    [Senate Hearing 117-209]
    [From the U.S. Government Publishing Office]

                                                           S. Hrg. 117-209

                    REALIZING THE VISION OF PARREN MITCHELL_
                           UNTAPPING THE POTENTIAL OF
                         MINORITY AND WOMEN CONTRACTING

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

                                    HEARING

                                   BEFORE THE

                          COMMITTEE ON SMALL BUSINESS
                              AND ENTREPRENEURSHIP

                                     OF THE

                              UNITED STATES SENATE

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                  MAY 19, 2021

                                   __________

        Printed for the Committee on Small Business and Entrepreneurship

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

            Available via the World Wide Web: http://www.govinfo.gov

                                   __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    46-998 PDF                 WASHINGTON : 2022

    -----------------------------------------------------------------------------------

                COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                        ONE HUNDRED SEVENTEENTH CONGRESS

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

                                C O N T E N T S

                                  ----------

                               Opening Statements

                                                                       Page

    Cardin, Hon. Benjamin L., Chairman, a U.S. Senator from Maryland.     1

                                   Witnesses

    Caldas, Ms. Rosa Q., President and CEO, ZemiTek, LLC, Bethesda,
      MD.............................................................     4
    Rubio, Mr. Euripides ``Ruby'', President and CEO, Ops Tech
      Alliance, LLC, Bowie, MD.......................................    11

              Alphabetical Listing and Appendix Material Submitted

    Caldas, Ms. Rosa Q.
        Testimony....................................................     4
        Prepared statement...........................................     6
        Responses to questions submitted by Senators Hirono and Young    36
    Cardin, Hon. Benjamin L.
        Opening statement............................................     1
    National Urban League
        Letter dated May 19, 2021....................................    32
    Rubio, Mr. Euripides ``Ruby''
        Testimony....................................................    11
        Prepared statement...........................................    13
        Responses to questions submitted by Senators Hirono and Young    41

                         REALIZING THE VISION OF PARREN MITCHELL--
                UNTAPPING THE POTENTIAL OF MINORITY AND WOMEN CONTRACTING

                                  ----------

                            WEDNESDAY, MAY 19, 2021

                          United States Senate,
                            Committee on Small Business
                                          and Entrepreneurship,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 2:30 p.m., in
    Room 301, Russell Senate Office Building, Hon. Ben Cardin,
    Chairman of the Committee, presiding.
        Present: Senators Cardin, Shaheen, Hirono, Rosen,
    Hickenlooper, Scott, Young, Hawley, and Marshall.

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

        Chairman Cardin. Good afternoon and welcome to this
    committee hearing of the Small Business and Entrepreneurship
    Committee. I want to thank all of you for joining on this
    important and timely hearing on the role the Federal Government
    must play in supporting minority and women-owned businesses
    that supply our government with goods and services.
        The title of today's hearing respects my late friend and
    mentor, Congressman Parren J. Mitchell. Congressman Mitchell
    was the first African American elected to Congress from the
    State of Maryland. He rose to become chairman of the Small
    Business Committee in the House of Representatives. He advanced
    opportunities for minority small businesses, including the
    first minority set-aside passed by Congress.
        In addition to being the first African American elected to
    the U.S. Congress from Maryland, Congressman Mitchell also
    created the first set-aside minority program. It was created in
    1977 when he successfully attached an amendment to a $4 billion
    public works bill that required State and local government to
    set aside 10 percent of the funds for minority-owned
    businesses.
        Congressman Mitchell called the amendment his proudest
    congressional accomplishment. Congressman Mitchell understood
    that any plan to strengthen the wealth of America must include
    entrepreneurship, and that the U.S. Federal Government, the
    largest purchaser of goods and services in the world, has an
    important role to play in this effort by ensuring that small
    businesses owned by members of historically disadvantaged
    communities, including minorities and women, are able to do
    business with government agencies.
        This hearing is timely because President Biden's American
    Jobs Plan proposes a once-in-a-generation investment in our
    Nation's infrastructure across all types. Addressing equity for
    underserved and disadvantaged communities must be a focus in
    all of these endeavors.
        So today we will focus on the programs within SBA that help
    level the playing field for minority- and women-owned
    businesses, including the 8(a) Business Development Program and
    the Woman-Owned Small Business Program. The motivation behind
    my commitment to ensuring that the Federal Government is
    providing contracting opportunities for minority- and women-
    owned businesses is twofold. First, I want to ensure that the
    Federal Government is providing small businesses with the
    opportunity to compete for Federal contracts on a level playing
    field with large corporations. And secondly, Federal
    contracting is a vital part of the economy in my home State of
    Maryland, where Federal Government contracting spending
    accounts for 8 percent of our annual GDP and supports thousands
    of jobs to help families into the middle class.
        Congress passed the Small Business Act to ensure the
    preservation and expansion of a level playing field for small
    businesses because by doing so it is vital to the security of
    this Nation. The COVID-19 pandemic has shown us all how true
    these words are. In the past year, the Small Business
    Administration has delivered more than $1 trillion in aide to
    our Nation's smallest businesses in order to prevent the dire
    economic consequences. I am proud that my amendment to extend
    the nine-year limit for participation in the 8(a) program to 10
    years was included in the Fiscal Year 2021 NDAA bill. That
    measure will provide small businesses in the program during the
    pandemic with an additional year of eligibility.
        Small businesses are where innovation happens in our
    economy, and this committee has discussed many times in the
    past years that we must ensure we provide our small businesses
    with the support they need to compete in the global
    marketplace. In 1997, Congress set goals for the Federal
    Government to spend 23 percent of all contracting dollars with
    small businesses. In Fiscal Year 2019, the Small Business
    Federal Procurement Scorecard showed that the Federal
    Government exceeded its small business contracting goals during
    that fiscal year, awarding 26.5 percent of all Federal
    contracts to small businesses.
        The total value of the contracts was $132.9 billion,
    representing a 10 percent increase from the previous fiscal
    year. The Scorecard showed that the Federal Government exceeded
    its goals in three of the four associated economic categories,
    including women-owned small businesses, the second time in the
    history of the Scorecard that the Federal Government hit its 5
    percent goal for that program.
        While I'm pleased that the Federal agencies are meeting
    most of their contracting goals, I have seen recent concerning
    data showing that we are shrinking the number of contractors
    that are participating in the program. A recent report by
    Bloomberg Government found that the number of Federal
    contractors working on unclassified contracts is at a 10-year
    low despite a steady rise in Federal Government contracting
    spending over the same period of time. So there are less
    businesses participating even though we have a growth in small
    businesses.
        In Fiscal Year 2016, for example, more than 120,000 small
    businesses contracted with the Federal Government, but in
    Fiscal Year 2019 that number had dropped to under 103,000 small
    businesses. That means that while contracts are getting bigger
    and bigger, we are creating an insular club where fewer and
    fewer businesses successfully compete for government contracts,
    creating a less competitive marketplace in the process.
        Predictably, our Nation's small businesses are bearing the
    brunt of the decline. According to the report, the Federal
    Government did business with 32 percent less small vendors in
    Fiscal Year 2018 than it did in Fiscal Year 2009. For a
    comparison, the number of large vendors fell by only 4 percent.
        So today I am looking forward to hearing from our
    witnesses. They're both Maryland entrepreneurs whose businesses
    have benefited from the 8(a) and women-owned small business
    program.
        Rosa Caldas is President and Chief Executive Officer of
    ZemiTek, an 8(a) and woman-owned certified small business
    headquartered in Bethesda, Maryland; and Euripides ``Ruby''
    Rubio is President and Chief Executive Officer of Ops Tech
    Alliance, an 8(a) and service disabled veteran-owned small
    business, certified, headquartered also in Bethesda. Bethesda
    is getting very well represented here today.
        Mr. Rubio is also a graduate from the Bowie Business
    Innovation Center 8(a) Accelerator and the Veterans Institute
    for Procurement program, which are both successful programs in
    Maryland that can serve as a model for the Nation as we seek to
    support small business contractors.
        I do want to acknowledge the work of Barbara Ashe with
    regards to the VIP program because it's a unique program. It
    was created under the sponsorship of the Montgomery County
    Chamber of Commerce. That's Montgomery County, Maryland. It was
    a national program to help veteran small businesses, and it's
    been very successful, helping over 1,600 veteran-owned small
    businesses to date. One of those companies is represented by
    one of our witnesses today.
        So I'm also looking forward to learning from Ms. Caldas and
    Mr. Rubio about what aspects of the 8(a) and the woman-owned
    small business programs are working well, as well as the areas
    we need to improve for more small businesses to successfully
    compete for Federal contracts.
        President Biden's American Jobs Plan seeks to invest more
    than $2 trillion in our Nation's infrastructure, so now is the
    time to improve the 8(a) and woman-owned small business
    programs so woman- and minority-owned small businesses have the
    support they need to participate in a once-in-a-generation
    opportunity.
        I know that Senator Paul, the ranking Republican member,
    will be joining us shortly. He asked us to proceed with the
    witnesses, so we'll do exactly that. We'll go in the order in
    which I first acknowledged our witnesses.
        So, Ms. Caldas, we'll start with you.

