[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
LEVERAGING THE INFRASTRUCTURE INVESTMENT
AND JOBS ACT: THE ROLE OF THE SBA'S
BOND GUARANTEE PROGRAM
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HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
JULY 27, 2022
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[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 117-064
Available via the GPO Website: www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
48-108 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
CHRISSY HOULAHAN, Pennsylvania
ANDY KIM, New Jersey
ANGIE CRAIG, Minnesota
SCOTT PETERS, California
BLAINE LUETKEMEYER, Missouri, Ranking Member
ROGER WILLIAMS, Texas
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
MIKE FLOOD, Nebraska
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
Page
Hon. Nydia Velazquez............................................. 1
Hon. Blaine Luetkemeyer.......................................... 3
WITNESSES
Mr. Peter Gibbs, President & Former Director of SBA's Office of
Surety Guarantees, Foundation Surety & Insurance Company,
Bowie, MD, testifying on behalf of the National Association of
Surety Bond Producers.......................................... 5
Mr. Ralph Pulver, Regional Underwriting Officer, Traveler's Bond,
Hartford, CT, testifying on behalf of the Surety & Fidelity
Association of America......................................... 7
Mr. Alan Gravel, President, Willow Construction, LLC, Powder
Springs, GA.................................................... 8
Mr. Joel Griffith, Research Fellow, Financial Regulations, Thomas
A. Roe Institute for Economic Policy Studies, The Heritage
Foundation, Washington, DC..................................... 10
APPENDIX
Prepared Statements:
Mr. Peter Gibbs, President & Former Director of SBA's Office
of Surety Guarantees, Foundation Surety & Insurance
Company, Bowie, MD, testifying on behalf of the National
Association of Surety Bond Producers....................... 25
Mr. Ralph Pulver, Regional Underwriting Officer, Traveler's
Bond, Hartford, CT, testifying on behalf of the Surety &
Fidelity Association of America............................ 28
Mr. Alan Gravel, President, Willow Construction, LLC, Powder
Springs, GA................................................ 31
Mr. Joel Griffith, Research Fellow, Financial Regulations,
Thomas A. Roe Institute for Economic Policy Studies, The
Heritage Foundation, Washington, DC........................ 33
Questions and Answers for the Record:
Questions from Hon. Flood to Mr. Joel Griffith and Answers
from Mr. Joel Griffith..................................... 41
Additional Material for the Record:
American Property Casualty Insurance Association............. 43
Glen Rose Veterinary Clinic.................................. 45
Glenroy...................................................... 46
MO-03 Constituents Statements................................ 48
Precision Pattern Co., Inc................................... 50
Significant Labor Shortage Statement......................... 51
Statements for the Record from Hon. Williams, Hon. Tenney,
Hon. Donalds, and Hon. Kim................................. 52
LEVERAGING THE INFRASTRUCTURE INVESTMENT AND JOBS ACT: THE ROLE OF THE
SBA'S BOND GUARANTEE PROGRAM
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WEDNESDAY, JULY 27, 2022
House of Representatives,
Committee on Small Business,
Washington, DC.
The committee met, pursuant to call, at 10:00 a.m., in Room
2360, Rayburn House Office Building, Hon. Nydia Velazquez
[Chairwoman of the Committee] presiding.
Present: Representatives Velazquez, Mfume, Carter,
Houlahan, Craig, Peters, Luetkemeyer, Williams, Stauber,
Meuser, Tenney, Garbarino, Van Duyne, Fitzgerald, and Flood.
Chairwoman VELAZQUEZ. Good morning. I call this hearing to
order.
Without objection, the Chair is authorized to declare a
recess at any time.
I would like to begin by noting some important
requirements. Standing House and Committee rules will continue
to apply during hybrid proceedings. 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 keep your
cameras on. Also, remember to remain muted until you are
recognized to minimize background noise.
In the event a Member encounters technical issues that
prevent them from being recognized for their questioning, I
will move to the next available Member of the same party and I
will recognize that Member at the next appropriate time slot
provided they have returned to the proceeding.
Before I begin, I just want to let the Ranking Member know
that our thoughts and prayers are with the people of St. Louis
who are affected by the recent historic flooding and I will
work with you to make sure that SBA in an expedited way assists
the people from St. Louis.
Before we begin, I want to welcome our newest Small
Business Committee Member from our side. First, we have Mr.
Scott Peters from California. He brings his experience serving
on the Committees on Budget, Energy and Commerce and Joint
Economic Committee to our efforts to strengthen
entrepreneurship and the challenges facing America's small
employers. Mr. Peters' understanding of the importance of
bipartisanship will be integral to his work on our Committee.
Welcome, Mr. Peters.
And I will yield later on to the Ranking Member for the
introduction of Mr. Michael Flood from Nebraska.
Last November, President Biden signed the $1.2 trillion
Bipartisan Infrastructure Bill into law. The package culminated
years of work to reverse decades of underinvestment and
revitalize American infrastructure. This effort represents the
most significant investment in America's infrastructure in
generations.
The funds outlined in the bill include $550 billion in new
spending, which will help rebuild our nation's roads and
bridges, strengthen public transportation, expand broadband to
more Americans, and improve drinking water and wastewater
infrastructure. Every American stands to benefit from these
upgrades. But, crucially, the bill will also boost small
businesses as they will play a critical role in rebuilding
American infrastructure.
Today, I want to examine one of the key mechanisms that
facilitate small business participation in government
infrastructure projects, SBA's Surety Bond Guarantee Program.
Surety bonds are three-party agreements with a surety, a
contractor, and a project owner. If a contractor cannot
complete a project, the surety is responsible for ensuring that
the obligation is met. These bonds help reduce risks in the
contracting process and protect project owners, subcontractors,
and suppliers.
That is why the Miller Act requires all federal
construction contracts greater than $150,000 to have a surety
bond. This practice has spread outside the public sector as
more and more private projects require surety bonds.
The SBG program guarantees bonds for contracts of up to
$6.5 million, and up to $10 million for federal contracts if a
contracting officer deems such a guarantee necessary. Under the
program, SBA guarantees bonds to small entities when a bond is
required, the businesses cannot obtain it elsewhere, and there
is a reasonable expectation they will be able to complete the
project they are competing for.
The SBG program is vital to disadvantaged businesses that
typically have a harder time obtaining a bond from traditional
sources. In fiscal year 2021 alone, SBA guaranteed 9,633 bonds
for a contract value of approximately $7 billion, which
supported more than 34,000 jobs.
As projects related to the bipartisan infrastructure bill
continue to develop, demand for surety bond guarantees may
increase. Given that, this Committee must look for ways to
improve the program to better serve more small businesses. For
instance, some experts have promoted raising program limits on
individual and federal contracts to keep up with increased
investment in infrastructure.
Questions have also been raised as to whether the SBG
program has the resources to adapt to the challenges that come
with increased demand. In this respect, advocates believe that
there is room for improvement in areas like information
technology, staffing, and outreach activities, which could be
addressed by allowing the Revolving Fund to be used for
administrative expenses.
Today, I want to take a close look at how the program is
operating and how Congress can ensure it is equipped to meet
small businesses' needs as they rebuild America's
infrastructure.
I would now like to yield to the Ranking Member, Mr.
Luetkemeyer, for his opening statement.
Mr. LUETKEMEYER. Thank you, Madam Chair. And thank you for
convening the Committee meeting this morning. I appreciate your
kind words with regards to St. Louis. Yes, it took me a lot of
extra time to get to the airport yesterday. I live about 2-1/2
hours from the airport. So between me and the airport there was
a lot of flooding and I made my flight by 5 minutes.
Thankfully, it was delayed. And so I was able to get here at a
reasonable time.
Later today, the Federal Reserve will announce its next
interest rate hike. The decision to raise rates is directly
tied to inflationary pressures our country is facing. As we sit
here today, inflation is at a 41-year high of 9.1 percent. This
elevated rate did not happen out of the blue. It has been
rapidly rising for the last year despite some calling this
transitory or temporary.
