[Congressional Record Volume 152, Number 44 (Friday, April 7, 2006)]
[Senate]
[Pages S3385-S3387]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. SNOWE (for herself and Mr. Vitter):
  S. 2608. A bill to ensure full partnership of small contractors in 
Federal disaster reconstruction efforts; to the Committee on Small 
Business and Entrepreneurship.
  Ms. SNOWE. Mr. President, as Chair of Senate Committee on Small 
Business and Entrepreneurship, I rise today to introduce The Small 
Business Partners In Reconstruction Act of 2006. This legislation, co-
sponsored by Senator David Vitter, is the product of 3 hearings held in 
my Committee in September and November 2005, and in February 2006, 
which examined the response of the Small Business Administration, the 
Army Corps of Engineers, the Department of Homeland Security and its 
Federal Emergency Management Agency, and other Federal agencies to the 
devastation wrought by the Hurricanes Katrina and Rita on our Gulf 
Coast states.
  Speaking on September 15, 2005 from New Orleans' historic Jackson 
Square, President Bush declared that ``It is entrepreneurship that 
creates jobs and opportunity; it is entrepreneurship that helps break 
the cycle of poverty; and we will take the side of entrepreneurs as 
they lead the economic revival of the Gulf region.'' Unfortunately, the 
Federal Government's performance has not matched the President's 
declaration. This is particularly true with regards to the role of 
small firms, especially Gulf Coast small firms, with regards to 
contracts and subcontracts for recovery and reconstruction. Too often, 
small contractors have been treated in the disaster contracting process 
less like the partners in disaster recovery and economic revitalization 
they are, and more like unwanted stepchildren. Eight months after 
Hurricane Katrina, it is time for this to change.
  To begin with, some Federal bureaucrats have used the Katrina and 
Rita disasters to exclude small business from contracting in the name 
of emergency and speed. Contracting with small firms, it was said, does 
not provide sufficient flexibility to the contracting officers in time 
of crisis. Quite the opposite is true. The Small Business Act contains 
flexible contracting authorities as part of the 8(a) program, the 
HUBZone program, and the service-disabled veteran-owned program, which 
allow Federal agencies to quickly buy goods and services in emergency 
situations. Indeed, on May 30, 2003, the Office of Federal Procurement 
Policy issued guidance on Emergency Procurement Flexibilities, which 
encouraged Federal agencies to use contracting flexibilities, such as 
the HUBZone flexibilities, which are part of the Small Business Act. 
This guidance was largely ignored, as billions of dollars went to large 
corporations through non-competitive mechanisms such as no-bid 
contracts or the so called micro-purchase authority, originally 
intended by Congress to cover small purchase card transactions.

  My legislation requires the Office of Federal Procurement Policy and 
the Small Business Administration (SBA) to ensure that Federal 
contracting officials have the most comprehensive and up-to-date 
guidance on the full use of available small business emergency 
procurement flexibilities, and that such guidance is published in the 
Federal Register. My legislation also ensures that the SBA provides 
government-wide training for procurement agencies on using small 
business contracting flexibilities in emergency situations, and directs 
the SBA to designate at least one advisor for small business emergency 
contracting who would help Federal agencies apply small business 
procurement flexibilities in emergency situations.
  Small contractors have also been denied access to reconstruction 
dollars by paperwork and bureaucracy. Red tape had the most serious 
effect on small disadvantaged businesses. Many of these contractors 
have been certified to do business under the Federally-funded, 
Congressionally-established Disadvantaged Business Enterprise Program 
(DBE) for transportation contracting such as highway or bridge 
construction. In the Federal procurement system, a parallel Small 
Disadvantaged Business (SDB) Program exists. According to law and the 
Memorandum of Understanding between the SBA and the U.S. Department of 
Transportation, the DBE certifications are based on the SDB 
certification requirements under the Small Business Act. Unfortunately, 
DBEs have been unable to secure recognition as SDBs by the Federal 
agencies or by Federal prime contractors. As a result, agencies and 
prime contractors had little assurance that SDB goals may be met by 
doing business with DBEs. My measure will ensure that capable small 
contractors enjoy full reciprocity among contracting programs instead 
of the red tape they currently face.