     STATEMENT OF ROSA Q. CALDAS, PRESIDENT AND CEO, ZEMITEK, LLC,
                              BETHESDA, MD

        Ms. Caldas. Good afternoon. Good afternoon, Chairman
    Cardin, we don't have here Ranking Member Paul, and members of
    the committee. It is an honor to meet you and to be invited to
    speak at this committee.
        My name is Rosa Caldas. I am the President and CEO of
    ZemiTek, an 8(a) and woman-owned small business located in
    Bethesda, Maryland. Thank you for the opportunity to speak at
    today's hearing.
        My experience supporting the Federal Government dates back
    to 1995, when I began managing projects for Federal
    contractors. I founded ZemiTek in 2007 because I felt I could
    do a better job supporting the government and providing a
    better and more nurturing environment for my employees.
        In 2008, ZemiTek was accepted as part of the Montgomery
    County Business Innovation Center, and I briefly entered the
    HUBZone program. During our first eight years, most of our work
    was through small purchase orders and subcontract work. During
    this period, we experienced difficulties in gaining access to
    funding, limiting our ability to grow.
        In 2015, we won our first significant prime contract award
    by leveraging a partnership with a more experienced large
    business. In 2017, we secured our GSA schedules, entered the
    SBA Mentor-Protege program, and formed a joint venture with our
    mentor. We obtained a GSA Best-in-Class OASIS schedule in 2020
    through our joint venture. We now have over 70 employees, as
    well as many consultants.
        The small business set-aside programs are critical for the
    development of small businesses, for economic development, and
    for providing innovation and flexibility to the Federal
    Government buyers. We sincerely believe the small business
    contracting goals are due for upward revision.
        The Federal Government small business goals have not been
    increased in over 24 years, and the WSB goal has not been
    increased since its inception.
        Goals are important and effective in keeping the Federal
    Government accountable. We are grateful for ZemiTek's
    opportunity to participate in the 8(a) program. It is important
    for potential participants to make sure they fully understand
    the Federal contracting landscape to fully benefit from the
    limited timeframe of the program. ZemiTek made a conscious
    decision to delay submitting our application until we were
    ready.
        The 8(a) program does have some challenges. For example,
    the sole source cap is long overdue for an increase. It needs
    to be adjusted for the increasing average size of contracts.
    The maximum total contract value for a sole-source 8(a) award
    is $4 million. Making it an annual cap of $4 million will be
    preferable. But at the very least, the cap should be doubled.
        More resources need to be provided to the SBA, its three
    offices. Business Opportunity especially carries an
    overwhelming workload and often focuses more on compliance
    rather than business development. SBA district offices could
    benefit from an increase in staffing, as well as more
    consistent training.
        We are very grateful to the Small Business Committee in
    allowing for a one-year extension in the 8(a) program. Twenty-
    twenty was a challenging year for all of us, as well as for
    small businesses. Normal business development, client
    engagement, and networking opportunities were reduced, and
    growth was difficult. We support the Mentor-Protege program and
    have benefited from participation. These formalized
    relationships allow us to benefit from our mentor's guidance
    and improve our ability to pursue prime contracts. Proteges are
    limited to two mentors for the company, and we believe that
    allowing more than two mentors will help small businesses
    maximize their learning opportunities prior to graduation.
        Category management poses serious and significant
    challenges for the small business community. Fewer and fewer
    requirements are being issued as a stand-alone contract,
    meaning fewer opportunities for small businesses. Consolidation
    and bundling of simple requirements and placing them on BICs
    further erodes the competitiveness of small businesses, as they
    often lack the capability to bid on the size and complex nature
    of the consolidated contract.
        With respect to the WSB program, we have found the
    certification process to be cumbersome, and we recommend
    increasing resources to the SBA to ensure that they are able to
    successfully manage the certification process. We also
    recommend implementing reciprocity between the 8(a) and WSB
    programs.
        Thank you so much for the opportunity to share my
    experience with you. I look forward to answering any questions
    you may have.
        [The prepared statement of Ms. Caldas follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman Cardin. Ms. Caldas, thank you very much for your
    testimony.
        We will now hear from Mr. Rubio from Bowie, Maryland, not
    Bethesda, Maryland. I want to correct the record to make sure
    the great city of Bowie--the mayor is going to be with me
    tomorrow--got the right credit for Bowie.
        Mr. Rubio?

