welcome my call the subcommittee hearing on small business contracting to order today we will examine whether the nation's entrepreneurs are being given a real opportunity to access the federal marketplace the topic comes before us at a time when the u s economy is in a sharp department of labor reported that unemployment had risen from four point five point one percent with an eighty thousand job losses during the month of march alone oil prices continue to climb and the average price of a gallon of gas is now three dollars and thirty three cents a record meanwhile credit is drying up liquidity is limited and businesses are finding it difficult to secure affordable capital grim but there is hope and it rests with small businesses entrepreneurs have always led the way to economic recovery and growth however the question of whether administration is giving them a fair chance to do it again remains well most sectors of our economy are struggling the federal marketplace and contrast continues to grow last year alone federal procurement spending rose by over nine percent in fact the federal government now spends upwards of four hundred billion dollars in goods and services which amounts to more than the g d p of many nations our government buys everything from thumbtacks and staples to navigation components for satellites and turbans for submarines the likelihood of a small business making one of these products or providing a needed service to the federal agency that uses them is very high just as important small business is increase the diversity and quality of the supply base and stimulate the economy congress recognize this fact fifty five years ago when it passed the small business that law commits our federal agencies to ensure a fair proportion of government contracts are awarded to entrepreneurs but this administration has moved away from those goals over the past seven years it has not met the government twenty three percent targets for contracting w small businesses at a single time moreover mundelein which robs small firms of the opportunity to compete for federal projects is on the rise within the agencies the situation is even worse contracting systems are being mismanaged and we are seeing many large businesses chosen to tackle projects that entrepreneurs could do far more efficient last may the committee approved eight hundred seventy three the small business fairness and contracting  legislation to bring greater transparency to the contracting process because it is obvious a high level of mis coding and contract bundling is shutting out small firms in march of last year the subcommittee held a hearing on the delayed implementation of the women's procurement program at the time i was less than three months into my tenure in congress and i was shocked by the utter disregard of the administration for the important role women entrepreneurs play in our economy incredibly the a continues to drag its feet on the implementation of this important initiative in january the agency even issued a regulation that was completely unworkable that was just the latest in a series of contracting decisions that run clearly counter to the intent of the current law american small businesses are the drivers of innovation and growth that is a fact they increase quality and give us help give us taxpayers the biggest bang for their buck offering these businesses a fair chance to compete for federal contracts is the least we can do i remain committed to ensuring the administration lives up to that commitment i want to thank each of the witnesses for sharing their time with us today and i look forward to their testimony and i now yield to my colleague and friend from the state of tennessee ranking member davis for his opening statement this afternoon thank you mr terrill for holding this hearing on ensuring small businesses have the federal contracts the house small business committee this subcommittee and our nation recognizes small business is critical to the countries over all economic will be the drive creativity and innovation of small businesses are the hallmarks of entrepreneurship and the keys to job investigation oversight mr wilcox and i'm sure we will find your testimony extremely helpful the small business act was signed into law and not seen fifty three creating small business administration recognizes that competition is the essence of the american economic system of private enterprise preservation expansion of competition is the basic not only to the economic well being but the security of our nation such a curate and well being cannot be realized unless the actual  potential capacity of small businesses is encouraged and developed congress has a mandate to authorize a number of programs to ensure the small business concerns receive their fair proportion of contracts for property and services these programs are controlled and managed by the small business administration as a result of these initiatives the small business small businesses produce thirteen to fourteen times more pa per year per employee than large and large firms small businesses participate in all major industries and represent ninety nine point seven percent of all employers and fifty percent of all private workers in addition small businesses employ thirty nine percent of high tech workers such as scientists engineers and computer workers the president many americans small business embodies so much of what america's all about self  work innovation the courage to take risk for future growth the present state that these values have served our nation well that's that's very beginning there are values that have passed on from generation to implementing the congressional direction of the small business act and specifically the contracting programs as this committee does should continue the effectiveness of existing federal contracting programs and can recommend and change changes for improvement they should also review and recommend inheritance energies that would benefit all small businesses this course of action would reduce or eliminate inviting among small businesses in the embracing opportunities to do business with the federal government are working i look forward to their testimony thank you again mr chairman and i yield back the balance of my time that i've not heard is a call to the  floor and fortunately neither mr davis control or control the floor schedule so i have to apologize to the witnesses we're going to ask to indulge your patience a little bit longer i will give you my commitment i'm sure mr davis will as well get back