of the companies like myself, which is identifying the
trackability as you mentioned, ma'am, earlier, if the dollars
being spent on the direct awards is indeed going to the
individually-owned 8(a)s. And what the recent trend contrary
has been unfortunately that the threshold has shifted
predominantly to the group-owned 8(a)s in the recent years
because of their unique capability to get awards at a much
higher threshold value.
Ms. SALAZAR. All right. Ms. Robinson?
Ms. ROBINSON-BURNETTE. Thank you for that question.
Some federal agencies have started decreasing their
contracts going to the 8(a) program because the pool was
shrinking and they did not want their contracts tied into the
8(a) program and not have enough firms to perform the work. I
would make sure that the SBA shift their focus to include every
firm that is eligible. The SBA can provide statistics on their
applications, but when I was at the SBA, I though the issue
with the declining pool was we were not receiving enough
applications. Then I found we were receiving 2,300 applications
a year and certifying 300.
Ms. SALAZAR. You said something about shifting the SBA's
culture.
Ms. ROBINSON-BURNETTE. Yes.
Ms. SALAZAR. What do you mean by that?
Ms. ROBINSON-BURNETTE. Right now the focus is making sure
they mitigate the risk of firms getting into the program that
should not be in the program. Focusing on the fraud and really,
that is the 1 or 2 percent of firms that apply. And so, the
other 90-plus percent of firms are struggling to get in, like
this lieutenant colonel that I talked about, because the SBA is
focused on the wrong thing.
Ms. SALAZAR. And I would like to hear your opinion. We have
a problem where the SBA is allocating those funds but is not
tracking if those funds are being successful. Meaning, like at
a university. We are paying for the tuition but we do not know
if the student receiving it is getting good grades, if it is
attending classes, or if it is graduating. So, the money is not
being, I believe that is just, we do not know if it is being
well used. So, do you feel the same way? Do you think that is
your impression? Ms. Li?
Ms. LI. Yes, I tend to agree. And one of the questions we
always ask is how do you measure a program's success? Is it by
how many new 8(a) companies are being admitted or how many 8(a)
contracting dollars that went into individual firms like ours?
Or is it by how many are graduating and how many are still in
business 5 years after?
Ms. SALAZAR. Which one do you think should be the right
answer?
Ms. LI. I think it should be number one, the dollars that
actually go to individual 8(a) firms. And number two, are they
still in business 5 years after graduation?
Ms. SALAZAR. What do you say, Mr. Khurana?
Mr. KHURANA. I would echo exactly the same, ma'am.
Ms. SALAZAR. Ms. Robinson?
Ms. ROBINSON-BURNETTE. Yes. The number of dollars----
Ms. SALAZAR. What should be the guidelines?
Ms. ROBINSON-BURNETTE. The number of dollars going to
eligible, to firms. And not just the super 8(a)s but the
individually-owned small businesses. The number of firms. And
then how many firms graduate and can stay in business after 5
years. I would also like to add, how many firms graduate and
can actually sell their company to a new 8(a) that comes in. It
is important that we reduce the burdens on that. A woman-owned
can sell to another woman-owned and their contracts stay. A
veteran to a veteran. If an 8(a) sells to another 8(a), a
graduate 8(a) sells to a new 8(a) and transitions, those
contracts are slated to be terminated. And that is unique only
to the 8(a) program.
Ms. SALAZAR. Mr. Hairston, I am going to give you the last
word.
I think he is muted.
Chairman MFUME. Mr. Hairston, we cannot hear you.
Mr. HAIRSTON. I apologize. I agree with the issues around
measuring success, but I think you also have to consider the
motivation of the entrepreneur coming in and what constitutes
success to that entrepreneur. I think measuring based on
dollars received is a fair measure, but we cannot forget that
this is a business development program and it has basically
survived based on the notion that it is a business development
program. So, anything measuring success also has to be
attributed to the business development assistance that has been
provided to the firm.
Chairman MFUME. Mr. Hairston, I am going to ask you to
begin to conclude.
Mr. HAIRSTON. Okay. But I would agree with the comments of
the other panelists.
Chairman MFUME. Thank you very much.
Ms. SALAZAR. I yield back.
Chairman MFUME. The gentlewoman yields back.
The Chair recognizes the gentleman from Pennsylvania, Mr.
Meuser, for 5 minutes.
Mr. MEUSER. Thank you very much, Mr. Chairman. And thank
you to our Ranking Member as well. Thank you to all of you.
Very important subject. I can see it in your eyes. You are
living this and it is very essential to your business
livelihood.
So, the questioning that is taking place here is specific,
and boy, that is what we need to do. And as the Chairman stated
earlier, that he has been dealing with such bureaucracy and
less than business efficiencies in these requirements for many,
many years. And I am hearing all that.
So, my first question would be to Ms. Robinson-Burnette,
and I think I already know the answer. But do you have a white
paper outlining some strong suggestions of what would be in the
interest of the contracting that we could have and we could
work on to actually try to implement? Do you have such a plan
already written?
Ms. ROBINSON-BURNETTE. Thank you, Congressman, for the
question.
I do not have a white paper, but my written testimony is 15
pages long that goes in-depth about the recommendations that I
have offered today.
Mr. MEUSER. Beautiful. I summarized it. I am sorry. I did
not read the whole thing but that will suffice.