     STATEMENT OF EURIPIDES ``RUBY'' RUBIO, PRESIDENT AND CEO, OPS
                     TECH ALLIANCE, LLC, BOWIE, MD

        Mr. Rubio. Good afternoon, Chairman Cardin and
    distinguished members of the committee. My name is Euripides
    Rubio, and I am the President and CEO of Ops Tech Alliance--
    OTA--a 100 percent Hispanic and service-disabled veteran-owned
    business located in Bowie, Maryland. As a minority and an
    advocate for service-disabled veterans in business, I thank you
    for the opportunity to contribute to the discussion of how we
    can best tap the incredible potential of our country's minority
    and women contractors.
        My company, OTA, was formed to bridge the gap between
    operations and technology. We provide training, cybersecurity
    products and services. With the increase of cyber threats to
    our Nation, OTA's background enabled us to consistently produce
    excellent results for our clients, and we're very proud of that
    fact.
        We also made the Inc. 5000 list for fastest growing
    companies the last three years in a row. So we are moving at a
    good pace.
        I grew up poor with a strong mother who got us out of the
    projects and kept us on track. She got me to college, but
    because of financial constraints I had to drop out. So I was
    that one guy who went to the Army recruiter. He offered me $50
    a month to jump out of planes, and I said ``Where do I sign?''
    So I spent 23 years in the Army with a career in Intelligence
    and Special Operations.
        After my retirement I was eager to do something
    challenging, so in 2012 I registered OTA as a business. I
    invested all my retirement savings into this company. I even
    survived the 2013 government shutdown. But statistically, I was
    expected to fail.
        By 2014 I hired our first employee, and we got into our
    first contract. By the end of the year I was responsible for
    four families, not to mention my own. Our biggest problem was a
    delayed payment by large prime companies. Of course, my
    employees could not wait 45 to 60 days to get paid, nor my
    bills.
        The current law doesn't enforce oversight to ensure small
    businesses are receiving prompt payment within 15 days. Faster
    payment will not burden a large business, but it will make a
    world of difference for small companies.
        In 2015 we applied for the 8(a) program and got accepted,
    but I found that the reality was not what I expected. Our
    current clients were not familiar with the program, and there
    was a lack of awareness and result to use the 8(a), at least in
    my line of work. So I ended up in the same position where I
    started from.
        It wasn't until 2017 where we were searching for a business
    incubator, and that's how we connected with Lisa Smith from the
    Bowie Innovation Center. They provided us with many resources,
    but more importantly the Bowie BIC 8(a) Accelerator program,
    which included training, mentoring, and many resources to use
    the 8(a) more efficiently.
        In the same year we were accepted to the Veterans Institute
    Procurement, the VIP, which was another great program, managed
    by Barbara Ashe, where we received very valuable training and
    networking with veteran-owned companies.
        Without question, these two programs gave us a lot of
    insights in areas of business and client landscape that I
    couldn't find anywhere else.
        As a minority and a veteran-owned business, we have more
    grit and experience overcoming obstacles. However, the
    competitive landscape is extremely unpredictable. And, of
    course, I'm not even addressing the devastating effects that
    COVID-19 had on small businesses. If it weren't for the PPP
    loan, I would not be sitting here talking to you today.
        In conclusion, I believe the following key steps, if
    implemented by the committee, will have the greatest impact.
        First, increase and enforce the contracting goals of the
    Federal Government and large prime contractors for minority
    small businesses.
        Next, increase training for all government agencies on the
    actual process utilizing minority small businesses.
        Expand access and require minority businesses to graduate
    from programs like the Bowie BIC 8(a) Accelerator and VIP.
        Establish oversight to ensure that Federal agencies and
    prime contractors are paying minority small businesses within
    15 days.
        And lastly, change the protest process. Protests are
    devastating the procurement system and wasting money and
    opportunities for minority small businesses.
        Thank you, distinguished members of the committee, for your
    time and attention to these issues. Minorities and women are
    clearly in the spotlight now, and I recommend focus on these
    matters more than ever. I'm honored to be here to speak on
    their behalf, and I'm ready for any questions you might have.
        [The prepared statement of Mr. Rubio follows:]