In addition to a CPI reading of 9.1 percent, wholesale
inflation, or the Producer Price Index, is running hot at 11.3
percent. These highs are impacting all Americans and all small
businesses. From the pump to the grocery store to the energy
bill, it all costs more than it should and you are not going to
get more for the money you are spending. For instance, the
latest number that I saw yesterday was $8,600 is what it is
costing more for people to live this year than last year. That
means $165 a week more to live to pay the same expenses today
as what you were paying last year but getting nothing extra for
it. No difference in amounts or quality of what you are
getting. That is astounding.
For small business, this means a cycle of price increases
that cannot be easily offset. The options or tools that they
have at their disposal is limited. They can raise prices on
their own, which NFIB has found that 86 percent of small
businesses have already done. Or small business owners can
decrease the goods and services available, use less expensive
products, or resign to the fact that revenues will be down.
All options are disastrous for a small business owner,
their employees, and the communities that they serve.
Inflation and the ongoing cost pressures cannot be ignored.
In survey after survey, small businesses report that inflation
and raising prices are the top challenge facing their company.
When I am in district visiting with small businesses, the
conversation always begins and ends with inflation.
And it is not just rising costs. Rather, there is a
multitude of economic headwinds that are hitting main street
businesses. From ongoing and persistent supply chain issues
that are leaving shelves bare, to an employment crisis where
small businesses cannot find workers, current economic
conditions remain forbidding. In fact, NFIB found that small
businesses anticipating a more robust and healthy business
environment has soured every month this year.
Simply put, we are heading in the wrong direction. Yet, my
democratic counterparts are proposing more spending and
potential tax increases on all passthrough small business
entities. This will be devastating. Higher taxes on the
nation's job creators do not result in growth, expansion, and
job creation.
In addition to the proposed tax increases, the Biden
administration just finished off its first year in office by
proposing over $200 billion in regulatory costs. During a time
of economic uncertainty that is hallmarked by inflation running
at a 40-year high, it is illogical to propose tax increases in
an enhanced regulatory environment.
Plain and simple, this administration is ignoring the
plight of small businesses, from the Small Business
Administration's quest to become a voter agency, to Treasury
Secretary Yellen's refusal to testify before this Committee.
Continued refusal, by the way. The Biden administration
continues to disregard and overlook the top concerns of small
businesses that produce almost half the nation's GDP and create
two out of every three new jobs.
While some of my colleagues dismiss these concerns, we will
not. I am confident that if we listen and address the needs of
our small business owners, including the soaring levels of
inflation, our country will grow leaps and bounds. The
entrepreneurs, innovators, and startups of our nation can drive
our economy forward. In order for this to happen, we need to
get out of their way. We need to usher in a pro-growth economy
that is focused on less regulation and taxes and do this before
we continue to put ourselves in an even deeper recession.
Otherwise, this downward cycle will continue.
With that, Madam Chair, I yield back. Thank you.
Chairwoman VELAZQUEZ. I would like to take a moment to
explain how this hearing will proceed. Each witness will have 5
minutes to provide a statement and each Committee Member will
have 5 minutes for questions. Please ensure that your mic is on
when you begin speaking and that you return to mute when
finished.
With that, I would like to introduce our witnesses.
Our first witness is Mr. Peter Gibbs, the president of
Foundation Surety and Insurance Solutions, an authorized agent
for SBA's Surety Bond Guarantee Program. His prior work
experience includes working at SBA for over 30 years, most
recently as the director and deputy director of the Office of
Surety Guarantees where he served for 16 years. Under his
leadership, the office established federal partnerships with
some of the largest surety companies in the world. Mr. Gibbs is
also a lieutenant colonel who served 27 years in the U.S. Army
Reserve. Welcome, Mr. Gibbs. We greatly appreciate your service
and your expertise on today's topic.
Our next witness is Mr. Ralph Pulver, a regional
underwriting officer for construction services of Travelers
Bond and Specialty Insurance based in Hartford, Connecticut.
Travelers is a participating surety in the SBA Surety Bond
Guarantee Program since its inception, and Mr. Pulver is
Travelers expert for the program counting with over 20 years of
experience. Mr. Pulver serves on the Board of Directors for the
Minority Business Development Institute. He also provides
technical support for the Surety and Fidelity Association of
America with its initiatives involving small, emerging
contractor bond readiness. Welcome, sir.
Our third witness is Mr. Alan Gravel, the president of
Willow Construction, a small business located in Powder
Springs, Georgia. Willow Construction is a heavily civil
contractor. The company specializes in the construction of
treatments plants and pump stations for local water and sewer
authorities. It has also taken on the construction of dams. Mr.
Gravel is a civil engineer and Air Force veteran. He founded
his company 30 years ago. Welcome, and thank you for your
service, Mr. Gravel.
And now I yield to the Ranking Member to introduce our
final witness.
Mr. LUETKEMEYER. Thank you, Madam Chair.
Our next witness is Joel Griffith. Mr. Griffith is a
research fellow in financial regulations for the Thomas A. Roe
Institute for Economic Policy at The Heritage Foundation. With
a background in law and financial services, Mr. Griffith's most
recent research explores the perils of inflation. Mr. Griffith,
I would like to thank you for joining us today and for your
continued commitment tracking the top issues and concerns that
are confronting the nation's small businesses. Your testimony
will certainly be appreciated. I would also like to extend my
thanks to all witnesses joining us this morning.
With that, Madam Chair, I yield back.
Chairwoman VELAZQUEZ. Thank you. The gentleman yields back.
Mr. Gibbs, you are recognized now for 5 minutes.
STATEMENTS OF PETER GIBBS, PRESIDENT, FOUNDATION SURETY &
INSURANCE SOLUTIONS; RALPH PULVER, REGIONAL UNDERWRITING
OFFICER, TRAVELERS BOND & SPECIALTY INSURANCE; ALAN GRAVEL,
PRESIDENT, WILLOW CONSTRUCTION, INC.; JOEL GRIFFITH, RESEARCH
FELLOW, THE HERITAGE FOUNDATION
STATEMENT OF PETER GIBBS
Mr. GIBBS. Thank you, Chairwoman Velazquez, Ranking Member
Luetkemeyer, and Members of the House Small Business Committee,
for the opportunity to testify today where I will discuss what
I believe is among the most important public-private
partnership in government, the U.S. Small Business
Administration Office of Surety Guarantees, Treasury listed
surety companies, and surety bond producers.
My name is Peter Gibbs. I am a small business owner and the
founder and president of Foundation Surety and Insurance
Solutions, a licensed insurance agency who assists small
businesses to obtain surety bonds.
I started my agency in October of 2021, and I am a Member
of the National Association of Surety Bond Producers. Prior to
starting my agency, I served as director of Office of Surety
Guarantees at the SBA. I retired in 2021 after serving at the
agency for over 30 years. I also retired from the U.S. Army
Reserves as a lieutenant colonel, and from 2006 through 2010, I
served on active duty at the Pentagon, the Defense Intelligence
Agency, and in the Middle East.
I strongly believe that today's hearing is vital to make
sure that small businesses, especially those that may have
difficulties obtaining surety bonds, have everything necessary
to better compete for work funded by the Infrastructure
Investment and Jobs Act.
For over 50 years, the SBA's Surety Bond Guarantee Program
has been successful because of the efforts of the SBA, surety
companies, and bond producers who work cooperatively to provide
bond into companies which otherwise cannot qualify for surety
credit due to financial or other reasons.
I will first describe the recent changes to the program
which over the years have expanded opportunities to small
businesses to participate on public and private work projects
and have spurred great participation from the surety industry.