Okay. So next, the administrative burdens the government
placed on small businesses that everybody is agreeing we want
to reduce, the fraud end of it, you say that is 1 to 2 percent,
and I agree with that. I think a little bit of a phone call and
a little bit of data analysis in today's information age should
not be all that difficult to determine whether it is a real
company or a phony-baloney company.
Now, on the same note, we just came off of EIDL and we had
some really rush initiatives which we are very familiar with
that did have some significant fraud in them. So, it has got to
be a concern.
Quickly, Ms. Li, let me go to you, if you would. What can
be eliminated from that so as we can have integrity and
efficiency?
Ms. LI. Thank you. From my own experience, the individual
8(a) program seems to be administered better than the 8(a)
Mentor-Protege Joint Venture program. Soliel has been in the JV
program for 6 years now. There is a lot of opportunity for the
SBA to really exert oversight and improve its oversight to stop
the abuse from the mentors to its small business proteges. That
is where my personal experience has been focused on.
Mr. MEUSER. Okay. So, you all must be aware of some
companies, and you have experienced it yourself, engage in the
contracting, 4-year eligibility for the contracted self and
just run into barriers that do not make a lot of sense to you
but you need to overcome anyway because it is a very important
contract. Does that happen regularly? And do you know other
companies that just give up because it seems too burdensome?
Ms. LI. Yes, I do.
Mr. MEUSER. Go ahead, Mr. Khurana. Go ahead.
Mr. KHURANA. Thank you for the question, sir. Absolutely.
Through the 9-year journey, the first 3 years I almost gave up
hope. This is after surviving two recessions, surviving in
commercial for 14 years, and still facing the challenges. I
mean, I thought 8(a) would be to the rescue but of course, in
the third year I got blessed with the first U.S. Air Force
contract. Then I started to foresee a few other challenges
which are roadblocks, clearly distinguishing them as such on
why they are there. What I started to notice is the
consolidation efforts, the bundling efforts, scope creeps on
the existing requirements just to make them above the direct
award threshold by the agencies so that they could make it
competitive or be awarded to the super 8(a)s. And that was at a
big loss of the development dollars which are much essentially
needed for the development firms like myself.
Another common one seen is the category management, and
once we are graduating, those 8(a) requirements are being
removed from the 8(a) to small business or some other category;
I believe requires strengthening the PCRs of the SBA which are
procurement representatives. They are our guardians. Protecting
the program and the requirements within the 8(a) program. They
need to be empowered, should have the influence on the agencies
and the additional scorecard mechanisms, as I have highlighted
a few options in my 10-page testimony.
Mr. MEUSER. Lastly, and I have very limited time, do you
find that ineligible companies are gaming the system and
gaining the contracts more in an unfair manner?
Mr. KHURANA. Sir, within the 8(a) program, I believe it is
very well vetted, at least the 8(a) part. The other
socioeconomic I am not too privy about but there may be some.
Mr. MEUSER. Okay. And are there any reasons that businesses
do not apply because the payment is not there, the requirements
are too costly? And I know I am over my time, Chairman, but a
quick answer to that. Do some small businesses not apply
because it is simply not worth it?
Please, Ms. Robinson-Burnette.
Ms. ROBINSON-BURNETTE. As I said, over 2,300 firms apply
every year. They are applying. Only 300 are being brought in.
Firms are paying advisors $4,000 to $10,000 to do applications
for them. So, they are interested. It is just very difficult to
get through the cumbersome process at the SBA, not relative to
eligibility but mistakes or in the application. It has nothing
to do with are they eligible.
Mr. MEUSER. We will certainly work on this. And thank you.
And thanks for your indulgence, Mr. Chairman, for being
over.
Chairman MFUME. The gentleman yields back.
The Chair recognizes the gentleman from Wisconsin, Mr.
Fitzgerald, for 5 minutes.
Mr. FITZGERALD. Thank you, Mr. Chair.
My colleague on this Committee, Mr. Evans and I introduced
H.R. 5861, which is the Waiver Authorization Streamline Act. It
seeks to reduce the regulatory burden on the 8(a) transferring
its contract to another 8(a) company. So, I know that was kind
of discussed here. And after acquisitions or simply just being
gobbled up by the other company, instead of going through the
multi-level review process, which could span months as was
brought up earlier again, SBA administration, being the
authority to waive the approval process so long as the 8(a)
company is absorbing the contract can perform the work.
So, I am going to ask Ms. Robinson-Burnette. So before
serving as the CEO of the consulting firm you served as senior
exec to the SBA Office of Government Contracting, so I
appreciate your experience. Based on your experience, do you
believe streamlining the approval process for transferring the
8(a) contract after acquisition would help keep more small
businesses in the program?
Ms. ROBINSON-BURNETTE. Thank you, Congressman, for that
question.
The SBA administrator on a nondelegable authority is the
approving authority for transferring the 8(a) contracts when an
8(a) graduate is acquired. And I believe that that authority
should remain at that level. But the contract should not be
automatically slated for termination without that. I believe
that the only time those contracts should be terminated is if
the company is going to a non-8(a), or if with the
consolidation of the company that acquires it the company now
becomes other than a small business. Because once you join
those two companies, they could now exceed the size standards.
But if they are still small, what a great way for a new 8(a) to
start out with contracts, customers, and possibly the
mentorship of the firm that released the company.
