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26–249 2017

THE PUERTO RICO OVERSIGHT, MANAGEMENT 

AND ECONOMIC STABILITY ACT: STATE OF 

SMALL BUSINESS CONTRACTING 

HEARING 

BEFORE THE

SUBCOMMITTEES ON CONTRACTING AND 

WORKFORCE AND ECONOMIC 

GROWTH, TAX, AND CAPITAL ACCESS 

OF THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

JULY 13, 2017 

Small Business Committee Document Number 115–029 

Available via the GPO Website: www.fdsys.gov 

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Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

STEVE CHABOT, Ohio, Chairman 

STEVE KING, Iowa 

BLAINE LUETKEMEYER, Missouri 

DAVE BRAT, Virginia 

AUMUA AMATA COLEMAN RADEWAGEN, American Samoa 

STEVE KNIGHT, California 

TRENT KELLY, Mississippi 

ROD BLUM, Iowa 

JAMES COMER, Kentucky 

JENNIFFER GONZA ́ LEZ-COLO ́ N, Puerto Rico 

DON BACON, Nebraska 

BRIAN FITZPATRICK, Pennsylvania 

ROGER MARSHALL, Kansas 

RALPH NORMAN, South Carolina 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

DWIGHT EVANS, Pennsylvania 

STEPHANIE MURPHY, Florida 

AL LAWSON, JR., Florida 

YVETTE CLARK, New York 

JUDY CHU, California 

ALMA ADAMS, North Carolina 

ADRIANO ESPAILLAT, New York 

BRAD SCHNEIDER, Illinois 

VACANT 

KEVIN FITZPATRICK, Majority Staff Director 

JAN OLIVER, Majority Deputy Staff Director and Chief Counsel 

ADAM MINEHARDT, Staff Director 

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(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Steve Knight ................................................................................................... 1 

Hon. Stephanie Murphy .......................................................................................... 2 

Hon. Dave Brat ........................................................................................................ 3 

Hon. Dwight Evans ................................................................................................. 4 

Hon. Nydia Vela ́zquez ............................................................................................. 5 

WITNESSES 

Mr. William Shear, Director, Financial Markets and Community Investment, 

United States Government Accountability Office, Washington, DC ................ 7 

Mr. Robb N. Wong, Associate Administrator, Office of Government Contracting and Business Development, United States Small Business Administration, Washington, DC ................................................................................... 8 

APPENDIX 

Prepared Statements: 

Mr. William Shear, Director, Financial Markets and Community Investment, United States Government Accountability Office, Washington, 

DC .................................................................................................................. 25 

Mr. Robb N. Wong, Associate Administrator, Office of Government Contracting and Business Development, United States Small Business Administration, Washington, DC ..................................................................... 39 

Questions for the Record: 

None. 

Answers for the Record: 

None. 

Additional Material for the Record: 

GAO Report ....................................................................................................... 43 

Statement of Mr. Kenneth D. McClintock, President, Puerto Rico Equality Forum ....................................................................................................... 98 

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(1) 

THE PUERTO RICO OVERSIGHT, MANAGEMENT AND ECONOMIC STABILITY ACT: 

STATE OF SMALL BUSINESS CONTRACTING 

THURSDAY, JULY 13, 2017 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

SUBCOMMITTEE ON CONTRACTING AND WORKFORCE, 

JOINT WITH THE

SUBCOMMITTEE ON ECONOMIC GROWTH, TAX, AND CAPITAL

ACCESS, 

Washington, DC. 

The Subcommittees met, pursuant to call, at 10:00 a.m., in Room 

2360, Rayburn House Office Building, Hon. Steve Knight [chairman of the Subcommittee on Contracting and Workforce] presiding. 

Present: Representatives Chabot, Brat, Knight, Kelly, Gonza ́lezColo ́n, Vela ́zquez, Evans, Murphy, Lawson, Chu, and Espaillat. 

Chairman KNIGHT. This hearing will come to order. Trent Kelly 

is here so we are ready. 

I would like to thank our witnesses for taking time to come and 

share their thoughts with us today, and I look forward to your testimony. 

Today’s joint hearing on the Subcommittee on Contracting and 

Workforce and the Subcommittee on Economic Growth, Tax, and 

Capital Access will focus on findings by the Government Accountability Office, GAO, report mandated by section 408 of the Puerto 

Rico Oversight Management and Economic Stability Act, also 

known as PROMESA. This report takes a close look and evaluates 

the Small Business Administration’s contracting activities in Puerto Rico. 

According to SBA size standards, 99 percent of all businesses on 

the island are considered small, but only a limited number of these 

firms are actually engaged in federal contracting activities. We 

often say on this Committee that small businesses are the backbone of this country. This is especially true in Puerto Rico. Therefore, it is important that small businesses are given every opportunity to ensure their success. The SBA’s federal contracting programs strive to do just that. These programs provide contracting 

preferences to small businesses based on specific socioeconomic designations such as service, disabled veteran, or woman-owned. This 

is done to ensure small businesses are given opportunities to access 

and compete fairly for federal contracts. 

The island itself is dominated by small businesses, and thus, presents an excellent case study examining the effectiveness of SBA’s 

SBREP-219A with DISTILLER

2 

federal contracting programs on the small business community. For 

example, the GAO found that small businesses in Puerto Rico are 

winning a significant portion of federal prime contract obligations, 

roughly twice the national average. While the findings appear 

promising, the report also states that most contract obligations 

were not won through SBA’s federal contract programs, so this 

raises the question: are SBA small business contracting programs 

effective or influential? Additionally, the result of PROMESA’s expansion of the SBA’s historically underutilized Business Zone or 

HUBZone program in Puerto Rico also provides important insights 

into the program and small business contracting in general. 

The lessons we take from today’s GAO report will help in our understanding of how the SBA’s federal contracting programs impact 

small businesses in the United States territories and nationwide. 

I look forward to hearing from our witnesses. We will benefit 

from your perspective, and I thank you for being here today. 

I would now like to yield time to the ranking member, Ms. Murphy, for her opening statement. 

Ms. MURPHY. Thank you, Mr. Chairman. 

I am pleased that we are holding this hearing on the small business provisions contained in PROMESA on the GAO report that 

was produced as a result of one of those provisions, and on the possible steps this Committee and the SBA can take to empower small 

businesses in Puerto Rico and to help the U.S. territory address its 

economic challenges. 

I want to thank Ranking Member Vela ́zquez, who is a tremendous champion for the island. I also want to thank my colleague, 

Congresswoman Jennifer Gonzalez, who represents Puerto Rico in 

this chamber with skill and determination. 

There are 3.4 million American citizens living in Puerto Rico. Because of the migration of Puerto Ricans from the island to the 

mainland, especially in recent years, there are now 5.4 million individuals of Puerto Rican heritage living in the States. The Puerto 

Rican population in Florida has increased by over 120 percent since 

the year 2000, and now stands at 1.1 million, running neck and 

neck with New York. 

My district in Central Florida is home to about 100,000 Puerto 

Ricans, the second highest of any district in the Sunshine State. 

Many of my constituents have family and friends still living in 

Puerto Rico. They care deeply about the island, and so I care deeply about the island. 

My view on Puerto Rico is simple: I believe the American citizens 

that live on the island should be able to vote for their president, 

should have a full delegation in the House and the Senate, so that 

Congresswoman Gonzalez does not need to do the work of seven 

people, and should be treated equally under all federal spending 

and tax programs. Our fellow citizens in Puerto Rico ought to have 

the same rights and the same responsibilities as residents of Florida or any other State. 

Until Puerto Rico is treated equally in all respects, however, federal policymakers should be exploring both straightforward and 

creative ways to improve quality of life and spur economic growth 

on the island. 

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3 

To that end, Congresswoman Vela ́zquez and Congresswoman 

Gonzalez have introduced the Puerto Rico Small Business Assistance Act, which I am proud to cosponsor. This bill incorporates recommendations made by the bipartisan, bicameral Congressional 

Task Force on Economic Growth in Puerto Rico, which was established by PROMESA and which issued a comprehensive report in 

December 2016. I hope Congress acts swiftly on this legislation. 

As the ranking member of the Subcommittee that oversees contracting, I will have specific questions for the two witnesses regarding the conclusions in the GAO report and the specific steps SBA 

can take at the agency level to better assist Puerto Rico’s 44,000 

small businesses. 

For now, I want to close by expressing a general concern. Puerto 

Rico firms, whether they are small, medium, or large, receive relatively few federal government contracts. As discussed in the report issued by the Congressional Task Force on Economic Growth 

in Puerto Rico, the territory ranks nearly last when it comes to the 

total dollar value of federal contracts performed within each State 

and dead last when considered on a per capita basis. 

