doing is to examine legislation that will start to turn around their four radio programs that we intend to address of zones in women's procurement program under service disabled veterans contracting initiative  these efforts play a vital role in helping various segments of the small business community to break into their faith or marketplace and it is clear that if they stand today based programs are failing to accomplish  this tended nation it is my goal to ensure that this legislation accomplishes two primary purposes for these programs must operate in a way that maximize the taxpayers and second  regard to their sole source limitation their naval contracts be awarded without competition these companies will be required to compete for contracts will provide much needed sentation so the program is not so narrow as to only help an estimated five hundred businesses during our september nineteenth hearing the s b a concurred that the hobbs own program is flawed and subject  through the program to law income areas we have also heard the concerns of the veterans community and are proposing to require this be a to implement its responsibility on their executive order one three three six zero later action has been taken to the eight and these businesses deserve more we have also suggested that companies that falsely report sent to be owned by service disabled veterans are subject to  penalties this is not different than what he's current law for every other business that mystery percent itself with this legislation on confidence that we are taking on important long overdue step to modernize  discussing today modifies government contracting programs authorized by the small business sector i'd like to thank your one for holding this hearing and each of the witnesses including preston who is the head of the small business administration and all the witnesses for taking the time to provide testimony important testimony to this committee as early as world war two congress recognize that a strong economy and industrial base requires a robust small business economy more than sixty years ago congress created the smaller war plans corporation to purchase goods and services from small businesses acting as subcontractors at the end of the korean conflict the small business administration was created to provide assistance to small businesses one aspect of that policy and the one we are examining today is the requirement that small businesses be awarded a fair proportion of contracts for the purchase of goods and services by the federal government despite the extra assistance from the small businesses owned by socially and economically disadvantaged individuals women service disabled veterans and those located in the story clean under utilized business  do not receive their fair proportion of contracts to sell goods and services to the federal government if federal contracting is to benefit the entire small business sector agencies must do better in dealing with these targeted small business groups the legislation before us today will rectify some of the problems associated with the operation of these programs however i believe that some aspects of this legislation need modification to avoid and do regulatory burdens on small businesses furthermore there are some parts of the legislation that simply need clarification to remove ambiguities that could make implementation difficult finally i look forward to hearing from the witnesses on other suggestions that could better integrate these targeted programs into the overall federal procurement process again i thank the chairwoman for holding this important hearing and look forward to working with her as the final piece of thank you madam chairwoman as chairman of the small business subcommittee on contracting and technology i have a special interest in the issues we'll be discussing today in our first subcommittee hearing we heard witnesses representing women owned businesses describe how the federal government was failing to keep its commitment to them they talked not only about the five percent goal for women owned businesses not being met but also how the women's procurement program which was enacted in two thousand has yet to be implemented by the  is a disgrace i also want to talk about the hubs own program established in one nine hundred ninety seven this program promotes community development for low income or high unemployment areas and i was first congressional district there are twenty one hub zone areas one thing i like about the legislation we're discussing today is that it prohibits the use of hub zone preference for construction contracts that are further than one hundred fifty miles away from the recipients i want to be sure that the work being done in the zones is truly contributing to the local economy by a lot federal organized patients are required to support small businesses however over the past five years total government contracting has increased by sixty percent while small business contracts have decreased by fifty five percent this suggests that the s b a procurement initiatives are not bringing work from the large businesses share to the small business share but rather are forcing small businesses to compete for an increasingly smaller piece of the pie it's essential that small businesses have access to the over four hundred billion dollars per year federal marketplace the small business contracting improvements act nicely compliments h r eight hundred seventy three  small business fairness and contracting contracting act a bill i introduced in april that passed later in the house on may tenth by an overwhelming bipartisan vote of four hundred nine to thirteen my bill will give small businesses more opportunities to compete for federal contracts raises small business federal contracting goal from twenty three percent to thirty percent this means that all of the programs we discussed today will have greater opportunities to compete for federal program for  contracts as we have heard small businesses are the driving force for job creation in this country and we must ensure that these businesses not only remain healthy but they have the support they need to grow this committee needs to work together to make sure that small businesses are not shut out of the federal marketplace unfortunately my state of iowa ranks forty eighth in terms of government contracting dollars awarded to small businesses small businesses are the backbone of the communities within my district in as they are in most congressional districts allowing them a fair opportunity to bid on federal contracts can bring economic vitality to these towns and cities i'm pleased that we will continue our discussion on this important subject and send a clear message to small business owners that they will finally receive a fair opportunity to compete for and win federal con i want to thank our witnesses for taking time from their busy schedules to join us today where under served and economically