here as soon as we can after the votes are concluded it's a series of four votes and then we'll look forward to your testimony at that time and in the meantime my staff will be available to answer any questions you might have and with that we stand in  the hearing is called back to order i'd like to welcome everyone back our first witness is ms fake she is the associate administrator of the office of government contracting and business development of the small business administration and in that capacity she is responsible for overseeing implementation of agency initiatives within the office of g c b including the eight a business development program the women's procurement program and the hub zone empowerment contracting program she is also responsible for managing agency efforts to determine if small business contracts are awarded to businesses that meet the appropriate size standards prior to becoming the associated ministre to serve as a senior manager at the s b a welcome and we look forward to your testimony billion during that time subcontract increased seventy one percent from thirty five point five billion to sixty point seven billion in terms of small business jobs this increase in prime contracting translates into more than five hundred seventy one thousand among some contractors we estimate that more than four hundred fifty thousand jobs were created or retained this is real progress looking forward s b a recognizes the need to improve small business contracting program we work to provide data that more accurately measures agency results and we continue to improve s b a scorecard measuring progress toward small business goals we address the long standing problem of the size standard  recertification through regulations that will focus the efforts of agencies on providing contracts to small businesses finally we're ensuring greater access to federal contracting opportunities by adding to and providing better direction for the personnel who work directly with small businesses currently there are sixty six pick your mit center representatives i know that the committee realizes the important role that p c r play and s b a is committed to supporting this work p c r and are an intricate part of our plan to address access to contracting opportunities and issues such as contract bundling s b a fiscal year two thousand and nine budget request is based on sixty six p c r and this number includes the recent hires that  preston discussed during his testimony before this committee along with more p c r as s b a is implementing a plan to improve the services provided one of administrator preston's two thousand and eight priorities is to review the duties of the p this review is ongoing but once fully implemented it will allow p c r to focus more intently on this fight a war it will also allow s b a and our resource partners to focus on getting small businesses the training they need to compete for federal contracts in the a program we're streamlining the process for annual reviews and certification and focusing on the skills that businesses need to succeed we've established new customer service training for district staff to improve the application review and contracting assistance stages in the hub some program eligible firms receive seven point one billion in prime contracts and two point six billion end sub contracts in fiscal year two thousand  in terms of jobs the prime contract supported nearly fifty three thousand by subcontractors provided more than one hundred thousand the hub program is directly benefiting historically underutilized areas and the small firms located there today one of our major objective for hudson is improving countability the may two thousand and six inspector general's audit of the program identified needed improvements and we've taken steps to address each of these issues these plans and actions have satisfied the inspector general in regards to its audit additionally in regards to oversight and certification issues we've stepped up program examination so far in fiscal year two thousand a we've completed three hundred sixty two program examinations resulting in one hundred forty four positive findings one hundred eighty three proposed certifications and thirty five decertification this process is continuing and we're working for greater accountability in the hub zone program in august two thousand and seven s b a released the small business for chairman scorecard the scorecard measures current performance and the progress plans of federal agencies in providing more small business contracts based on performance seven agencies were rated green five yellow and twelve were red since its release the scorecard has provided a real incentive for agencies to increase access for small business we've worked effectively with these you our next witness is margo dorfman who is the founder and c e o of the u s women's chamber of commerce dedicated to championing opportunities to increase women's business growth career and leadership advancement the u s women's chamber of commerce is a leading  e economic opportunities for women in america dorfman has an extensive background in business business ownership publishing and nonprofit leadership corporate experience includes ten years in executive positions with general mills and other fortune five hundred companies thank you very much chairman ranking member davis and members of the subcommittee on contracting technology i am here today behalf of the millions of american women business  advice to provide more thorough analysis of small business contracting to include such characteristics as type and size of business agency breakout for the contracting and regional breakout each year the s b a publishes the total dollar spent and the total transaction completed with however no further analysis is presented never does this committee or the american public have the opportunity to understand the total number of women own small businesses receiving contracts the size of these contracts graphic dispersement the number of new receiving contracts the dollars flowing through joint ventures the top one hundred women contractors or relative to each of the major agencies purchasing with women  i strongly urge you to take action to require deeper accountability transparency and useful reporting from the information gleaned from these actions will most certainly assist in the efforts to assure that small businesses have fair access to federal contracts thank you thank you our next witness mr chris bates who is the president of national office products