Compounding the problem, according to the Federal Procurement 

Data System, of the 571 federal contracts that were performed in 

Puerto Rico in fiscal year 2015, 346, which is approximately 61 percent, were awarded to firms located outside of Puerto Rico. That is 

a very high percentage compared to other jurisdictions. And in 

short, very few federal contracts are performed in Puerto Rico, and 

those that are performed in Puerto Rico are more often than not 

awarded to firms located off the island. That is an impediment to 

economic growth and job creation. 

I hope the witnesses will address this broader point during the 

hearing. Thank you, and I yield back. 

Chairman KNIGHT. Thank you very much. 

And now we are going to yield time to Chairman Brat, as this 

is a joint hearing, for his opening statement. 

Chairman BRAT. Thank you, Mr. Chairman. I would also like to 

thank our witnesses, first of all, for your willingness to be with us 

and speak to us today, and I look forward to your testimony. 

I think we can all agree on both sides of the aisle that achieving 

and sustaining long-term economic growth is the key to unlocking 

Puerto Rico’s full potential. Unfortunately, the island has been, and 

continues to be, embroiled in economic crisis. I hope through our 

discussion today we can identify pro-growth policies and solutions 

from the GAO’s report. 

As the chairman noted, the vast majority of businesses in Puerto 

Rico are considered small, but not many of these firms actually operate in the federal contracting space. Even fewer hold SBA certifications, which would allow them to receive federal contracting preferences. The GAO report also makes clear that less than a handful 

of government agencies actually award contracts to firms in Puerto 

Rico, and only in a few select industries. Having a strong, healthy, 

and diversified small business base has been critical to this country 

and is critical to Puerto Rico’s economic stability and financial 

independence. 

We can start by taking steps to harness the power of the small 

business workforce in Puerto Rico. I look forward to hearing from 

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4 

our witnesses on ways this Committee can help small businesses 

in Puerto Rico succeed. 

Mr. Chairman, I yield back the balance of my time. 

Chairman KNIGHT. Thank you very much. 

And now we would like to hear from the ranking member, Mr. 

Evans, the ranking member on Economic Growth, Tax, and Capital 

Access. 

Mr. EVANS. Thank you, Mr. Chairman. And also, I would like 

to thank my colleague Congresswoman Vela ́zquez for her long history of working to help Puerto Rico. 

Today is an opportunity for us to consider the dire economic situation facing Puerto Rico. While the cause of decline are debatable 

and outside the purview of today’s hearing, what is very clear is 

the harm being done to Puerto Rico’s small business community. 

More private sector workers in Puerto Rico are employed by small 

firms than here on the mainland, yet their needs are overlooked, 

their economic contribution unappreciated. Rather than bickering 

over the issues not under our control, we should be working together to improve the lending, contracting, and entrepreneurship 

development landscape on the island. 

The Small Business Administration offers a wide variety of programs to support entrepreneurs in exactly those areas, yet the 

GAO report concludes that much more can be done, specifically as 

it relates to contracting. The GAO spoke with a number of stakeholders that identified challenges that small businesses in Puerto 

Rico may face in obtaining federal contracting opportunities. These 

include increasing use of contracting bundling or consolidation, difficulty in meeting contract procurement requirements, and a lack 

of knowledge about the federal procurement process. These barriers 

are compounded by challenges created by the island’s geographic 

location and economic condition. Along those lines, I am greatly 

concerned about the lack of access to contracting officials for Puerto 

Rican entities. GAO referenced the uphill circumstances the island 

businesses face in forging relationships with agency representatives. These representatives are meant to be advocates for small 

contractors, but Puerto Rico does not have the same access as the 

mainland firms. 

Small businesses in Puerto Rico also lack the knowledge about 

the federal contracting process. Despite SBA efforts to train them, 

GAO concludes that the small firms do not know how to complete 

proposals or even basic information about the existence of the 

small SBA federal contracting programs. 

But most disappointing is the lack of access to capital and financing. In light of the fiscal realities facing the island, it comes as no 

surprise that small businesses cannot meet financial standards of 

surety companies and other lenders. The gap in financing reduces 

the ability of small contractors and small firms to generally do 

their part in rebuilding Puerto Rico’s economy. While I applaud the 

approval of the first Puerto Rican surety company to be approved 

to participate in the Small Business Surety Bond Guarantee program, I believe more must be done to attract lenders and other programs’ resources to partner to our own. 

Doing nothing is no longer an option in that regard. I am encouraged to learn that the SBA is serious about its duty to Puerto 

SBREP-219A with DISTILLER

5 

Rican entrepreneurs. I look forward to working with my Committee 

colleagues and with the SBA to move legislation forward to help 

small businesses in Puerto Rico because they are the engine needed 

to promote growth, drive stability, and achieve economic revitalization. 

I thank the witnesses for testifying today and hope to learn more 

about how we can use the federal marketplace as a building block 

to help Puerto Rico. 

Thank you. I yield back the balance of my time. 

Chairman KNIGHT. Thank you, Mr. Evans. 

And I am pleased to see the ranking member from the full Committee, and I would like to yield her some time for an opening comment from Ms. Vela ́zquez. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. I am very grateful 

for your indulgence. 

I am very proud of the island, not only because it is where I was 

born, but because despite all the fiscal ailments it is facing, young 

entrepreneurs are leading its economic renaissance. While the 

bankruptcy process slowly unfolds, there is a degree of uncertainty 

that has forced banks to cut back markedly on their small business 

lending. When small businesses employ more than 80 percent of all 

private sector workers, this becomes particularly challenging. Yet, 

in the face of adversity, entrepreneurs are rolling up their sleeves 

and getting to work. They are harvesting the land and building 

upon their strong human capital to get out of their economic hole. 

Just last week, I learned of a small 50-person 8(a) technology company that secured a contract with a large federal agency. I also 

learned of virtual office spaces and business incubators that are encouraging collaboration with likeminded businesses and supplying 

entrepreneurs scalable solutions for their particular needs. 

The truth is that the people of Puerto Rico want and need jobs. 

I believe small businesses will be the driving force behind the island’s vitality. I commend Administrator McMahon for traveling to 

the island and hearing from small businesses. Understanding their 

challenges is vital to restoring economic growth. Assisting small 

businesses in Puerto Rico is not only good for entrepreneurs on the 

island; it is the right thing to do. We must remember that as citizens of the United States, Puerto Ricans have fought, shed blood, 

and given their lives in nearly every major American war. We owe 

it to the island to provide them the help and resources to jumpstart 

their economy. 

In the agriculture space alone, Puerto Rico can become the leader 

in organic, tropical, and specialty crops. It has a year-round growing season, abundant rainfall, and it abides by the same legal 

structure and regulatory standards as crops in the mainland 

United States. Their universities graduate over 18,000 students annually in engineering and technology. I want for those students, for 

those engineers, to have the option to stay in Puerto Rico. I do not 

want for them to face the reality that the only option they have for 

themselves and their families is to leave the island. 

The potential to increase agribusiness in the often overlooked 

territory is wide-ranging. Leveraging the existing assets can be as 

simple as increasing education. In fact, last year, the Federal Reserve Bank of New York released a report on a small business surSBREP-219A with DISTILLER

6 

vey in Puerto Rico and found that 19 percent of respondents cited 

a need for training on federal government contracts. To that end, 

I welcome the GAO analysis of the trends and challenges in the 

federal contracting space. I take very seriously the responsibility of 

examining the effectiveness of SBA programs, both nationwide and 

in Puerto Rico, and that is why I introduced H.R. 2488, the Puerto 

Rico Small Business Assistance Act. It comprehensively addresses 

the needs of small firms on the island by expanding lending, contracting, and entrepreneurial development services and resources 

to Puerto Rico. I hope we will have the opportunity to move it 

through Congress as the first step towards the revitalization of the 

island’s economy. 

And let me make a last point. We owe it to the people of Puerto 

Rico to have a final resolution to the political limbo that they find 

themselves. Puerto Rico is a colony and we need to resolve that 

issue. But it is not for these members of Congress who happen to 

be Puerto Rican to decide what is the best political situation for 

Puerto Rico; that is up to the people of Puerto Rico. And so our responsibility in the U.S. Congress is to provide for a fair, open, inclusive process that will allow for the people of Puerto Rico to resolve that issue once and for all. 

And with that, Mr. Chairman, I yield back. Thank you. 

Chairman KNIGHT. Thank you very much. 

And I would like to say welcome to the chairman of the full Committee, Mr. Chabot is here, and we started off the day with the 

SBA secretary. And it was a nice morning, and she has got a lot 

of energy and is doing a great job so far. 

So if Committee members have an opening statement prepared, 

I ask that they be submitted for the record. 

I would like to take a moment to explain the timing. I think that 

both of our witnesses understand this, but you have 5 minutes. As 

the lights come on, you will be green until you get down to 4 minutes. You will go yellow and then you will go red. And when you 

get to red, either try to wrap it up or we will wrap it up. But it 

has been pretty easy so far, and both of you are veterans, so we 

are good to go. Okay. 