disadvantaged groups will flourish into the federal marketplace of fair access to federal contracts we've taken many actions to advance that objective and i will briefly outline a few of them here today first of all as you all know we have change rules on certification to make sure that small businesses are the ones getting small business contracts first ever real change in that area secondly with the joint request of me and the white house office of policy federal agencies  reviewing eleven million contract actions from the past two years to cleanse of the database of miscoded contracts those were incorrectly reported as small business contracts almost five billion of misrepresented contracts have been cleaned out of the database for two thousand and five alone we need to feel confident that the data we're using is correct so that we can prevent this from happening in the future in addition we are holding federal agencies accountable for hitting their goals in fact just a couple of months ago we released the first ever small business and scorecard we rated agencies red yellow or green and gold achievement and progress scorecard will help agencies measure their achievement small business contracting and increase transparency and accountability while working with federal agencies to achieve mandates i'm very proud of the progress we've made in those areas but we're not stopping here we continue to pursue further opportunities that may be less visible to the committee internally at the s b a we've increased training for our field staff to enable  to improve outreach and improve support for small business clients and refocused our p c r and their primary responsibility identifying small business opportunities to federal agencies in fact almost fifteen hundred s b a employees in various functions ave ged deceived a full week of training in the past several months within approximately ninety percent strong approval rating on the part of employees in terms of the quality of the training this is very important to pushing the mission of the agency forward in our ability to serve well within the hub zone program we're taking steps to ensure that those participating in that program are following the rules were committed to reviewing five percent of all certifications through a full scale program examinations were either implementing or have already implemented all the recommendations from the inspector general's two thousand and six report s b a has acted to reduce misrepresentation and mis coding of hubs on awards in the past contracting authorities failed to verify his own status of the awardees for hubs on contracts to resolve this we currently have a regulation pending before the far council that will require firms to test to the hubs and status not only at the time of the bid but also the time of ward this regulation will help resolve both miss coding and the certification issue at the same time the federal  block any entry for hubs on firms that do not have the required certification in addition s b a is working with our agency colleagues to educate contracting officials on the simple steps that they need to take to verify hubs status in the business development program we've taken a number of steps to improve the prophecies to eliminate the backlog of processing a day in s t v certifications to increase the flow of firms into the program quickly and easily as well as to approve oversight of the program the agency has revised its partnership agreements delegate a contract execution function from the s b a to various federal procurement agencies to clarify their roles and their responsibilities for monitoring contract compliance of performance by eighty firms agencies will now be held accountable for meeting all s b a regulations as well as far regulations our goal is to broaden access to a contract to more program participants and ensure that firms and agencies are using the program properly now i'd like to comment briefly on the legislative proposals from the brief outline that we received would be opposed to the elimination of that delegation of authority as proposed agencies we believe need a streamlined process for making a award since the delegation of authority was created in amending the process rather than eliminating it and as i mentioned before s b a has already redrafted the agreement with the agencies regarding the standard net worth regarding the net worth standard s b a has not found that the current two hundred fifty thousand level is a barrier to entry in the program the program participation stands at an all time high applications are coming in steadily while studies have shown that indexed for inflation since the time it was instituted the standard would be approximately five hundred fifty thousand and we do have concerns over a blanket seven hundred fifty thousand dollar minimum i must also point out that our inspector general has repeatedly expressed concerns over the nature of economic disadvantage in our existing definition of s b s concern over the proposal to require on evaluations before a firm's second contract in the hub program we do we do foresee significant cost and logistical challenges in implementing that program effectively the fire regulation that s b a has pending will improve accuracy significantly and we best of hobson's status at the time of an award of any contract however consistent with the committee's concerned s b s committed to pursuing greater and forstmann an assessment of penalties against firms that violate the program rules were equally concerned about the other provision in the title restricting the award of pubs and construction contracts outside of a one hundred fifty mile radius from the hub primary location depending on the state or the location of the hubs on this would effectively eliminate any hub zone firms from competing for work at all for example hubs and construction firm on a native american reservation would potentially be unable to bid contracts in the nearest city we have no objection to the provisions included in the veterans order and then finally we do have concerns about the proposal for increasing the sole source award authority to ten million this provision has the potential to create a significant pool of large sole source contracts that would be outside the reach of most small businesses if the committee's concern is to reduce disparity in the program we would not suggest this approach because creating that authority we think is only likely to increase the gap between small and large firms so that completes my testimony and i would be happy to answer any questions at provide background checks on every one of those firms that want to get a qualification for any one of our programs would be a very significant undertaking and i feel the need to look into it more  i think i need to understand more broadly what it means that contracting picture our understanding of what you are proposing is did not include that from my understanding we're talking