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i 

58–100 2010

[H.A.S.C. No. 111–104] 

CAN DOD IMPROVE INNOVATION AND 

COMPETITION IN ACQUISITION BY 

BETTER UTILIZING SMALL BUSINESS? 

HEARING 

BEFORE THE

PANEL ON DEFENSE ACQUISITION REFORM 

OF THE

COMMITTEE ON ARMED SERVICES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

OCTOBER 29, 2009 
(II) 

PANEL ON DEFENSE ACQUISITION REFORM 

ROBERT ANDREWS, New Jersey, Chairman 

JIM COOPER, Tennessee 

BRAD ELLSWORTH, Indiana 

JOE SESTAK, Pennsylvania 

K. MICHAEL CONAWAY, Texas 

DUNCAN HUNTER, California 

MIKE COFFMAN, Colorado 

ANDREW HUNTER, Professional Staff Member 

JENNES SIMLER, Professional Staff Member 

ZACH STEACY, Staff Assistant 
(III) 

C O N T E N T S 

CHRONOLOGICAL LIST OF HEARINGS 

2009 

Page 

HEARING: 

Thursday, October 29, 2009, Can DOD Improve Innovation and Competition 

in Acquisition by Better Utilizing Small Business? .......................................... 1 

APPENDIX: 

Thursday, October 29, 2009 .................................................................................... 21 

THURSDAY, OCTOBER 29, 2009 

CAN DOD IMPROVE INNOVATION AND COMPETITION IN 

ACQUISITION BY BETTER UTILIZING SMALL BUSINESS? 

STATEMENTS PRESENTED BY MEMBERS OF CONGRESS 

Andrews, Hon. Robert, a Representative from New Jersey, Chairman, Panel 

on Defense Acquisition Reform ........................................................................... 1 

Conaway, Hon. K. Michael, a Representative from Texas, Ranking Member, 

Panel on Defense Acquisition Reform ................................................................ 2 

WITNESSES 

Jenkins, Calvin, Deputy Associate Administrator, Government Contracting 

and Business Development, U.S. Small Business Administration .................. 5 

Oliver, Linda, Acting Director, Office of Small Business Programs, U.S. Department of Defense ............................................................................................. 4 

APPENDIX 

PREPARED STATEMENTS: 

Andrews, Hon. Robert ...................................................................................... 25 

Conaway, Hon. K. Michael .............................................................................. 27 

Jenkins, Calvin ................................................................................................. 37 

Oliver, Linda ..................................................................................................... 29 

DOCUMENTS SUBMITTED FOR THE RECORD: 

Letter from Calvin Jenkins to Hon. Robert Andrews Regarding Online 

Courses Related to Government Contracting Offered by the Small Business Administration ...................................................................................... 45 

WITNESS RESPONSES TO QUESTIONS ASKED DURING THE HEARING: 

Mr. Andrews ..................................................................................................... 49 

Mr. Cooper ........................................................................................................ 49 

QUESTIONS SUBMITTED BY MEMBERS POST HEARING: 

Mr. Conaway ..................................................................................................... 53 

(1) 

CAN DOD IMPROVE INNOVATION AND COMPETITION IN 

ACQUISITION BY BETTER UTILIZING SMALL BUSINESS? 

HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED SERVICES, DEFENSE ACQUISITION REFORM PANEL, Washington, DC, Thursday, October 29, 2009. 

The panel met, pursuant to call, at 8:00 a.m., in room 1310, 

Longworth House Office Building, Hon. Robert Andrews (chairman 

of the panel) presiding. 

OPENING STATEMENT OF HON. ROBERT ANDREWS, A REPRESENTATIVE FROM NEW JERSEY, CHAIRMAN, PANEL ON 

DEFENSE ACQUISITION REFORM 

Mr. ANDREWS. Good morning ladies and gentlemen. Thank you 

very much for your attendance. We thank our colleagues on the 

panel for their attendance, and especially the witnesses for giving 

us their time this morning. 

Yesterday, the President signed the fiscal 2010 defense authorization bill. Let me say for the record we express our appreciation 

to the professional staff and all the support staff on both the minority and majority side for the excellent work that these ladies 

and gentlemen did on that bill. 

And the President highlighted in his remarks before he signed 

the bill the need to achieve more efficiency in defense procurement. 

As you know, he signed some provisions in that bill which we believe will lead us to that result and enjoy broad bipartisan support. 

And of course earlier this year, the President signed a major 

weapons system acquisition reform bill that the members of this 

panel, both sides of the aisle, worked very hard on and were 

pleased to be a part of. 

One of the points the President made in arguing for the need for 

efficiency was the principle that enhanced competition enhances 

taxpayer value and warfighter value. One of the ways that we have 

attempted to enhance competition is to engender more small business participation in the procurement process. 

And as this panel has continued our work, we have looked at a 

series of hypotheses as to why the warfighters and taxpayers do 

not get full value for the dollars that are provided, and we have 

examined a number of hypotheses along that path. 

The one we are looking at this morning would be the implicit hypothesis that one of the reasons that we don’t get full value is we 

don’t have robust competition. 

And one of the reasons that we don’t have robust competition is 

we have, in some instances, inadequate small business opportunities for small businesses to join the competition, which not only en-
2 

hances their commercial position, but we believe would also enhance the value-added for the taxpayer. 

So this morning we are going to examine a number of questions 

that revolve around the role of small businesses in defense procurement competition. The data show that in fiscal 2007, of the $269.3 

billion in prime contract awards for procurement, small business 

awards totaled $55 billion of that or 20.44 percent of the total. 

By our standards that are in the law, that is a success. The agencies responsible for enhancing small business opportunities have 

targets to shoot at, and that 20 percent total is very much in the 

range of the target that they are supposed to shoot at. 

This would on its face appear to be good news. There are, however, questions that we want to explore in relation to these data. 

The first is, to what extent do the data truly reflect small business 

participation in the competition, and to what extent are the data 

flawed by situations where the small businesses are mislabeled and 

are not, in fact, operating as small businesses? To what extent are 

the data accurate? 

The second question is, to what extent is our premise correct? 

Does small business competition in fact enhance taxpayer value in 

quality or not? Superficially, it would appear the answer is yes, but 

the panel has a responsibility and an interest in going beyond superficiality to examine the actual record. 

And then finally, as a corollary to the second point, indisputably 

there are administrative costs associated with compliance with 

these kinds of small business goals and targets. And I do think it 

is a fair question to ask, whether the benefits of enhanced competition, in fact, substantially outweigh the costs of administrative 

compliance. 

I happen to believe that there is a happy middle ground where 

we can expand and enhance competition, but we can do so in a way 

that is efficient, that does not involve an overly cumbersome process, and can serve the twin goals of enhancing competition while 

minimizing additional administrative burden and responsibility. 

The way we will proceed this morning is that I am going to ask 

my friend, the senior Republican on the panel, Mr. Conaway, to 

make an opening statement, and when he has finished, without objection, we will take opening statements from our other members 

on the record. 

We will then introduce the two witnesses. We have had a chance 

to review your written testimony, so we would ask you to orally 

summarize in about five minutes your written testimony so we can 

maximize the opportunity for interchange with the members of the 

panel. 

So at this time, I am pleased to recognize Mr. Conaway for his 

opening statement. 

[The prepared statement of Mr. Andrews can be found in the Appendix on page 25.] 

STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE FROM TEXAS, RANKING MEMBER, PANEL ON DEFENSE 

ACQUISITION REFORM 

Mr. CONAWAY. Well, thank you, Mr. Chairman. I appreciate you 

calling this hearing, and Mr. Oliver—excuse me, Mr. Jenkins and 
3 

Ms. Oliver, thank you for both being here. Our panel has held 

hearings on everything from the Department of Defense’s (DOD) 

role in tackling the challenges facing the industrial base to information technology contracting, to last week’s hearing where we 

looked at auditing. 

I find it very appropriate that with today’s subject we are going 

from Wall Street to Main Street. Very few members of Congress 

have multinational corporate companies in their districts but every 

one of us have some form of small business in our district. 

I realize that today’s hearing will focus on the Department of Defense utilization of small business to improve innovation and competition in defense acquisition. It is no secret that it can be very 

challenging for small businesses to participate in the defense acquisition process. 

We are very fortunate to have a couple of expert witnesses in 

front of us today to help us understand how we can continue to 

help small businesses to successfully participate in the system. 

One question that I get asked from small business is in regards 

to the small business set-asides, and I hope to learn more about 

that today. But are there specific metrics, which lead to the inclusion or exclusion of small business set-asides in a request for proposal, and are set-asides more prevalent in product development 

type contracts or maintenance and repair contracts? 

I also think that the news report this week of a scam, at least 

the alleged scamming of the system, by a group of small businesses 

in California speaks clearly to the chairman’s comments about the 

need to make sure that it is being policed properly and that the 

right folks are in the competition. So I look forward to our witnesses’ testimony. Thank you for both being here. 

[The prepared statement of Mr. Conaway can be found in the Appendix on page 27.] 

Mr. ANDREWS. Thank you. Without objection, opening statements 

from all panel members will be included in the record. I am now 

going to proceed to introduce this morning’s witnesses. Ms. Linda 

B. Oliver is the Acting Director of the Office of Small Business Programs for the United States Department of Defense. 

She assumed that position on January 21, 2009, the second time 

that she has served in this capacity. She began her tenure at the 

office as Deputy Director in December 2001. Her office is responsible for establishing and enforcing DOD policies so as to provide 

maximum practicable opportunities for small businesses to successfully compete for DOD contracts. 

Linda previously served in the Office of Management and Budget 

(OMB) where she was Associate Administrator for Procurement 

Law, Legislation and Innovation in the Office of Federal Procurement Policy. I love these names that we have created for these 

agencies. 

Ms. Oliver began her federal government career as an attorney 

with the U.S. Department of the Navy. During most of her Navy 

service she specialized in federal procurement law. While at the 

Pentagon, she was assistant general counsel at the Office of the 

General Counsel, advising on contract claims resolutions and has 

a tour at the Naval Air Systems Command where she provided contracting advice to program managers. 
4 

Prior to joining the United States Government, she was in private practice in Honolulu, Hawaii and Bremerton, Washington. She 

has been a member of the Senior Executive Service since 1998. Her 

honors include Presidential Rank Award of Meritorious Executive 

and U.S. Department of Navy Superior Civil Service Medal. 

Ms. Oliver, thank you for your service, and welcome to the panel. 

Mr. Calvin Jenkins is the Deputy Associate Administrator for 

Government Contracting and Business Development. He was appointed to that position by the Administrator of the U.S. Small 

Business Administration (SBA) in October 2005. 

Mr. Jenkins is the SBA’s top career senior executive for government contracting and business development programs. He is responsible for overseeing the administration of the umbrella office 

with jurisdiction over the agency’s offices of technology, size standards, government contracting, business development Section 8(a), 

and small disadvantaged businesses certification. 

Other management positions held by Mr. Jenkins include the 

Deputy Associate Deputy Administrator for Capital Access at the 

SBA, Associate Administrator for Field Operations, District Director of the agency’s Washington district office and a number of other 

positions. 

He has been the recipient of several government service awards 

including the SBA’s Distinguished Service Award and the 1998 and 

2004 Presidential Rank Award of Meritorious Executive. He is a 

native of New York and holds a bachelor’s degree in economics and 

urban geography from the City College of New York. 

Mr. Jenkins, welcome. 

Ms. Oliver, you are up. We ask you to, as I said earlier, your 

written testimony without objection is included in the record, and 

we would ask if you could synopsize it so we can get to questions. 

Good morning. 

STATEMENT OF LINDA OLIVER, ACTING DIRECTOR, OFFICE 

OF SMALL BUSINESS PROGRAMS, U.S. DEPARTMENT OF DEFENSE 

Ms. OLIVER. Good morning, thank you. Good morning, Chairman 

Andrews, Ranking Member Conaway, members of the panel. I 

thank you truly for the work you have done on this panel. I have 

spent most of my professional career concerned about procurement 

and most of that procurement was in the Department of Defense. 

So I am grateful to have a distinguished group of people focused 

with such good staff also focusing on procurement in the Department of Defense. It is really important. And of course, I am always 

pleased to be able to talk about small business and how small business fits in to helping us provide the best possible products and 

services for our warfighters at the best possible cost to the taxpayers. 

Last night when I was reviewing my written statement, and particularly since Chairman Andrews has just said you have all read 

what I had to say, it occurred to me that probably although you 

know a lot about procurement, you are like a lot of other people 

who know a lot about the big picture but not about really very 

much about the small business specialist role with the Department 

of Defense, and what small business specialists do. 
5 

Well, it seems to me like you might want to know that because 

as a response to Chairman Andrew’s question, does small business 

enhance competition? Yes of course. It seems like a given to me, 

and I have addressed that in my remarks, my written comments. 

So I want to go on to talking briefly about what small business 

specialists do, how they fit in to the whole process. Most small 

business specialists in the Department of Defense are contracting 

officers who have, I always think, sort of gotten a master’s in small 

business, although, of course, it is not a formal thing, but they are 

specialists, specialists beyond being contracting officers. 

They work in the organization with contracting officers but they 

actually report to the head of the organization, whatever the head 

of the organization is, and their function is actually to provide, to 

make sure that the Department of Defense provides maximum 

practicable opportunity to the small businesses. 

But they do it by focusing within the Department of Defense on 

the acquisition team, and so a small business specialist in a wellrun situation will be one of the early members on a product integration team for example. 

A small business specialist will help as the team does a sort of 

a final refinement of the requirements. The small business specialist works with the team to think about, all right, now we have 

the requirement. What do we do to fill this requirement? 

It is important that small business specialists be involved at that 

very early stage so that the small business specialist can use their 

particular skills to devise the procurement which provides the maximum practicable opportunity in that direction you have given us. 

The small business specialist will work with the team throughout 

the entire procurement, and of course there is a role for the small 

business specialist. There is an enforcement role at the end of the 

contract. 

I delve briefly into this so that you have a fuller understanding 

that a small business specialist, it is not their function, it is one 

of the things they do, but it is not their primary function to do outreach and give speeches, to shake hands. It is to understand and 

fit small business into the Department of Defense procurement system. 

Thank you very much. I will be happy to answer any questions 

for you. 

[The prepared statement of Ms. Oliver can be found in the Appendix on page 29.] 

Mr. ANDREWS. Ms. Oliver, thank you very much for your preparation and your testimony this morning. 

Mr. Jenkins, welcome to the committee. We are happy to have 

you with us. 