Okay. I would like to introduce our witnesses today. Mr. Shear 

is a friendly face, been in front of this Committee many times. And 

our first witness is Mr. Shear, director of Financial Markets and 

Community Investment at the United States Accountability Office, 

or GAO. Mr. Shear has engaged with this Committee on a wide 

range of small business topics and having testified before the Committee on a number of occasions. We welcome you back today. 

Our second witness today is Mr. Robb Wong. Mr. Wong serves 

as the associate administrator for the United States Small Business Administration Office of Government Contracting and Business Development. He recently rejoined the SBA in his role in 

March of 2017. Mr. Wong is responsible for overseeing more than 

$500 billion in total federal spending within the federal marketplace and ensures small businesses can compete for federal contracting opportunities. Mr. Wong is returning to his roots at SBA, 

having started his career there as an attorney with the Office of 

General Counsel and as SBA acting district director and counsel in 

the Lubbock District Office. We look forward to your testimony. 

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7 

So we will start with Mr. Shear. And Mr. Shear, we welcome you 

back, and you have 5 minutes. Thank you, sir. 

STATEMENTS OF WILLIAM SHEAR, DIRECTOR, FINANCIAL 

MARKETS AND COMMUNITY INVESTMENT, UNITED STATES 

GOVERNMENT ACCOUNTABILITY OFFICE; ROBB N. WONG, 

ASSOCIATE ADMINISTRATOR, OFFICE OF GOVERNMENT 

CONTRACTING AND BUSINESS DEVELOPMENT, UNITED 

STATES SMALL BUSINESS ADMINISTRATION 

STATEMENT OF WILLIAM SHEAR 

Mr. SHEAR. Thank you very much. 

Chairmen Knight and Brat, Ranking Members Murphy and 

Evans, and members of the Subcommittee, and I also have to add 

that I am very honored that Chairman Chabot and Ranking Member Vela ́zquez are also in attendance. 

I am pleased to be here today to discuss, first, trends in small 

business contracting and the use of SBA programs in Puerto Rico 

that provide contracting preferences to small businesses, and second, stakeholder views on any challenges that small businesses in 

Puerto Rico face in obtaining federal contracting opportunities. 

First, in discussing trends in small business contracting, we use 

nationwide statistics as a reference point. For fiscal years 2006 

through 2017, a higher percentage of federal contracting obligations was awarded to small businesses within Puerto Rico for contracts performed there compared to the percentage for small businesses nationwide, particularly in the last fiscal years of the period. In fiscal year 2016, small businesses in Puerto Rico received 

about 47 percent of federal contracting obligations to Puerto Rico, 

compared to 23 percent of federal obligations awarded to small 

businesses nationwide. 

As our mandate directed, we evaluated the utilization of four 

SBA programs that provide contracting preferences based on socioeconomic designations that can help small businesses obtain contracts. Of the four SBA programs that provide contracting preferences, a higher percentage of obligations was awarded in Puerto 

Rico through the 8(a) Business Development program, compared to 

the HUBZone, women-owned, and service-disabled, veteran-owned 

small business programs combined. More generally, full and open 

competition and the 8(a) program were the most prevalent basis for 

awards, and I certainly hope in Q&A we can talk about the success 

in full and open competition. I think it is a major point from what 

we found. 

In June 2016, for its HUBZone program, SBA eliminated the cap 

on qualified census tracks for Puerto Rico and nationwide. Nearly 

all of Puerto Rico now qualifies as a HUBZone. We found that the 

number of applications submitted to the HUBZone program increased in Puerto Rico after this expansion. The number of certified 

HUBZone businesses in Puerto Rico increased from 25 to 40 for the 

first 6 months of fiscal year 2017. 

As to our second objective, stakeholders GAO interviewed identified several challenges small businesses in Puerto Rico may face in 

obtaining federal contracting opportunities. Challenges identified 

include a lack of knowledge about the federal contracting process, 

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8 

difficulty meeting procurement requirements, and difficulty accessing bonding, financing, and capital. Many of these challenges are 

similar to those we had identified in a 2012 report on challenges 

faced by small, minority-owned businesses in obtaining federal contracts. In our discussions with SBA, DOD, GSA, and VA, the officials identified examples of conducting outreach, providing training 

and seminars, coordinating with local organizations, and other efforts intended to help Puerto Rican small businesses obtain federal 

contracting opportunities. 

Chairman Knight and Brat, Ranking Members Murphy and 

Evans, this concludes my prepared statement. I would be happy to 

answer any questions. 

Chairman KNIGHT. Thank you very much. 

And we will go to Mr. Wong for your 5-minute opening statement. 

STATEMENT OF ROBB N. WONG 

Mr. WONG. Good morning. Esteemed members of Congress, on 

behalf of the U.S. Small Business Administration, our inspirational 

administrator, Mrs. Linda McMahon, and the longstanding and 

dedicated team in the Office of Government Contracts and Business Development, thank you very much for the opportunity to 

meet with you today. 

At SBA, Mrs. McMahon has encouraged us all to be efficient, effective, and customer-centric in executing our responsibilities; and 

so I will try to do that right now. 

Our team has previously provided a much lengthier testimony 

that I understand is already included in the record. Therefore, instead of repeating something that you may have already read, I 

want to focus on your questions about SBA and how we can best 

serve the people of Puerto Rico. I will do my best to provide meaningful responses to you today or, if necessary, I will get the response to you as soon as possible. I look forward to working together so that the SBA can continue to help strengthen small businesses and to improve the opportunities for them. 

I respectfully yield back the balance of my time, and I am ready 

for your questions. 

Chairman KNIGHT. Mr. Chairman, my witnesses used 6 of their 

10 minutes. This should be an example for what witnesses come in 

and yield back time. 

I think that everyone has got many questions for what is coming. 

And I have read through the report and it is interesting. But I 

want to go to Mr. Shear on a couple of the things that you said. 

One of them, and we see this with small businesses, whether it 

be in Puerto Rico, whether it be here in the States or wherever, 

access to capital and the requirements to go through to get what 

you need to do to expand your business and expand the ability to 

contract and make your business bigger is all part of what you are 

trying to do, and it is very difficult. It is very difficult for small 

businesses to kind of work through that system and to make sure 

that they can dot all the I’s and cross all the T’s. 

So as you said in your opening statement, you want a little time, 

so I am going to give you a little time to go through that, and then 

I will shut you down because I have got other questions. 

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9 

Mr. SHEAR. Okay, thank you. First, I am very glad that you 

asked questions about the challenges. And I will also make reference to Representative Chu as one of the requesters of our 2012 

report addressing challenges. And what we find many times is 

that—as the Small Business Act and all the tools available recognize, and I think SBA and other agencies recognize—there is a 

need to reach out to small businesses to help them access the federal marketplace. 

So what do we have? SBA has its Procurement Center Representatives that are intended to try to look at contracting and to 

try to develop contracts that are more accessible to small businesses. You have offices of small and disadvantaged business utilization that are part of the federal framework across 24 agencies to 

try to reach out, to have matchmaking events, things of that nature. You have the Department of Defense that funds PTACs to 

provide assistance and the regional centers that basically reach out 

to have matchmaking and other events. But what we find is that 

it is very difficult to get into the federal marketplace, and many 

times it can take small businesses years of concerted effort and 

working to get access to contracting officials and of getting the 

right types of financing to do that. So we found very much the challenges identified in Puerto Rico are very similar. There are a couple of others that had to do with building standards and past performance on contracts, but for now I will end there. I am happy to 

address follow-up questions. 

Chairman KNIGHT. Mr. Wong, we talked to Mrs. McMahon this 

morning and we talked about WBCs and SCORE and all kinds of 

things that SBA does or performs that help small businesses. Can 

you kind of help us out with that, of how small businesses have the 

abilities and the different agencies to help them, and sometimes 

that they might not know what is out there to help them and how 

we can reach out to them? 

Mr. WONG. Thank you very much for that question. This is actually an industry that I was in immediately prior to coming here. 

And one of the things I would just say is that one of the main challenges, particularly with a lot of the set-aside programs that we 

offer, there is a misperception, I believe, that having the license 

itself is going to be the key to the future. Sadly, it is not. I wish 

that it were so, but sadly it is not. It is an amazing tool to help. 

But there is no shortcut to educating and being an educated business so that they can learn about the federal procurement process. 

Something as simple as understanding what they can sell and 

being able to annunciate that to a client very clearly. Some of the 

things that I tell businesses when I have done this through SBA 

training, you know, first and foremost, do not lead with your certification, lead with quality. And tell people very simply what you 

are very good at. That will start a conversation with a contracting 

officer. 

My secret weapon used to be I could tell you something that this 

is what I do very well in 15 seconds, and then you lean in and say, 

but what are three things that you need and how can I help? And 

I guarantee you that that will start a conversation. 

So what is the answer that SBA can do? We can teach those 

things to the small businesses. We have those resources available. 