Mr. FITZGERALD. Yeah, I do not want to overgeneralize, but
sometimes those mergers are either because there is a stress on
one of the two, financially, or in some instances, I mean, it
makes sense because both entities kind of say, you know, we are
competitors now. We should kind of unite and be more
competitive in the market; right?
Ms. ROBINSON-BURNETTE. Yes. Also, after a 9-year term,
sometimes--one real example I had, and it was the first time I
encountered this, I was actually the associate administrator of
the 8(a) program, an 8(a) participant died. And now his
contracts had to go to another company. And if the company was
sold to another 8(a), then, of course, his family that helped
him build this company could benefit but then transition the
company and the employees to a new 8(a) so the company could
continue to go instead of the company having to shut down,
employees lose their jobs and all the contracts be terminated.
So it could be because of illness, a desire to retire after 20
years in the business, or the company just wants to sell for
other reasons.
Mr. FITZGERALD. Gotcha. Very good. Very good. Thank you.
Just real quick, Ms. Li, Wisconsin, my home state, our big
three are tourism, agriculture, and manufacturing. And for the
most part, light manufacturing. So, you have got kind of these
smaller factories and then you have got the transportation
component, and then you might have a tool and dye shop down the
road. So, they are all integrated. In my experience, not only
personal experience because of interacting with some of the
small businesses and my father-in-law that was in manufacturing
for years, but oftentimes, I mean, they would tell the story
that the federal contracts would come, they would land on the
desk, and they would put their best person on it. But by the
time they got done bidding it and going through kind of what
the standards and specs are, it just was not worth their time.
So, they eventually would just give up on any of those types of
contracts. The reason I bring it up is because I think there is
a misnomer that, oh, my gosh, we cannot wait to get government
contracts because it is just the best thing in the world and
that is not always the case, I think, especially for medium to
small businesspeople. And I am just wondering if you could
comment on that and what your experience on that front is.
Ms. LI. I would agree. Especially if you think about it, a
lot of the acquisitions, even though it is a direct award or a
small business set-aside, they require a huge amount of
certification, especially with the cyber risk and supply chain
risk for the DoD community that we support. It is a legitimate
requirement, but to what extent for a small business that you
need to require the same level of certification as those
billion dollar companies that have resources to go through, you
know, years of certification and investing hundreds of
thousands of dollars to acquire those. So that is a legitimate
concern and I share that.
Mr. FITZGERALD. Very good.
Thank you, Mr. Chair, and I yield back.
Chairman MFUME. The gentleman yields back.
The Chair is happy to recognize and to welcome Mr. Stauber,
the gentleman from Minnesota who has joined us.
Mr. STAUBER. Thank you very much, Mr. Chair.
While we can all agree that increasing contracting goals of
the federal government, especially of the disadvantaged small
businesses, it is a laudable goal, I think we need our agencies
to be more transparent. It seems to me that agencies are
picking a few of their favorite small businesses, dumping all
their money into those very select few, and then reporting that
they are far exceeding their contracting goals year after year.
So, without competition, we are guaranteed to see an increase
in prices for taxpayers in the long run.
Ms. Li, can you explain how contract consolidation
practices has harmed more competition amongst 8(a) businesses?
Ms. LI. Thank you. I would be very happy to.
As mentioned by my fellow witnesses earlier, this category
management----
Chairman MFUME. Ms. Li, would you speak into the
microphone? Thank you.
Ms. LI. Oh, I am sorry.
Chairman MFUME. That is okay.
Ms. LI. I would be happy to. And that is what we live with
as individual 8(a) companies on a daily basis because there is
the group 8(a)s that have now a threshold of $100 million. So
even when there is an 8(a) opportunity that is being solicited
or directly awarded and Soliel was on the receiving side of
that multiple times, the question for a contracting officer is
very realistically, if you have a requirement that is $4
million a year but a 5-year requirement totaling $20 million or
above, so what do you do? Would you give to an individual 8(a)
company that you need to then subsequently, if you are even
allowed to reissue that same contract five times or four more
times? Or would you give it to another 8(a) company, group 8(a)
company that has a much higher threshold?
So, it is really a challenge. And one of the contracts that
Soliel performed, we lost that because of the real
consideration, very practical considerations. It went to a
group-owned 8(a) company but I cannot say the performance was
up to the level, so it was subsequently recompeted. So, to your
question, I am really saying one of the ways to address that is
to raise the threshold so there is more a level playing field
among 8(a) companies and also extending that to all small
business. You have HUBZone, woman-owned, veteran-owned, SDVOSB.
So that would really help the small business. Thank you.
Mr. FITZGERALD. Thank you very much. That was the only
questions I have. And I yield back, Mr. Chair.
Chairman MFUME. Thank you very much. The gentleman yields
back.
The Chair recognizes the gentleman from Louisiana, Mr.
Carter, for 5 minutes.
Mr. CARTER. Mr. Chairman, thank you very much. I greatly
appreciate the opportunity to ask questions.
Let me ask a question very basically. When we talk about
8(a) contractors, we know that the issues that impacted those
contractors during COVID have been somewhat adjusted by
advancing an additional year. We know that many of those
contractors suffered beyond that 1 calendar year. What are your
thoughts on some additional time and/or assistance that can be
given to those people that were graduating out of the 8(a)
program but lost significant time because of the pandemic?