Recent program enhancements have included the following:
Increasing the contract size bond amount from $2 million to
$6.5 and up to $10 million for federal contracts;
Granting the SBA administrator with statutory discretion to
determine the portion of liability assumed by the SBA and the
surety company;
Increasing the bond guarantee up to 90 percent for
participating surety companies;
Instituting a paperless application process while approving
bond applications in less than 2 days;
Raising the streamlined Quick-App Bond application from
$250,000 to $400,000; and
Reducing the fees charged to sureties and contractors.
There is still work to be done, however, to expand
opportunities for small businesses especially in the current
economic climate.
I suggest the following additional enhancements to
streamline the program.
Ensure that adequate staff levels for the Office of Surety
Guarantees, as natural attrition and retirements have reduced
staffing levels significantly and position replacements have
not been made;
Dedicate resources for the investment in information
technology infrastructure to increase program efficiency;
Explore techniques to manage, mitigate, and transfer risk
which may attract participation from the reinsurance industry;
Consider adding other surety products to the program, which
may be difficult for small businesses to obtain in the
marketplace;
Establish parity, internal coordination, and communications
between SBA's Bond Guarantee Program and other SBA Small
Business programs, such as those relating to loan guarantees
and business assistance;
Enhance the marketing resources and budget available to the
program;
Provide marketing resources and incentives for federal and
state procuring agencies to make small businesses aware of the
program;
Consider a temporary suspension of program fees paid by
small businesses to access the program; and
Consider raising the current contract guarantee amounts
from $10 million to $20 million, and on non-federal contracts
from $6.5 million to $10 million.
In the last 50 years, the Surety Bond Guarantee program
supported over 55,000 small businesses, 750 surety bond
guarantees, and an estimated $150 billion estimated contract
value. As impressive as that sounds, I believe that more can be
done for the benefit of small businesses with the right
enhancements.
Thank you again for your consideration and the opportunity
to testify before the Committee. I am happy to address your
questions.
Chairwoman VELAZQUEZ. Thank you, Mr. Gibbs.
Mr. Pulver, you are now recognized for 5 minutes.
STATEMENT OF RALPH PULVER
Mr. PULVER. Good morning. My name is Ralph Pulver. I am
employed by Travelers Bond and Specialty Insurance in Hartford,
Connecticut, where for the past 20 years I have served as
regional underwriting officer in our Construction Services
business unit. My day-to-day responsibilities include
underwriting contract surety bonds for our construction
clients. This includes underwriting support for a dedicated
team that services our small contractor clients, including
those that are underwritten through the SBA Bond Guarantee
Program.
I am here today on behalf of the Surety and Fidelity
Association of America, otherwise known as SFAA, a nonprofit
organization based right here in Washington, D.C., whose
Members are primarily insurance companies that provide over 98
percent of the surety bonds written in the United States.
Today, I will be addressing three topics. The background on
surety bonding and the operation of the SBA Bond Guarantee
Program. Secondly, discuss how the SBA program helps small and
emerging contractors grow their companies and contribute to the
economic strength of their communities. And lastly, the
positive improvements to the SBA program.
Firstly, Mr. Gibbs and Madam Chair Velazquez, did a very
good job of talking about the background of the program and the
parameters and so forth, so I will not be redundant there and
adding anything onto there. I will tell you that the SBA Bond
Guarantee Program currently consist of a Plan A, which is known
as the Prior Approval Program, and Plan B, which is otherwise
known as the Preferred Surety Bond Program. Travelers
participates in the Plan B program. This means that the SBA has
reviewed our underwriting and administrative practices and our
financial strength and made a determination as to the aggregate
limit of bonds that Travelers can underwrite. Under the Plan B
program, Travelers does not have to submit individual bonds to
the SBA for approval, which streamlines the process. The SBA
has given us the authority to underwrite and issue the bonds on
behalf of SBA. As a preferred surety, Travelers must also agree
to periodic review and audit of those SBA bonds.
As of the most recent update from SBA, Travelers is the
third largest writer in the Plan B program, averaging about 262
bonds annually and impacting about 85 to 100 contractors each
year annually.
It should be noted that this ranking is determined by the
number of bonds written, not by the amount of the surety bond
premium.
Under the Plan A and Plan B programs, the emerging
contractor must qualify as a small business as classified under
the U.S. Office of Size Standards. The size standard is
determined by the gross revenues of the company and their
affiliates averaged over the last 5 years, as well as the
company's industry or class of work. The SBA's regulations
provide that a bond must be required in the contract in order
for it to be eligible for the guarantee. And, the contractor
must certify that they have been unsuccessful in finding surety
bond credit in the standard marketplace.
The Surety Bond Guarantee Program provides an effective
tool for surety companies to favorably underwrite small and
emerging contractors that would otherwise not qualify for
surety support. Although these emerging contractors may not
have the balance sheets that reflect financial strength of
larger companies, the surety will still undertake a very
rigorous prequalification process focused on the contractor's
ability to complete the obligation.
Providing an initial opportunity for small and emerging
contractors to participate in public bid market is critical for
their future success. While there is no time restriction for a
contractor regarding how long the SBA supports them, most
growth-oriented contractors aim to meet the underwriting
standard requirements or traditional surety markets and in
effect, graduate from the SBA program.
This is what I often refer to as the ``groom and grow''
period, where the small and emerging contractor receives
coaching and advice from their surety bond professionals on how
to best position their company to obtain surety bond support in
the traditional surety marketplace. Undoubtedly, the
Infrastructure Investment and Jobs Act will provide increased
opportunities for small and emerging contractors, including
minority- and women-owned businesses. For some contractors new
to the surety bond market, the SBA Surety Bond Guarantee
Program helps make that opportunity a reality.
Under the leadership of Peter Gibbs and currently, Jennifer
Vigil, significant, positive operational and program
improvements have been made to the SBA program, including the
size enhancements that Peter mentioned earlier. The
enhancements to the Mentor-Protege Program, including the size
for eligible projects that has been referred to earlier,
increasing the guarantee percentage, permanently decreasing
fees for the contractors and increasing the quick application,
again, that Mr. Gibbs referred to earlier. All these
improvements have increased the number of participating small
and emerging contractors, surety bond producers, and surety
companies, now the largest number of sureties ever
participating in the program.
I commend the SBA for making these improvements to the
program and would like to thank the Committee for your support
and leadership on this issue.
And thank you for the opportunity to appear before you
today.
Chairwoman VELAZQUEZ. Thank you, Mr. Pulver.
Now, Mr. Gravel, you are recognized for 5 minutes.
STATEMENT OF ALAN GRAVEL
Mr. GRAVEL. I am Alan Gravel, Chairman of the Board of
Willow Construction. I grew up in Louisiana, earned a B.S. in
Civil Engineering at Louisiana Tech, and an MS in Environmental
Health Engineering at the University of Texas. I joined the Air
Force and flew the C-7 Caribou in country in Vietnam and then
the KC-135 in Vietnam after that. In 1974, I left the Air Force
and moved to Atlanta to work for a civil engineering consulting
firm. In 1981, I left that firm to work for a utility
contractor. When that company went out of business in 1992, I
started Willow with the employees who had worked for me at the
old company. Of the 28 or so employees, we now have about six
or seven of them who have been with me over 35 years. Willow
itself has completed 600-plus jobs worth about $170 million in
our 30 year history. We just celebrated our 30th anniversary.
In the beginning, we were, like many startups,
undercapitalized but we established modest banking and bonding
relationships and steadily built our business. In 1997, we
bought a tract of heavy industrial property and built a shop
and an office, you can see it behind me, and moved from the
office where we had been renting. By 2000, we reached our
target volume of work and were on reasonably sound footing. In
these early days, almost all our work was public bid work that
required payment and performance bonds.
Between 2000 and 2008, we gradually picked up some private
and subcontract work which did not require bonding, but we were
still actively bidding bonded work. Our bonding agent at the
time was an experienced professional who recognized us as a
minimal risk to the bonding company. We had always been able to
provide the financial documentation that he needed because of
the experience we had had in the previous company.