about background checks now required of those companies  firms and we ask them to research there are many reasons why they don't recertify and most of them have nothing to do with fraud many of these firms don't exist any longer when we go for the recertification many of them are getting federal contracts so they choose not to recertify in addition we have taken many actions some of which i described in my testimony that we think significantly tighten up the process around hobson and i should also mention that we to look at your objectives in the program are and set a net worth limitation based on that my understanding of the language is that it is designed to represent economic disadvantage and i think we have to understand what so as a business person sitting here you know i think we've got a little bit of a mismatch frankly so if you're asking me what describes personal economic disadvantage i would tell you that most of those people are going to be the top ten percent net worth in our country if you're asking me what put somebody in a competitive position as an overall business other businesses in that area i think it's an entirely different analysis but my understanding is that's not what the statute  that's got five million net worth or twenty million net worth individuals has one hundred thousand bank account or an individual that's got a million in his bank account but no net worth in the construction business i think those are two different analyses and find that firm was not responsible they were not responsible better under the federal acquisition roles that's exactly right that responsible lies with the contract that responsibility lies with the contracting officer thank you and would you then they need to submit submit information with respect to their payroll their location the various other information that shows that they qualify for hobbs status codes various other things then the far requires that before they actually bid on a contract they have to test once again to their eligibility the new rules were posing requires and then to test one more time to their eligibility before they actually get an award and then now based on upgrades to the system a contracting officer if he or she puts that data into the federal contracting system as a hobbs own firm and it's not registered as a firm it will not take it any anymore so there's a block in the system  to validate that if there is an award if the agency the s b a and other firms bidding on the contract have the ability to protest any words if there's concern that they don't comply with the requirements thank you let me shift gears a little bit here what would you discuss briefly the constitutional considerations that are required when implementing a based contracting program well i'm not i'm neither a lawyer nor constitutional scholar so it's hard for me to get into a whole lot of detail there but i do know that based on the arrange a decision number of years ago gender or race based programs do receive a relatively high level of scrutiny to determine their eligibility for in the constitution but i unfortunately cannot provide for you the criteria or the specific considerations that are undertaken in that process but there are constitutional issues because a previous supreme court case is the one putting together one of these programs so you can't necessarily just do what you want to do you have to really comply with existing case law and order or it'll be thrown procurement well i think we've made a lot of progress on that just in the last number of months i mention a lot of the overview the oversight issues of recertification cleaning up the data and a score card to score cards are actually already beginning to see a response by a number of federal agencies coming to us to say you know we're not happy with the rating we've got what can we do to improve it in addition specifically for categories that are not hitting for example of an agency isn't hitting  r we are working with those agencies giving them electronic tools giving them other support specifically to help them get those numbers we've rolled out a new electronic tool that helps agencies input their location  the code and the preference group and they can get a list of companies that qualify that's just been in place for a few months that's a whole new tool that's out there once again we've retrained our entire field network to do more outreach to the end of jewel's to the small businesses possible consider that as well and finally just one more question is anyone ever examined to your knowledge the cost benefit ratio of these programs and other words is the government getting sufficient return in terms of job growth that type of thing given the resources expended to operate all these programs i don't know that that we have jobs created for hubs but more broadly i don't think we've actually done a hard cost benefit analysis check and see if there are any studies out there that we may have access to i'm not suggesting we spend more money for studies like that at this time but what i'd be a level of commitment to resolving some of the long standing problems of your agency that from my contact with other committee members was sorely missing in your predecessor but when you tell this committee that you share our frustration with the lack of progress on the women's procurement program i don't believe you when we had the women's chamber of commerce commerce here for the first subcommittee hearing of contract again technology this entire room was packed with frustrated women who own their own businesses who have been waiting far too long for progress on this program and when you told us that the regulatory process for the women's procurement program would be completed by the end of the summer i think most of us assume that the traditional end of summer is the autumnal equinox which occurred on september twenty third at five fifty one a m eastern daylight time so the fact that you're here today telling us that the administrative procedure act is going to cause further delays which is part of the regulatory process you knew about when you made that representation to us i just don't find your explanation plausible and i would like you to explain to us what you as the administrator of the small business administration they are going to do between now and the next ninety day period to ensure that this program the resources the attention from the top down to make it happen because quite frankly the fact that this rule was released one day before your testimony here i find remarkable well i would be remiss to imply that my one year of work on this role would be similar to seven years of frustration among the affected parties so i share your frustration i wouldn't imply that it is to the same extent because obviously many  of my participation in it i think if you spoke with my policy staff they would tell you that there is nothing higher on their agenda that they have pushed harder on or been more