STATEMENT OF CALVIN JENKINS, DEPUTY ASSOCIATE ADMINISTRATOR, GOVERNMENT CONTRACTING AND BUSINESS DEVELOPMENT, U.S. SMALL BUSINESS ADMINISTRATION 

Mr. JENKINS. Thank you, Chairman. Chairman Andrews and 

other distinguished members of the committee, I want to thank you 

for inviting me today to testify about the Small Business Administration and its small business procurement-related programs. 
6 

A key part of SBA’s mission is to ensure that small businesses 

receive a fair share of federal procurements. We also include in 

that small businesses that are women-owned, small businesses that 

are owned by individuals who are socially and economically disadvantaged, small businesses that are owned by service-disabled 

veterans and small business located in Historically Underutilized 

Business Zones (HUBZone). 

This mission is important because federal procurement is a significant market for small businesses to sell their products and services, and they contribute as a driver to the economy. Earlier you 

mentioned some of the statistics regarding small business share 

within the Department of Defense, but overall in 2008, federal procurement accounted for about $434 billion. 

Of that, small businesses in general received about $93 billion. 

Small disadvantaged businesses received about $29 billion, womenowned small businesses $14 billion and HUBZone-certified firms 

$10.1 billion, and also firms owned by service-disabled veterans 

$6.4 billion. 

Clearly, these are significant numbers. However, when we look 

back at the procurement goals, consistently the federal government 

has only met one goal, and that is the goal for small disadvantaged 

businesses. We have yet to achieve the goal for women-owned small 

businesses, service-disabled veterans as well as HUBZones, and 

have not on a consistent basis even met the goal for small businesses. 

SBA’s role in the procurement process, SBA helps agencies try to 

meet these goals by working with them through our network of 

procurement center representatives. These are individuals assigned 

to major procurement buying activities throughout the country. 

Their job is to, one, review procurements in which the contracting 

activity feels that they wish not to set-aside for small business. 

We review those contracts and review the effort that the contracting official put forth to try to identify small businesses. Our 

first aim is to set those contracts aside for small business, and then 

we look at whether or not those contracts can then flow down to 

some of the socioeconomic groups that I mentioned earlier. 

SBA is also responsible for establishing size standards. And one 

of the initiatives that we are currently embarking on now is to reevaluate all of the size standards. This is a process which we just 

recently issued three of the next sectors for public comment in 

which we are going to adjust those. A number of agencies, including the Department of Defense, has indicated that our size standards are at a level that are too low, in order for them to continue 

to use small businesses in federal procurements. 

Based on the types of procurements that they are procuring, the 

size of procurements that they are procuring, they need more small 

business with more capacity and capability to perform. So we are 

currently looking at that process. 

We also just yesterday released regulations to streamline and improve the 8(a) Business Development Program. Out of the $29 billion in 2008, that program accounted for $16 billion. However, the 

program is a Business Development Program not a contracts program. 
7 

Contracts is just one of the tools we use over a nine year period 

to assist those businesses, and so we are looking to ensure that the 

program is streamlined and that the benefits of the program truly 

goes to those that are eligible. 

We are also looking to reduce risk and streamline the HUBZone 

Program. We believe that program, unlike the 8(a) Program, is 

more of a place-based program where the leveraging of the federal 

contracts are used to improve distressed communities. 

Our concerns there is to ensure that that program has the integrity built into it, and so we have undertaken a business process reengineering effort to ensure that it works consistent with congressional intent. 

Two other programs that help to contribute innovation are the 

Small Business Innovative Research Program, SBIR and the Small 

Business Technology Transfer, STTR. We are currently waiting for 

reauthorization for both of those programs. Certainly the Administration supports reauthorization, as well as the business community there. 

Thank you for the opportunity to speak with you this morning. 

I would be happy to answer any questions you have. 

[The prepared statement of Mr. Jenkins can be found in the Appendix on page 37.] 

Mr. ANDREWS. Well, thank you to each of you. We appreciate 

your time and efforts. 

Ms. Oliver, I would like to begin with you. When small businesses win Department of Defense procurement contracts, is the 

typical situation that they are competing against only other small 

businesses or are they competing on a larger playing field? 

Ms. OLIVER. I asked somebody to look up the numbers on this, 

on the possibility that you would want to know that. As I mention 

in my testimony, the amount that small business—the amount of 

competition—when you look at the contracts that are awarded to 

small business, and you say how much of this business is competed—— 

Mr. ANDREWS. Right. 

Ms. OLIVER [continuing]. And you compare that to competition in 

general in the Department of Defense, there is much more competition where small businesses are awarded contracts than the number overall. Those numbers are about—competition rate for the Department of Defense is about 64 percent. 

Mr. ANDREWS. Meaning that 64 percent of the contracts have 

more than one bidder? 

Ms. OLIVER. The dollars, yes. For small business, it is about 77 

percent. 

Mr. ANDREWS. So I think—that was my second question, which 

I am glad you anticipated. My first one, though, is when a small 

business is in a competitive situation, is its competition other small 

businesses exclusively or is it the entire range of competitors? 

Ms. OLIVER. That 77 percent is composed of full and open competition. Let us see, I have a summary of this. I broke it down. I 

had them break it down by the special categories. 

Mr. ANDREWS. Right. 

Ms. OLIVER. That 77 percent is full and open competition and full 

and open competition after exclusion of sources. Full and open com-
8 

petition after exclusion of sources means a set-aside, most frequently—— 

Mr. ANDREWS. Right. 

Ms. OLIVER [continuing]. A set-aside for small businesses. 

Mr. ANDREWS. Right. So what share of that 77 percent is the setaside environment—I don’t mean as the pejorative either. I mean, 

in a, you know, limited market—— 

Ms. OLIVER. No. 

Mr. ANDREWS [continuing]. And what portion of it is not a setaside environment? You know, you don’t have to be—just roughly. 

Ms. OLIVER. It is—— 

Mr. ANDREWS. You can submit for the record. 

Ms. OLIVER. Let me submit it for the record because I—— 

[The information referred to can be found in the Appendix on 

page 49.] 

Mr. Andrews. Yes. But is it half and half, is it two-thirds, onethird, about what is it? 

Ms. OLIVER. I would rather that—let us see—40, about 40 percent is full and open competition and about 37 percent is full and 

open competition after exclusion of sources. 

Mr. ANDREWS. Okay, that is good. 

Ms. OLIVER. So it went a little bit more—— 

Mr. ANDREWS. Yes. 

Ms. OLIVER [continuing]. Full and open, one on full and open and 

one on—— 

Mr. ANDREWS. So when a small business gets a contract, 40 percent of the time that is after they have competed in full and open 

competition. 

Ms. OLIVER. Yes. That is right. 

Mr. ANDREWS. Thirty-seven percent of the time, it is when they 

have competed only against other small businesses, and the remaining, which would be 16 percent, if my math is right, is where 

it is sole source? Would that be right? 

Ms. OLIVER. Yes, yes. 

Mr. ANDREWS. Or 23—no 23 percent, I am sorry. At any rate 

that is about the distribution. 

Ms. OLIVER. Well, there is one other category. 

Mr. ANDREWS. Yes, what is that? 

Ms. OLIVER. Earmarks, earmarks do not count as competed. 

Mr. ANDREWS. Nor should they. Nor should they. I agree with 

you. And I assume earmarks bear a very small portion to the overall universe. 

Ms. OLIVER. I don’t have it broken out into subcategories, but it 

looks to me, among my figures, that it is a little bit over 12 percent. 

Mr. ANDREWS. That is interesting. That is interesting. Now, are 

there any—now, given these four categories, right, once your small 

business wins a contract sole source, small business gets an earmark, small business competes against all comers, and small business competes against other small businesses. 