    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Chairman Cardin. Let me thank both of you for your
    testimony, and let me make this observation.
        The American Jobs Plan is really a once-in-a-generation
    opportunity to make a significant investment in the
    infrastructure of our Nation. But we also have to make sure
    it's opportunities for all businesses to participate in that
    infrastructure. So we need to operate from the beginning with
    the opportunities for small businesses, particularly in the
    underserved communities, in the minority communities and women-
    owned small businesses.
        That's one of the reasons for this hearing. You've made a
    lot of suggestions. We're going to be looking at those
    suggestions. We're in discussions with the Biden administration
    and with our House counterparts as to how we can ensure that
    the investment in infrastructure will be used to advance these
    goals, and I think you've given us a lot of good suggestions.
        I want to talk for just a moment about the Bowie
    Accelerator program. We're very proud of what they do at Bowie.
    It's one of the great examples, and it's been extremely
    helpful. The VIP program that Barbara Ashe heads is one that I
    brag about all the time. It started with the resources of the
    local Chamber of Commerce in Maryland, in Montgomery County. It
    became a national model because it served the national
    community of veterans, got a partnership with the Small
    Business Administration. We were pleased to promote that, and
    now it is truly the template for how we can provide services to
    veterans in our Nation.
        So we're proud of both of the programs that you all have
    referred to.
        I want to deal with raising the caps that you've talked
    about, so let me start with the sole source, because sole
    source is one of the great tools that allows for the contract
    really to be made with minority businesses and women-owned
    businesses.
        Today, the cap on a multi-year contract is about $900,000
    on sole source, which really takes you out of the prime
    contract area exclusively. So you deal with the abuses you're
    talking about on prompt payment and all the other challenges
    you have in dealing with prime contractors.
        So just elaborate a little bit more for me how important it
    is in reality, what types of contracts are we talking about
    that you all could qualify for under sole source if that cap
    was raised.
        Either one who wants to start.
        Mr. Rubio. Well, I can tell you, sir, Senator, that we
    missed opportunities because of that cap. Like Ms. Caldas
    mentioned, it should be increased even yearly, because when you
    look at those numbers and the opportunities that are out there,
    the numbers are not keeping up with inflation, with the
    economy. So it definitely should be increased. When you look at
    these numbers, they haven't changed in a long time, over 20
    years. So I think it's time.
        Chairman Cardin. And when the contracting agency is limited
    by the size, they can't put these contracts up for sole source
    even though they may be ideal for the sort of special attention
    that Congress intended.
        Ms. Caldas, do you want to add anything to that?
        Ms. Caldas. Yes. I'm just going to provide a couple of
    examples. We have received a couple of sole source 8(a)
    contracts. The limit was $4 million. And this is just to
    illustrate how important it is to increase the cap. One of our
    coding contracts is providing technical support services to
    USAID and the Mission in Haiti. Because of all the security
    problems they have had in that country, they have had to rely
    more and more on contractors to provide service support.
        We received the contract sole source award, and because of
    this situation, we started deploying and providing technical
    assistance and staff, and this contract is less than a year
    old, and they already have committed to around 80 percent of
    the ceiling of that contract. It takes time for the agencies to
    identify companies like us that have the technical expertise
    and have the knowledge to deliver those services. They
    establish, they award the contract, and then they get
    themselves in a situation where they are reaching the cap and
    the ceiling very quickly, and they don't have the flexibility
    to increase that ceiling.
        I think it's very obvious that whatever--the contracts that
    were $4 million so many years ago, you cannot buy the same
    amount of services as you do today. But the reason for the sole
    source allows for an easier expedited process to issue these
    contracts, and it is not very straightforward for the agencies
    to understand if they have any flexibility to increase it and
    what is the next step.
        So I just wanted to illustrate one of the examples. That is
    the type of services that we provide, and it would be
    beneficial for 8(a) companies, but also beneficial for the
    Federal Government buyers.
        Chairman Cardin. Let me ask one additional question, and
    that is that I was pleased, and you acknowledged in your
    testimony, that we extended the 8(a) program for an additional
    year as a result of COVID-19 in the NDAA bill. But I want to
    talk about graduating out of the 8(a) and your ability to
    compete once you have completed the number of years of
    eligibility.
        We had the 7(j) technical assistance that's supposed to be
    helping you transition off of the preference under the 8(a)
    program. Should we be looking at ways to strengthen the ability
    to deal with the transition off of 8(a)? Are there other issues
    that we should be looking at? Are there things that we can do
    to make it more resilient for small businesses that were 8(a)
    that no longer are?
        Ms. Caldas. Absolutely. Prior to forming my company, I
    supported a small business, mid-size businesses, and I was also
    an employee of large companies. The type of resources that
    large companies have to compete for work cannot even compare to
    what a small business can do. So what happens is many of our
    small business company owners start worrying about the
    situation where you go from being a small business to other
    than small. Other than small could be a company that just
    graduated from their NIC code. It is a very difficult
    environment where a lot of small businesses don't survive, or
    they start finding ways to stay small so they don't enter the
    ``valley of death,'' like some companies mentioned, or they
    look for opportunities to be acquired because they know that
    they may not be able to compete in that environment.
        So there are several things that could be done. One of them
    is revising the size standard under NIC codes so a small
    business could take advantage of staying small a little bit
    longer while they strengthen their capabilities to graduate
    from that NIC code.
        Allowing more mentors in the Mentor-Protege. As I mentioned
    in my testimony, small businesses can only have two through the
    life of the company, when mentors, and most of them are large
    businesses, can have three Proteges at the same time. So
    allowing for more mentors also gives the opportunity for small
    businesses to grow and learn more through the advice of those
    companies.
        So there are many, many other options out there that should
    be considered. Training is always good. But at the end, when
    you finish the training, you need to find ways to have
    resources to compete in an environment where it's just very,
    very hard to compete.