  Lack of comprehensive procurement data on Katrina and Rita 
contracting is another flaw which my bill is trying to correct. It is 
hard to believe that almost 8 months since the Hurricane Katrina 
struck, the Federal Government's disaster contracting ship is literally 
sailing blind. Both the Small Business Act and the Office of Federal 
Procurement Policy Act require that accurate and comprehensive data on 
government contracting and subcontracting, especially including small 
business participation, be collected and maintained. Although the 
government-wide procurement spending database, the Federal Procurement 
Data System (FPDS), collects the data related to Hurricane Katrina and 
Rita reconstruction, this data is demonstrably incomplete. According to 
the Government Accountability Office and admissions of Federal 
procurement officials, the FPDS data is not accurate and omits billions 
in Defense and Homeland Security contracts. As a result of these 
deficiencies, the Executive Branch made exaggerated claims concerning 
the share of reconstruction work that went to small businesses. For 
instance, last October, the Commerce Department claimed that small 
businesses received 72 percent of Katrina contracting dollars, and the 
SBA claimed the small business share to be at 45 percent. During 
hearings before my Committee, the GAO confirmed that the 
Administration's claimed numbers are unrealistic and unsubstantiated. 
My legislation directs the Administrators of the SBA and the OFPP to 
ensure that the Federal Procurement Data System reflects comprehensive 
government-wide contracting spending on Katrina and Rita 
reconstruction.
  For years, the Historically Underutilized Business Zone (HUBZone) 
program, created to direct Federal contacting dollars to small firms in 
economically distressed areas, has been recognized as a potent economic 
development stimulus. Since its inception in 1997, the HUBZone program 
stimulated the hiring of over 124,000 HUBZone residents and investment 
of over half a billion dollars in HUBZones by HUBZone-certified firms. 
With the support of the Administration, I propose extending the HUBZone 
designation to the disaster region. A HUBZone designation would enable 
small businesses located in the disaster area and employing people in 
that area to receive contracting preferences and price evaluation 
preferences to offset greater costs of doing business. Extending the 
HUBZone designation to the Gulf Coast would bring needed businesses 
development tools to affected areas of the Gulf Coast. Under my 
proposal, the SBA Administrator would have the discretion to define the 
geographic scope or duration of this designation to ensure that the 
HUBZone preference is targeted to those who need it the most.
  Small businesses vying for government contracts or subcontracts often 
must post bid or performance bonds in order to convince Federal 
contracting officials or prime contractors that small business are a 
good project risk. In turn, small firms must seek bonding from private 
bonding companies. The SBA, through its surety bond program,

[[Page S3386]]

has provided guarantees on bonds awarded to small businesses up to $2 
million. But small firms need an increase in bonds to handle larger 
projects for hurricane relief. Local small businesses in the Gulf Coast 
can use higher bonds to compensate for the damage to their assets from 
the hurricanes. My legislation would increase the maximum size of SBA 
surety bonds from $2 million to $5 million, and provide the SBA with 
authority to increase the maximum size to $10 million upon request of 
another Federal agency. In its proposal to re-build the Gulf Coast 
region, the Administration suggested making the $5 million increase.

  My legislation also directs the SBA to create a contracting outreach 
program for small businesses located or willing to locate in the 
Katrina disaster area for the next five years. Federal contracts and 
subcontracts can provide critical assistance to small businesses 
located in the areas devastated by the hurricanes in the form of solid 
business opportunities and prompt, steady pay. In addition, government 
procurement would open doors for many local small businesses to 
participate in the long-term reconstruction work in the Gulf Coast 
areas. While many small businesses would benefit from other forms of 
disaster assistance, many of them want to get back to work and into 
business as soon as possible. Technical assistance and outreach through 
the SBA, the Procurement Technical Assistance Centers, the Federal 
Offices of Small and Disadvantaged Business Utilizations, and other 
organizations could prove invaluable to these firms.