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I believe that we have up to 20 resource partners located in Puerto 

Rico that have all sorts of different ways that people can educate 

people about the federal procurement process, as well as how to do 

business and how to grow your business. 

Chairman KNIGHT. And I think that is one of the challenges, 

is getting out the information of what SBA does and all of the resources that SBA has. And sometimes businesses do not think of 

that. They think of, well, how do I get from A to B, and I have got 

to do it myself instead of saying there are resources out there that 

can help me. And sometimes that is an education issue. Sometimes 

that is just an advertisement of us telling you, hey, there are resources out there that can help you on these challenges. 

I am out of time, so I am going to now ask Ms. Murphy for her 

questions. 

Ms. MURPHY. Thank you, Mr. Chairman. And thank you to the 

witnesses for being here. It is great to see you again, Mr. Shear, 

and nice to meet you, Mr. Wong. 

I would like to start with something that I mentioned in my 

opening statement. GAO concluded that 47 percent of federal contracting awards to be performed in Puerto Rico go to small firms, 

which is twice the national average. That is encouraging but it obscures a larger problem, which namely is that Puerto Rico receives 

relatively few federal contracts compared to the States, and 6 of 

the 10 of those awards are made to off-island firms. Do you have 

any views on why this is the case? 

Mr. SHEAR. We find that the number that you reference is a 

fairly high share, but it is hard to say what a fairly high share is, 

like we refer to nationwide as a reference point. We really do not 

have a benchmark. What I will point out, which I think is trying 

to be informative here, is we have in the appendix to our underlying report State by State and territory by territory, how those 

contracts break out. And so you will see a wide range of variation. 

But as far as contracts performed elsewhere and what we found, 

we focus on contract obligations. We are looking at dollars. And 

what we find is those dollars that are going to small businesses 

are, for the most part, going to small businesses that are located 

in Puerto Rico; in terms of the contract obligations, going to small 

businesses. We focus on contract obligations. So in that sense you 

could say they are doing fairly well. 

As far as how big is the base in terms of how much contracting 

is going on that is performed in Puerto Rico, we do not address 

that question. But one of the things that we observe is that that 

total has actually declined over time, over the last few years. One 

of the reasons the small business share went up since 2012 is just 

because the denominator fell as far as the total size of contracting, 

but I think our findings point, to some degree, some successes of 

small businesses in Puerto Rico of being able to compete for contracts. 

Ms. MURPHY. Great. And my next question is for Mr. Wong. 

The GAO reports that the federal agency use of the 8(a) contracting 

program is higher in Puerto Rico than other SBA designations. You 

also reported that certified small businesses receive more contract 

opportunities through full and open competition than the setasides. This nullifies the effect of any certification and price prefSBREP-219A with DISTILLER

11 

erence. Given the recent increase in HUBZone eligibility, is SBA 

advocating for federal agency use of HUBZone contracting preference to the same extent that they are for the 8(a) program? 

Mr. WONG. With respect, Congresswoman Murphy, I am not 

sure, but it would match my hope. I am responsible for four programs and I want them all to do well. 

Ms. MURPHY. Well, how are the other contracting programs 

doing given the high number of eligible veterans and women-owned 

businesses on the island? 

Mr. WONG. That is a good question. I think first and foremost, 

if I can explain some of the differences between the programs. Our 

first program and our priority program, in my opinion, the longest 

standing program, has been the 8(a) program. It is so old that I actually helped to write some of the regulations in 1990. So, it has 

been a tried and true vehicle and I think that what we are trying 

to do, I think that every other program is basically based off of that 

program. It has been around the longest so it is not a surprise to 

me that it does better than others. But I think that my personal 

belief is with the HUBZone program, I think that it is an equally 

strong program. We have to do a better job of highlighting a lot of 

its capabilities because I think that it has the potential to have 

equal, if not wider, effect. 

Ms. MURPHY. And given the large number of veterans on the 

island, what do you think the SBA can do to increase the presence 

of veteran-owned small businesses? 

Mr. WONG. I am sorry for missing that part of the question. We 

do have a service-disabled veteran-owned program. One of the 

things I wanted to say, though, is that compared to the 8(a) program, the 8(a) program is a program that we internally have to approve. It is an analysis process. It is an eight-step analysis process 

to qualify for the program. The service-disabled veteran program is 

a self-certification program. So in that regard, we have less to do 

with the certifications. I do not know why more companies may not 

participate in that, but if they do both are qualified to do contracts. 

Again, it does go back to the number of contracts, the number of 

opportunities really is based upon the firm’s ability to go out, market, and to find contracts. 

Ms. MURPHY. Great. Thank you both. It looks like I am out of 

time so I yield back. 

Chairman KNIGHT. Thank you, Ms. Murphy. 

And we will go to Chairman Brat for his questions. 

Chairman BRAT. All right. I was going to ask a certain set of 

questions more narrowly targeted, but then you guys got my economic juices going. 

James Madison is from my country and Adam Smith is overseas 

a little bit. And if you follow those two, together you might get sustained economic growth over the long run. And so we are all talking about economics, and we want the best for everybody, and in 

my reading of economic history, a society has to choose a free market system or you will not get growth. 

And so I heard you mention a few themes that struck my ear. 

Central governments do not work too good. We set up a control 

board. Control boards do not have a good history of producing long 

run, sustained economic growth. You said you need to lead with 

SBREP-219A with DISTILLER

12 

quality, and that caught my ear. That is good, right? And you have 

got to lead with quality that is demanded by somebody, right? And 

so we are all struggling right now to compete, right? 

The Indian economy is doing well. The Chinese economy has 2.5 

billion people. They are now globally competitive. We are asleep at 

the wheel growing at 1 percent last quarter, et cetera. And it seems 

to me we all need to capture this free market logic. So I just kind 

of want to hear your comments. 

I worked at the World Bank about 25 years ago and they 

propped up every economic variable except the one that mattered; 

right? They were concerned about secondary education, caloric intake, infrastructure, the environment, et cetera. But if you do not 

choose a free market economy in the first place, you can invest in 

all those secondary variables and you will not get good performance. 

And so when you said you have got to educate small businesses, 

how is it going? And you also have to think business is morally 

good. If you think business is morally bad and you are trying to 

educate small business that this is the way forward, I am just interested in both your commentary on how are we doing on educating that there is some hope that people want to get in this small 

business entrepreneurial space. 

And Mr. Wong, sorry for the liberal arts sermon, but what have 

you got for me? 

Mr. WONG. Congressman, that is okay. I am a liberal arts major 

myself. Do you know what the great thing about that is? What they 

teach you in liberal arts school, it does not teach you anything like 

a trade school, but what it teaches you, I learned, is not to be 

afraid of new things, right? Within 1 to 2 weeks, if you look at a 

5-credit course and a 3-credit course, take 1 to 2 weeks and you 

will be able to learn anything. So it teaches you the wide and the 

deep. So I will take a liberal arts education from anybody all the 

time. 

My feeling is this, and I do not mean to sound critical, but I believe that it is the analogy that you can lead a horse to water, but 

you cannot make him drink. We can provide the resources. We do 

not have the authority to make people learn, but the best thing 

that we can do, we can advocate. And to that degree, I think I have 

given 11 lectures within 4 months. I have been traveling constantly 

trying to educate people and tell the new things that we are trying 

to do. Overall, I am trying to take our programs that are a little 

bit dusty and I would like to make them simpler to apply for and 

much more effective to use in 2017 and beyond. 

One of the things that I cannot do is I cannot force people to believe me. I cannot force them to take the courses, but I can make 

them available. So, what I do try to do, as an example, I try to be 

a little bit different. So, for example, when I speak, I give out my 

email address and I give out my phone number. And I return every 

single email and I return every single phone call. Hopefully, by 

demonstrating, leading by example, it shows that I am going to be 

different. But at the end of the day, as you are saying, not everybody believes what you and I believe. But we can certainly try to 

help them. 

SBREP-219A with DISTILLER

13 

Mr. SHEAR. I do not want to repeat what I just said before 

about challenges and the need to outreach, and Robb Wong just 

gave a very good answer as far as addressing that issue. But I will 

just say that I do not know if you are trying to wind me up or not. 

As it happens, I am an economist with a Ph.D. in economics, so I 

can get carried away with these issues. 

So at any rate, the one issue that I will raise, and I think it is 

very pertinent to this hearing and to the expansion, the elimination 

of the cap for qualified census tracks, is that going back to 2008, 

I testified before this Committee on the HUBZone program. I said 

it is a pretty complicated program. It is an economic development 

program meant to serve depressed economic areas. And really what 

is needed is an economics framework to evaluate how well that program is working. That was one recommendation from that report 

that SBA did not implement. And I think we are still in a situation 

where we are trying to say, how can you use the HUBZone program to try to increase opportunities for low-income areas, whether 

they be in Puerto Rico or elsewhere, or to help to encourage small 

businesses that are located in depressed economic areas? And I 

think that is part of what is kind of missing here in terms of how 

to move forward with that program. 