        Chairman Cardin. Thank you. I appreciate that.
        Senator Hawley and Senator Scott have passed on
    questioning, so we're up to Senator Marshall.
        Senator Marshall. Okay. Well, thank you so much, Chairman.
    Glad to be here, and welcome to our witnesses this afternoon as
    well.
        In today's hearing we're supposed to be talking about the
    HUBZone service, disabled and veteran-owned and woman-owned
    small business programs. Our staff and myself, we made a huge
    effort to reach out to our minority Chambers, to small business
    owners, small business wannabe owners in economically
    distressed communities, and I certainly have not solved the
    puzzle yet.
        And as I interviewed people and listened, two big issues
    remain, among others, two that I've identified: access to
    capital, and really financial literacy. So I want to talk about
    access to capital for a second.
        What advice would you be giving to me to give to future
    small business owners when it comes to accessing capital? And
    in particular, I want to know if you've had any experience with
    the CDFI, the Community Development Financial Institutions.
        I'll ask each of you first, and ladies first, Ms. Caldas,
    please.
        Ms. Caldas. Having access to capital is imperative. When we
    started and we reached out to one of the banks that we were
    working with, the first thing they tell you is we want you to
    be in business for two years. Then you go back and knock at the
    door, it's been two years and, oh, it just depends on how many
    contracts you have. When you have contracts, come back and show
    the bank, and the bank said, well, we want you to have multiple
    years.
        And in the meantime you have payroll, you have benefits to
    pay for your employees, and many of us do a couple of things:
    one, cashing in retirement and mortgage the house, just to make
    sure to keep the company moving; or using some services where
    you sell your invoices and pay very high interest so you can
    manage your cash.
        It has been helpful when we started winning prime contract
    work because some of the Federal agencies do pay us quickly. It
    is completely different when you are a subcontractor to large
    primes. Sometimes you get paid 60 days, 90 days, and payroll
    needs to be paid before the invoice goes out.
        So definitely there should be more resources dedicated to
    either some of these financial banks, working with the SBA and
    providing some ability for smaller companies to start being
    able to have access to borrow based on the work that they are
    doing and making it easier to tap that capital. It is not that
    easy, and we all as small business owners have gone through
    that.
        Senator Marshall. Right. Mr. Rubio, I certainly understand
    it's a challenge. That's what I'm trying to get at. Have you
    had any experience with CDFIs? And where are people getting
    access to capital, woman-owned businesses, minority-owned
    businesses? Any advice?
        Mr. Rubio. In my case, when I first started, I had to
    borrow money from friends and family, and a lot of people do
    that. Like she said, you show up to a bank and they say great
    story, great company, great contract, but you just got a
    contract, we're not giving you money.
        There was this thing we did not know about, the 7(a) SBA
    loan, and we actually got that. One bank, actually--we ended up
    with Sandy Spring, and they're the ones that actually told us,
    hey, by the way, there's an SBA-backed 7(a) program, and that
    saved our lives, actually. I got my first loan there. Of
    course, you also had to put in your house, your life insurance.
    I had to put everything in it, but that actually helped us a
    lot.
        Senator Marshall. Was that like a 5 percent down? Is that
    what that type of loan was?
        Mr. Rubio. Yes, there were some fees there, and since I was
    a veteran too, there were some things that were waived. But it
    was an easy--well, not an easy process, but definitely once we
    found out that that was available, we're still in it today. The
    deal with that is there was no education. I had no idea that it
    existed.
        Going back to education, things like the VIP, the 8(a)
    Accelerator--actually, I found out after the fact. I went to
    this course, this training, years into when I started the
    company, and I wish I would have done all that before even
    getting my certification. I regretted getting my 8(a) so early,
    and I was already three years into it. I wish I would have had
    this training before I did this.
        And the same thing with the money, the education. They
    brought the banks, they brought folks, CPAs who came in and
    talked to us. The deal with these programs is you actually have
    to sit there, and all these folks come in, and you can
    mentorship, you can ask questions. It's different from me
    sitting online and going through a class. It was more
    interactive, right? And you have folks who have actually done
    it.
        Senator Marshall. All right.
        Thank you, Chairman. I yield back.
        Chairman Cardin. Senator Shaheen?
        Senator Shaheen. Thank you, Mr. Chairman.
        And thank you both very much for being here and for your
    insights into what we could do to make these programs more
    effective.
        One of the concerns that I've heard from a number of small
    businesses in New Hampshire is the challenge of getting into
    Federal contracting. It requires a lot of paperwork, there's
    bureaucracy, and they find it really challenging. I've also
    heard that they feel like the agencies that they may be talking
    to have businesses that they've done business with over the
    years, and so they're not that welcoming to new small
    businesses that want to do work for them.
        So I wonder, I think you talked a little bit about how you
    got into the programs, the SBA programs. But can you talk a
    little bit about what your experience was getting into Federal
    contracting and what was the break that allowed you to do that?
        Either one or both of you.
        Mr. Rubio. It helped me that I was already in the
    government. I was retired, so I understood the system, I was
    used to it. Networking is a big, big piece to it, of course,
    for any business.
        The issue for me was that when I first came in I had to
    develop a business plan. And it's not their fault, but when I
    went to the SBA office, the sample they gave me was actually a
    hot dog stand, and they were trying to simplify it for me. But
    that doesn't compare to what you have to do in a Federal--
    Federal contracting is a different animal. I mean, the
    financials alone, when I first started the company, you had to
    be DCAA compliant. Okay, what does that mean? There is actually
    a whole agency that does that.
        So there are a lot of things, a lot of rules and policies
    that you have to establish, for good reasons, but I don't think
    the SBA is prepared--they don't have, at least in my case, they
    didn't have anybody that was actually Federal contracting
    experts. And again, going back to the training that we
    received, those guys that were there, those folks were
    important for me, in my experience.
        Senator Shaheen. Ms. Caldas?
        Ms. Caldas. Yes. Similarly, before I formed ZemiTek, I
    supported the Federal Government as an employee of a small,
    mid-size, and large contractors. So I knew enough how to
    deliver work and understood the Federal contracting environment
    to an extent, because as a manager we didn't have access to
    certain information. It was challenging. For the reasons he was