Are there any data that compare the price that the taxpayers 

pay for that product or service versus a competition where there is 

no small business involved? Do you understand what I mean? 
9 

Let us say that in the full and open competition segment, the 

product that is being purchased is a sheet metal produced product 

for a refrigeration unit, okay? And we have a similar product where 

there is no small business competition, and then we have the marketplace where there is small business competition. 

Are there any data on, comparing apples to apples, are there any 

data on the price differential results from that competition difference? 

Ms. OLIVER. There are none that I have. However, I will be 

happy to go back. I do have some people who are just astounding 

at being able to figure out what it might be, and I will surely—— 

[The information referred to can be found in the Appendix on 

page 49.] 

Mr. ANDREWS. Yes, we would be very interested, and I will tell 

you why, because as I said, at the outset of the hearing, to me it 

is intuitively true that broader competition produces a better result, but I don’t want to rest on my intuition. 

I would actually like to see the data which leads to the second 

point that I made. To play devil’s advocate for a minute, there are 

people who would argue that the incremental gain that we get from 

the increased competition is more than offset by the administrative 

cost of qualifying people and figuring that all out. I don’t think that 

is true, but again I would like empirical evidence that would demonstrate that. 

Let me just move on to Mr. Jenkins, if I may, because I want 

to make sure our colleagues get time. Mr. Jenkins, I want to describe to you a concern that I think the members would say is 

heard throughout the country in all districts and see if I can get 

an answer as to how I would help my constituents. 

I had a constituent who came in, runs a business with very 

small, like 45 employees, and they make a floor coating product 

that helps in industrial situations to keep the floor clean and protected. And they are near an Air Force base in New Jersey. 

No, they actually came in and they said, ‘‘Look, like everybody 

else, we are hurting in this economy, we are looking for some contracting opportunities. How do we get involved in the defense field? 

We are near an Air Force base, airplane hangars use the kind of 

product that we make. We would like to compete for the right to 

sell this product to the Air Force base.’’ 

And we went about trying to help them, but what is the best answer I could give them is to say here is how you do it. Here is how 

you can get yourself on the list to compete for the right to sell this 

floor sealant to the Air Force base, and maybe pick them up with 

as a customer. How do they do that? 

Mr. JENKINS. Sure. There is a number of ways and various strategies that we present to small businesses and try to help them. 

How do you get into the federal procurement arena? One, you 

have to do your homework. For example, the federal procurement 

data system, which is all of the federal procurement data, is just 

packed with information as—— 

Mr. ANDREWS. It has too much—— 

Mr. JENKINS. Well—— 

Mr. ANDREWS [continuing]. As far as they are concerned. 
10 

Mr. JENKINS. Well, I think if, you know, there is help that can 

kind of help them weed through that. 

Mr. ANDREWS. I don’t want to cut you short, but I want to focus 

the question this way—— 

Mr. JENKINS. Yes. 

Mr. ANDREWS [continuing]. And you understand this, because 

you work with these businesses all the time. You know, they may 

have 3 or 4 administrative people out of those 45. And if they guess 

wrong and go after the wrong contract because it is just way out 

of their league to get, they have just wasted an enormous amount 

of time and money and taken a big step backward. 

So how do they deal with this information flow? How do they figure out more surgically which is the right contract for them to go 

after and how to do it? 

Mr. JENKINS. Well, once again, I really have to point you to the 

federal procurement data system. And the only reason why I do 

that is it is the eyes for all of federal procurement as to what happens. 

Let us say that company sells about less than $1 million of product. They can go into the system, and see what agency actually 

purchased the item and what volumes had previously been purchased. 

Mr. ANDREWS. Right, that would be important. 

Mr. JENKINS. If they look and all of a sudden see that that Air 

Force buys in huge quantities that they can’t actually supply, then 

they need to shift their strategy a little bit. 

Mr. ANDREWS. Got it. 

Mr. JENKINS. They also have access to our procurement center 

representatives. SBA has cognizance over all federal procuring and 

buying activities. We have individuals stationed at the major ones, 

but we can go in and sort of introduce that individual to the small 

business office at that buying activity. One of the strategies we talk 

about is don’t necessarily spend a lot of time with the contracting 

officer. Spend time with the actual user. 

Mr. ANDREWS. Right. Is there an online tutorial as to how to use 

that data system you referenced a few minutes ago? 

Mr. JENKINS. There are a few online. SBA recently introduced 

How to Win Federal Contracts, an online course, offered toward 

small businesses, women-owned small businesses and—— 

Mr. ANDREWS. Because I think you gave a great example, that 

if I were running that floor coating business, and I saw that the 

Air Force never bought in quantities of less than two million gallons and that is my entire output for the year, I am crossing that 

one off the list. 

But knowing where to look for that, and how to slice the data 

to find it is something I wouldn’t know how to do. So I would 

think—I would like to take a look at those online courses, if I 

could—— 

[The information referred to can be found in the Appendix on 

page 45.] 

Mr. JENKINS. Sure. 

Mr. ANDREWS [continuing]. And thank you. That is very helpful. 

Mr. JENKINS. Yes. 

Mr. ANDREWS. Mr. Coffman. 
11 

Mr. COFFMAN. Thank you, Mr. Chairman. I think your point is 

very interesting about simply the volume of some of these contracts 

and has there been a thought to, I mean, for those that produce 

products probably more than services, such as the one that the 

chairman mentioned, has there been a thought to breaking it down 

a little bit more for small business, in terms of quantities? 

I know that is probably inefficient in terms of costs, in terms of 

economies of scale, but has there been consideration for that? 

Mr. JENKINS. From SBA’s standpoint, it is certainly one of our 

key strategies. When we send our procurement center representative into a buying agency and we look at a procurement, one of the 

things we try to go through with the buying activity is different 

strategies to increase small business participation. 

So if we do see a procurement where it is structured in a certain 

way that precludes small business participation, we try to work 

with that agency to structure it in such a way that we could increase small business participation. 

Mr. COFFMAN. Okay. 

To Ms. Oliver, you mentioned the earmark issue, and is that 

when—I mean, I am new to Congress—and so it is when you would 

just, I mean, trying—where it would impact a specific small business. 

Where you would earmark and say I have got a small business 

in my district that produces a very specific product that—let us say 

it is ceramic plates for the bulletproof vests, for the protective body 

armor. 

And so what I want to do is put an earmark in for that small 

business to produce that particular product, and that is generally 

how it is done. Is that correct? 

Ms. OLIVER. That is correct. I believe, currently, the requirement 

is that they—don’t rely on this—ask somebody on the legal staff. 

I believe the current requirement is that the congressperson have 

passed into law legislation that says this amount of money for this 

purpose to this organization. I think that is the format it takes. 

Mr. COFFMAN. Yes, I see. And in your view, in terms of the cost 

effectiveness of that, could you respond to that? 

Ms. OLIVER. Of earmarks? 

Mr. COFFMAN. Related to a specific firm to produce a specific 

product or service. Am I—— 

Ms. OLIVER. That is sort of slightly outside my area of competence, but—— 

Mr. COFFMAN. Okay. 

Ms. OLIVER [continuing]. But you know it depends on who knows 

what. In terms of is it actually it efficient, it depends on who 

knows about it. And I mean by that I am not too quick to say that 

a Congressman sometimes doesn’t have special insights about the 

capabilities of people in their district. 

Now, I understand all the problems with earmarks, and I definitely am in favor of competition and I speak only for Linda Oliver, 

not for the Department of Defense—but I don’t discount that the— 

I don’t just automatically discount, in my mind, about whether the 

Congressman is—whether this is an uneconomic thing to do. I 

think sometimes it is. 