  Yet, outreach alone would not ensure fair participation of small 
businesses in Gulf Coast reconstruction contracts. To promote jobs 
creation and development in the disaster region, the Federal Government 
must set and follow definitive goals for small business participation. 
Prior to the disaster, small construction companies in Alabama, 
Mississippi, and Louisiana received nearly $500 million in Federal 
contracts a year. Total small business contracts in the Gulf Coast 
region exceeded $3 billion a year. With the Federal cost of hurricane 
relief and rebuilding estimated at over $100 billion, small businesses, 
particularly those located in the disaster area and that employ 
individuals in the affected areas, should receive their fair share of 
Federal contracting and subcontracting dollars. My legislation 
establishes a 30 percent prime contracting goal and a 40 percent 
subcontracting goal on each agency's hurricane-related reconstruction 
contracts. These goals are compatible with the Department of Homeland 
Security's and the Army Corps of Engineers' history of small business 
achievements.
  My legislation would also address two unfortunate provisions in the 
Second Katrina Supplemental Appropriations that unwisely changed the 
emergency procurement authority Congress granted to contracting 
officers in the aftermath of 9/11 and reclassified many reconstruction 
contracts into categories that excluded small firms from prime 
contracting or subcontracting. I spoke out against these provisions, 
and Congress ultimately repealed them last year. Nonetheless, this bill 
puts in place safeguards to ensure that small firms do not fall prey to 
such actions again. My legislation protects the Small Business 
Reservation (SBR) for disaster-related contracts below the Simplified 
Acquisition Threshold (SAT). The SAT and the SBR are normally set at 
$100,000. The Federal Acquisition Streamlining Act allowed Federal 
agencies to use simplified procedures for all contracts below the SAT, 
but only if they attempt to place, or ``reserve'', these contracts to 
qualified small businesses. Many small businesses qualify for contracts 
under expedited procedures under the Small Business Act, which would 
help to move the reconstruction process forward. The SBR does not delay 
relief contracting. If no qualified small business is available to do 
the job, agencies can place the contract with any qualified supplier. 
This provision restores the parity between the SBR and the SAT any time 
the SAT is increased for disaster-related contracts.
  My legislation also restores small business subcontracting 
requirements in emergency procurements. The Second Katrina Supplemental 
abolished small business subcontracting requirements for all Katrina-
related contracts by treating contracts for hundreds of millions of 
dollars as purchases of commercial items, like contracts for office 
supplies. This is an improper and unjustified procurement practice. The 
Army Corps of Engineers currently imposes a 73 percent subcontracting 
requirement on hurricane-related contracts, demonstrating that the 
subcontracting requirements are not onerous. Under the Small Business 
Act, only a ``good faith effort'' to provide subcontracting 
opportunities is required. The legislation allows a grace period of 30 
days to negotiate an acceptable plan (subject to a 50 percent payment 
limitation until the plan is concluded).
  Looking forward, my legislation directs the Administrators of the 
OFPP and the SBA to work with other Federal agencies to ensure creation 
of multiple-award contracts for disaster recovery which are set aside 
for small business concerns. As the GAO testified before the Senate 
Committee on Small Business and Entrepreneurship last year, Federal 
agencies lacked adequate acquisition planning for hurricane disaster 
relief. This measure would reverse this practice both for ongoing and 
for future disaster recovery efforts.