The financial crisis of 2008-2012 ended our steady progress
toward financial security. My late wife, Sheri, said to me,
``So let me understand. We are giving up our retirement savings
to ensure that all Willow employees have a steady paycheck
through the recession?'' And my answer was, yes, that is
exactly what we are doing, but if Willow survives then all
problems can eventually be solved.
Willow lost significant amounts of money in 2009-2012 and
essentially broke even in 2013. I depleted most of my
retirement savings, and in 2011, we had to sell some of our
construction equipment. All salaried employees took pay cuts.
We did not have raises for 7 years. We survived and throughout
that time, our experienced bond agent, who knew us well, was
able to provide bonds at the reduced level of business that we
were able to maintain.
Things improved starting in 2014 but we had dug a pretty
deep hole for ourselves. Our private and subcontract work
picked up significantly but when public bid opportunities came
along, we had to do some serious negotiation to get our bid
bonds. Then, our long-term professional bond agent fell ill and
had to retire. His company replaced him with a young man with
no experience and things quickly went downhill from there.
Howard Cowan and I were friends in college. We had
maintained that friendship through all of the years since. When
he left the Air Force, he became a surety underwriter and
eventually a surety agent. When I left the Air Force, I worked
for a consulting engineering company and then a utility
contractor. We have always found it amusing that I studied
civil engineering and he studied philosophy and somehow we
ended up in two parts of the same business. Particularly since
Willow had started, I had relied heavily on Howard's advice
about bonding and many other things.
When bonding became very difficult for Willow, I called
Howard. After some discussion he said, ``I have resisted doing
this for 30 years, but I think it may be time for me to become
your bonding agent.'' He recognized that Willow had a proven
track record but for circumstances that were somewhat beyond
our control, we did not meet the normal commercial standards
for bonding.
Howard had a long-term relationship with the underwriters
at SureTec. They studied our situation and concluded that
Willow was a good candidate for SBA's Preferred Surety Bond
Program. Early in the relationship, Howard and the SureTec
underwriters visited our office in Atlanta to meet our key
people and to get a better understanding of our capabilities.
Through SureTec's comprehensive understanding of Willow's
operations and their strong partnership with the SBA, we were
able to continue bidding bonded work.
Through lots of hard work, some good luck, and the SBA-
backed bonding program, Willow has recovered our financial
stability, and in 2020, we were able to re-enter the commercial
bond market. Since then, we have had our third and fourth best
years in our 30-year history. We are steadily reducing our
debt, upgrading our equipment fleet, and hiring young employees
to carry the company into the future.
In those dark days of 2010 and 2011, we could have chosen
to declare bankruptcy. Instead, we chose to never give up. Had
the SBA program not been available, we might have eventually
recovered but it would have taken much, much longer and it
would have been a lot more painful. With it, we returned to
financial health, providing good incomes to our employees,
paying taxes, and completing quality projects for our community
and the environment. Thank you.
Chairwoman VELAZQUEZ. Thank you, Mr. Gravel.
And now we recognize Mr. Griffith for 5 minutes.
STATEMENT OF JOEL GRIFFITH
Mr. GRIFFITH. Chair Velazquez, Ranking Member Luetkemeyer,
Members of the House Small Business Committee, thank you for
the opportunity to testify.
My name is Joel Griffith. I am a research fellow at The
Heritage Foundation. The views I express today are my own.
Businesses of every size, especially smaller businesses,
are struggling with supply chain issues, rising prices, and a
shortage of people willing to work. The Biden administration
insists that these problems are transitory, and the
administration continues to blame the pandemic and the war in
Ukraine for these economic woes.
Meanwhile, this presidential administration refuses to
acknowledge the primary culprit behind our economic turmoil.
Senseless COVID restrictions throttle production. Ill-targeted
transfer payments that shrink the workforce. The opposition by
organized labor to common sense port operations. New
environmental regulations that target diesel semi-trucks in
California, and record government spending financed by the
Federal Reserve. In short, the federal government reduced
supply while stoking demand. This is a recipe for the shortages
and higher prices that we are facing today.
Far too many here in Washington, D.C. continue to blame the
pandemic for our economic woes. But it is important to keep in
mind that the pandemic itself did not shut down the world. To
the contrary, governments across the world shut us down with
lockdowns and oppressive restrictions. These erratic,
unpredictable, arbitrary tramplings of human freedom made
planning by businesses even for the short term nearly
impossible. Politicians across the world pushed millions of
families and businesses off an economic cliff all the while
misleadingly blaming the pandemic.
Government policies also created the unprecedented labor
shortage that we are experiencing today in the United States, a
shortage caused by millions of workers leaving the workforce.
Generous federal unemployment bonuses in terms of payout and
duration acted as a powerful disincentive to returning to work
even as the economy reopened, especially when combined with
multiple federal stimulus checks. Many individuals delayed
their return to the workforce even after benefits ended,
instead choosing to live off the stockpiled cash.
Private vaccine mandates and a threatened federal vaccine
mandate pushed many others out of the workforce. Now,
businesses across nearly every industry are desperate for
workers and have expanded their benefit packages. Of course,
those failed to keep up with the rise in prices. Nearly half of
small businesses are unable to fill open positions. This is
more than double the national average, or the historical
average.
Small businesses, too, are suffering from the supply chain
disarray. California, specifically, matters on this because it
receives nearly half of all containers coming into the U.S.
Yet, in the midst of this supply chain crisis, what did
California do? Well, California ordered a continued phaseout of
older diesel trucks and organized labor in California continues
to resist modernization of their ports in favor of inefficient
modes of operation.
Labor costs and bottlenecks on the supply chain side could
increase even further if the Teamsters Union convinces the
Biden administration to change the definition of employee so
that businesses can no longer hire independent truckers to
transport their goods.
Lastly, while governments hampered the supply of goods and
services, the federal government has used the Federal Reserve
as a piggybank, selling trillions of dollars in debt for newly
printed cash, nearly $80,000 per family of four that has
flooded into the economy. Our Federal Reserve has doubled its
balance sheet from just $4 trillion in March 2020 to nearly $90
trillion just months ago.
Unfortunately, today's proposals to expand the Small
Business Administration's Lending and Bond Guarantee Programs
do nothing to counteract these destructive policies. Broadly
speaking, calls to expand the role of the SBA and the credit
markets also ignore this reality, that small businesses are
being serviced by private credit markets. Only 3 percent of
respondents to the January 2022 NFIB Survey reported that their
borrowing needs were not satisfied. Only 1 percent of small
businesses reported financing as their top business problem.
In conclusion, misguided COVID-19 restrictions, combined
with Federal Reserve financed government borrowing and spending
set in motion the current economic turmoil, the skyrocketing
inflation, and the supply chain havoc that are crippling
businesses and families. Proposals for yet more government
spending, more labor regulations, more attacks on energy
production, and massive tax hikes on businesses risk further
pain. Thank you.
Chairwoman VELAZQUEZ. Thank you.
And now I will recognize myself for 5 minutes.
Mr. Gibbs, considering the bipartisan Infrastructure
Investment and Jobs Act that Congress passed last year, $1.2
trillion, it was great to see in the social media every Member
praising the projects that have been funded in their district
thanks to the infrastructure legislation. Why is the Surety
Bond Guarantee program more important than ever?
Mr. GIBBS. I think it is important because it is going to
allow small businesses who are having difficulties to get
bonded and to take advantage of opportunities because of the
infrastructure bill. They will be in a better position to get
into the game. They will be able to bid on projects. I mean,
there are companies who cannot even, if they cannot get a bid
bond, they cannot even bid on a project. So they are left out
of the process. So I think small businesses having the
opportunity to bid on projects puts them in the game and gives
them a fairly equal opportunity to get awarded a project.