Mr. COFFMAN. Thank you. 
12 

Mr. Jenkins, on the notion of set-asides, I mean, all categories, 

can you define to me the different categories that there are? I know 

it is women-owned and minority-owned small businesses, but what 

are the other set-aside areas that we use right now? 

Ms. OLIVER. Sure, the first one and probably most noticed is the 

small business set-aside. Then you have the set-aside for servicedisabled veterans. The women-owned set-aside program has not 

been put in place yet. SBA has regulations over to the Office of 

Management and Budget to establish that set-aside program. You 

also have a set-asides within the HUBZone Program itself. 

And in terms of how we have set-aside procurements or how SBA 

requests set-asides from the agencies, we look for at least two or 

more small businesses that can provide the product or services to 

the agency to meet their needs. 

The companies have to also be competitive, meaning their price 

has to be competitive because every procurement that is issued, the 

contracting officer has to attest that the price is fair and reasonable. 

And so we look at that area first and that becomes the basis for 

the market research, are there two or more small businesses out 

there? Can they provide a competitive price to meet the needs of 

the agency? 

Mr. COFFMAN. Mr. Jenkins, I have seen so many different definitions of small business. Is there, for purposes of DOD procurement, 

is there one definition for a small business and is that by the number of employees? 

Mr. JENKINS. Unfortunately, there are not. There are probably 

common standards but there are various industries and because of 

the number of industries, there are different size standards that go 

with each of those industries. 

Commonly, you would see maybe 500 or less in terms of number 

of employees would define a small business where it is a manufactured item. So, on the manufacturing side it is number of employees. On the service-based side, it is the end of the revenues of the 

business over a three-year period of time. 

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

Mr. ANDREWS. Thank you very much. 

The chair recognizes Mr. Ellsworth. 

Mr. ELLSWORTH. Thank you, Mr. Chair, for calling this timely 

meeting. I just had some gentlemen in my office this week. They 

were talking about the system, I guess I will call it a system, 

where a small—or a large business would subcontract, create a 

small business in order to bring even more in. 

And I was curious—I know that there is occurrences in the 

HUBZones where large businesses rent a storefront somewhere in 

a downtrodden area to get those benefits. But I was curious how 

large of a problem both of you see this is where—how pervasive it 

is? 

And then how many people do you all have dedicated to that, to 

weed that out? You know, let us say, we used to call them in Indiana ‘‘hogs at the trough.’’ 

So how much effort, how pervasive is the problem where large 

companies are creating these small companies, and I know that, 

you know, I know back at home I hear this where you would see 
13 

someone where the requirement is for minority-owned and femaleowned and all of a sudden you see somebody start a business 

whether it was laundry cleaning or linen service, somebody who 

never had a business in that, no storefront, and all of a sudden 

they got the contract whether—you know. 

Can you explore that a little bit and how big of a problem that 

is and how far you go and how many resources do you have dedicated to weeding that out and stopping that? 

Ms. OLIVER. That is fine. We will do a tag team here. 

Mr. JENKINS. There you go. 

Ms. OLIVER. I think that the extent of the problem is exaggerated. And this is in part because it is very hard for a small business—it is very hard for any business to—when they don’t win to 

contract to attribute the problem to themselves, and this is just 

hard. 

So people are quick to look for other reasons; reasons external. 

And that is the reason that fairly frequently, when we pull a string 

on one of these, it turns out not to be quite what the small business owner thought was happening. 

There are two—well, at least two sources of—the most, let me 

say, put it this way—the most frequent sources of small business 

credit being taken when it is a large business performing the contract, there are two primary sources, in my opinion, and we spend 

a lot of time trying to get the record right. 

One is when a big business buys a small business, but the small 

business had a contract. That contract continues to be performed 

even though it is now no longer—the Department of Defense no 

longer gets credit for it being a small business for example. So that 

is one legitimate way. 

Another way, to be honest with you, is data input is a huge problem, and it is especially a huge problem if the system is set up and 

it is the sensible way of having lower-level people do the data 

input. Now, we are working hard on that at the Department of Defense. 

But the biggest reason—every time I try and track one of these 

things down, what has really happened is somebody has a stack of 

papers they want to get through. They have no idea that the numbers are even used by anybody. They just know they need to get 

through it. So they put in whatever will make the program move 

forward to the next thing, and they kind of learn how to do that. 

If they don’t think the data is valuable, I can surely understand 

why they are putting in inaccurate data, and that happens really 

frequently. This doesn’t happen hugely frequently, but when there 

are problems, that is very frequently the source of it, as opposed 

to some sort of conspiracy to have the data show something which 

it isn’t showing. We are not clever enough to be good conspiracists 

to be honest with you. Anyway, that is the way that I say the problem is exaggerated. 

Mr. JENKINS. Yes, I have to tend to agree with Linda. We have 

looked at the data, for example, in the 2005 small business procurement data, and when we went back to the various federal 

agencies we had to reduce the amount of achievements by about $5 

billion. The large amount of that was due to, as Linda said, data 

entry errors. 
14 

We have found just minimum amount of cases where someone 

deliberately said, ‘‘I am a large business, and I am going to certify 

myself as small.’’ We also had to change the entire process. In 

years past, prior to 2007, if you were a large business, and you purchased a small business, that contract was hardwired forever to 

still show up as a small business contract. 

We changed that rule in 2007 to say within 30 days of a large 

business purchasing a small business, that entity has to recertify 

to the contract and also that they are still small or that they are 

other than small. Then the contracting officer can no longer get 

credit as small business. 

We also have some mechanisms in place, if a small business believed that someone won a contract on a small business set-aside 

and they are not small, they can protest that to SBA, and we have 

staff throughout the country that process those protests. 

We also do ongoing certification reviews of firms within the 8(a) 

Program. We are required to do annual reviews to ensure that they 

are continuing to be eligible. As I mentioned earlier, we are revitalizing or changing the entire HUBZone Program to put more integrity in that program and minimize the risk of someone setting up 

a storefront in an underutilized area and really don’t qualify for 

the program. 

Also in the service disabled veterans program, there is a protest 

mechanism as well. So we have staff in place that are reviewing 

those and certainly, if any small businesses have some concerns or 

we can identify a firm they have concerns, we will certainly look 

at those. 

Mr. ANDREWS. Thank you, Mr. Ellsworth. 

Chair recognizes Mr. Cooper. 

Mr. COOPER. Thank you, Mr. Chairman. I would like to explore 

with Ms. Oliver the earmark situation. 

Ms. OLIVER. Okay. 

Mr. COOPER. You mentioned a figure of 12 percent, what is that 

12 percent of? 

Ms. OLIVER. I need to get you, probably, a better figure. 

[The information referred to can be found in the Appendix on 

page 49.] 

Ms. OLIVER. The number is probably accurate, but the composition of the number may be not completely accurate. Under not 

available for competition, we look at not available for competition, 

the number—and these are the 2008 numbers—the number is 

12.69 percent. 

I don’t know if I can break it out where you can go back to the 

folks who gave me the numbers and break that specifically, you 

know, which subcategories that falls into. I know earmarks is—— 

Mr. COOPER. So this would be a total Pentagon small business 

procurement? 

Ms. OLIVER. Yes. 

Mr. COOPER. Or total Pentagon procurement or—— 

Ms. OLIVER. But small business. 

Mr. COOPER. Small business. 