Mr. KHURANA. Thank you for the question, sir.
As a graduating 8(a), the recent addition has made a decent
impact but it is not yet just enough. I will give an example.
The last year, our own follow-on contract from the United
States Air Force for the clinical healthcare services came up
for Avosys to be able to recompete on and that was only made
possible because of the 1-year extension given. However, there
are many other large government vehicles which are delayed
through the pandemic response in getting reprocured and I feel
that I will be losing that once in an 8(a) lifetime chance to
bid on them. So, I humbly request another year of extension
which will make a real big difference to many graduating 8(a)s
like myself.
Mr. CARTER. Anyone else want to add on that?
Ms. ROBINSON-BURNETTE. Thank you, Congressman.
I think an additional year would significantly benefit the
8(a)s that are in the program right now. Also, I think it is
incumbent on the SBA to really push the Mentor-Protege Program
which allows a graduating 8(a) to joint venture with a new 8(a)
and transition the contracts and continue to perform on 60
percent of the work. And this is a real legitimate way that an
8(a) that is graduating can maintain their work and their
customer base.
Mr. CARTER. How much of that actually happens? I hear about
the Mentor-Protege Program. I hear varying thoughts on some
that work, some that do not work as well. What is your general
experience on the availability of willing mentors?
Ms. ROBINSON-BURNETTE. Thank you for that question. I think
the SBA's Mentor-Protege Program is one of the most successful
programs that has come out of the SBA. The director of that
program is Mr. Stanley Jones, Jr., I think one of the smartest
leaders at the SBA. It is work exceptionally well and the SBA
has a Mentor-Protege Program conference every year. They had
one before COVID-19. And this is a great place to do
matchmaking between graduated 8(a)s and new 8(a)s and allowed
them to meet and connect at that event.
Mr. CARTER. Can some body speak to the reverse of that,
becoming and finding a protege? How successful has that been
and are there seamless opportunities to create that linkage?
Mr. KHURANA. Sir, I would like to add there are elements
which can be implemented to come in line with the mentor-
protege intention and the success which can be achieved through
it. First, the sole source threshold, if it comes close to the
four or five times the capacity it is, it will help directly
give the empowerment to the prime contractor or the 8(a)
contractor to compete for the real world awards which are
generally on an average of $20 to $25 million.
Two, the SBA lending program could be empowered with
working with the banks to provide the line of credit which is
much needed on the financial support rather than reliance on
just the mentors.
Three, empowering SBA with the additional PCRs for the
support, they can then further help us in providing the
contract legal HR negotiation support which is much needed.
These are all elements which a mentor would typically provide
to the proteges and SBA has been instrumental in giving many of
those but more could be done. Thank you.
Mr. CARTER. Mr. Chairman, unless there is somebody else
that wanted to weigh in? I am sorry; did I hear someone jump
in?
Chairman MFUME. None of the witnesses unless it is Mr.
Hairston, who is not here.
Mr. CARTER. Okay, in that case, Mr. Chairman, I would like
to, first of all, thank you, and thank all of our witnesses.
Mr. Chairman, I ask at a later date if we can revisit the
possibility of visiting with SBA to see what the likelihood and
ability for us to advance discussion to consider an additional
year of resources for those 8(a)s who were undoubtedly
significantly harmed by the pandemic.
Chairman MFUME. Thank you very much. It is so noted and I
appreciate your comments.
One of the things we really I think are committed to doing
in this Committee is to find a way to start being able to mark
some progress so that 5 years from now this is still not the
discussion.
And I want to take a moment just to thank again all of our
witnesses, Mr. Hairston, Ms. Li, Mr. Khurana, and Ms. Robinson-
Burnette. I have to say I am a little troubled to hear though,
and I was not aware of this and maybe it is my own fault, that
if you are an 8(a) contractor and you die or you retire after
25 years or something else happens and your business is sold to
me, that all of the contracts that are in place are considered
null and void. I mean, that really, really disturbs me,
particularly I think as you said, Ms. Robinson-Burnette, that
that is not the case with any other category of business. There
are a lot of good ideas and suggestions from all of you that I
hope we will find our way to make into legislation. The Ranking
Member and I as I have said before are committed to real change
and change that is verifiable so that we are able to mark
progress.
But again, I want to thank all of you. I want to thank Ms.
Salazar. She was kidding earlier when she was not really
kidding. This is the first time we have sat together on a
Committee because we have been in a hybrid virtual situation.
But here we are, the A Team. My thanks to all of you and this
hearing now stands adjourned. Thank you.
[Whereupon, at 12:14 p.m., the subcommittee was adjourned.]
A P P E N D I X
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
TESTIMONY OF
QIN LI
PRESIDENT, SOLIEL LLC
HOUSE COMMITTEE ON SMALL BUSINESS
SUBCOMMITTEE ON CONTRACTING AND INFRASTRUCTURE
``THE 8(A) PROGRAM: OVERVIEW AND NEXT STEPS TO
PROMOTE SMALL BUSINESS SUCCESS''
MARCH 2, 2022
Chair Mfume, Ranking Member Salazar, and Members of the
Subcommittee, thank you for the opportunity to testify before
you today. My name is Qin Li, and I am the President of Soliel
LLC, located in Vienna, VA. Soliel brings innovative solutions
and capabilities to help its customers develop and transform
its IT systems and infrastructure. We provide technical and
functional engineering, development expertise in IT
modernization, cloud migration, DevSecOps, software
engineering, data analytics, and cybersecurity.