    mentioning, we saw a lot of 8(a) companies apply, but by the
    time they figured things out they were already three or four
    years into the program. So that's why we decided to wait
    through our infrastructure, our accounting system, before we
    applied for the 8(a) program.
        Now, with regard to something you mentioned that helped us
    break into some of the agencies, because it is true, sometimes
    you are trying to provide support to some agencies and you
    don't understand how they work. They have different language,
    and they have different missions. What worked for ZemiTek was
    looking for opportunities where we could bring our experience
    as a subcontractor, and it gave us the opportunity to learn how
    that agency worked before we tried to pursue work in that
    agency as a prime contractor. It would have been very difficult
    for us to win the work without having an understanding not only
    of the Federal contracting landscape but specifically
    understanding of that Federal agency, what they buy, what are
    the rules and regulations, because besides the Federal
    regulations, each agency has some regulations that you just
    have to understand.
        So those two things worked for ZemiTek trying to tap into
    Federal contracting.
        Senator Shaheen. Thank you. Can I ask you, too, about your
    certification as a woman-owned small business? The rules are
    changing, and as of October you're no longer able to self-
    certify. I also understand that that's off to a relatively slow
    start in terms of helping women-owned small businesses
    understand how the new process is going to work.
        Part of the problem is you have something called the Rule
    of Two, where there have to be two women-owned small businesses
    who can compete for whatever the contract is, and part of the
    challenge is we don't have that many women-owned small
    businesses. So it's sort of a Catch-22. Have you experienced
    anything similar to that?
        Ms. Caldas. I'm going to answer your question in two parts,
    the certification, and opportunities for the women-owned.
        The certification process has changed, and the new system
    is cumbersome and is difficult to navigate. I have been
    applying to certifications since 2008. You go from the paper
    process, to a system process. When you had Certify it was
    working, and we got certified in September 2020, and now they
    have a new system, and there is not a lot of support sometimes
    from the SBA to navigate the certification process to complete
    the new procedures that we need to do before our first year.
    When we certified in September with the Certify process, we
    have one year to then jump to the new system.
        So the process is difficult, and there is not a phone
    number of somebody you can call. You keep on sending emails and
    just trying to resolve the problems by yourself. So one is the
    certification.
        Regarding opportunities, I have seen a lot more
    opportunities for women-owned small business in the last couple
    of years, and there are so many years that we have supported
    the Federal contracting. One thing that we are dedicating
    resources and, as you mentioned, they need to do the research
    and prove that a small business can do the work. I do believe
    there are a lot of woman-owned small businesses that can do the
    work. Sometimes I think the agencies, it's hard for them to
    find it, and it is also our responsibility as woman-owned small
    business to make the agencies know that we are out there.
        So one of the things that we are doing is any time an
    agency has a requirement that we think we can do the work and
    they have a request for information release, we are dedicating
    the resources to respond to that and to let them know we can do
    the work, and by the way, we are 8(a) and woman-owned. We have
    seen good results on that. Last year we pursued and won a
    contract that was a set-aside woman-owned using the GSA
    schedule, and this year we have seen one or two in the last few
    weeks that have been released, set-aside woman-owned, using the
    GSA Best-in-Class OASIS.
        So something is happening. Things are changing. We are
    seeing more than we have seen before. But I just wanted to
    address the two things, the certification process and the
    number of opportunities that are starting to go up for woman-
    owned small business set-aside.
        Senator Shaheen. Thank you. That's very encouraging.
        Thank you, Mr. Chairman.
        Chairman Cardin. We'll now go to Senator Hirono, who is
    with us through Webex. I understand she was here when the gavel
    was brought down, so I thank her for her patience.
        Senator Hirono. Don't let it happen again, Mr. Chairman.
        [Laughter.]
        Senator Hirono. Thank you very much.
        Have both of you gotten sole-source contracts?
        [Pause.]
        Senator Hirono. Hello? Can you hear me?
        Mr. Rubio. Sole source you said?
        Senator Hirono. Yes. Have both of you gotten sole-source
    contracts as 8(a)?
        Mr. Rubio. I have.
        Ms. Caldas. Yes, I have.
        Senator Hirono. Both of you. So, how does a company--for
    example, you're just starting out, you're in an 8(a), you have
    no track record. How do you qualify? How do you get the
    attention of SBA or any of the contracting entities if you
    don't have a track record as a sole-source provider? I think,
    Ms. Caldas, you touched on that a little bit. How did you gain
    the attention of the contracting entity so that they could do a
    sole-source contract with you when you just started out?
        Ms. Caldas. Yes. As I mentioned before, we understood that
    challenge, so we did not enter the 8(a) program when we
    qualified. We only needed to be in business for two years when
    we applied for the program, and we were in our eighth year when
    we submitted our application. So in the moment when we
    submitted for the 8(a) program, we already had some experience
    doing work as a subcontractor that we could pull forward when
    we were trying to pursue work to demonstrate that we could do
    that work.
        It took us several years more to get our--we have gotten
    three sole-source contracts, one really small with the Defense
    Innovation Unit of DOD, and two others providing technical
    assistance overseas. But at the time that we were pursuing
    those, we had enough past performance and past experience to
    demonstrate that we could do the work.
        It is a little more difficult for new companies entering
    the 8(a) that don't have that track record to be able to
    demonstrate that they can perform the work, so it makes it
    difficult for them to pursue 8(a) sole-source contracts.
        Senator Hirono. So is the path you followed to be in
    getting subcontracts so that you did have a track record, is
    that the usual path for 8(a)s who want to obtain sole-source
    contracts, Ms. Caldas?
        Ms. Caldas. I don't know if it is the usual path. I think
    the 8(a) is intended for 8(a) companies to be able to pursue
    those sole source when they are starting. But the reality is
    that when you are trying to pursue that work, you need to be
    able to demonstrate that you can do the work and that you have
    the capacity and the infrastructure to do the work. So I think
    it is a big mismatch in what is expected versus reality, and I
    think a lot of small businesses that join the 8(a) program
    think, okay, now I have 8(a), I can get a sole-source contract,
    and then find it difficult, taking several years, to be able to
    gain the experience that they need to pursue it. So that's the