engaged with or been pushed on harder by me than this rule i have spent a tremendous amount of time with my counterparts around the federal government on this issue personally and i will continue to do that and i will continue to do that over the next three months is a complicated set of issues  and it's been a complicated set of issues for seven long years it has been and we've had a number of missteps and we've had the rand study since april and that now has put in motion a whole nother set of activities the other thing i do have to remind you is i never said it would be done by the end of summer i said i hoped it would be and i specifically said my testimony i can't give you a hard time line on that so i just want to make sure to state before this body that i was never placed did you ever see those charts i haven't seen the charts but i have seen a list of where those are located and when i talk to you during that at that hearing in february i specifically asked you based upon the fact that i come from a state that ranks forty eighth in terms of federal contracting dollars whether you were going to commit to devoting a p c r to my state and other states that don't have access to the benefit of that type of program are you aware of whether one of those p c r is being placed in iowa experts that work with small businesses to get those contracts i'll also has dedicated personnel in our iowa district office which are business development specialists that work specifically with small businesses to help them in the contracting picture but the  work with small businesses they're housed at the federal agencies with major buying activities and my understanding is there are no major buying activities located in iowa so our focus has been reaching out to the small businesses there because that's that's i live about fifty miles from here and i have to get up early to get down here for an eight or nine o'clock meeting and so when i leave the farm at the at six twenty in the morning i have to be able to put my clothing on quickly and so i carry a constitution and in one of my pockets and i carry carry pens and paper and so forth and the pen i pulled out to write my notes with this this morning says zone contracting it's good for america not just happens to  three and four times and mean salary the average salary in that district all of our other programs which i'm very supportive help people with a hub zone program helps not only people it helps whole areas because we really are upgrading these areas when the subzone is moving and i know that there are some problems in and certifying that they are in fact there are two ways that we could make sure that the that  not it would be very expensive and would have to increase your staff let me ask you what's wrong with peer surveillance the people who are most most interested that nobody cheats is the other guy who submitted proposal didn't get it because the cheater got it we encourage them to report that and what's wrong with that as a way of monitoring this i don't think there's anything wrong with that in fact we get hundreds of cases you're filed through that mechanism person i have a lot of small businesses and in my district and i have a lot of protests in my district so i'm very familiar with those they come to our office and we try to mediate a number of those things is this one of our new programs it is one of the newer programs that's about ten years old so it's not brand new are there not growing pains with most of the new program there are growing pains with new programs and i think we have a long way to go to improve the effectiveness of this program and i think a lot of it's in our sights but i'm glad to hear  understand that when you look at the statistics of firms that have not recertified or not completed the work on examinations many firms are no longer in business specifically the ones during the i g review many of these firms  biggest concerns i have is when you look at the firms are coded as hubs somewhat around ten percent of them the contract value was gotten through set asides most of them either came in through a different program or they were small businesses who wanted small business competition so the federal agencies actually are not using the program is actively to bring in specifically and as a result we go out there to do a resort vacation or do an examination a lot of these firms don't even bother sending us the paperwork because they're not seeing the benefit from that aspect of the program so i think we actually have to get out there and encourage usage of the program more because i think that's what's going to make it viable thank you very much been very effective in my district  marriage to create some revenues i do have one question in all seriousness a little over a year been as administrator how much longer is it going to take for you to truly feel like you have been here long enough to make a difference or truly get some of the problems and issues and i'm not asking you to step on the toes of your predecessor but but to truly be able to to implement some of the it really need  to be implemented because seven years is a long time and i think we would all agree that that's unacceptable and obviously you see a tremendous amount of emotions that's plan a part of this  in the chairwoman because she has certainly made this committee what it should be and i know it's putting excess work on your entire staff partly because of what people did not do before how long is it going to take i mean you've been here i mean we've only i've only been here nine months so it's still a learning process as we go along just so i'm sure you're learning through this process how is it going to take for you feel it truly feel like you want to get your feet up underneath you to be able to truly manage just the way you want to and that you don't as a committee don't have to every time you show up here feel like  dramatically better position to disaster victims in this country when i go down to the gulf of mexico people hug us people in that area are constantly telling us whatever remarkable transformation we have made we're hearing it from legislators from both sides of the aisle from citizens i was down there doing a television interview i had the cameraman and the producer come up to me and i had no idea they were even by our house down there for the second anniversary in our program we were making tremendous progress firms when they coming into our program a year ago had backlogs very long backlogs to get into the program we've worked through most of those backlogs we're now giving every one of them somebody on the phone to help them we've simplify the process we're giving them tools to help them get through it more quickly that's and the other thing and i shouldn't be talking about this ahead of time but fifteen months ago we were the agency and in the federal government that had the lowest morale of any federal agency we are going to be sending out a new survey