Chairwoman VELAZQUEZ. Thank you.
Mr. Pulver, many small businesses across the country are
unaware of the existence of the SBA Surety Bond Program. Based
on your knowledge of the program, what can we do to spread the
word?
Mr. PULVER. Yes. Program awareness, increasing the number
of agents and producers that are involved in security the bond
aids for contractors, making more sureties aware and making
more contractors aware of the program, it could use that to
help to your question.
Chairwoman VELAZQUEZ. Thank you.
Mr. Gravel, your company was able to recover financially
with the help of the SBG program. What does the SBG program
mean for you, your business, and the personnel you employ?
Mr. Gravel, you are muted. You need to unmute yourself.
Mr. GRAVEL. We were able to more quickly return to a
position where we could give raises, our employees can send
their kids to college. We were able to focus on safety and
quality issues instead of feeling like we have to cut corners
to get by. It means that we can afford to provide healthcare,
Section 125 flexible spending programs, a 401(k) retirement
plan. It means that the sacrifices that you expect to make when
you start a business do not have to last forever. And we are
back up on our feet financially in a time period that we could
not have accomplished without SBA assistance.
Chairwoman VELAZQUEZ. Thank you.
Mr. Gibbs, I understand that there are concerns with the
capital access financial system which is the IT system SBA uses
for the SBG program. Could you please expand on those concerns
and what needs to be done to improve that situation?
Mr. GIBBS. Yes. So as stated earlier, I spent 18 years in
that program. And that system needs a total overhaul. I think
it would assist not only the external users but also the
internal users of the program. The system is antiquated and it
needs to be upgraded.
Chairwoman VELAZQUEZ. Thank you.
And Mr. Pulver, there have been efforts to increase the
bond guarantee thresholds to $20 million for federal contracts
and $10 million for all other contracts. And these thresholds
have not been increased in more than a decade. Would it make
sense to increase those now, and why?
Mr. PULVER. It is the position of SFA and their Members
that the program works very well at the current levels and that
further dialogue around increasing them is something that SFA
would like to be a part of.
Chairwoman VELAZQUEZ. Thank you.
Mr. Gravel, it seems you were not able to access the
standard market for bonds due to economic losses experienced
following the 2007 recession. So what options would you have
had to have to save your company had it not been for SBA's
Surety Program Guarantee Program? Would your company----
Chairwoman VELAZQUEZ. Yeah, go ahead. Go ahead.
Mr. GRAVEL. Without bonding, without SBA backed bonding we
would have had to cut way, way back, more or less start over. I
mentioned in my testimony that I have multiple employees who
have worked for me for 35, 38 years, like that. Most of those
people would probably have had to go to other employers and we
would have lost that experience. And that would have slowed our
recovery even more. We had just built the building that you see
behind me in 1998. We might have been in a position where we
would not have been able to maintain those buildings and that
property which helps us to function very, very well.
Chairwoman VELAZQUEZ. Thank you, Mr. Gravel. My time has--
--
Mr. GRAVEL. At the very least it would have delayed our
recovery.
Chairwoman VELAZQUEZ. Thank you.
And now we recognize the Ranking Member.
Mr. LUETKEMEYER. Thank you, Madam Chair.
Mr. Griffith, as you can imagine when I am back home
visiting small businesses, the topic of inflation comes up
every single conversation. It is at the top of everyone's mind.
And with that I would like to submit statements for the record
with regards to two of my constituents with regards to the
comments that they made, Madam Chair.
Chairwoman VELAZQUEZ. Without objection.
Mr. LUETKEMEYER. Thank you very much.
We are now running at a 41-year high with inflation.
Wholesale inflation is double digits. Mr. Griffith, you have
written about this extensively over the last year. Where do you
see inflation going in this country short term and long term?
Mr. GRIFFITH. Well, longer term, so long as we continue to
empower the Federal Reserve to print the resources to fund our
government, we can expect inflation to continue to be
exacerbated. And I think it is important to keep in mind that
even if the inflation rate comes down from the 9 and 10 percent
rate that we are at today to say a more typical 2 or 3 percent,
that does nothing to mitigate the fact that families have lost
thousands of dollars over the past year. The income does not
just recover once inflation returns to normal. All of the
families that benefitted from the stimulus checks from all the
benefits, they benefitted from that but now they have lost
income in excess of what they received. And I am really hoping
that these families are able to connect those dots.
Mr. LUETKEMEYER. You make a great point there from the
standpoint that a figure I just got last week is now $8,600
more to live in this country than it was a year ago, which is
about $165 a week that you get nothing extra for, which I
mentioned in my opening remarks and follows along with your
conversation there.
When you talk about the Fed, yesterday in Politico, there
was an article with regards to Fed Relies on Dubious Data to
Chart the Economy's Course. And then the byline was officials
are preparing another huge rate hike likely to convulse economy
markets which is kind of like it blows your mind. If they do
not have the right economic information that they are going to
try to make a move here, it is like what in the world are we
doing?
One of the things that is in there is that it talks about
going in the wrong direction here. So, we actually had, again,
since mid-November, this is the highest level of unemployment
claims that we have had, 251,000. We are in a recession and
nobody seems to on the administration side to want to admit it.
So Mr. Griffith, how would you define recession?
Mr. GRIFFITH. Well, historically, once you have 2 quarters
of negative economic growth, a recession has been declared.
That has been the norm. We had negative economic growth in the
first 3 months of this year. We are going to know very shortly
if we saw the economy contract in the second quarter.
Typically, that has been a recession. And the administration
can deny the recession all they want but the bottom line is
that American families are feeling the impact right now of this
economic misery.
Mr. LUETKEMEYER. It is interesting that they are trying to
redefine recession before the numbers come out which tells you
they know where the numbers are going to be. They know it is
going to be bad. It is going to be recessionary numbers. And so
they are trying to redefine this. And this is not something
new. I sit on the Financial Services Committee and I see this
every day, especially with the Consumer Financial Protection
Bureau. Not only do they reinterpret laws, redefine words, make
up words, they also issued press release one time saying it is
a problem so suddenly they can go back and say, you know what?
We saw on the news that this was going on so all of a sudden
then they can go out and have authorization to go after
somebody when they created the problem themselves. When you go
in and redefine what is going on in the world, I think the
American people are not going to be hoodwinked by this. They
know things are going in the wrong direction. It is interesting
that the administration keeps touting all the jobs they
created. If you look at the numbers, we are still 520 some
thousand people short than we were prior to the pandemic. So I
know your labor participation continues to be low. How does
this all factor into inflation, Mr. Griffith?
Mr. GRIFFITH. Well, on the job side you are exactly right.
We have actually more than a million people that just
disappeared out of the labor force. You mentioned rightfully
that our total number of people employed is about 500,000 lower
than it was a few years ago and that is despite the fact that
our population has grown in the meantime. And this is feeding
into inflation because companies now are having to increase
those labor costs, and those labor costs as they increase are
not keeping up with the cost of living. So it really feeds in
as a cycle.
Mr. LUETKEMEYER. Thank you.
Mr. Gravel, thank you for being here. You are an
entrepreneur. You are a businessman, and we certainly
appreciate you are willing to share some experiences. I
congratulate you on being a survivor. I hope that you were able
to participate in the PPP program. I hope that was able to be
helpful to you.
Just one quick question for you. Whenever you are bidding
these projects now, with inflation the way it is, how do you
continue to protect yourself against the rising inflation when
you are bidding a project that may take several months or years
to do?
Mr. GRAVEL. We basically bid hard dollar projects where we
have a hard quote from our suppliers on the major things.
Things like pumps and generators and things like that, we will
have a hard quote, and some quotes like electrical subcontracts
will be hard dollar. So, once we commit our pricing, the
supplier is committed to us.
Mr. LUETKEMEYER. So the bond process is helpful to you in
case something goes wrong you would be able to have a backstop;
would that be a fair assessment?