Ms. OLIVER. Yes. 

Mr. COOPER. Okay. So 12 percent of that universe is not available for competition because it is a congressional earmark? 
15 

Ms. OLIVER. It is not available for competition. A good portion of 

that will be an earmark, but I don’t know what the proportion is. 

I don’t know what is in that whole category. I mentioned earmarks 

to Chairman Andrews because we were going through a list of reasons they might not be competed, and one of the ones that he had 

not thought about was earmarks. 

Mr. COOPER. So this category is not only not available for competition it is also not subject to regular small business rules, right? 

They can bypass all those rules? 

Ms. OLIVER. With an earmark you mean? 

Mr. COOPER. Yes. 

Ms. OLIVER. Yes, we do whatever you tell us to. I mean, you 

make the law. 

Mr. COOPER. And so it doesn’t have to be a small business or a 

minority business—— 

Ms. OLIVER. No. 

Mr. COOPER [continuing]. Or a disadvantaged business—— 

Ms. OLIVER. No. 

Mr. COOPER [continuing]. Or a woman-owned business or anything like that? 

Ms. OLIVER. No. 

Mr. COOPER. It doesn’t even have to be a small business? 

Ms. OLIVER. No. 

Mr. COOPER. It can be a large business? 

Ms. OLIVER. Absolutely. 

Mr. COOPER. And the Pentagon doesn’t even necessarily need 

what they are producing? 

Ms. OLIVER. All that is true. 

Mr. COOPER. So this is very curious category here. Has that category been growing or shrinking in recent years? 

Ms. OLIVER. I don’t know but I definitely can—— 

Mr. COOPER. Find that out for me? 

Ms. OLIVER [continuing]. Find that out for you, and I would be 

happy to. 

[The information referred to can be found in the Appendix on 

page 49.] 

Mr. COOPER. Is there any record of the usefulness or the viability 

of these earmarks and the services they produce? You said you 

didn’t want to assume that Congressmen didn’t know what they 

were doing, but some of us might assume that. [Laughter.] 

Ms. OLIVER. It is very hard to—I don’t—that is one that I 

wouldn’t know how to help people get at because usefulness is sort 

of in the eyes of the beholder. If we could think of a way, an indication of what might mean not useful and, you know, some way to 

tag it to the data system, I can get people to look at those tags. 

Mr. COOPER. But these are specific businesses that are mentioned by name in the legislation or in the report language? 

Ms. OLIVER. Yes, there is a—— 

Mr. COOPER. They get the money. 

Ms. OLIVER. Yes. There is a—and it isn’t even a report. At least 

last year there was a list that was specific. I mean, it was so that 

we could clearly understand what Congress wanted us to do 

and—— 

Mr. COOPER. And we are talking here—— 
16 

Ms. OLIVER [continuing]. A version of greater than—— 

Mr. COOPER [continuing]. Just in the DOD area because earmarks exist in many other areas as well, but now we are just talking about national defense? 

Ms. OLIVER. That is, last year, the appropriation I paid attention 

to. I can’t—I don’t know for sure about the other areas, the other 

appropriation acts. 

Mr. COOPER. So essentially we have a small business program 

here in DOD, and then we have this earmark program which may 

or may not be small business? 

Ms. OLIVER. Well, let me tell you how we arrived at those numbers because I have misled you I am afraid. We looked at contracts 

awarded to small business, and then we put those into pockets, 

into categories. 

Mr. COOPER. Okay. 

Ms. OLIVER. And of contracts awarded to small business, about 

77 percent of them were competed. If we look at the other—whatever the number is—17—27—whatever the rest of it is, if we break 

that number down, two of the categories are not available for competition and another category—the two biggest other categories are 

not available for competition and not competed. 

Mr. COOPER. So you were just referring to the earmarks that 

went to small businesses? 

Ms. OLIVER. Yes. 

Mr. COOPER. And there is another larger universe of earmarks 

probably that went to other businesses. 

Ms. OLIVER. That is right. I was only focused on small business 

numbers. 

Mr. COOPER. Do you think—— 

Ms. OLIVER. I don’t know whether—from a percentage standpoint, I don’t know whether small businesses or other than small 

businesses get the higher percentage of earmarks. My very partisan in favor of small business guess is that the ‘‘bigs’’ aren’t as 

competitive and get more earmarks, but, I mean, that is maybe just 

wishful thinking. 

Mr. COOPER. I see my time is expiring. If I could have one more 

question to Mr. Jenkins. He had mentioned that SBA is thinking 

of raising the size standards for small business so that more capacity could be in that category? Was that—— 

Mr. JENKINS. Well, I don’t want to necessarily say raise it. We 

were doing a comprehensive review of all of the size standards and 

some—and in a number of industries we will certainly see that 

they will go up. 

Mr. COOPER. Yes. Is this kind of like the super-size me approach, 

so no longer we are talking about small business, but you are going 

to go for medium-sized businesses, too, and we will have a mediumsized business program? 

Mr. JENKINS. Well, no. Hopefully—that is not our aim and that 

has been our challenge is to strike that balance. A lot of our data 

and a lot of our analysis is dependent on federal procurement. Our 

size standards also apply to our lending program as well, and so 

it is a very extensive analysis. 

We spent a lot of time developing the methodology, and we have 

listed the methodology out there for the public to review that as 
17 

they submit their comments. And certainly we expect some comments to come in and say, hey, your methodology might be flawed 

or that you raised these standards too high and here is the reasons 

why. And certainly we are open to look at those. 

Mr. COOPER. I thank the Chair. 

Mr. ANDREWS. Thank you, Mr. Cooper. I do have a couple of follow-up questions. Do any other members have, and Mr. Coffman, 

would you have any follow ups? 

Mr. COFFMAN. Well, Mr. Chairman, one of my military legislative 

assistants raised the prospect, Ms. Oliver, that the DOD does have 

some discretion on earmarks up or down in evaluating their efficacy. Could you respond to that now or get back to the committee 

later on with that? 

Ms. OLIVER. Yes. The Department of Defense has some discretion 

about following or doing what is an earmark. It is the discretion 

you have given us because we have to do exactly what you tell us 

to do, but particularly on spending money. 

There is less flexibility with spending money. I mean, there may 

be—I am not quite sure—I probably am not completely sure what— 

your staffer is thinking of something, and I am not meeting—I am 

not thinking of what it is. 

Whoever is wondering didn’t just make it up out of this. There 

is something there, but I don’t know what it is. I don’t know what 

to address. 

Mr. COFFMAN. Maybe that is something—— 

Mr. ANDREWS. Would the gentleman yield? I wonder if Ms. Oliver 

would—my understanding is there is a distinction between statutory language—— 

Ms. OLIVER. Yes. 

Mr. ANDREWS [continuing]. ‘‘The DOD shall spend the billion dollars on X.’’ 

Ms. OLIVER. Right. 

Mr. ANDREWS. And report language which is directive with respect to an existing program element (PE) number, where if there 

is a PE number that has a billion dollars in it, and the committee 

in its report says the committee directs, urges—there is various 

permutations of this—the committee directs that money be spent 

to buy widgets. My opinion is you would have a lot more discretion 

over that because it is not a statutory direction. I think that may 

be what we are getting at here. 

Ms. OLIVER. That makes sense, yes. I think that is probably true. 

Mr. ANDREWS. Although I think the custom has been to treat 

that report language as directive, it has not been a universal or exhaustive practice, something we ought to think about in how we 

conduct our business. 

Mr. Ellsworth, did you have any follow up? 