and about fifteen days and we will be sharing the results with you and i can't hide anywhere because that was finished the day before i came in the last survey we're asking the exact same questions we provide that to this committee and then we'll get to see how we've done with the employees so i would tell you i think we've done a tremendous amount and i do not want any of that progress to in any way be diminished by the work we still have to do and there's a lot of work to do and continue your hard work because i know the committee will keep you accountable for the hard work and and to truly get to the point  we can feel that every time that you come to this hearing that but it's always the bad news because we have a chairwoman that well i think most of the issues that we're addressing are issues that the chairwoman brought to discussed with me before i came into the well i was under the impression that earlier this year you had talked about a deadline of september thirtieth as well maybe i was on the wrong impression but somehow that came across as a benchmark or a goal what you have done today is made of fluid situation now i hear that the programs regulations are still being reviewed by twenty four federal agencies and you don't know when contracts will be set aside for women owned businesses in the federal process at this stage i believe that you know there's a real blockage there and so the question i have is do you believe that the s b a and by extension the federal government is discriminating against s mentioned the rand study so is everyone sort of just holding in place until studies are done what type of work is happening within the agency within the people who you employ that you know it's contingent upon a rand study this is seven years seven years and let me just say this black's law dictionary defines discrimination as differential treatment especially failure to treat all persons equally when no reasonable distinction can be found between those favored and those not favored here we have an administration that for seven years has not implemented any part of the program women owned businesses are under represented as many as eighty seven percent of all industries in the federal marketplace that has cost women owned business is about six billion in seven years ago and the sense of urgency has turned into a fluid well i mean where is the urgency for getting this done and how do you feel comfortable coming back to this committee not representing a commitment to this and i think that that has to be the most frustrating part so i want to really think about the definition of discrimination and think about whether in fact you know your intent does not match your actual great exception with any implication that i'm showing any discrimination in this process so let me just tell you right now that if that's what you're implying i'm offended by your comment would have to not have seen a whole lot of tangible activity the study had to be done before any under represented industries could be designated the study was done the study was made public we submitted a rule  unfortunately we have to resubmit based on various issues we've resubmitted to date that's going into clearance again those are all action points also in the last last year we saw women's procurement go up a billion and a half that's fifteen percent increase from zero five to zero six we continue to we are now in the process with federal agencies because the women's goal is not being hit specifically identifying women owned businesses as a category that they need to improve on we are actually in the process of negotiating memoranda of understanding specifically around women owned businesses and other categories that have not been met in addition we've rolled out a tool that helps other agencies find women owned businesses that meet their qualifications this it's approximately a three month process and after that we would then take those comments and implement them in the federal a companies travel far and specifically i mentioned my testimony companies located on indian reservations so it is primarily for companies in areas where we think they travel a long way in addition to those companies people from hobbs close to that job site can you provide some insight as to how we can be sure that hubs and companies performing contract law a long way from their homes on will well i know at the two thousand and three welcome you have five minutes to make your presentation carol and last question congressman jabot it is an honor to be here today i also have three very special guests with me here today i have my daughter and my son and our o pair from brazil my daughter ellie stiles my son rhett stiles and jennifer medina dale maida who is from brazil on the state department program welcome thank you very much i've been a passionate defender of small business both inside and outside the government and it really does give me great pleasure to be here today i only wish that i had a more positive story to tell you our patchwork system for small business contracting just isn't working and it isn't working for anybody our country's small businesses our federal contracting officers our federal agencies or the u s taxpayer we've created such a complex amalgamation of laws regulations and policies that even the best of lawyers are really struggling to figure out the maze right now how exactly then can we expect small businesses were limited resources or contracting officers of the g s twelve and g s thirteen level to understand this hodgepodge system there is a reason that fraud abuse and even simple errors are on the increase very few people understand the system there aren't resources that s b a to understand the questions and those who do understand it can manipulate it to their benefit in essence we have half the contracting officer spending double the money in a constantly changing and complex regulatory environment with little training on small business the small business side the complexity of the programs is a significant barrier to entry many small businesses give up trying to understand the regulatory complexities or make significant errors in application with a little help from s those inclined to commit fraud or to abuse the system have a complex and strict changing structure within which to hide their misdeeds it is not a wonder that the system is experiencing problems and while many of the legislative changes are considering today are perfectly targeted at solving real problems there will be unintended consequences of adding a new layer of complexity that our overburdened federal contracting workforce will have difficulty implementing and small businesses will have difficulty understanding frequent changes to these programs also make it difficult to identify and ferret out fraud and abuse in the system but let me give you a few real world examples that i have found in the practice of law very recently last week i got a call from an old client of mine