Mr. GRAVEL. Well, the costs that we have are fixed,
basically, for all of the major part of the cost. Now, there
are costs that can go up like fuel, and to some extent our
labor costs and that is our risk. They are going to go up
during the course of the contract. We just have to build that
into our markup and make sure that we are prepared.
Mr. LUETKEMEYER. Thank you. I yield back.
Chairwoman VELAZQUEZ. The gentleman yields back.
The gentlelady from Pennsylvania, Ms. Houlahan, is
recognized for 5 minutes.
Ms. HOULAHAN. Thank you, Madam Chair.
Just confirming that you all can hear me okay.
Chairwoman VELAZQUEZ. Yes, we can hear you.
Ms. HOULAHAN. Excellent. And I have a series of questions
but I actually have a follow up to Mr. Luetkemeyer's question
really quickly for Mr. Griffith.
You mentioned that there are a million people that still
have not returned to our economy inexplicably. Really briefly,
what is your hypothesis? Who are those people? Could it be
childcare issues? What kinds of things are keeping a million
people from coming back to our economy?
Mr. GRIFFITH. Part of the situation is that much of the
childcare providers have not returned and that is being an
impact on parents. But a big part of this, too, is the fact
that families, a lot of people were able to earn more off the
job than on the job. A lot of those resources were stockpiled.
Ms. HOULAHAN. Yes, sir. But right now that is not the case
any longer. So a million people are still not back in the
economy and part of your hypothesis is childcare might be an
issue. Is there anything else right now that might be the issue
that we could be doing to be helpful to bring those people
back?
Mr. GRIFFITH. What we do know is that people are still
actually drawing down on their savings. The savings rate has
declined but families are still working through that surplus.
That has been a drag. And then also if you look at the fact
that wages have not come up with the cost of living, that is
also a deterrent to those returning to the workforce.
Ms. HOULAHAN. Well, it would seem to me that if you do not
have any money that you would return to the workforce if you
had the ability to return to the workforce. And thank you very
much for that. I really, really appreciate that insight. That
is a thing that I am also trying to unwrap.
If it is okay, I am going to turn my questions over to Mr.
Gravel and to Mr. Pulver as well. And again, thank you very
much for joining us today.
There is definitely no doubt that the passage of the
bipartisan Infrastructure Investment and Jobs Act was historic,
not just for the larger industry but also for smaller
enterprises that we are focusing on today. Since its passage,
the project has helped 342 new Pennsylvanian roadway, bridges,
and projects this year, and infrastructure development with
many more projects to follow during the remainder of this year
it is anticipated. So it is clear that the IIJA is an economic
engine that is supporting good paying, local jobs. Businesses
and communities across our country offer manufacturing to
construction across all other industries. And as our panelists,
you guys included, have mentioned, the SBA plays a very key
role in assisting our smaller businesses and enterprises in
accessing these important opportunities.
Mr. Gravel, first, thank you very much for your service and
for being an entrepreneur. You and I have those things in
common. And for sharing your story with us. Would you talk a
little bit more about how the increased contract opportunities
made available from legislation like the IIJA will benefit
small firms like you?
Mr. GRAVEL. Right now, virtually all of our work, 90
percent of our work is private. So I do not know to what extent
these funding programs might affect that indirectly or not but
they are not affecting it directly.
Ms. HOULAHAN. And that actually pivots to my next question
which is I feel as though there is a little bit of a gap in
terms of small business owners being aware of what sort of
resources and opportunities are available to them through the
IIJA program and through the SBAA.
Mr. Pulver, you recommended in your testimony that the SBG
program provide marketing resources and incentives. Where is
the disconnect, Mr. Gravel and Mr. Pulver, where we could be
able to be more forthcoming and people could be able to
understand more what is available through IIJA and SBC for
smaller businesses like yours. And Mr. Gravel, maybe I could
start with you.
Mr. GRAVEL. In our particular case, our connection with the
SBA was through our agent. And I would support more robust sort
of a relationship between SBA and some of the agents. And any
way you could enhance that relationship would be good. If we go
for bonding, we are going to go to an agent first. That is
where we have to go first. We cannot go directly to the SBA.
And so the relationship between the agents and the sureties is
the most important thing and that is why in our case it worked
out so well because our guy, our agent was very much involved
in the SBA and knew a lot about it, and through NASB he had
become very aware of it. And that is why it worked so well for
us. But I think the small companies and, of course, we have
been in business a long time now, so we do not really represent
new companies anymore, I guess. But there are lots of
opportunities out there. There are plenty of people who are
advertising all the jobs that are out for bids and things like
that. There is no shortage or anything of that sort.
Ms. HOULAHAN. Thank you.
Mr. GRAVEL. But these people need to know that they can
find bonding if they find the right agent and get to know the
right agent and develop his faith in them as far as their
ability to perform.
Ms. HOULAHAN. Thank you, Mr. Gravel.
I am afraid I have run out of time. And I yield back, Madam
Chair.
Chairwoman VELAZQUEZ. The gentlelady yields back.
And now we recognize the gentlelady from Texas, Ranking
Member of the Subcommittee on Oversight, Investigations, and
Regulations, Ms. Van Duyne, for 5 minutes.
Ms. VAN DUYNE. Thank you very much, Madam Chair Velazquez
and Ranking Member Luetkemeyer for holding this hearing.
For over a year, Members of this Committee have called on
Treasury Secretary Yellen to meet her legal and statutory
obligation to appear before this Committee and speak on matters
related to COVID-19 relief loans. While some may view this
requirement to be pointless so much time later, I can assure
you that the small businesses around this country who have
watched their margins shrink in this volatile economy care.
What small businesses understand, which this administration
apparently does not, is that amidst record high inflation and
rising costs of capital, every fraudulent dollar that went to a
criminal pocket was a dollar taken away from a deserving small
business. For the lifeblood of our economy, this is just
another signal from this administration of their indifference
to the economic standing of our smallest employers.
While President Biden may look the other way of regarding
this inflation-ridden economy, we simply cannot. Tomorrow, we
will likely see the second quarter GDP report indicate that we
have just recorded another quarter of negative growth in the
economy, which is typically an indicator of a technical
recession. And as if they were anticipating an abysmal report,
the White House released a blog post Monday arguing that 2
straight quarters of negative growth no longer indicates a
recession. And while Secretary Yellen may not have time to
follow the rule of law, she stated in her interview on Sunday
that our economy was not in a recession but in a period of
transition in which growth is slowing.
While this administration would rather debate semantics
than admit that their policies have devastated our economy,
small businesses are struggling. And even if every major news
outlet may hold the water for this administration's economic
misdealings, let us set the record straight. As Michael Strain
of AEI has pointed out, 10 recessions were declared the last 10
times we have experienced a consecutive quarterly decline. That
fact seems straightforward to most people.
And if you needed another sign times are getting tougher,
retail giant Walmart lowered its profit outlook Monday due to
consumers having to redirect money usually spent on leisure
goods to afford highly inflated food and fuel costs. Every
administration official and Member of this Congress has seen
the evidence that this economy is in a rough spot. Hopefully,
they are in touch with the communities and constituents they
represent to understand the perils consumers have faced over
the last year. But unfortunately, based on the actions
Democrats are planning to take, I fear they have not.
I want to be very clear. Republicans will continue to
combat the Democrats' plan to spend hundreds of billions on the
new reconciliation package and they will continue to fight
their planned increases on the small businesses which they
claim to support.
I appreciate all the witnesses being here today. And Mr.
Griffith, I know you wanted to respond to the last question. In
addition to potentially childcare not being available, what
impact do you think forcing kids to stay home from school,
forcing people to get vaccinated against their will or lose
their job, and ridiculously high gas prices have affected these
million people who have not been able to get back to work?
Mr. GRIFFITH. Thank you for that question.