Chairman KNIGHT. Thank you, Chairman. I give out my personal cell phone, too, and as a congressman that is a thrill. Every 

day, let me tell you. Responding to those texts I get every day. But 

it is part of leadership, being there and being available. You are 

right, you can lead a horse to water, but you cannot make him 

drink. A thirsty horse will drink, and businesses that do not know 

about the resources do not know, but if you show them the resource, they will use it. And so I think that that is a big part of 

this. And we talk about this in small business all the time. If something is not working, stop doing it. And either reverse course or 

change course or do something else to make sure that your business can be successful. And if you do not have the resource, that 

is what we are trying to get you to. Some people know something 

other than you and the resources can help you. So I think that that 

is a big part. 

Mr. Evans, we will go to you for your 5 minutes of questions. 

Mr. EVANS. Thank you, Mr. Chairman. 

Mr. Wong, it appears that some businesses in Puerto Rico have 

trouble meeting certain procurement requirements. From your experience, do you feel that these requirements need to be modified 

in terms of location specific? 

Mr. WONG. Congressman, if you could be more clear it would be 

helpful. 

Mr. EVANS. Basically, my understanding from listening is the 

question about procurement requirements, and the question is, particularly for the island of Puerto Rico, should they be modified relating to specifically Puerto Rico because of the location? 

Mr. WONG. Well, at this point I would be hazarding a guess. I 

probably would want additional information. But in general, this is 

the way that I would look at things. If you do not have a result 

that you like, you have to look at what the potential causes are. 

So the procurement requirements could mean a thousand different 

SBREP-219A with DISTILLER

14 

things to me, and I apologize, I am a lawyer by trade so, you know, 

I make things difficult for myself. 

But in general, one of the things, I think that you might asking 

is, you know, part of the thing that we are dealing with in federal 

procurement is a changing environment. For example, with 8(a) 

set-asides, there were lots of them because there were not very 

many competitive vehicles. What happens when you make a rule 

or a law? People start to pivot. People start to become tactical, 

right? People get smarter, right? And people start changing their 

behaviors. 

So where we are in procurement right now, one of the things 

that I think that we are talking about is bundling and we are talking about category management and making things more condensed. The problem is that what happens is that makes it more 

difficult for small businesses, and particularly newer small businesses, to compete. 

So one of the resources that we have with SBA is the PCRs. And 

we work in tandem with the OSDBUs. Are you familiar with them? 

Okay. So the OSDBUs, the analogy that I would look at is, they 

go into that $500 million federal spend and they do the dirty work. 

They do the enforcement. They go in there and they grab things 

for small business and they fight with their agencies. And the 

PCRs fight with their agencies to make sure that small businesses 

get their share. And I am proud to say that we have achieved the 

23 percent goal for at least 4 years running. Can we do better? We 

are analyzing that, and I always think you can do better. But it 

is going to take some analysis first. 

Mr. EVANS. I want to go to Mr. Shear and then what I want 

to do is sort of come back to you because I really would like a yes 

or a no on the modification of the location. I heard what you just 

said but this is what I want to say, Mr. Shear. If you were on the 

ground in Puerto Rico on a day-to-day basis, what type of advice 

would you give to officials there who would like to increase the 

number of small businesses to engage with the SBA? Hearing what 

Mr. Wong said and understanding what we are trying to accomplish in terms of procurement to achieve a certain objective, I am 

interested in your reaction, your comments. 

Mr. SHEAR. Let me go to a very specific case that we found 

based on our work in Puerto Rico that gets to very much the role 

of PCRs. 

Very relevant to that. There are different building standards in 

Puerto Rico than there are in the 48 States. And the question is, 

so you have small businesses, construction businesses in Puerto 

Rico that feel that they are being disadvantaged because their construction standards are different than mainland standards. So, for 

example, SBA acknowledged that can be a problem. GSA, one of 

the three contracting agencies that we met with said that they try 

to strike a balance between what is appropriate for the territory 

with the requirements that tend to be part of kind of like the cloth 

that they come out of. But this is, to me, it is like regardless of 

where the PCRs are located, whether they be in Boston or they be 

in Puerto Rico, this, to me, is begging for involvement by PCRs to 

try to look at are there ways that we can come up with changes 

in requirements for construction contracts that make sense for 

SBREP-219A with DISTILLER

15 

Puerto Rico and expand opportunities for small businesses in Puerto Rico to compete. 

Mr. EVANS. That is the key point I am making because I do not 

have much time. So did I hear you say that you think it should be 

modified? 

Mr. SHEAR. I am saying that GSA in particular said we try to 

modify, but this is really a role for PCRs to ask are they modifying? 

How much are they modifying? How engaged are the PCRs from 

SBA in terms of looking for opportunities? We did not have the 

chance to drill down exactly what are the PCRs doing in Puerto 

Rico? We could observe where they are located, but this to me 

would represent a real opportunity. It seems that PCRs, if they are 

not heavily involved now, they should be heavily involved. 

Mr. EVANS. Thank you, Mr. Chairman. I yield back the balance 

of my time. 

Chairman KNIGHT. Thank you very much. 

And we will now go to Mr. Kelly for his questions. 

Mr. KELLY. Thank you, Mr. Chairman and the ranking members, for this important hearing. 

Over my 32-year career in the Mississippi Army National Guard, 

I have had the pleasure of serving with many soldiers from Puerto 

Rico National Guard. As citizen soldiers, many of these men and 

women that I have served with owned small businesses in Puerto 

Rico. Starting with basic training in 1985 and the officer basic 

course in 1989 and Iraq in 2005, let me just tell you, Mississippi 

and Puerto Rico are a lot alike. We are very patriotic. A larger 

number than usual serve in the military services. So that being 

said, I think there is a lot of similarities and we both are poorer 

States or areas. 

So Mr. Shear, in your testimony you state that stakeholders are 

complaining of a lack of access to agency contracting officials. I 

know how hard it can be, being from Mississippi, for service-disabled veterans from rural areas to connect with government officials, like federal contracting officers. Can you talk to me about 

what the SBA, the Department of Defense, and VA can do to increase access to service-disabled veterans? 

Mr. SHEAR. Thank you for the question. I will start out first 

with VA is one of the three agencies that we interacted with because it is one of the three agencies that conduct the most contracting activity in Puerto Rico: the VA, along with GSA and DOD, 

obviously. VA has different statutory provisions, and what is often 

called Vet First for its contracting, and VA for its own contracting 

you have to have verification. So what I can observe from other 

work we have done for this Committee is that VA works with the 

PTACs, the Procurement Technical Assistance Centers, in trying to 

reach out to the veteran-owned small business community and the 

service-disabled, veteran-owned small business community. 

And again, on this work, we did not have the opportunity to drill 

down exactly what they are doing in Puerto Rico, but this gives a 

certain framework for certain things that are going on in the VA 

contracting space that is leading to greater opportunities for service-disabled veterans to participate at least in VA contracting. And 

I would hope that with the veteran centers, whatever interactions 

there are with these other tools that are available through Small 

SBREP-219A with DISTILLER

16 

Business Act provisions such as the PTACs, that SBA would explore looking for greater opportunities. I realize that they are already doing some, but I would hope that they could explore doing 

more. 

Mr. KELLY. And I just think that is so important. Listen, these 

guys choose to serve our Nation, and I think they ought to get a 

leg up and be ahead of everybody else because they have chosen 

to serve this Nation and their patriotism. 

Mr. Wong, I think everyone can agree that Puerto Rico has some 

unique geographical and economic challenges, as Mississippi has 

some of those same economic challenges. However, I believe that 

some of the challenges of small business contracting that affect 

Puerto Rico also affect areas like Mississippi. Only three agencies 

awarded contract obligations to firms in Puerto Rico and only three 

sector: manufacturing, construction, and professional services. Do 

you see this trend in other economically depressed areas, like Mississippi, as well as Puerto Rico? 

Mr. WONG. With respect, Congressman, I am not sure at this 

point. I am still learning. I have been here 90 days, but it is something that if it is important to you, then it is important to me and 

I can take a look at it. 

Mr. KELLY. Mr. Shear, do you have any comments on that? 

Mr. SHEAR. I would just go back to what I just answered your 

previous question. Thank you. 

Mr. KELLY. I thank you for saying. And Mr. Shear, you said at 

the very first, it was a program that I did not get it, I was not listening as well as I should have been, that you wanted to talk about 

the successes of. If you would address that in the last minute we 

have left I would appreciate it. In your opening comments you said 

there was a program that you wanted to talk about the success of. 