in a firm and she just did on nine different contracts that had been sent to her from one contract specialist the art of p s the request for proposals had been sent from the contract specialist home email almost simultaneous with those are the contract specialists sent requests for this a company to buy one candle and to host a whole wine candle party for her as well lo and behold when my a client ignored and properly ignored the whole why and candle request seven contracts in a row were awarded to a why and company each award to the one company was cents lower than my a client's offer and it wasn't until she complained about the abuse that she was actually awarded one of those nine contract i can also tell you that i get a number of calls from large businesses because they've been contacted by one person a company that had a deal to supply a federal agency with a particular product the eight day this one individual acts as a pass through for the large business  nothing but act as a pass through the large business gets a sale the agencies meet their small business numbers and the only loser there is really the taxpayer but what is driving this problem it's legal but i think abuses there's a lot of pressure on the agencies to meet their small business goals and they find ways to do it some of which i think we would all consider to be improper and abusive and i don't think the goal of the a program is to enrich one individual by passing through a product without adding value but that is the reality of the small business contracting world for small businesses one that seems i think almost accepting of the abuse so what can we do to solve these problems i don't have a magic wand but i do think you can simplify the process you can reduce the barriers to entry a lemonade the vast opportunities for aaron fraud and a lemonade to ridiculous numbers and representations and certifications our small businesses must make every day the best place to start is what i reference as a single automated point of entry a place where a small business to go into the data about their company and find out whether they are actually small and what programs for which they're el certify that the information they've supplied is accurate and complete and seek approvals of their joint ventures and mentor protegee agreements without monumental effort s b a should be able to take this data verify the information submitted and give it to contracting officers electronically through the central contractor registration it sounds simple and frankly it is and should be simple it takes out multiple layers of process and room for error and abuse on the small business side and the federal contracting side i think the regs the barriers to entry should be low the statute regulation should be clear and easy to understand and the information regarding these programs should be accurate  remarks but i'm very happy to answer any questions you have my understanding is you will have to leave before we well we have to plan to catch i can stay until about one fifty our next includes those small businesses owned by reserve component members who have been or may be called to active duty or may be affected by base closings and reductions of our military forces american legion has encouraged congress to veteran on small businesses within federal contracting and contracting goals for small business owners and one thing goes for the participation of small businesses and put your on the contract agency compliance with public law one of six tasks fifty has been minimum with only two agencies self reporting that they have met their goals and that is to be an s b a in two thousand and four president bush issued executive order thirteen thirty six zero to strengthen opportunities in federal contracting for service disabled better known businesses some of our recommendations have been one to create an interagency task for the american legion supports the creation of an of veteran service organizations that should be appointed by the president a task force should be charged with developing proposals regarding increased capital access be increasing access to federal contracting su contracting see increasing the integrity of certification of status as a small business concern service disabled veterans or small businesses controlled by veteran d reducing paperwork in the ministry of burdens on veterans in assessing assessing business assistance and finally making improvements relating to supporting veteran business development the task force must say in an annual report to the senate and house small business committees and veteran affairs committee another recommendation is to incorporate executive order thirteen thirty six into s b a regulations and standard operating procedures th american legion agrees with the recommendations given from the s b a advisory committee on veteran business affairs f y two thousand as a report and it states the s b a needs to really emphasize implementation of executive order thirteen thirty six zero and establish it as a federal procurement per r d across the entire federal sector federal agencies need to be held accountable by the s b a for the implementing by the executive order pursue ongoing follow up also to achieve this to achieve the goal contained in the executive order of the s b a must've been a file all agencies affected by the executive order on a directive data to all agencies veteran service organizations impose its findings on the s b a website as a bellwether program progress we would also like to make some changes to the source or sole source contracting method to provide priority to provide parity among special emphasis but your main programs the s b a should take immediate appropriate steps to promulgate the change would mirror thirteen c f r one twenty four parts which applies to a program participate participants and states in order to be eligible to receive a source or say a contract for points that you might be able to make in conclusion yes the american legion appreciates this committee's attempt to restructure many of them small business programs within this which will result in tremendous benefits of veterans currently the veterans community is the only community that represents every social cultural small business group within this there are presently ten thousand four hundred fifty one registered service disabled veteran on small businesses of which three thousand three hundred a minority and one thousand three hundred are women the american legion is looking for a program that works for all small businesses and which would make an immediate demonstrated impact on  five hundred thousand women on company throughout the country in five minutes to make your see woman they are also included in hub zones and service disabled veterans in a recent hearing before this committee ranking member shabbat asked me what principle changes i would make in order to remedy some of the failings of the s b a while my view is that many of