  I am a firm believer that the reconstruction acquisition process must 
be not only efficient, but also transparent. In this regard, the 
Federal Government provides central website postings for all Katrina-
related opportunities through the SBA's Sub-NET. Unfortunately, the 
SBA's Sub-NET subcontracting database, though recommended by the 
Government, has been until recently unused by the Katrina prime 
contractors. My legislation directs all prime contractors which 
received substantial Federal contracts related to the Hurricanes 
Katrina and Rita for which subcontracting plans are required to post 
subcontracting announcements on the SBA's Sub-NET online database.
  Finally, my legislation addresses the government's failure to direct 
contract dollars to those who need them the most--local small 
businesses. During the hearings in my Committee last November, I was 
deeply troubled to discover that Federal agencies failed to grant 
business opportunities to qualified Gulf Coast small firms. These 
shocking practices make a mockery of our national commitment to rebuild 
the Gulf Coast. For instance, while investigating Hurricane Katrina 
contracts at my request, the GAO found a memorandum from an official in 
the Army Corps of Engineers informing the SBA that the Corps has 
successfully concealed the information about millions of dollars in 
upcoming contracts for mobile classrooms in Mississippi from, among 
others, local small businesses. The Corps requested that SBA approve 
giving this work to an out-of-state company without any prior 
experience. As a result, the Corps excluded a local small business, 
licensed by the Mississippi Department of Education, from bidding. 
Incredibly, the SBA obliged and approved the contract three times, 
eventually increasing its value from $10 million to $47 million.
  Practices such as these violate Section 15 of the Small Business Act, 
which unequivocally directs priority in government contracts ``to small 
business concerns which shall perform a substantial proportion of the 
production on those contracts and subcontracts within areas of 
concentrated unemployment or underemployment or within labor surplus 
areas.'' It is hard to imagine a clearer example of an ``area of 
concentrated unemployment or underemployment'' or a area with labor 
surplus than the devastated Gulf Coast region. Nonetheless, some have 
ignored the clear command of the statute. My legislation would 
designate the Gulf Coast disaster area as a labor surplus area for 
purposes of the Small Business Act's preference for labor surplus area 
contractors. In addition, this provision authorizes Federal agencies to 
use contractual set-asides, incentives, and penalties to enhance 
participation of local small business concerns in disaster recovery 
contracts and subcontracts.
  Finally, my legislation suspends the application of the Small 
Business Competitiveness Demonstration (Comp Demo) program to Gulf 
Coast disaster contracts. The Comp Demo Program denies the protections 
of the Small Business Act like set-asides to small businesses involved 
in construction and

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specialty trade contracting, refuse systems and related services, 
landscaping, pest control, non-nuclear ship repair, and architectural 
and engineering services, including surveying and mapping. 
Historically, small businesses have been the backbone of these 
industries, and these industries are in heavy demand for disaster 
recovery efforts. The Comp Demo Program, ostensibly a test program, 
denies Federal agencies likes the Departments of Defense and nine other 
agencies the ability to do small business set-asides. Essentially, the 
Comp Demo Program reserves whole industries for big business. Last 
year, at the request of the Department of Defense, I supported an 
amendment to terminate the Comp Demo Program. The Senate agreed that 
small businesses in all industries should receive the full protections 
of the Small Business Act, and unanimously voted to repeal this 
Program. Suspending this Program for Katrina and Rita contracts would 
go a long way towards restoring fair treatment for small businesses 
affected by this disaster.
  I believe this legislation will find broad support in this body. 
Indeed, the HUBZone designation, the outreach programs, and the surety 
bonding increase have already been adopted by the Senate on a vote of 
96-0 as part of my amendment to the Science, State, Commerce, and 
Justice Appropriations Act for Fiscal Year 2006. The provisions dealing 
with the small business reservation offset and retention of small 
business subcontracting in emergency procurements were cosponsored by a 
bi-partisan group of Senators as part of my bi-partisan disaster relief 
bill, S. 1807. With the Senate leadership and every Senator of both 
parties on the record in support of greater access of small businesses 
to Federal contracts, I look forward to speedy consideration of this 
legislation and its support by the Senate.
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