Ms. Oliver, I did have a question on SBIR—— 

Ms. OLIVER. Yes. 

Mr. ANDREWS [continuing]. Which we think is a very valuable 

tool, not only in expanding small business opportunities, but putting us on a much sharper cutting edge for the kinds of products 

that we buy. 

I am particularly interested in the Pre-Milestone A material acquisition area, where we have a material solution process going on 
18 

within the Department. We are Pre-Milestone A. The reason I ask 

this question is that I think evidence, anecdotal evidence has 

shown some really terrific ideas to come out of small businesses in 

that phase. 

But once we get beyond A and certainly when we get beyond B, 

almost by definition, the small businesses are in very deep water 

and don’t have a chance to contribute as much. What mechanism 

do we have in place Pre-Milestone A in these material solutions 

contexts, to make sure that there is an active outreach effort to the 

small business that may have a great idea but not a whole lot of 

capital to develop it? How do we do that? 

Ms. OLIVER. Well, that is one of the things we are working on. 

To be honest with you, we need to do a better—we in the Department of Defense have to do a better job than we are doing in making program managers understand that if there is an SBIR product 

or almost product, they need to consider it. 

It is so hard to put a program together, and there are so 

many—— 

Mr. ANDREWS. Yes. 

Ms. OLIVER [continuing]. Things to think of. I do understand why 

a program manager might say, ‘‘I don’t want to hear anything more 

about anything. I am overwhelmed here. I am overloaded.’’ Well, 

we have to do a better job in helping them understand—— 

Mr. ANDREWS. How does the program manager educate himself 

or herself about those possibilities? Let me use an amateur example, but—— 

Ms. OLIVER. Okay. 

Mr. ANDREWS [continuing]. If I am in charge of a material solutions process, I know there are certain vendors to whom I can go, 

the biggies, as you call them, that probably have a dog in the hunt. 

Ms. OLIVER. Yes. 

Mr. ANDREWS. But I am just not going to be aware of a five-person company spun off of Stanford University or Massachusetts Institute of Technology (MIT) or Cornell—— 

Ms. OLIVER. Yes, yes. 

Mr. ANDREWS [continuing]. Regulars. How—and I don’t expect 

these program managers to spend their whole day looking for 

those. That would be pretty inefficient. How do we set up—this is 

not a rhetorical question—how do we set up a system where he or 

she can be aware of the creative, entrepreneurial, dynamic, small 

decisionmakers out there? How do you do that? 

Ms. OLIVER. It is function of resources. 

Mr. ANDREWS. Yes. 

Ms. OLIVER. Not to get off on a hobby horse, but the SBIR program is almost unique, not completely, but almost unique in that 

you may not use program funds to administer the program. 

Mr. ANDREWS. Yes. 

Ms. OLIVER. That makes things like helping program managers 

understand what is out there, that makes it sort of a luxury in a 

way for the program managers. The Department of Navy has done 

a good job on it. 

Mr. ANDREWS. Yes. 

Ms. OLIVER. And there are—— 
19 

Mr. ANDREWS. So if our rules say that all of the SBIR money 

must go for contracts and grants to the recipients—— 

Ms. OLIVER. That is correct. 

Mr. ANDREWS [continuing]. But you have got to eat the overhead 

through some other aspect of your budget basically? 

Ms. OLIVER. I didn’t hear the last. 

Mr. ANDREWS. How—the overhead to—— 

Ms. OLIVER. Yes. 

Mr. ANDREWS [continuing]. To give the money out—— 

Ms. OLIVER. Yes. 

Mr. ANDREWS [continuing]. Has to come from some other pool of 

money? 

Ms. OLIVER. Yes. 

Mr. ANDREWS. Would you favor and, you know, not speaking for 

the Department, just your professional opinion as someone who 

knows this area, would you favor a small administrative set-aside 

in SBIR that would give the program managers some support for 

that? 

Ms. OLIVER. Yes. I think you have to have money to run a program well. 

Mr. ANDREWS. I mean, my instinct would be that the savings 

would be multiples of the set-aside. If you had some program support for the small business—for the program manger in the material solution context, to find the five people at Stanford that have 

a great idea about this, that even if they don’t wind up awarding 

the contract to that enterprise, the competition that would be stimulated would probably bring the price down of the contract they 

would eventually award and maybe sharpen the competition in a 

qualitative way as well. 

Ms. OLIVER. Absolutely. 

Mr. ANDREWS. You would agree with that idea? 

Ms. OLIVER. Absolutely I do. 

Mr. ANDREWS. Well, ladies and gentlemen, we have really benefited from your hard work and preparation for today. And as I say, 

I start with the presumption that competition enhances value and 

that broader small business participation enhances competition. 

I think it would behoove us, wherever we can, to put empirical 

data behind those suppositions because it would then give the committee the intellectual heft, as it were, to make the argument that 

there should be some changes in the law that would benefit small 

businesses and benefit the country. 

So we are interested in whatever you can do to supplement the 

record. A number of members asked questions that would help us 

do that. And as we proceed in this process, the panel during the 

end of this calendar year and early of next year, is going to be 

meeting to consider a series of recommendations, which will take 

the form of a report which will hopefully then take the form of legislative language in the fiscal year 2011 authorization bill. 

We would welcome your input into that process, that we would 

hope that your participation would not end with today’s hearing 

but, in fact, would begin with it. 

Again, we thank you for your involvement. I thank my colleagues, and the hearing stands adjourned. 

[Whereupon, at 8:58 a.m., the panel was adjourned.] 

A P P E N D I X 

OCTOBER 29, 2009 

PREPARED STATEMENTS SUBMITTED FOR THE RECORD 

OCTOBER 29, 2009 

(25) 
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27 
28 
29 
30 
31 
32 
33 
34 
35 
36 
37 
38 
39 
40 
41 

DOCUMENTS SUBMITTED FOR THE RECORD 

OCTOBER 29, 2009 

(45) 

WITNESS RESPONSES TO QUESTIONS ASKED DURING 

THE HEARING 

OCTOBER 29, 2009 

(49) 

RESPONSES TO QUESTIONS SUBMITTED BY MR. ANDREWS 

Ms. OLIVER. The following is provided to identify the competitive break-down of 

dollars awarded to small businesses in FY 2008, based on information generated 

from the Federal Procurement Data System – Next Generation (FPDS–NG) as of 

September 22, 2009. Of the $62.027B awarded to small businesses, $24.9B or 40 

percent of the dollars were awarded using full and open competition where competition was not restricted to small businesses. Another $23.2B, or 37 percent of the 

dollars were awarded using full and open competition after exclusion of sources 

which means competition is restricted in some manner, such as for small business 

set-asides. The remainder of the dollars awarded to small business were either not 

available for competition 12.69 percent or not competed 9.7 percent. A contract action is categorized as not available for competition in limited cases such as when 

a law specifies a particular source, sole source awards to 8(a), HUBZone or ServiceDisabled Veteran-Owned Small Business concerns, international agreements, items 

bought for resale in the commissary, or utilities. Other non-competitive awards are 

reported as not competed. [See page 8.] 