Bringing the same innovation and cutting-edge solutions
that I worked with in the private sector to the government
sector, I steered Soliel into government contracting in 2010.
Soliel, a woman-owned, 8(a) company provides technical
engineering and development services to the U.S. Government. We
have built an impressive team of subject matter experts that
have extensive expertise in computing, networking, data, and
cloud. We serve many U.S. Government customers, which include
the Defense Information Systems Agency (DISA), Army, Navy, and
the Defense Counterintelligence and Security Agency (DCSA).
Originally from China, I got my Master of Science degree from
the George Washington University and have called the Washington
D.C. metro area home ever since.
Soliel's adventure into government contracting was also out
of a need for flexibility and taking advantage of opportunity.
Seeking treatment for my middle child with a rare chromosome
abnormality requires more flexibility than full time employment
offers. When the opportunity to subcontract to a large firm
presented itself, I took the risk. Soliel's success is
remarkable given that only 9% of all women-owned companies are
Asian American owned, and Asian women account for only 6% of
science and engineering employees in the United States.\1\
Navigating the complex acquisition process and competitive
federal contracting industry is a daunting task for any
company. We have invested heavily to build our own innovation
lab to stay on the forefront of new ideas and technologies--
before bringing them to our customers. I am always looking for
opportunities to empower other women to pursue careers in
technology or start a business, as well as participate in
acquisition and small business policy discussions.
---------------------------------------------------------------------------
\1\ The 2019 State of Women-Owned Businesses Report: Summary of Key
Trends. American Express, 2019. https://s1.q4cdn.com/692158879/files/
doc--library/file/2019-state-of-women-owned-businesses-
report.pdf
I would like to start by thanking the Committee for its
commitment to small businesses and for advancing policies that
support small businesses doing business with federal
government. Soliel started in government contracting in 2010,
as a 2nd tier subcontractor in support of DISA. We
then became a 1st tier subcontractor, and gradually
started bidding for small business prime contracts. Soliel
received its 8(a) designation in June 2015, and it provided
Soliel a critical contract vehicle to accelerate our growth. I
would like to outline my thoughts on some specific elements of
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the 8(a) program.
While the 8(a) program has allowed me to find a successful
path forward, I know many companies have not had the same
experience. For example, one of the downfalls for any company
is relying on 8(a) awards as the majority of their business.
So, when it is time to graduate, companies do not have exit
strategies to transition out of the program. One of the ways
the Small Business Administration (SBA) is trying to tackle
this issue is through the 7(j) Management and Technical
Assistance program. According to the SBA, the 7(j) program
provides assistance in a wide range of business activities,
including marketing, accounting, opportunity development and
capture, contract management, compliance, and financial
analysis. When I attended a 7(j) training, I found it was
geared more towards businesses just starting out, instead of
those who were newer 8(a) program participants but more
developed contractors. Although training for companies new to
contracting is necessary, it would be beneficial for the SBA to
consider having two tracks--one for businesses who are in the
beginning phases of the program and one that is more advanced.
Utilizing this existing resource could be a way to tackle the
issue of businesses struggling to succeed after graduation. SBA
resource partners and 7(j) training would benefit from
information shared from Business Opportunity Specialists (BOS)
who counsel firms like mine, so that more relevant resources
could be provided to 8(a) program participants.\2\ Tracking
success of 8(a) participants throughout their time in the
program is important for all of these programs to best support
small, disadvantaged businesses (SDBs).
---------------------------------------------------------------------------
\2\ See Finding 2: SBA Needs Improved Procedures for Providing
Business Development Assistance. https://www.oversight.gov/sites/
default/files/oig-reports/SBA/SBA-OIG-Report-22-08.pdf
It is also important to assess how participant firms are
performing once they have left the program. I have heard many
stories of fellow program participants struggling to continue
after their 9 years have ended. A recent report from the SBA's
Office of Inspector General (OIG) suggested tracking whether
the program achieved business development objectives, including
the number of graduated 8(a) firms.\3\ I think it is important
that the Committee examine ways to ensure better success of
program graduates. Additionally, greater assistance from the
SBA is needed in the transition out of the program. For
example, it would be helpful for the SBA to consider allowing
contracts performed by a graduating 8(a) women-owned small
business (WOSB) to be solicited and awarded as a WOSB contract
instead of 8(a). This approach fully aligns with the goal of
promoting small business success and provides graduating 8(a)
small businesses additional opportunities to perform their
contracts, especially when requirements were introduced into
the 8(a) program by the graduating small business. Currently,
all graduating 8(a) small businesses will not be able to prime
for their work once they are no longer an 8(a), losing a
significant portion of their revenue.
---------------------------------------------------------------------------
\3\ Id.
There have been some issues with SBA oversight with respect
to the joint venture (JV) program, which has directly impacted
my company. While there is a lot of paperwork and scrutiny in
the initial stages of a JV, there is not much SBA oversight
beyond that stage, and there is limited recourse if the mentor
is not fulfilling its commitment. In many instances, small
businesses are being taken advantage of by large companies in
these arrangements. For example, Soliel's large business mentor
used their ``negative control'' / ``veto'' to block the JV from
responding to opportunities that they did not want to pursue,
despite them being viable for the JV. This action, taken by the
mentor solely out of self-interest, significantly impaired the
JV's success and breaches its fiduciary responsibility as a
mentor and shareholder of the JV. The issue was brought to the
SBA district office, but it was not clear what recourse the SBA
can give to enforce a correction of the mentor's behavior.