alliance otherwise known as prior to joining this organization mr bates served the motor and equipment manufacturers association and he has worked as an independent consultant international economic policy adviser with the u s government and congressional legislative assistant and most importantly apparently a native of my district  in addition to that an open which is based in alexandria virginia the u s industry association for office products and their industry partners who are focused on continuous improvement to achieve profitable business grows  thank you very much chairman brayley ranking member davis congressman thank you very much opportunity to be here with you today represents and serves more than seven hundred independent office product dealers trying very hard to get that done in particular seventy three establishes a strong foundation for needed reforms in the areas of contract bundling data collection reporting and oversight that we believe will help business partnership relationship for the sole purpose of gaining access to contracts set aside for small business let me emphasize that are not the same thing as legitimate small business mentoring program relationships  business service the front for the larger business the negative impact obvious in the case of the office supply industry independent dealers already are losing tens of millions of dollars annually as a result of this hundred five and started his firm he has time graduate classes in strategic management management development organizational development program and project management courses additionally he has presented and published nationally and internationally on organize development and entrepreneurship topics and we welcome you here to the committee thank you jim and brayley ranking member davis members of the subcommittee on technology and sub and contracting charles de the senior i'm happy to share my small business views of the technology challenges that may not be visible in the business environment but may impact in three opportunities i would also like to discuss to court challenges in dealing with department of defense namely winning contracts and getting paid the emerging technological requirements in the business environment are as important as the functions of human resource management operations finance and accounting and marketing our business like so many others now is net centric which means we are also net dependent increased dependency leaves us more vulnerable to threats of hackers viruses spoofing and similar activities we all recognize that we have to continually update our internet and internet security measures however we are completely dependent on two or three security providers and personally i'm not confident that we're able to keep up with the threats where new and small businesses really need help is in defining the risks and the threats of security and information assurance to the business environment another challenge is application of quality initiatives to the digital environment or how to take action to continuously improve quality status in this environment i personally don't know how to keep abreast of quality and in this environment we don't know what best practices or where to find best practice the cost of research is restrictive i think small businesses need helpful source such as a small business technology community of practice and technology assistance centers in the specifics of working with department of defense the two critical challenges are winning contracts and getting paid brand identity is a critical component winning contracts in the department of defense i think it consists of three elements social capital and networks status within the networks and past performance for new companies with no brand identity there is minimal chance of entering the d o d market in my experience contracting officers generally do not allow personal experience to be submitted in lieu of corporate experience without an individual's past performance being committed a new company has limited chance of making entry into the market now the g s a schedule should be a good vehicle for contracting with the federal government however the g s a schedule award is based on past performance further the g s a schedule is not necessarily good for growing small businesses because the prices negotiated for ward are based on better than your current best prices we are told there are no allowances for rates to support company's growth the g s a contracting office also tells us the initial negotiations into a rate structure for ten years cash flows in my written testimony i stated ninety percent of our pain was for late i'd like to clarify that and say ninety percent of our invoices for the time we created to when we were paid were late we have data that shows that twenty nine percent based on the fast measures were late when you look at the measure from when it was submitted to the government and we accepted by the core when it was paid forty two percent were late and then there is a gap when you create an invoice and when it is action by the corps and put into the system that anywhere from one to twenty one days in our experience the net result was that we were not able to execute our projected cash flow sources and uses because of the fluctuations in the fast payment schedule when we went into the electronic system we eliminated a lot of the variability that most small businesses have not migrated thank you for your time and i have to answer any questions next i will be introduced by the ranking member but i just want to personally welcome her to the committee hearing and we look forward to your testimony the next witness will be missing holds a master's degree from a university located in gainesville georgia currently she is executive director of the board office for small business and management she has a small businesses with number one providing technical got it finding sources of capital identifying available resources and outlining small business administration programs before coming to her present position she had more than fifteen years in corporate marketing and sales support spirits in various industries is also actively involved in the community at the present time she is on the board she's a board member of earlier we are engaged in helping our clients write their business plans capital for their business a location for their business so the mission to not only help them start up so it's not just for startups but also  thousand and six and then have a good time there's a lot to do so we