In relation to families with children, a lot of the new
data are actually showing that those are the individuals most
likely to have returned to work. They need to supply resources
to their families. They found a way to get back to work. What
we see is that the real drawbacks now over unemployment has
been, like I said, the families that are still drawing down on
all the resources the federal government provided, well
intentioned, maybe, but still, families are drawing down on
those resources.
And second of all, the fact that working pays less than
before. A middle-class family right now, they are earning
$3,000 less per year in real terms because of this inflation
that was caused by these shutdowns and by all the money
printing that we undertook in order to pretend that shutdowns
do not have economic consequences.
Ms. VAN DUYNE. How much do you think that reckless spending
by this administration has contributed to the inflation that
the country is experiencing today?
Mr. GRIFFITH. Oh, it has definitely exacerbated it.
Remember, this started several years ago when Democrats and
some Republicans teamed up together to paper over the impact of
the shutdowns. But this administration has doubled down on
those mistakes. We knew this was going to be a problem. We had
left wing and right wing economists that were saying if you
print money to pay for massive expansion government spending,
there will be inflationary results, and this administration
chose to double down on those mistakes.
Ms. VAN DUYNE. I have been talking a lot about how much
regulations cost. Can you share with the Committee the impact
that regulatory costs have had on small businesses, especially
in our current economic climate?
Mr. GRIFFITH. Regulations in general, and a lot of these
regulations are related to the energy sector. We know that over
the years the Green New Deal has not been able to be passed by
Congress, and prior administrations, including the Obama
administration and the Biden administration, they are trying to
implement the regulatory package. They are trying to do that
through Executive Order and through the rules making process.
And that is driving up costs. And on the energy front, that has
indirect cost, too, on the manufacturing sector because we are
driving up energy costs on a lot of these smaller factories.
Ms. VAN DUYNE. I appreciate that. Thank you very much. I
yield back.
Chairwoman VELAZQUEZ. Time has expired.
And now we recognize the gentleman from Louisiana, Mr.
Carter, for 5 minutes.
Mr. Carter, you are muted.
Mr. Carter, you continue to be muted.
Mr. CARTER. Can you hear me now?
Chairwoman VELAZQUEZ. Yes, we can hear you now.
Mr. CARTER. Okay. Okay. Thank you very much.
My question is for Mr. Pulver. What private or public
resources would you recommend to small businesses for them to
gain a better understanding of how the SBG program works?
Mr. PULVER. Yes, thank you for the question. It refers back
to what we were speaking earlier about with regards to the
small business more than often does not have a board of
directors. It has a circle of influence, be it their banker,
their CPA, their bond professional, their insurance advisor. So
looking to those trusted advisors, and particularly the surety
bond professional to help them identify opportunities that
exist within the Jobs Act or elsewhere is critical, and finding
access to the SBA Bond Guarantee Program as well.
Mr. CARTER. Part of the problem, I appreciate it, is small
businesses have historically had a difficult time in getting
bonding, period. And learning of these programs, having
technical assistance to get ready for them continues to be a
barrier. Any advice or suggestions you would give to a small
business person, particularly a DVE or women-owned enterprise
that may be watching today on how do they break through these
barriers of, someone mentioned a while ago about not even
having the bonding to do a basic bid. We know that that
continues to be a problem. And as we talk to contractors,
having the ability to contract and never getting a contract is
two different things.
Mr. PULVER. Yes. Again, I am going to refer back to the
surety bond professional that understands SBA and the SBA Bond
Guarantee Program. Those are few and far between. And getting
that guidance from that individual to help make the appropriate
investments into their business to prepare it to be bondable
and perhaps using SBA as the foundation to getting there.
Mr. CARTER. Based on your company's profile, what
percentage of SBA guarantee bonds are for these business?
Mr. PULVER. I am going to decline that question. I do not
have that data.
Mr. CARTER. You are going to decline into r you do not have
it? Those are two different answers.
Mr. PULVER. I do not have it.
Mr. CARTER. If you had it, would you share it? I am not
sure. You said decline, so I am wondering, does that mean you
would have shared or you just do not have access today?
Mr. PULVER. Well, I will rephrase that. Earlier I said on
an average we have, at Travelers, I am taking the question to
be at Travelers, we have between 85 and 100 contractors
annually that are benefitting from the program. Some of those
contractors move up, graduate, and become ready for bond credit
elsewhere. Does that answer your question?
Mr. CARTER. A little bit more. But I will draw down. I have
your information. I will send something more specific to you
that will get at that.
This is a question for anyone. What changes do you think
could be made for this program to expand bonding capacities for
DBEs? Again, I will mention that we know that that is a major
barrier. If you had a magic wand and you had this Committee
being able to advance any issues that it might be able to make
it clear and more available, what suggestion or advice would
you give us?
Mr. GIBBS. This is Peter Gibbs. My suggestion is the Office
of Surety Guarantees needs the resources so they can market the
program. A question earlier, you know, not too many people, as
the former director of this program, we had three marketing
personnel to market a $6 billion program. Right now I believe
there is one marketing person to speak to organizations and
small businesses, so I think the response is----
Mr. CARTER. Are you saying, I am sorry, you say one
marketing person within SBA to promote this SBG program?
Mr. GIBBS. The Office of Surety Guarantees. Yes. We have
one marketing person. They need the resources so that they can
go to all these organizations, conferences, to small
businesses, to agents, to surety companies. They just do not
have the resources to spread the word of this program.
Mr. CARTER. Under your leadership when you worked for the
organization, you may or may not remember this, but tell me if
you just had to guess, the percentage of small, disadvantaged
enterprises being able to fully take advantage of SBG and
bonding capacity. Is that number 20 percent, 30 percent,
roughly?
Mr. GIBBS. I do not know what that percentage is. I am
sorry.
Mr. CARTER. I mean, and I will not hold you to any science,
but it is short. Is that a fair assumption?
Mr. GIBBS. Yes.
Mr. CARTER. Okay. And what changes do you think the
program----
Chairwoman VELAZQUEZ. Time has expired. Mr. Carter, time
has expired.
Mr. CARTER. My time has expired?
Chairwoman VELAZQUEZ. Yes.
Mr. CARTER. I am sorry. Thank you, Ma'am. I yield back.
Chairwoman VELAZQUEZ. Now we recognize the gentleman from
Texas, Mr. Williams, Vice Ranking Member of the Committee.
Mr. WILLIAMS. Thank you, Madam Chair.
There is no question that small businesses across the
country are hurting as they try to manage the various economic
headwinds during the Biden administration.
I am a small business owner. I employ about 300 people back
in Texas. I am a car dealer. I have been in business 51 years.
I remember 1971. I remember 1981. I remember 1988. I remember
2008. And this president is really putting it on us compared to
what we saw in the past.
And I recently received a letter from a constituent in my
district, Mr. Michael Jones, who is the owner of Glen Rose
Veterinary Clinic that I would like to share with you all
today. Mr. Jones wrote, he said, ``The past few months have
been particularly challenging as I have been struggling to keep
up with the rapid price increases as a result of supply chain
disruptions and increased gas prices.'' And on top of this he
is having trouble keeping up his employees' wages since
inflation is eating away at all of their hourly rates. The
economic realities have left him with no choice but to pass
these costs along to his customers in order to keep his
business running.
So before I get on with my questions, I would like to
submit this letter, Madam Chair, for the record.
Chairwoman VELAZQUEZ. Without objection.
Mr. WILLIAMS. Thank you. Thank you for that.
And unfortunately, Mr. Jones's experience in Glen Rose is
becoming all too common for small businesses across the
country. There again, I am a small business. I get it. I know
what he is going through. I know it is hard to hire people.
Supply chain is a disaster. Try that in the automobile business
right now. So I know what he is going through and what small
businesses have happening.
We have an administration that has no small business
experience, no business, making rules they have actually no
reference to go from.
So Mr. Griffith, what specific actions can the
administration and Congress take to combat these economic
challenges small businesses are facing right now?