Giving the SBA greater power with respect to enforcement of
these agreements would help assist 8(a) companies, as well as
---------------------------------------------------------------------------
all small businesses, when mentors take these type of actions.
Further, there are additional policies that impact not just
8(a) firms, but all small businesses doing business with the
federal government. Small business contractors are currently
facing unprecedented economic and workforce challenges due to
the ongoing COVID-19 crisis. According to the survey by the
National Defense Industrial Association, 60% of small business
respondents expect to have long-term financial and cash-flow
issues.\4\ Additionally, the small business industrial base has
been shrinking over the past 10 years. Analysis of agency data
reported in the Federal Procurement Data System (FPDS) finds
similar trends regarding the small business supplier base at
large, including a loss of 49,000 small businesses (or 38% of
small businesses) in the Federal supplier base since 2010.\5\
---------------------------------------------------------------------------
\4\ NDIA COVID-19 Small-Business Impacts Survey Summary (2020).
Available at: https://www.ndia.org/-/media/sites/ndia/policy/documents/
covid-19-small-business-impacts-survey-summary.ashx.
\5\ Memorandum from Executive Office of the President Office of
Management and Budget M-22-03, Advancing Equity in Federal Procurement
(December 2, 2021).
I. Bring sole source thresholds in line with current
---------------------------------------------------------------------------
government buying
Since the 8(a) program has a time limit of 9 years, it is
important to me that other socioeconomic set-aside programs at
the SBA can be utilized after graduation, such as WOSB. One
area that needs to be changed is the current sole source
thresholds for individual 8(a), WOSB, service-disabled veteran-
owned (SDVOSB) and Historically Underutilized Business Zones
(HUBZone) certified firms. Both the House and Senate Small
Business Committees have attempted to increase sole source
thresholds and bring them more in line with government buying.
The House passed H.R. 190 in the 116th Congress, which
eliminated option years and would have allowed for the current
threshold amounts per contract year. A draft of the Senate
Small Business Committee SBA Reauthorization bill in the 116th
Congress also made changes to the thresholds--raising them to
$8/$10 million per year by eliminating option years. Included
in the 2021 House passed version of the National Defense
Authorization Act (NDAA) was H.R. 3065, Expanding Contracting
Opportunities for Small Businesses Act of 2021. This bill
raised the sole source thresholds to $8/$10 million per year
but did not eliminate option years. I would like to thank the
Committee for their tireless work to achieve this increase over
the past two Congresses, especially Ranking Member of this
Subcommittee, Representative Salazar, as well as Ranking Member
of the Committee, Representative Luetkemeyer and his staff.
Soliel has had multiple 8(a) direct awards where our team
performed extremely well. However, because some of the
requirements had a higher dollar amount than the $4 million
threshold, the work was awarded other contract vehicles that
have a higher ceiling threshold. In one case, Soliel's work was
consolidated into another 8(a) sole source award to a
community-owned 8(a) contractor because they can be awarded up
to $100 million without justification. In another case, instead
of making a direct award to Soliel, since the threshold was too
low, our work was instead competed on a large existing
indefinite delivery/indefinite quantity (IDIQ) and awarded as a
task order.
Broad bipartisan support for increasing small business
participation in the federal marketplace dictates changes are
needed to bolster awards to these businesses. Increasing these
thresholds is a necessary change to acquisition policy given
the average size of contracts. By making these programs more
accessible for federal agencies to use such as the 8(a)
program, many more small businesses will benefit.
II. Strengthen subcontracting transparency and
accountability
Since subcontracting was so integral to my long-term
federal contracting success, I want to discuss how the
Committee could improve this process. Subcontracting serves as
an important avenue for small businesses to enter the federal
marketplace and build past performance and often the only way
to win work. With larger contract being utilized by the federal
government, subcontracting is more important than ever. It is
critical that prime contractors are rewarded for adhering to
subcontracting plans and penalized if they do not. Presently,
there is little to no recourse for prime contractors that fail
to meet their small business subcontracting goals. Soliel
started out its federal work as a 2nd tier
subcontractor. We worked as a subcontractor in the first four
years of our operation. Our first competitive contract win was
in our 4th year as a contractor. However, it was
protested, which delayed our ability to perform. Thankfully
this protest was defined by the Government Accountability
Office (GAO), and Soliel was able to resume support.
Subcontracting was the critical to Soliel's survival and
success as a contractor, as I know it is to many other small
businesses.
The FY2021 NDAA included language to require large primes
with subcontracting plan requirements to provide past
performance evaluations when requested. However, many small
businesses have faced issues when requesting this information.
Creating a streamlined framework for large primes to provide
this information to small businesses would greatly assist
businesses trying to enter the prime contracting arena.
Although reports by federal agencies show that dollars are
being awarded to small businesses at consistent levels in best
in class (BIC) contracting vehicles, the number of small
business concerns being awarded prime contracts is shrinking
drastically. Category management undoubtedly plays a role.
Consequently, subcontracting is now incredibly important for
small business concerns. Many small businesses are not prime
awardees of BIC vehicles, and many may not have the
qualifications to even bid on these large contract vehicles.