the challenges we see come from a failure of leadership and commitment of the it is also clear that there are several areas in which congress can help the process of improvement through legislative action as these programs are filled by the s b a and assess by this committee it is critically important that the committee observed three things the quality and commitment of the implementation by the s b a the quality of expected outcomes and the consequences of the unexpected outcomes and looking at women and small business programs the small business administration has shown a lack of commitment to the woman's program that this very committee has designed been nearly seven years and it sounds like it will be more than seven years since this woman legislation has become law and we are still waiting for the regulations to be published the list of under represented industries to be published in the far updated so the agency leaders effectively leverage this program in the interim the s b a has stated many times that their website women's office and matchmaking sessions are more than enough to serve women small business owners unfortunately the statistics do not support this assertion women owned one third of all businesses in the united states and more than fifty percent of all small businesses but we still only secure three point four percent of all contracting dollars i call upon this committee today to take action the s b a is tried every way possible to avoid compliance with this law simply writing letters to the s b a doesn't help calling s b a leaders into these hearings haven't helped so now i strongly urge you to establish very clear legislation that compels the f d a to implement this program the method of collecting and assessing the data was made clear by the the rand studied collected the data and reported the woman and small businesses are under represented in federal contracting and over eighty seven percent of all industries again i ask you to compel the s b a to implement the seven year old law for the a v program we are not seeing broad based activity in the eighty program a lot of emphasis is placed in signing business up as a contractors but now we need the s b a to work diligently with these businesses and with agency leaders to achieve the real goals we need to increase the net worth provisions and the time businesses may stay in the eighty program so that they can reach the level of size and strength and survive after they graduate program our hub phone program a prime concern with you ha them program has been the validity of hubs on contractors the inappropriate leveraging of the hub zone designation when performing work clearly was well outside of the hub you need to tighten up the process for being designated as hubs  additionally there are several general small business contracting issues that i believe should be addressed transparency i strongly encourage you to require that the s b a provide a much deeper reporting that shows the true representation of diversity for contracts going to small businesses we need to measure the total number of small businesses receiving contracts by agency and small business program and the disbursement of these contracts by size and location size standards i encourage you to require in a reporting unemployment and revenue for all s b a small business contracting programs we need to assure that the firms taking part in small business programs are small but the goals i encourage you to push going more deeply by requiring the establishment of prime contract and sub contracting goals for each us be a program within each agency accountability we need to hold agencies account countable at the top levels starting with the secretaries and including the program managers integrity of contractors in the a large amount of fraud we have seen in small business programs and federal contracting in general i encourage you to require a background of integrity to take part in any small business program and finally effective implementation of small business contracting programs i hear time and time again from agencies small business and contracting personnel that the small business contracting programs are challenging and time consuming consequently the small business contracting programs are not utilized to their fullest sector employees and you know all the rest of the receive a small fraction about a contracting dollars and a tiny sliver of the sliver of federal research and development investment in two thousand and six small companies receive just one hundred percent of federal contracting expenditures according to data compiled by the eagle eye publishers and according to the s b a the percentage of federal contracting dollars going to small businesses in two thousand and six was just twenty two point eight percent and that is clearly  insufficient we are pleased that this committee and now the house of representatives has passed h r eight hundred seventy three which takes many steps we think to expand the size of contracting opportunities for small companies and it's we think that's a crucial goal because as we often see in hearings like this what we what we see are competing programs the small business community competing with one another for federal dollars and we think that's rather unfortunate because we need to find ways to increase opportunities for all small companies not simply figure out who should be first in line among the small business community while those rules we think have to be clear and they have to be fair we are hopeful that we can expand opportunities for all small companies and not just at the expense of tried to address in this hearing and that you're thinking about is the issues of fraud so i talk about that a little bit more as well large businesses too often are the real recipients and business contractors in two thousand fire actually large businesses according to the lie again additionally more than twenty percent of the respondents to our own internal survey reported losing out on a federal procurement opportunity that instead went to a large firm that had been identified as a small business lcome efforts to combat fraud an s b a small business contracting programs including actions such as onsite verifications and geographical limitations and civil penalties for firms found to have falsely represented themselves as service disabled veteran and in against companies committing fraud since eighty eight small business has provided for felony convictions up to ten years criminal fines of five hundred thousand dollars mandatory three year department and forfeiture for companies determined by the  misrepresented their small business status prosecutions under these provisions have been lacking however and the s b a really rules on whether companies have misrepresented their small business status to a change in s b a urges prop prosecution for companies down to a improvement act of two thousand and seven men our full statement for the record i'd