Mr. GRIFFITH. Well, I think one of the things Congress
could do would be to take a second look at what has been
proposed in the Pro Act. The Pro Act would actually apply basic
California labor standards to the rest of the country and would
make it very difficult for independent truckers, for instance,
to work. And that is something that Congress right now is
actively considering imposing. This would really put small
businesses in a bad situation and harm a lot of independent
workers.
Mr. WILLIAMS. Well, and you know, 75 percent of the
workforce, 75 percent of the payroll is small business but,
yet, we have one party that wants to help. We have another
party that wants to hurt.
So it has been over 4 years since the 2017 Tax Cuts and
Jobs Act passed Congress and was signed into law by President
Trump. This historic tax reform ensured that American small
businesses and workers were provided opportunities to grow and
compete. Unfortunately, many of the important provisions in
this bill will expire in the next few years, and rather than
working to extend these important provisions and make it easy
for small business and easy for main street that prove
successful in jumpstarting main street, the Democrats continue
to discuss new taxes on passthrough entities and S corps. What
a time to be raising taxes; right? It is unbelievable.
So Mr. Griffith, can you discuss how the additional 3.8
percent tax that the Democrats keep reviving would hurt small
business?
Mr. GRIFFITH. Well, it is going to discourage these
business owners from actually saving and reinvesting that
capital. Instead, they are going to be incentivized to consume
that capital. It is going to harm not just the business owners
but it is going to harm those people who rely on those
businesses to create new jobs.
Mr. WILLIAMS. Well, they are going to have to raise prices;
right? They are going to get in defense mode. Instead of
spending, they are going to have to hold for taxes. So it is a
disastrous, backwards economy. And Americans are seeing Help
Wanted signs everywhere in the windows of businesses across the
country. A recent survey by the NFIB found that 50 percent of
all business owners reported job openings it could not fill.
These overwhelming staffing shortages are hindering business
operations and limiting owners' abilities to keep up with
current demand while preventing business growth. We have talked
about this.
Why do you believe, Mr. Griffith, that there are so many
open jobs across the country right now, and how should the
administration encourage Americans to return to work? Before
you answer that, we have talked a little bit about it, but they
might be able to encourage workers to go to work if we cut
taxes. Let people make more money. Let people understand that
there are jobs out there and employers like me, let's hire
people, put them back to work because we have got a generation
of kids that think a career is a $15 minimum wage or it is an
unemployment check. We need to fix that. So what would be your
advice?
Mr. GRIFFITH. Well, two of the leading factors right now of
people not going back to work, (1) People are still drawing
down on the savings that they accumulated with all the generous
government benefits. But also, work pays less today because of
all this government spending and money printing. The typical
person is earning around 10 percent less today in real terms
than they were just 1-1/2 years ago. Work pays less.
Mr. WILLIAMS. Right. And they want more money because they
are trying to stay up with inflation and small business cannot
afford to do it. So it creates a problem.
So I guess at the end of the day I would certainly have
less government and I would cut taxes again because it works
and put money in the hands of these people so they can start
spending again.
With that in mind, Madam Chair, I yield my time back.
Chairwoman VELAZQUEZ. The gentleman yields back.
And now we recognize the gentleman from Pennsylvania, Mr.
Meuser, Ranking Member on the Subcommittee on Economic Growth,
Tax, and Capital Access.
Mr. MEUSER. Well, thank you very much, Madam Chairwoman. I
thank the Ranking Member Luetkemeyer as well. Thank you very
much to our witnesses. And I am also pleased to say that I have
a number of small business owners from Pennsylvania's District
9 here attending. So thank you all as well.
So, Mr. Griffith, you know, facts are stubborn things. I am
appreciating the fact that you are bringing out the facts. And,
you know, there is a saying, ``In God we Trust but everybody
else bring their data.'' So why do we not stick to the data and
priorities?
Small businesses are clearly under great pressure. This
topic of access to capital is very important but it is simply
not the priority right now. Inflation is. And there is also a
saying that goes, ``When you are in a ditch, the first thing
you do is stop digging.'' But I am not so sure the Biden
administration understands this because the things that got us
here are part of the plan moving forward, such as continued
spending, a continued assault on our domestic energy, continued
regulations. The CBO puts it over $200 billion just in the last
18 months. And no pro-growth or pro-production proposals. You
know, pro-production would increase supply to meet demand as
opposed to trying to diminish demand with higher taxes, which
incredulously is being considered by the Biden administration
and our friends in the left.
So right now inflation is at 9.1 percent. In laymen's term,
9.1 percent is about 1/12th of your income or revenue for a
year; right? So, in other words, 1 month of every year, 1 month
of this year, income and revenue will be evaporated for every
business and every family because of inflation. That robs
people of a lot. And it is not looking much better moving
forward. I mean, right now we have as much as 46 percent of
families struggling to pay bills. One year ago, according to
surveys, it was 60 million people struggling to pay bills as
they would denote. Now it is 90 million, right, again, with no
end in sight.
We are also about to be informed that we are in a
recession, regardless of whether or not the administration
wants to admit it or how they want to redefine it after the
historical definition that has existed. And inflation as we all
know plays no favorites; right? It affects construction. It
affects farmers. It affects manufacturers, service, families,
everyone in the U.S.
So some of my small business constituents stated that their
focus right now is on fighting headwinds rather than growing
their business. Another stated that, a family farm owner,
fertilizer is up 300 percent. It should be no wonder why food
prices are through the roof as they are. Others state how they
cannot hire. Projects are being delayed, construction projects
and other, and one of my constituents informed us that the
infrastructure bill that was passed will now provide 30 percent
less projects because of the level of inflation that has taken
place. So we really have some serious issues to address.
And Mr. Griffith, let me ask you this. Will continued
regulations, continued excessive spending, continued assault on
our domestic energy industry, keeping gasoline prices near
$4.80, and new taxes, again, remarkably, they are considering
new taxes on small business, is that going to help us turn the
corner and provide small businesses relief? Or are there better
solutions than that?
Mr. GRIFFITH. No, this war on production right now that you
see with this administration will make matters far worse. And
you mentioned something very important. Fertilizer costs. Well,
what goes into fertilizer? It takes a lot of energy to actually
produce that fertilizer. So when you see our administration
declaring war on fossil fuels, declaring war on affordable
natural gas, we are remaking ourselves in Europe's image and
Europe is even in a far worse situation than we are in terms of
energy costs and in terms of agricultural production. So if we
continue down this road, declaring war on production at the
same time that we are going to continue spending trillions of
dollars that we do not have, we are promising to make matters
worse. And there is an alternative, and the alternative is to
actually incentivize production and get government spending
under control. That will make it possible for American families
to have a higher standard of living once again.
Mr. MEUSER. All right. I would love to ask the other
witnesses the same question but I am out of time.
Madam Chair, I yield back.
Chairwoman VELAZQUEZ. The gentleman yields back.
And let me take this opportunity to thank the witnesses on
this very important topic that is the Surety Bond Guarantee.
Maybe next time when there is a bill to cut taxes we should all
be committed to make sure that small businesses are not an
afterthought, sunsetting those taxes while corporate American
runs away with the biggest cut in the history of this country.
For small businesses to benefit as much as possible from
this once in a lifetime infrastructure investment, they must be
well-equipped to engage in the federal contracting process. By
finding ways to improve and modernize the Surety Bond Guarantee
Program, we can help more small businesses take part in this
historic effort. I look forward to taking the insights we have
heard today and working with my colleagues to ensure this
program meets the needs of small firms, especially the
disadvantaged businesses that need it the most.
Without objection, Members have 5 legislative days to
submit statements and supporting materials for the record.
And if there is no further business to come before the
Committee, without objection, we are adjourned. Thank you.
[Whereupon, at 11:15 a.m., the committee was adjourned.]
A P P E N D I X
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