Transparency should include whether prime contractors have
aggressive small business goals in their subcontracting plans.
It would be extremely beneficial to small businesses if data
existed on three fronts: (1) the number of subcontractors on
BICs broken down by small businesses and the socio-economic
set-aside programs listed under the Small Business Act; (2)
compliance of primes in achieving goals set forward in
subcontracting plans; and (3) the percentage of subcontracting
work performed by small business concerns on taskorders.
A 2020 GAO report on subcontracting compliance \6\ found
that agencies did not consistently follow all required
procedures for oversight of small business subcontracting
plans, both before and after contracts were awarded. GAO
reviewed 26 contracts with a subcontracting plan at 4 agencies
and found that of the reviewed contracts, about half of the
agencies could not demonstrate that procedures for Procurement
Center Representative (PCR) reviews were followed. PCRs are
critical for ensuring small business success in federal
agencies--they have been shown to increase the small business
share of Federal procurement awards through their work. PCRs
initiate small business set-asides, provide small business
sources to identified opportunities and counsel small firms.
However, there are currently a limited number of PCRs available
to do this important work. Increasing the number of these
positions would assist the success of 8(a) firms, both during
their time in the program and after they graduate.
---------------------------------------------------------------------------
\6\ U.S. Gov't Accountability Off., GAO-20-464, Small Business
Subcontracting: Oversight of Contractor Compliance with Subcontracting
Plans Needs Improvement (2020).
Further, category management shuts out any small or midsize
companies from competing for the work--the requirements were
structured for very large businesses. Subcontracting is
becoming an increasingly important tool for small businesses to
enter the federal market. I encourage the Committee to look at
incentives that would spur subcontracting plan compliance,
---------------------------------------------------------------------------
transparency, and accountability.
III. Align rulemaking between SBA and the FAR Council
Each year, SBA issues a procurement scorecard, which
indicates how agencies performed in meeting their small
business goals.\7\ The governmentwide goal of contracting with
WOSBs is 5%. Despite this small number, the federal government
has only met this goal twice. However, fewer contracts have
likely gone to WOSBs due to inaccurate reporting. Agencies
often count the same dollar value towards multiple
socioeconomic program goals, even though the contract was not
explicitly a set-aside for more than one program. For example,
if a contract is set-aside for the WOSB program, and the
winning company is also a certified HUBZone and SDVOSB, those
contract dollars count toward the agency's goals in each of the
3 programs. This practice ultimately inflates the data reported
on small business contracting awards. It would be beneficial to
the small business contracting community if agencies reported
progress toward small business based on how the contract was
solicited. In other words, if an agency set a contract aside
for the WOSB program, then the dollars should only count as a
WOSB award. This change would hold agencies accountable for
truly awarding 5%, for example, to WOSBs, and result in an
increase in the number of awards to small businesses.
---------------------------------------------------------------------------
\7\ SBA FY2020 Small Business Procurement Scorecard, available at
https://www.sba.gov/sites/default/files/2021-07/GW-508.pdf (last
visited Feb. 24, 2022).
Further, pervading inconsistencies exist in government
contracting due to discrepancies between final rules issued by
the SBA and the Federal Acquisition Regulatory (FAR) Council.
This causes confusion for both companies and federal agencies
on which guidance they should ultimately follow. Many in the
acquisition workforce do not follow changes in small business
rules unless it is in the FAR, despite the fact that final
rulemaking by SBA is sufficient. The time lapse between FAR
Council action and final rules promulgated by the SBA can span
many years. For example, in 2016, the SBA updated its
regulations pertaining to limitations on subcontracting. It
took until August 11, 2021, 5 years later, for the FAR Council
to finally publish two final rules that largely mirrored the
SBA's. To remedy this problem, I suggest requiring the FAR
---------------------------------------------------------------------------
Council issue its rulemaking simultaneously with SBA.
As mentioned in the beginning of my testimony, I credit the
8(a) program to accelerating my company's success. I believe in
the value of this program and thank the Committee for holding
this hearing to ensure it is helping SDBs to the fullest extent
possible. Thank you again for the opportunity to speak today
about my experience, and I look forward to answering any
questions.
HO-CHUNK INCORPORATED
VIA EMAIL TO: [email protected]
March 14, 2022
The Honorable Kweisi Mfume, Chairman
Subcommittee on Contracting and Infrastructure
Committee on Small Business
2361 Rayburn House Office Building
Washington, DC 20515-6315
Dear Chairman Mfume:
On behalf of Ho-Chunk Inc. (Ho-Chunk), I am pleased to
submit this response to the hearing held on March 2, 2022, by
the Subcommittee entitled ``The 8(a) Program: Overview and Next
Steps to Promote Small Business Success.'' The hearing examined
how the 8(a) Program currently works as well as the resources
it provides to small businesses. Members heard from
stakeholders about ways to modernize the program and improve
its effectiveness. We would like to thank you and other members
of the Subcommittee for carefully considering the impact the
Small Business Administration's (SBA's) 8(a) Business
Development Program has had on small business. We would also
like to expand on the information provided by the witnesses
during the hearing and detail the economic opportunities the
Program has provided for entity-owned companies such as ours.
Background:
The designation of Indian tribes as socially disadvantaged
for purposes of the 8(a) program arose due to the high levels
of unemployment across Indian Country, often in excess of 60%.