    reality.
        Senator Hirono. That makes a lot of sense to me that a
    small business should have a track record if they hope to
    compete for a sole-source contract. It's probably something
    that the SBA should inform the 8(a) participants that that's
    the reality of things.
        So how many years are you into the 8(a) program, Ms.
    Caldas?
        Ms. Caldas. Five years. We entered the year in 2016, but
    just so you can compare, the company is going to be 14 years
    old in a few months, and we've only been in the program for
    five years.
        Senator Hirono. Yes. So I think that you are probably quite
    unique in how you have very strategically managed your company
    so that you are able to maximize your participation in the 8(a)
    program, so I commend you. And you have obviously grown your
    business to 70 employees. When you started, how many employees
    did you have?
        Ms. Caldas. One, me.
        [Laughter.]
        Ms. Caldas. The first year was me, and then I had a second
    person part-time.
        Senator Hirono. You should be a mentor. I think you said
    mentors would be good.
        You mentioned the concern about the category management
    contracting model, and I've heard from other companies, other
    minority-owned businesses that are concerned about the category
    management contracting model because it means that there are
    fewer contracts to go around, which means fewer opportunities
    for minority-owned businesses, particularly small businesses,
    of course. You have expressed some concerns about it. What
    should we be doing? Should we be getting away from this sort of
    contracting model?
        Ms. Caldas. I think with the category management and the
    Best-in-Class, it's a combination of issues. One, it is really
    hard to get in as a small business because, again, for you to
    be able to be successful and have one of those contract
    vehicles, everything is based on the scoring, and the scoring
    depends on how many contracts you have, what type of
    certifications you have. And the other thing is that those
    contracts don't have a full open enrollment, so they are every
    five years, a small window for you to try to apply and enter.
        So a lot of companies are doing, and we were successful
    just by partnering with a large business. So we as a team, who
    score high enough to enter--to gain the vehicle. So that's one
    thing.
        I think more agencies need to be educated about what is
    expected to be done with category management, because what we
    have personally seen is that we need to meet our category
    management goals, and certain requirements that were performed
    by small businesses are being moved to either the unrestricted
    pool or they--and we have seen this a couple of times. I don't
    know if it's something that is happening frequently. They
    release the same requirement at the same time for the small
    business pool and the unrestricted pool, and at that point you
    are really not competing. It is really just too hard to compete
    when you know that the large business is also going for the
    same work.
        So it is challenging because then a lot of the newer small
    businesses that don't have that experience, it's almost
    impossible to get into those vehicles. So it's either
    facilitating that some small businesses can really be part of
    it and opening the enrollment so we are not--I mean, we made an
    effort and we knew we only had one chance, we have to do it
    with a large business because if we don't do it now, we need to
    wait five more years. And then a lot of the requirements
    started to be consolidated and bundled. And because they are
    consolidated and bundled, they bundle a lot of small business
    requirements into a large requirement that they then release in
    the unrestricted pool.
        So I think it needs to be more visibility and oversight in
    how these plans are being implemented, because this is just
    reducing the contracts that are available for small businesses
    to pursue.
        Senator Hirono. Mr. Rubio, do you share that perspective
    regarding this kind of model for contracting?
        Mr. Rubio. Yes, and I was also--it's interesting because we
    had different experiences. I was in the JV also, in the
    mentorship program, and that was another lesson learned because
    there was not a match, and I wish I would have known a lot of
    things before I got into that. It's kind of like a marriage.
    You get married. You see each other's culture and financials
    and everything. So that did not work as well.
        As far as going back to the sole source piece, I just
    wanted to mention something, that I did have some issues with
    that, and it was that our clients--the deal with 8(a)s is that
    you have 8(a)s in specific areas, like I was supporting a very
    specific client in DOD, the Department of Defense, and they
    were not familiar with 8(a)s. They had no other 8(a). I was the
    first 8(a) that showed up, and I actually had a relationship
    with this client as far as doing other work for them. When it
    came to the point where we had to do a--we said, hey, let's go,
    we're an 8(a) now, and that's what happened back in 2015. I got
    my 8(a) and said, okay, we have an 8(a), and they said we have
    no idea how to use you like that, let's just keep doing what we
    were doing before. And we couldn't actually grow any business
    we were doing with them because of that. So education on the
    government side definitely was an issue for us, and even for
    us, because I didn't know how to tell them until years later,
    when I learned.
        So I did not wait, like you did. I should have.
        Senator Hirono. Considering that----
        Chairman Cardin. Thank you.
        Senator Hirono. Oh, I'm sorry. Considering that all
    contracting agencies I thought were supposed to have certain
    goals regarding minority-owned business contracting, the fact
    that some entities still don't seem to know that, never heard
    of 8(a), that's pretty astounding.
        Mr. Chairman, I think this idea, this concern about the
    category management contracting model, I hope that we can ask
    further questions about how that is being implemented and the
    impact on 8(a)s and small businesses.
        Thank you, Mr. Chairman.
        Chairman Cardin. Thank you, Senator Hirono.
        Senator Rosen by Webex.
        Senator Rosen. Thank you, Chairman Cardin. I appreciate you
    holding this important hearing on Federal contracting for
    minority and women-owned businesses.
        I really want to thank the witnesses here today, too, for
    your insightful testimony, for your hard work to build your
    business and mentor others. What I want to say is that 99
    percent of businesses in Nevada are small businesses, and so we
    understand their importance not just to our community and to
    our families but, of course, to our states and country.
        Congress has historically worked to enhance the integration
    of our small businesses in the Federal contracting process. In
    Fiscal Year 2020, Nevada small businesses received over $500
    million in Federal contracting dollars. More than $220 million
    was awarded to small disadvantaged businesses, minority-owned
    businesses that are also economically disadvantaged, but $157
    million awarded to woman-owned small businesses.
        So I'm pleased that in recent years the Federal Government
    has met its goals on small business contracting; but, of
    course, there's always room to improve minority- and women-
    owned businesses in Nevada and across the country.
        Ms. Caldas, can you tell me what you think we could do to