like to talk briefly about four points which are not addressed by the legislation first delegation decade or so ago delegated contract oversight to the federal because of the tremendous log jam and getting paperwork processed by the s b a i was just frustrated contracting officers throughout the federal government we welcomed that at the time and i personally has spent tremendous amount of time trying to solve these kinds of problems in advocacy for our members so i'm personally familiar with it at the same time i do agree that it's time to revisit this issue because s b a has essentially abandoned business development function with respect to the contracting process and more and more privileges that have crept into the program through the number of amendments over the years and have now rendered this program out of control are not small impoverished tribal businesses struggling to survive in remote villages in alaska or billion dollar corporate conglomerates that thing i think is being used to do is to make sure that companies coming into the portfolio into the program have an opportunity to secure the smaller contracts that the federal agencies tend toward other more experienced i am sure you heard my exchange  portfolio and so we have long advocated as you know an increase in the person that worked for entry into the program let me say that we also keep in mind that the purpose of the network ceiling is to estab thank you should the committee intervene to ensure that they women's procurement program is implemented i would say yes because after today hearing that it's going to be delayed at least three more months and knowing what that entails after the fact we need some sort of assistance the administrator mentioned that woman on firms got a million dollars this past year in contracts and isn't that wonderful but the reality is if you multiply out what we've lost over the last seven year that forty two billion dollars and subtract one billion dollars then you've got forty one billion dollars that we have lost and that will number will continue to grow  properly absolutely we've seen stonewalling from the beginning it's been seven years we've we've watched the deadline self imposed come and go and i don't suspect that the behavior will change we program what effect will that have women on firms will continue to lose the billion dollars of revenues annually that impacts not just their business but their families their communities because they hire even men who have families so this is not a woman's issue this is a community issue and it's the country's because again the whole growth of the economy is dependent on small business growth of well known firms represent one third of all businesses the united states penalties for fraud the problem with this is before you can get to the penalties you have to catch some one inspector general has reported that eighty percent of pubs on companies aren't eligible three years after they have been approved what do your proposal for how we catch these people well i think there are two issues one there are seven people the s b a that work on the hubs on program not sure how much you can do with thousands of companies and seven people you need to allocate resources to it or you're not going to find them and second when you find them send him a jail for them over to the department of justice and make examples of these people if there aren't examples you're going to have people out there that with less when i will add if you take people out of the program and put them in the hub zone then you'll start having problems in that program i mean it's not a matter of being able to adjust their resources it's a matter of the off the management and budget realizing that they need to commit the money i think  come upon examples like that rather frequently i hate to say this one was just a stunning and stark one of my client asked me not to reveal her name but that i was perfectly happy to use examples because it was really stunning i mean there you know you've got this contract specialist at home sending out and then trying to benefit herself through a candle company at the same time and a small business i mean this woman knows me personally she's a friend of mine a client for a long time so she had me to come to what can i do about this how can i handle that well there's a lot of small businesses out there that will buy the candles because it will help them get you know the business or you know have no idea what to do in a situation like that and there are a lot i mean it's it's not just a small planning to take or will take perhaps in the future to enforce the judgment of the federal district court and its lawsuit against the s b a right now what we wanted to do is get through this hearing and see what was happening here the statement thinking maybe today would be the day it was going to be implemented just oh well anyway so at this point we will have to get back with widespread do you believe that the fraud is for example of why we had there and what would you like to expound upon that i can try and again my information unfortunately in terms of how widespread it is various  for that but i think there are lots of things going on at different times but i think my biggest concern is not those individual cases it's the culture that that can lead to a left unchecked long term and they can be and that they are being implemented in the way that we all expect that they are implemented in force but i think as a big part of that at the same time i think a lot of transparency and simplification as i mentioned you this stuff and should we rely on other contractors who see it happening and say well this guy isn't really you know on the up and up here should they be reporting that and i think one of the dangers and one of the reasons that may not work in all cases is because the contractors themselves they may assume there are some loopholes a guy used to get in the program they don't understand and there may not in fact actually be so they won't report those cases because the system is so complicated that a lot of those things people just shrug their shoulders and say complexity of the tax code as being one of the principal problems and i agree very much with you could you take maybe thirty seconds to sixty seconds to tell me what the problem is there oh well you know that i can do it in thirty seconds but and why not apply that standard across the board we're giving companies in these various programs a tremendous advantage in the federal marketplace that ordinary citizens don't have that demands a lot of respect and i think that everybody should be subject to the same type of scrutiny to me as a no brainer let's let's have background checks for everybody let's do on site surveys for everybody  accomplish what we really intend to do in terms of responding to the concerns on the problems that we have seen with all those programs and my intention is to try to move this legislation through the comm