Mr. SHEAR. I think one of the things I wanted to talk about was 

that you did have small businesses in Puerto Rico that, at least a 

fair number of them, that are successful with small business setasides, outside of the four SBA programs, as being able to compete 

for small business set-asides and, also, competing in full and open 

competition. And to me that just points to the idea that there are 

at least some businesses in Puerto Rico that basically have found 

a way to manage even without preferences, or with just the small 

business set-asides in Puerto Rico. And hopefully, it means that if 

there is greater outreach by the agencies and other things that that 

could be something that could be leveraged. 

Mr. KELLY. And with that I yield back, Mr. Chairman. 

Chairman KNIGHT. Thank you very much. And we will now go 

to Mr. Lawson for his questions. 

Mr. LAWSON. Thank you very much, Mr. Chairman. And welcome to the Committee. 

Mr. Shear, we are all aware of the economic challenges that 

Puerto Rico has faced over the past several years. Do you think it 

could be helpful for GAO to study the impact that our overall economic market in the mainland U.S. has on the growth or the lack 

of growth of the Puerto Rico economy? 

Mr. SHEAR. I feel like, I want to become an economics professor 

again, but I would just say that you raise a very good issue. And 

I think probably the best thing to do in response to that issue, 

SBREP-219A with DISTILLER

17 

which happens with Committee staff all the time, which is there 

are ideas for GAO work and I and others on our team are always 

glad to come up and talk about work you might be interested in. 

So it sounds promising, but beyond that I am not that good at 

thinking on the fly. 

Mr. LAWSON. Okay. 

Mr. SHEAR. Okay. 

Mr. LAWSON. My next question was, as you know, there are 

more small businesses in this country than any other type of business, and these businesses provide large support for the local economy. It appears that SBA has worked at its fully capacity in support of small business in Puerto Rico, particularly with regard to 

contracting. Can you describe SBA’s past effort in Puerto Rico, as 

well as SBA plans moving forward to build a stronger small business industry? 

Mr. WONG. In Puerto Rico, sir? 

Mr. LAWSON. Yes, sir. 

Mr. WONG. I am unfamiliar with the efforts with the agency 

prior to PROMESA, but I do know that after PROMESA we are 

doing everything allowed under the law to maximize the participation of Puerto Rico firms, for example, for HUBZones. Mrs. 

McMahon has made this a priority. She has gone down to Puerto 

Rico for a week. She is debriefing me on the issues. Her priorities 

are my priorities, and so I am thankful for today’s meeting. I am 

taking a look at the strategies that we employ. I am looking at the 

education that we can provide. And I am looking at the outreach 

that we could provide as well. If what we were doing previously is 

not meeting with satisfaction, then I am looking for ways to improve that. 

Mr. LAWSON. Okay. And from my research on some of the economic issues with Puerto Rico, it seems that Puerto Rico has a lack 

of access to a lot of resources, including agency officials’ knowledge, 

financing, and adequate communication with SBA. And I guess this 

might have a little bit to do with your statement about you can 

take a horse to the water, but you cannot make them drink. And 

so with that disconnect, how do you think that that can be improved in order to guarantee full accessibility to SBA resources? 

Mr. WONG. And let me please clarify, I did not mean that at all 

in a disrespectful or pejorative way. I know Janette Fasano, who 

is the Area Director for Puerto Rico, and I know that she does a 

great job. She has been with the agency for forever. I know that 

we deal with issues and I think our district office down there is bilingual, so we know we have the capability. And if that is not true, 

that is something easily that we can fix. You have my commitment 

that I will look into that. I apologize. 

But again, I am still in the analysis phase of what we can do. 

If this will help, what I used to do is I used to help fix businesses, 

and what I tend to look at is their processes and their procedures 

and things like that. And in this case here, if we are looking at a 

specific market, then I am going to take a look at that as a business person and I am going to see what is working, what is not 

working, those things. To Chairman Knight’s admonition, if it is 

not working, we are going to stop doing it. But I do believe that 

going forward we can always make improvements. 

SBREP-219A with DISTILLER

18 

Mr. LAWSON. Okay. Thanks for your answer. 

Mr. Chairman, just before I yield back, I was talking about a 

business roundtable that I did in Jacksonville, Florida, and it still 

is a lot of disconnect, especially in a minority community in the 

U.S., and I can imagine what the disconnect might be from the distance of being in Puerto Rico and that is some gap that we ought 

to fill. 

With that, Mr. Chairman, I yield back. 

Chairman KNIGHT. Thank you very much. 

And we are going to,—well, I am going to take a little latitude 

and I am going to give Ms. Gonza ́lez-Colo ́n a little extra time if you 

would like, and we would like to hear from you. 

Ms. GONZA ́ LEZ-COLO ́ N. Thank you, Mr. Chairman. And I want 

to really thank Chairman Chabot and Ranking Member Vela ́zquez 

and the chairmen of the Subcommittee and ranking member for allowing this hearing today regarding the island. 

As you may know, the situation of the economic crisis in Puerto 

Rico, it is very important to fix, and having small business empowered to do that I think is the key to solve part of that situation. 

So thank you again to the members of the Subcommittee and the 

Committee for having this hearing. And thank you, Mr. Shear, for 

having been in my office for more than 2 hours discussing these 

same aspects of the methodology of the report that you are issuing 

regarding the SBA. 

As you may know, I have got a lot of questions and a lot of recommendations. And one of them is the continuous situation with 

contracting bundling and assuming most of the contracts there 

have been awarded to companies on the island are in the lesser 

amount. Most of them have already been rewarded or the requests 

for proposal are not directed from the district office. They have already been requested from Washington, D.C., or an original office 

in the States and not in Puerto Rico. So when the award is already 

granted, even the local office, they never know what is going on between that process. 

That is the official process to award those kinds of contracts with 

small businesses? I know we got 2 weeks ago SBA administrator 

Linda McMahon, and I was so happy we got a lot of roundtables 

with her, with the SBA, with the private sector, with the lending 

sector on the island. But we think we should improve the way 

Puerto Rico businesses are making contracts directly for their government. I want your input on both ideas and I have got other 

questions. 

Mr. Wong? Contracting bundling. 

Mr. WONG. Yes. The contracting volume, as I look at this, and 

sometimes I think it helps to be new to the process. So the tool that 

SBA has is again to advocate. So, for example, with Puerto Rico 

being the priority for Mrs. McMahon, there are two things that we 

can do. We can certainly help to improve our programs so that they 

will increase education and outreach and things like that going forward to Puerto Rican small businesses. 

The other thing we can do in terms of contract volume is, again, 

using the PCRs, and also here in Washington, go to, some of the 

procuring activities and highlight the importance of Puerto Rico; 

ask them and advocate to them that when thinking about Puerto 

SBREP-219A with DISTILLER

19 

Rico maybe should not bundle as much. And if I could work with 

you to help to annunciate the concerns that you have, I mean, at 

the end of the day, contracting officers, PTACs, OSDBUs, they are 

all people. I get an opportunity to meet them and they are very 

nice. But I am very persuasive. 

Ms. GONZA ́ LEZ-COLO ́ N. That is good to hear. And I will tell 

you, in that matter, that we filed H.R. 2429, which is a bill, a bipartisan bill that has a lot of ideas regarding small business on the 

island. And one of the ideas is having on the island a full-time procurement center. We do not have that. So if we got a procurement 

center based on the island, I think that may improve the situation 

we are having. The same thing with the veteran outreach center 

in the island. And I want to thank Congressman Kelly for his 

statement regarding our people in the military. And that situation, 

our people in the military, they cannot even vote for the commander in chief, but we do serve proudly, but we do not have even 

a veteran outreach center for SBA. That, I request for you that you 

take a look at H.R. 2429. It has got a lot of provisions regarding 

SBA. 

And there is another bill that we filed and that bill is bipartisan. 

Actually, the ranking member is a cosponsor of that bill. And there 

is another bill, H.R. 2488, which has similar amendments and try 

to fix those problems we are having. For example, and I do not 

know if the chairman is letting me have—thank you. 

One of the situations we had with the SBA administrator 2 

weeks ago, there was a vet owner, an IT contractor, highly experienced with excellent references, and what happened is that contractors from the mainland win prime contracts only to turn 

around and subcontract them. And that is happening all over 

again: IT, communications, construction. So if they even have a 

lower bid and they are going to be the final of the process doing 

the job, that contract went for $1.7 million and his original bid was 

$900,000. So what is going on? The bid has already been awarded 

in D.C., not in the district or not in the regional office. And those 

are the kind of things that are happening every time, not only in 

Puerto Rico, but I think in other territories. 

With this situation, I do not want to extend the indulgence of the 

chairman of the Committee, but I do want to have SBA and the 

panel to come up with new ideas in terms of having pilot programs 

being implemented on the island regarding this. And we discussed 

that in our meeting, Mr. Shear, and I know you are very committed 

to this, and identify prime contractors located on the mainland— 

I am sorry, local contractors on the island can compete against contract bundling. So we need to fix that problem at the source. 