Like other governments, tribal governments are responsible for
the health and welfare of their tribal citizens. But relocation
to remote areas of the Country, along with failed federal
policies, led to disparate treatment of tribal governments and
their citizens in areas such as healthcare, education, and home
ownership. Removal and relocation left few opportunities for
economic development. Acknowledging the need to create
entrepreneurship and economic development opportunities for
tribal governments and their citizens, tribes were included in
the 8(a) Program to spur economic opportunity.
Ho-Chunk believes the 8(a) Program has been one of the most
successful and consistent federal programs aimed at creating
economic opportunities and affecting generational change in
Indian Country. We wish the Subcommittee to understand that the
role of 8(a) corporations in Native Communities differs from
other non-tribal small businesses. Our letter details some of
the requirements for entity-owned firms in the 8(a) Program,
and we make some recommendations for improvement.
In 1986, Indian tribes, as owner-groups, became eligible
for the 8(a) program when Congress passed legislation providing
that firms owned by Indian tribes were to be deemed socially
disadvantaged for 8(a) Program purposes. During the 1980s,
other owner-groups became eligible for the Program, including
Community Development Corporations (CDCs), Alaska Native
Corporations (ANCs), and Native Hawaiian Organizations (NHOs).
There are several exceptions to the 8(a) program rules for
entity-owned participants based on the acknowledged lack of
economic resources and access to capital. These exceptions to
federal regulations allow entity-owned companies to provide
revenue to their tribes that is used for health care,
infrastructure for very rural communities, education, housing,
language and cultural retention and revitalization, and other
important tribal initiatives.
The 8(a) Business Development Program certification and
participation is governed by regulations contained in 13 CFR
124. These regulations are primarily the same for both
individual and tribally-owned corporations, with some
exceptions for ``group'' or entity-owned firms. All 8(a)
companies, including tribally owned, must meet strict
certification qualifications, are restricted to nine years in
the Program, must be small, must report on their progress in
the program annually, and must meet the limitations on
subcontracting, among other CFR and FAR, contracting rules.
The primary exceptions for entity-owned firms are the
ability for tribes to own multiple firms in the 8(a) program
and the exemption from competitive thresholds for sole source
awards. These few exceptions to the Program allow entity-owned
firms to provide profits to benefit communities, sometimes
numbering in the hundreds of thousands of tribal citizens, as
opposed to individually-owned firms that provide benefits to
only the owner.
Entity-owned firms, however, are the only 8(a) Participants
that have a regulatory requirement that they must report on the
benefits they provide to their communities during each required
annual update. In addition to the requirements of an individual
applicant, tribally owned firms must submit documentation with
their applications that they are included on the official
Bureau of Indian Affairs list of federally acknowledged Indian
Tribes in the contiguous 48 states and Alaska. Tribes must also
show that the applicant companies are owned and controlled by
the tribe. If a non-tribal person is managing the 8(a) company,
the tribe must retain control of the company and have a
management plan in place that shows how the tribe is mentoring
and developing tribal members to manage its companies in the
future.
Recommendations:
SBA Systems: The SBA has modernized the 8(a) application
and annual reporting process through the SBA.Certify system.
The system was designed for an individual applicant and not
entity-owned applicants. The Administration has tried to
address the system deficiencies through training and some
workarounds, however, the additional documentation required for
entity-owned firms is difficult to fit into the system as it is
currently designed. Ho-Chunk, Inc.'s experience has shown that
the SBA analysts also have a difficult time finding submitted
documentation in the system. There is a lack of communication
between the SBA and applicant companies regarding the submitted
applications, and a lack of transparency in the system. We
recommend that SBA improve the existing system to allow for
entity-owned differences and require less personal information
from the managers of the companies, or create a new system that
tracks the regulatory requirements of tribally certification.
We support SBA's efforts in trying to modernize the reporting
process.
SBA Hubzone Program: We applaud SBA's efforts in recent
years to improve the Hubzone Program such as allowing an
employee that was living in a Hubzone at the time of
certification to remain counted as living in a Hubzone if they
subsequently moved outside a Hubzone, and allowing firms a one-
year certification. However, Hubzone status is very difficult
to maintain when performing service contracts for the federal
government. Often the employees on a government contract can be
in very disparate locations, most of which are not in Hubzone
areas. We would like to recommend that the SBA consider a two-
year certification period.
Conclusion:
The Native 8(a) program at the Small Business
Administration has been one of the most successful economic
opportunities for Tribes. In many cases, this program is the
only economic opportunity available--especially for tribes who
are in rural areas. Ho-Chunk Inc. through its government
contracting businesses and other subsidiaries has been able to
create jobs for tribal members and members of the local
community, has raised the median household income of
Reservation residents and has started to reverse hundreds of
years of poverty on the Reservation.
The 8(a) program at the Small Administration is a model of
self-determination, allowing tribal governments to determine
what type of businesses best suit the needs of their citizens
and how to enter a market that is local, national, and
international. The program musts be protected and encouraged to
grow to take into account the capacity and infrastructure that
tribally-owned entities now have so the gains of the
corporations can be returned to the tribal governments and
citizens.
Please do not hesitate to contact us if you would like any
further information.
Sincerely,
Annette Hamilton
COO - Ho-Chunk, Inc.
[all]