[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
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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
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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED SEVENTEENTH CONGRESS
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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
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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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