Ms. OLIVER. The following is provided in response to the question of whether 

there is a price differential realized when there is small business competition in the 

market place. The DOD Office of Small Business Programs relies on the data and 

reports that can be generated from the Federal Procurement Data System – Next 

Generation (FPDS–NG). For awarded contracts, FPDS–NG contains data elements 

that allow for reporting the dollar value of contracts awarded by DOD and other 

federal agencies. However, information in this database does not include the prices 

that the government may have received in the competition process from unsuccessful offerors. In addition, reports generated from FPDS–NG do not offer the opportunity to assess competition and pricing differences between full and open competition and those competitions that have been set aside for small business concerns 

(full and open competition after exclusion of sources). It should be noted however, 

that when a small business concern is awarded a contract under full and open competition, it is competing against all offerors, regardless of their size. FPDS–NG reporting for FY 2008, indicates that $24.9B or 40% of dollars awarded to small business concerns resulted from full and open competition and another $23.2B or 37% 

of dollars awarded to small business concerns resulted from full and open competition after exclusion of sources. These statistics support the premise that small businesses are price competitive in open market competitions. [See page 9.] 

RESPONSES TO QUESTIONS SUBMITTED BY MR. COOPER 

Ms. OLIVER. The following is provided to clarify what type of actions compose the 

12 percent of dollars awarded to small business that are reported as Not Available 

for Competition. The DOD Office of Small Business Programs relies on the data and 

reports that can be generated from the Federal Procurement Data System – Next 

Generation (FPDS–NG). DOD contract awards that were made to small businesses 

in Fiscal Year (FY) 2008, total $62.027B. The 12 percent mentioned is actually 12.69 

percent and represents the total amount of DOD contract awards that were made 

to small businesses that were reported as Not Available for Competition. This 

amount is $7.84B of the total. Contracts reported in this category include those 

where statute expressly authorizes or requires that the acquisition be made from 

a specified source or through another agency. For example, awards to Ability One, 

sole source awards to 8(a), HUBZone, or Service-Disabled Veteran Owned small 

business concerns. Awards authorized by statute comprised $7.7B of the dollars 

awarded to small business that were reported as Not Available for Competition, 

with the remainder reported as being authorized by international agreement. Contracts for earmarks do not automatically fall into this category. Unless law specifically requires procurement from a specified source, the buying office must compete 

a new contract for an earmark or justify a non-competitive award consistent with 

the exceptions authorized by the Competition in Contracting Act. [See page 14.] 

Ms. OLIVER. We obtained data from the earmark database managed by Office of 

Management and Budget to answer the question whether earmarks have been grow-
50 

ing or shrinking in recent years. The database reflects that in Fiscal Year (FY) 2008 

there were 2,275 earmarks for DOD totaling $7.8B, down from 2,636 earmarks for 

DOD in FY 2005 totaling $9.3B. [See page 15.] 
QUESTIONS SUBMITTED BY MEMBERS POST HEARING 

OCTOBER 29, 2009 

(53) 

QUESTIONS SUBMITTED BY MR. CONAWAY 

Mr. CONAWAY. I want to focus on small business set-asides in DOD contracting 

for a moment. In your experience, are there certain types of procurements—be it 

product development, maintenance and repair, etc.—that achieve stronger results 

with small business set-asides in them? 

Ms. OLIVER. There is no specific area; small businesses are capable of providing 

and performing a wide range of products and services for DOD. Based on contract 

award data from the Federal Procurement Data System – Next Generation for Fiscal Year 2008, areas where small businesses achieve strong results include information technology, professional scientific, technical services and wholesale and retail 

trade. 

Mr. CONAWAY. We have all seen and understand that resources are tight these 

days, and we all share a responsibility as stewards of taxpayer funds. In your experience, what level of savings do small business bids on DOD contracts achieve for 

the government and the taxpayer? Can you detail it in any specific way for us? 

Ms. OLIVER. The Department maintains no data that would show the level of savings that small business bids achieve on DOD contracts. However, it is instructive 

to look at DOD contract awards that were made to small businesses in Fiscal Year 

(FY) 2008. These awards total $62.027B. Of this amount, forty percent, or $24.9B, 

are contracts that were awarded to small businesses under full and open competitions. This strongly suggests that small businesses are competitive and bring the 

best value to the taxpayer. It is also instructive to note that another $23.2B, or 37.4 

percent of DOD contracts that were awarded to small businesses were competed 

under full and open competition after the exclusion of sources (i.e., set aside for 

small business). The total percentage of competed contracts for small businesses 

(both full and open and full and open after the exclusion of sources) is more than 

77 percent. Competition among small business is valid competition that brings best 

value and savings to the taxpayer. 

Mr. CONAWAY. Can you give us an idea what leads to the inclusion or exclusion 

of a small business set-aside in an RFP? As an example, the P–3 Orion, an airplane 

which is seeing extensive use in a vital role in Iraq, is currently the subject of a 

draft RFP for Programmed Depot Maintenance (PDM). The current draft RFP does 

not have a small business set-aside in it, yet the service is considering it for the 

final RFP. I am aware of small businesses that can perform this work for the Navy 

but would be shut out of the competition if there is not a small business set-aside 

included in the final RFP. Given the demand for these airplanes around the world, 

shouldn’t we include a small business set-aside in the RFP that can serve as an additional source of repair for the Navy? 

Ms. OLIVER. To clarify a potential misunderstanding derived from the question 

posed—the P–3 Orion RFP referenced is not for PDM (Phased Depot Maintenance), 

but for the maintenance, repair, and modifications of the Navy’s P–3 aircraft. The 

Navy Program Office, PMA–290, recently completed a comprehensive review of six 

potential small businesses who expressed interest in the contract being designated 

a full or partial small business set-aside during the pre-solicitation Industry Day. 

The review was conducted using NAVAIRSYSCOM Sources Sought Process Guidebook to ensure a consistent methodology was used to evaluate the company’s ability 

to meet minimum capability and capacity requirements necessary to meet the 

Navy’s requirements. It is the assessment of PMA290 and the NAVAIR Procurement Contracting Officer that this contract is not suitable for set-aside to small 

business. However the evaluations and recommendation are still under review by 

the NAVAIR Small Business office (OSBP) and the Small Business Administration’s 

Procurement Center Representative (PCR) as part of the Small Business Coordination Record (DD2579) process. Once recommendations are received from the OSBP 

and PCR, the contracting officer will make the final determination of the acquisition 

strategy. 

Mr. CONAWAY. The Small Business Acquisition and Sustainment Tool (SbAST) is 

being conducted as a total small business set-aside by the USAF and specifically 

Warner Robins ALC. The contract requirements include maintenance, repair, modifications, upgrades, and enhancements for reliability, serviceability, maintainability, 
54 

and performance improvements for Air Force operated systems at Warner Robins 

Air Logistics Center. I recently spoke with the CEO of a small business DOD contractor who will be submitting his proposal in early November for SbAST. His enthusiasm for this type of RFP and the prospects it holds for his business and employees was clear. I wonder if you would comment on SbAST and whether this form 

of RFP, directed at Small Businesses, will continue to be utilized in DOD contracts? 

Ms. OLIVER. The Small Business Acquisition and Sustainment Tool (SbAST) is 

being conducted as a companion contract which is a strategy developed by the Small 

Business Office at the Department of the Air Force. Under this approach two separate request for proposals (RFPs) are issued. One RFP is designated work set-aside 

exclusively for small businesses. The proposal is similar but may not be identical 

to the full and open RFP issued for the same general requirement using multiple 

award contracts. Companion contracts allow small businesses to compete against 

other small businesses for all task orders to be awarded under the companion contract. The contracting officer decides at the task order level whether a requirement 

is best suited to be competed amongst small business contract holders or by those 

who won contracts under the full and open request for proposal. The Department 

of the Air Force is considering the use of this strategy on other large service acquisitions. 

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