Thank you, Mr. Chairman, and I yield back. 

Chairman KNIGHT. Thank you very much. And we will now go 

to the ranking member of the full Committee, Ms. Vela ́zquez, for 

her comments. 

Ms. VELA ́ ZQUEZ. Mr. Chairman, if I could ask that Ms. Chu be 

recognized before me because she has been there waiting. Thank 

you. 

Chairman KNIGHT. Absolutely. We will go to Ms. Chu for her 

questions. 

SBREP-219A with DISTILLER

20 

Ms. CHU. Well, actually, I would like to just ask one question, 

then yield to Ms. Vela ́zquez. 

And my question is on language barriers. I saw that stakeholders 

that were interviewed by GAO identified that language was an 

issue facing small businesses on the island and it may hinder the 

ability of these firms to complete the applications, to become certified, or to access the opportunities once certified. So, actually, I 

wanted to ask Mr. Wong, given that we have seen that agencies 

like the General Services Administration successfully staffed their 

Puerto Rico office with bilingual staffers, why does SBA struggle to 

hire an appropriate number of bilingual staff members in the Puerto Rico district office? 

Mr. WONG. Thank you for that question, Madam Congresswoman. 

All I can tell you is that now that I know that that is the issue, 

I will do my best to fix that. I think that language barriers is something that should—I agree, that should not be an issue in 2017, 

and that has been a failure in our office and I will do my best to 

rectify that. 

Ms. CHU. That is good to hear. 

And now I would like to yield to Ms. Vela ́zquez. 

Ms. VELA ́ ZQUEZ. Thank you, Ms. Chu. 

Mr. Wong, Ms. Murphy asked a question earlier about veterans 

and I want to follow up. There are many veterans on the island 

who have and still are fighting American wars. What specific resources are present on the island dedicated to meeting veterans’ 

needs for contracting, lending, and technical assistance? 

Mr. WONG. I will be honest with you; at this point, if you are 

asking for specific resources, I do not know them, but I can certainly educate myself on them and be prepared next time when you 

ask that question. 

Ms. VELA ́ ZQUEZ. Well, Mr. Wong, it is really disappointing that 

you come here, and I know you have been in the job for 90 days, 

but this issue from PROMESA was enacted a year ago. And so you 

are going to come here and you will not have information to provide to me. You know, this is an issue that is too important for 

American citizens who live in Puerto Rico. For veterans, who even 

are willing to make the ultimate sacrifice for this nation, that is 

an unacceptable answer. 

And on the issue that Ms. Chu raised, I do know that GSA has 

bilingual staff all the time in Puerto Rico. We cannot say the same 

with SBA, and I want and I beg for the SBA to really address this 

issue because it is important. You just made a reference about taking a horse to the water and teaching them, but if you teach them 

in a language where they cannot comprehend, then what good does 

it do? 

I do not want for the people of Puerto Rico, American citizens, 

to be given preferences. I expect fairness. And when it comes to 

prime contractors, most of those prime contractors are from the 

mainland, and then they are going to sub, provide subs to people 

in Puerto Rico who will perform the jobs. That is not right. When 

contractors in Puerto Rico come to Ohio and develop public housing 

for the federal government with federal funding, but they cannot 

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do the same in Puerto Rico, that does not make sense. So we need 

to address those issues. 

And then we need to have—I would like Mr. Shear, to tell me 

what nonlegislative fixes can be done that will help the people of 

Puerto Rico and the small businesses on the island based on your 

research, based on your communications with GSA, veterans, DOD. 

Mr. SHEAR. I think there has to be a lot of focus, first of all, 

on just the small business community. And, you know, I have had 

the pleasure over the last month or so of meeting, Robb Wong, and 

he is showing an interest in looking into the situation, but it is 

something that I point to. I do not mean this to be marketing a request, but we have not looked at the role of PCRs in a number of 

years, generally, much less in Puerto Rico. And the question is, 

what is the involvement of the PCR in trying to improve opportunities? 

We are looking at what lessons can be learned about the use of 

small business set-asides? What can be learned about just generally as far as outreach and working—I know that SBA works 

with what I call the OSDBUs and DOD’s Office of Small Business 

Programs, but the question is that the level of commitment, it just 

is not that clear. So I am glad it is at least on Mr. Wong’s agenda 

to be looking into this situation. 

Ms. VELA ́ ZQUEZ. So let me just make it clear for the record. 

You know, I truly believe that the administrator, Linda McMahon, 

genuinelly cares about what is going on in Puerto Rico, but there 

is a culture that we need to deal with within the SBA and many 

other federal agencies. And I can tell you and the people who sit 

on this committee will tell you that I have raised the same issue, 

whether it is a Republican or Democratic administration, I went 

after the administrator that was there for many years, in previous 

years, whether they were one or the other. We want to make sure 

that the resources are there to assist the small businesses and that 

we will do everything within our power to make sure that happens. 

But Mr. Shear, in your testimony, you indicated that GAO analyzed data from the Federal Procurement Data System Next Gen. 

What data is not covered in FPDS that could be valuable to seeing 

the whole picture? 

Mr. SHEAR. It is a really good question and it is a very difficult 

question. There are certain efforts to try to bring small businesses, 

reaching out to small businesses generally. Some of them deal with 

programs that work through subcontracting. Some of them work 

with mentor-protege programs. I will point to the pilot Mentor-Protege Program that DOD has where we have raised issues as far as 

the lack of measures of how well those programs are working. But 

you are asking a very good question where I do not really have a 

good answer for you, but those are some of the things that come 

to mind. 

Ms. VELA ́ ZQUEZ. Do you agree with me that maybe it does not 

really reflect the real scope of what is going on in Puerto Rico when 

it comes to federal procurement? 

Mr. SHEAR. I think that we were focused on contracting obligations, which I would argue that we were focused on the right thing. 

It is what revenues are being generated for small businesses in 

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22 

nomic development. So I think we were focused on the right things, 

but there are other things that are going on, part of the dynamic 

that would include subcontracting which we did not look at and 

some other aspects that I think would be important to look at. And 

then the more general question as far as how do agencies decide 

what should be procured for performance in Puerto Rico, and that 

is something we did not look at. 

Ms. VELA ́ ZQUEZ. Thank you. 

Mr. Wong, going forward, are you planning to make sure that 

there is going to be all kinds of events that will provide information 

in terms of federal procurement with the different agencies? What 

kind of things are you planning to do to make sure that we provide 

a level playing field for businesses in Puerto Rico to be able to compete and win? Win contracts that are not only subs, but prime contracts? 

Mr. WONG. Thank you for—— 

Ms. VELA ́ ZQUEZ. Such as the FBI building that is being built 

in Puerto Rico and where there were a lot of Puerto Rican contractors that bid as prime contractors, but none of them, even when 

Ms. Gonzalez explained the case of someone who bid with a lower 

number, and yet not even that gave him an opportunity? 

Mr. WONG. Thank you for the question, Congresswoman. 

If I could go back. I apologize for going backwards, but I just 

want to let you know, my own wife is not a native English speaker 

so I am very sensitive. When we met, I proposed to her on our first 

date. We just hit 20 years of marriage, but one of the things that 

I did was I had to educate myself. I took 8 weeks of a 12-week Japanese course just to be able to ask for her hand in marriage, so I 

am very sensitive to the needs of people who are not English 

speakers, and I apologize if my first comment was taken as pejorative. It certainly was not. 

As for the veterans, we have one individual in our office who I 

believe is an American hero. On Memorial Day, he said that he had 

to say goodbye to 34 of his friends who were killed in action in his 

unit. I see him every day and I try to get to know my staff very, 

very well, and that has affected me. So veterans are extremely important to me. I see them. 

I like police officers and firefighters. When there is danger, we 

run away from danger. When they see danger, they run to it. That 

is a job that I would not ordinarily accept, and I applaud anyone 

who has done that, and I have deep abiding respect for anyone who 

has lost their life. So in that regard, you have my sincere commitment to address those problems. 

As to your last question, my job is to represent all businesses 

fairly. By the same token, when Mrs. McMahon has made Puerto 

Rico a concern and a priority, and I understand the concern raised 

in your testimony as well, my commitment to you is that I will analyze and I will evaluate, and if there is a need, if we could work 

together to do this, I believe that we can work together and address your concerns. 

Ms. VELA ́ ZQUEZ. Thank you. I yield back, Mr. Chairman. 

Chairman KNIGHT. Thank you very much. 

Well, as this hearing comes to a close, I would first like to thank 

every Committee member for being here. And I would like to recogSBREP-219A with DISTILLER

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nize my co-chairman, Chairman Brat, for any closing statement he 

might have. 

Chairman BRAT. Thank you, Mr. Chairman. And to our guests 

today, thank you all for being here. 

I am going to yield my time to Ms. Gonza ́lez-Colo ́n for closing remarks. 