already know what the statistics are for the contracting and small business so again i just want to share with you my experience with woods and as far as small disadvantage business being certified such as that there were none of the ninety five were actually certified  businesses  the process because the process there is a system in place specialist and he introduced me to a number of folks and made the success possible made it possible for us to forge the relationship with us and get the additional help or resources for our clients thank you let me get begin with you one of the focal points of subcommittee but also the committee as a whole has been on the implementation of the women's could get more more comments and we're going to take the time and go through and do that analysis and once we've completed that analysis will move forward and given the volume of comments that agency received do you consider that to be a reflection of the interest in this particular rule is that a normal amount of comments typical amount of comments how would you characterize i think this rule has generated a tremendous amount of interest and we welcome everybody's comments and we're looking forward to going through and and analyzing the comments and moving forward now one of the goals that i have as chair of this contracting subcommittee is to try to encourage a more equitable distribution of contract opportunities outside the beltway and we've heard a little bit from some of the other witnesses about that concern i know in june the will be working with me on a contracting form in waterloo back in my district in iowa but my question have a specific program or programs in place to help businesses in those areas that normally are not as familiar with contracting opportunities in the broaden the scope of resources available to small businesses and we've given our district offices and our resource partners the tools that they need to educate and train small business an online course we have developed a brochure on how to contract with the federal government as a matter of fact the online course we just went live with it in february already five thousand people have taken on line course on how to contract with the federal government over forty percent of those that have taken the course or forty five percent i believe are our woman that have taken online course and we have a number of initiatives in place to reach out to more small businesses and provide them with the opportunity to register and learn about contracting with the federal government one of my passions is pushing federal agencies to use plain language in communicating with their intended audience and on monday we passed with an overwhelming bipartisan vote three hundred seventy six to one plain language in government communications act that's going to require federal agencies if passed into law to use plain language in communicating and federal brochure documents and other communications has the s b a done anything to implement plain language guidelines as part of its outreach effort and i ask this question because  ms wilcox's comment earlier which is consistent with my perception and that is that many small business owners are struggling to incorporate a lot of new information and sometimes new technologies and i'm interested in what the doing to try to communicate with that intended audience in a manner that they can clearly understand and respond to absolutely one of the big concerns that we had was everybody kept saying that it was so difficult to contract with the federal government which is why we came up with the on line course which is a step by step guide in plain language and i were sure that goes along with it is very comprehensive and it is it is plain language and  so many opportunities for small businesses but it also creates some long term challenges in your testimony you touched upon how the tenure pricing mechanisms can limit small business ability to grow could you where you are in that in your current cost structure as a function of your growth status to that and in fact if you are getting ready to take the next impact on overhead expenses and depending on what industry you're operating in that may be a key driver on your success or failure within that industry so there are serious risks to the small business  getting into the g s a schedule if they don't have a very understanding of how that cost structure will affect their future growth and what variables what risks they are carrying along with w variable costs it really can be a detriment to their success as they move forward at a fair characterization absolutely correct so when you are young and small and in your belt and you're getting by everybody's were multiple at that point your race structure will not support you through ten years of growth and that is a real challenge one of the obstacles small businesses face in breaking into the federal marketplace is qualified quantifying their private business experience as it competes against larger competitors performed government contracts and i think you touched on this in your opening statement and you noted that contracting officers tend to favor those has no bearing on past performance when they're only past performance on government contracts or commercial contracts so if you have someone who is highly qualified and has product especially the contracting i went through that one myself it is very simple and easily understood and i think the matter there is just letting people know that that is out there letting me know that that's out there so that i can tell my clients they're both a good product i think it's effect question so i'm going to run over and vote and then come back willing and able to that would be fine but i just want to make that the witnesses who have made the effort to come here get an opportunity to talk a little bit more about the issues that brought them here and then we're probably going to adjourn after this first vote because it looks like it's going to be about an hour of i really appreciate your indulgence and the hearing is adjourned until we return will and mr bates let me ask you some questions one of my favorite t v shows is the office which admittedly is a comedy about the business that you represent but there's also some important lessons about what's going on in the office product industry in that show and one of the things that i think is significant is how the industry has changed in the last ten or fifteen years one of the things we know is it's faced many issues recently some of which relate to the