    improve not just the process but increase opportunities for
    women-owned businesses and just really increase the awareness
    that these things exist? And also do you think the resources
    that you needed were available to you through the process of
    seeking your opportunities? And what might you add, future
    resources that you think SBA could put in to help women and
    minorities and others in their quest to get their own small
    business going?
        Ms. Caldas. Several things regarding the woman-owned small
    business. I think the process of getting certified should be
    streamlined and should be easier. I mentioned in my testimony
    that we go through the process, for example, 8(a), we have
    proven that we are a U.S. citizen, that we belong to these
    groups, and that we have control of the business, and then we
    need to go through the same process to prove that we are woman-
    owned, controlled by a woman.
        So reciprocity between the 8(a) and the WSB. If we submit
    an application for the 8(a) and I already have proven that I am
    the sole owner, that you can get the WSB certification without
    having to go through the process is one thing.
        I think woman-owned small businesses need to receive some
    education in how to market to some of the agencies and have the
    resources available to respond to the requirements that
    agencies have to at least demonstrate that woman-owned small
    businesses out there are capable of doing that work.
        And I think at the same time agencies and government buyers
    and the contracting officers need to have a better
    understanding of setting aside work for woman-owned small
    businesses. Some agencies are doing better than others, and I
    think it's just a matter of some education and training and
    understanding.
        Just playing devil's advocate, sometimes the buyer needs to
    buy the services quickly, and they are going to go the fastest
    and easiest way to do that. So if they have an ability and they
    have an understanding of how to tap into the woman-owned small
    businesses out there, I think it's just going to benefit both
    the agencies and also the companies that are owned by women.
        Senator Rosen. Thank you. I think you're right about
    improving outreach and awareness. That's always an important
    factor.
        Mr. Rubio, I want to thank you for your service to our
    country. Of course, in Nevada we're proud to be home to over
    225,000 veterans, and one in eight of our small businesses are
    veteran-owned. We also have one of the largest Latino
    populations per capita in the U.S., so really part of our small
    business ecosystem.
        So what do you think Congress can do to improve Federal
    Government's contracting numbers for veterans like yourself and
    being sure that there's outreach and awareness? What do you
    think you can add in the short time I have left? Thank you.
        Mr. Rubio. Thank you, thank you. It's basically the same
    thing. Also with the certification, after going through the
    8(a) process, I had to get certified as a WSB, and we had to go
    through exactly the same process, although you can self-
    certify. But in order to get that CVE, you had to go through
    the process.
        It's education, going back to the same thing. The programs
    like VIP and the 8(a) Accelerator are things that we need. You
    need to get training like that before you get your
    certification because, like Ms. Caldas mentioned, you get your
    8(a) or CVE and you go, okay, I'm ready, and crickets. Nobody
    comes or calls. You think that the phone is going to be ringing
    off the hook.
        And I get the part where we have to do marketing, we have
    to reach out to clients, but it's education on both sides,
    because your clients, the clients you've been dealing with,
    they don't even know how to use it.
        Senator Rosen. Well, thank you. I think this has been
    really informative. Outreach and training on both sides,
    streamlining, duplication in the process, that's going to make
    it easier for everyone, and then hopefully more effective for
    small businesses to move forward.
        Thank you, Mr. Chairman.
        Chairman Cardin. Thank you, Senator Rosen.
        You all have really put a lot before us, and we're going to
    be taking that into consideration. We did talk about the
    mentorship programs and the limitations that are there with the
    way that it has been merged with the Protege program, so we
    will be taking a look at that.
        We haven't had a chance yet to talk about HUBZones. I
    understand, Ms. Caldas, you did participate in a HUBZone. I
    don't know if you have any suggestions on how we could improve
    that program to make it more effective. We know it's important,
    but we do get concerns as to whether that's being most
    effectively designed in order to help underserved communities.
        Ms. Caldas. Yes. We were HUBZone very briefly. We entered
    the HUBZone program in 2009. It is very difficult to qualify in
    the HUBZone and maintain it because of the requirement that 35
    percent of your employees should also live in a HUBZone, and
    you cannot dictate where your employees are or where they're
    going to move to.
        And then with the Census of 2010, a lot of companies like
    mine, zones change, and we lost the certification.
        So making it easier to maintain with the HUBZone would be
    one thing to take a look at.
        Also, make more opportunities available for HUBZone
    companies. When we were in the HUBZone program, a lot of the
    requirements that were released under that program, we couldn't
    find enough technical work aligned with what we were doing that
    we could pursue. What helped us was to be part of being a
    subcontractor because the large companies had to meet the goals
    of having a certain percentage of work contracted to HUBZone.
    So that's the only thing that we were able to take advantage of
    when we had the HUBZone.
        So looking for opportunities for HUBZone companies that are
    really good opportunities for the companies to do the work. You
    don't find a lot of IT work under HUBZone. I think I saw one a
    few months ago, and even though we were not HUBZone, I was just
    so happy to see that something real and tangible was really
    good work. More opportunities released under the HUBZone, but
    also facilitate the certification process. I know that there
    have been some changes lately in the HUBZone, but still the
    opportunities that are set aside for the HUBZone are very
    limited.
        Chairman Cardin. Thank you.
        I know that Senator Hickenlooper was attempting to be here.
    He may have an opportunity to ask questions for the record if
    they're asked.
        I want to thank both of you again for your testimonies. I
    can assure you we're going to be following up on the points
    that you have raised, and I think we will have opportunities
    during this Congress to respond to many of the points that you
    brought to our committee.
        So, in the legacy of Parren J. Mitchell, we're going to be
    doing everything we can to make sure that the tools available
    to the SBA are there to serve the underserved communities,
    minority businesses, woman-owned businesses, veteran-owned
    businesses, which Congress has intended to make sure it's
    carried out to its fullest.
        And with that, the committee will stand adjourned. Thank
    you very much.
        Ms. Caldas. Thank you.
        Mr. Rubio. Thank you, Senator.
        [Whereupon, at 3:32 p.m., the hearing was adjourned.]

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