Ms. GONZA ́ LEZ-COLO ́ N. Thank you, Chairman Brat, for letting 

me use your time and your leadership. First, I want to thank, 

again, Chairman Chabot, Ranking Member Vela ́zquez, and Chairmen Brat and Knight, and ranking members for having this hearing that is so important for the Puerto Rican community and businesses on the island. 

Second, I think it is most important to acknowledge and recognize that under PROMESA, we are looking forward to have the 

tools to improve our economy. And those tools are going to be in 

the private sector. So if we do not have the small business area 

working in the right direction we will never accomplish that. In 

that area, the bundling contracting problems are I think one of the 

main issues. The second one, we do not have a veteran outreach 

center on the island, and that is one of the provisions that are included in H.R. 2429, and in H.R. 2488, both bills in this Committee. 

Second, we need to have a procurement center on the island. I 

think that will solve a lot of the issues regarding the federal contracting situations that the island is facing, but it has got to be on 

the island, on site, not on the mainland, because we are facing that 

kind of problem. 

Third, a similar situation that occurs with the SBA is occurring 

with the General Service Administration. Suppliers, such as HP, 

will win the contractor bid, a GSA supplier, and then simply subcontract local companies to do the hands-on service. And as a result, Puerto Rican companies will never get a chance to get listed 

as a contractor. And that is a problem we are having every time. 

So I want to thank SBA Administrator Linda McMahon for her 

commitment and her leadership regarding and facing these issues. 

We discussed that. We had several roundtables. We even visited 

the VA Hospital in San Juan where she got the opportunity to see 

those same problems with veterans telling her directly the problems with the contracting services on the island, and I think the 

SBA now may face that in a more quickly way. 

And a fifth point I may say regarding the General Contracting 

Office report, that I am leading an effort with the local SBA office 

for Puerto Rico and the Virgin Islands to improve and to make 

more seminars, more orientation and education to our businesses 

and to our people about the services of the SBA locally. And that 

includes an alliance with not only the universities or the outreach 

centers, but the 78 municipalities on the island. And we just began 

that process in July and it is going to be through the next year. 

So I want to thank you again. And thanks to the chairman and 

the Committee for having this hearing. I yield back. 

Chairman KNIGHT. Thank you very much. 

And I want to thank our witnesses. Thank you, Mr. Wong, for 

your coming here today and willingness to understand and to work 

on some of the problems that we see today. And also understand 

SBREP-219A with DISTILLER

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that we appreciate what Mrs. McMahon is bringing to the table 

and her enthusiasm and her commitment to small business. And 

we appreciate everything that you are doing. 

Mr. Shear, we appreciate your report, as always, and your candor, in this Committee. It is always fun and interesting to hear 

your opinion on what is going on in the small business world. 

I ask unanimous consent that members have 5 legislative days 

to submit statements and supporting materials for the record. 

Without objection, so ordered. 

This hearing is now adjourned. 

[Whereupon, at 11:26 a.m., the Subommittees were adjourned.] 

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A P P E N D I X 

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Chairman Brat, Chairman Knight, Ranking Member Evans, 

Ranking Member Murphy, and other distinguished members of this 

Committee. Thank you for inviting me here to speak with you 

today. It is truly an honor to speak before you today and I thank 

you for this opportunity to discuss the trends and challenges facing 

small businesses on the island of Puerto Rico. I stand ready to 

work with you and the committee to improve the future for small 

businesses. 

My name is Robb Wong. I am the Associate Administrator for 

Government Contracting and Business Development (GCBD) at the 

U.S. Small Business Administration (SBA). I have been a lifelong 

entrepreneur and small business advocate. I have had a small business since the age of 11. After my education, I have been blessed 

to spend a majority of my 30-year career focused on small business 

federal contracting. I have personally seen SBA programs positively impact small businesses around the country. I started my career at the SBA years ago as an attorney in SBA’s Office of General Counsel; I also spent several years working in both the SBA 

Houston and Lubbock district offices, and 6 months in GCBD in 

the early 90s. I left government and spent the past 20 years in several leadership positions within several small businesses that successfully relied on SBA products and programs to enhance their 

growth. I am a personal testament to the power and importance of 

the SBA’s effectiveness in helping small business. I am blessed and 

fortunate to be back at an Agency that I love and to work with our 

Administrator Linda McMahon who is inspirational leader. I hope 

to help them to strengthen the SBA both now and for the future 

to help ALL small businesses. 

Administrator McMahon has asked the new leadership at the 

SBA to make our programs as efficient and effective as possible to 

empower the further success of small businesses in the US. In that 

regard—my team’s mission is to assure that small businesses continue to receive their fair share of federal government contracts; to 

optimize the present-state of the SBA certifications; and advocate 

on behalf of the small business community. We want businesses to 

spend less time applying for certification, and more time USING 

them to grow their businesses. I hope to increase opportunities for 

small businesses as well as enhance their abilities to grow and 

compete by (1) reducing or eliminating regulations that are unnecessary and burdensome; (2) improving our processes without sacrificing quality; and (3) becoming more customer-centric. Finally, I 

will work hard to advocate on their behalf for their inclusion government-wide as often as possible. 

I am here today to talk about trends and challenges to Small 

Business contracting on the island of Puerto Rico. Within the past 

two weeks, Administrator McMahon visited the island to learn 

about how the SBA can best assist Puerto Rico in its economic recovery. She spent several days meeting small businesses and talking to local government officials—including Congresswoman 

Gonza ́lez-Colo ́n—to learn about economic conditions and challenges 

the island is facing. 

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41 

GAO recently released a report detailing the challenges and 

trends in government contracting on the island of Puerto Rico. 

GAO noted that a high percentage of Puerto Rican small businesses use the 8(a), HUBZone, Service Disabled Veteran-Owned, 

and Women-Owned Small Business programs. However, we know 

that Puerto Rico faces unique challenges due to its economy and 

geography. Small businesses confront a number of challenges when 

they attempt to contract with the Federal Government including 

lack of knowledge about the federal contracting process; difficulty 

meeting procurement requirements; and minimal access to bonding, financing and capital. GAO found that small businesses in 

Puerto Rico feel these challenges more acutely than their counterparts off the island. The SBA appreciates GAO’s work in this area. 

While Puerto Rican small businesses are participating in Federal 

Contracting, more work needs to be done to increase their numbers. According to the Congressional Task Force on Economic 

Growth in Puerto Rico, Puerto Rico ranks 55th (out of the 50 

states, D.C., and 5 major U.S. territories) by total dollar value of 

federal contracts performed in each jurisdiction per capita at 

$430.6 million. Further, 53% of federal contracts performed in 

Puerto Rico were awarded to firms located outside the island. We 

know that in order for firms on the island to grow and thrive, more 

federal contracting needs to stay with local firms. Part of that effort will be to educate our Federal buying partners about the capabilities of Puerto Rican firms to do quality work—both on the island and off. We look forward to working with Congress to do that. 

Administrator McMahon and I are committed to improving the 

delivery of our programs. Improving the programs as a whole will 

specifically benefit small businesses in Puerto Rico. 

Businesses have an expectation that obtaining SBA 8(a) or 

HUBZone certifications will immediately and significantly improve 

their businesses and allow them to quickly win government contracts. Although we recognize that not all firms’ expectations can 

be realized, we remain committed to help firms to better understand the procurement process and to utilize our many resource 

partners to gain needed business development assistance. 

SBA provides assistance to firms at all phases of the procurement process. Our District Office in Puerto Rico conducts small 

business outreach activities throughout the island including training and seminars to promote participation in the SBA’s small business programs. The District Office has developed crucial relationships with local governments, nonprofits, chambers of commerce as 

well as resource partners with local governments, nonprofits, chambers of commerce as well as resource partners such as SCORE, 

SBDC and Women Business Centers to provide a referral and 

training network for SBA programs. We are discussing with the 

Administrator ways to provide enhanced SBA support to Puerto 

Rico, such as revised HUBZone rules, suggestions to pending legislation, and enhanced procurement support. 

The staff of Office of Government Contracting and Business Development continues to improve the implementation of the SBA’s 

federal government contracting programs through improved appliSBREP-219A with DISTILLER

42 

cation and certifications processes. With the expansion of eligible 

HUBZone census tracts in Puerto Rico, SBA continues to focus on 

online accessibility to the HUBZone program through improvement 

to our HUBZone maps and application process. 

The small businesses of Puerto Rico are essential to the economic 

recovery and future of the island; they are the island’s innovators 

and job creators. Administrator McMahon and I, along with the 

SBA staff are committed to help the small businesses of Puerto 

Rico grow, innovate, and create jobs through the efficient and effective delivery of the SBA’s federal contracting programs. This creates meaningful and sustainable jobs, and promotes economic 

growth in the community. 

I reaffirm my commitment to work together with you and the 

Committee to improve the future for small businesses. 

Thank you for the opportunity to speak with you today. I am 

happy to take your questions. 

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