administration policies rather than s b a programs in your opinion what can congress and the s b a do without micromanaging to help small businesses that suffer when the government changes it but i do think that there are purchasing vehicle has a big impact on the ability of any small business to participate general approaches there ought to be more competition not less excessive contract bundling things things that limit the number of competitors on any given contract really in the long run doesn't help the government higher prices less choice less effective service to the customer through competition is really the solution at the end of the day and i know i'm going to lose people who aren't fans of the show but my kids and i this is one of the favorite things we do together as a great episode where i go out on a call to a customer who has  most of their business with somebody where prices primary objective and they make a call to that competitor and leave the fallen on the desk while they're having a conversation with a potential customer just to demonstrate the point that sometimes customer service is an important component in addition to pricing for your members what types of challenges do you face in a government system or price is such a high priority in breaking through and talking about the total contract performance and what your members can provide to be competitive in that type of an environment i think one of the disturbing things is past performance not been really clear that past performance is something that ought to be taken into effect we obviously have to do a better job of getting the message out to the people who are involved in the procurement as well about what that officers government wide who are out there part of the lack of oversight or insufficient oversight is really related to the problem that there aren't enough qualified people who are able to look into the details of  is falling short of its goal for contracting with women and businesses and the s b a recently released a proposed rule i mentioned earlier for implementing the program which will allow for set asides allowing set asides for small businesses a whole has nearly doubled agency however the rule only allowed for women and set asides effectively in three very narrow industries for example kitchen cabinet manufacturing apart from set  really would hope that they would start to go back to its core mission and small businesses whether it's implementing a program that was passed by congress as congresses intended or providing the funding needed to offices which are struggling to provide the real resources that are needed we do need also see them working hand in hand with the small business  train small businesses but they're actually going back to doing the job that they should be doing which is making sure that contracts as they come forward do provide for small businesses to be able to access part of those contracts and i'd like to see more and more of that and then also access to capital is huge for women we still are finding it challenging to get the amount of funding we need to grow our businesses and even with the s b a if we get along it's generally not the amount of money that we need for the small business owner to grow at the rate that she needs to grow but the door of the federal procurement opportunities and the other thing you mentioned was the need for regional breakout of data showing what successes are being achieved and this is similar to the concern i raised earlier about this circle that's been drawn around the district of columbia where the concentration of federal contracting dollars goes and then the other circle that goes around the large corporations that have the lion's share of these federal procurement dollars so if you would if you could just elaborate a little bit on those two concerns false contracting data and the need for requested  communities when you take a look at right now the companies that are and able to get that or service most of the contracts and when you get while there might be agencies that have  why not in my district with five women five women who own their own businesses and are really having an enormous impact on revitalizing a downtown area my sense is that a lot of your members really  ynergy that develops one one successful women owned business providing opportunities for networking and connection with other women is that while expanding regional access to opportunities is so critical hurricane katrina speaks very closely to this where the contracts were actually awarded to corporations that were not based in the region and the region is still suffering how many years later going on thr sure that that the community itself will be growing if we can provide access to the contracts into the community that the money will come in we can grow the business hire more employees within the community the money goes back into the community and that is a very good  after a workshop like that the client will go in and they will register themselves in the i think it's top you know at that point because it can be a little bit overwhelming for him they don't know where to go next and so and i think with a program if you can document some of the successes that businesses in your region are having in participating in these parts human opportunities it creates more enthusiasm for further participation but if people don't see number of times last year to support and he came out one time he did a breakfast meeting for us and spoke to about small businesses at that breakfast meeting on another occasion he came out and we set him up with individual the client has actually been contacted at least getting a little bit further he's the one that was he's a veteran so there is a good story there now he has an opportunity to bid on something now did he representative at these hearings but it's a very important function for the work of the subcommittee we appreciate your willingness to come and share your candid assessment of some of these issues very important to the small business most of this country so thank you for joining us today and to all the other witnesses i know that this is an imposition on your time and we really do appreciate the stories you've shared the experiences that you've learned and it makes the work of this committee more vital and gives us a human face that we can apply to these important decisions we're making here so thank you all i ask unanimous consent that members have five legislative days to enter statements into the record without objection so ordered this