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FULL COMMITTEE FIELD HEARING ON

PARTICIPATION OF SMALL BUSINESS

IN HURRICANE KATRINA RECOVERY CONTRACTS

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF 

REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

APRIL 12, 2007

Serial Number 110-14

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

JUANITA MILLENDER-McDONALD, 

California 

WILLIAM JEFFERSON, Louisiana 

HEATH SHULER, North Carolina 

CHARLIE GONZA ́ LEZ, Texas 

RICK LARSEN, Washington 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

HENRY CUELLAR, Texas 

DAN LIPINSKI, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

BRUCE BRALEY, Iowa 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

STEVE CHABOT, Ohio, Ranking Member 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

STEVE KING, Iowa 

JEFF FORTENBERRY, Nebraska 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio 

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KEVIN FITZPATRICK, Minority Staff Director

STANDING SUBCOMMITTEES 

Subcommittee on Finance and Tax

MELISSA BEAN, Illinois, Chairwoman 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

DEAN HELLER, Nevada, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

Subcommittee on Contracting and Technology

BRUCE BRALEY, IOWA, Chairman 

WILLIAM JEFFERSON, Louisiana 

HENRY CUELLAR, Texas 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

JOE SESTAK, Pennsylvania 

DAVID DAVIS, Tennessee, Ranking 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

MARY FALLIN, Oklahoma

(II) 

Subcommittee on Regulations, Health Care and Trade

CHARLES GONZA ́ LEZ, Texas, Chairman 

WILLIAM JEFFERSON, Louisiana 

RICK LARSEN, Washington 

DAN LIPINSKI, Illinois 

MELISSA BEAN, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

LYNN WESTMORELAND, Georgia, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

MARILYN MUSGRAVE, Colorado 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

Subcommittee on Urban and Rural Entrepreneurship

HEATH SHULER, North Carolina, Chairman 

RICK LARSEN, Washington 

MICHAEL MICHAUD, Maine 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JEFF FORTENBERRY, Nebraska, Ranking 

ROSCOE BARTLETT, Maryland 

MARILYN MUSGRAVE, Colorado 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee

Subcommittee on Investigations and Oversight

JASON ALTMIRE, PENNSYLVANIA, Chairman 

JUANITA MILLENDER-McDONALD, 

California 

CHARLIE GONZA ́ LEZ, Texas 

RAUL GRIJALVA, Arizona 

LOUIE GOHMERT, Texas, Ranking 

LYNN WESTMORELAND, Georgia

(III) 

C O N T E N T S 

OPENING STATEMENTS

Page

Vela ́zquez, Hon. Nydia M. ....................................................................................... 1

Westmoreland, Hon. Lynn ...................................................................................... 3

Jefferson, Hon. William ........................................................................................... 4

Melancon, Hon. Charlie ........................................................................................... 6

WITNESSES 

PANEL I 

Preston, Hon. Steven C., U.S. Small Business Administration ........................... 8

Doan, Hon. Lurita, General Services Administration .......................................... 10

Strock, Hon. Lt. Gen. Carl A., U.S. Army Corps of Engineers ............................ 13

Schneider, Hon. Paul, U.S. Department of Homeland Security .......................... 15

Finley, Hon. Dr. James I., U.S. Department of Defense ...................................... 17

Dunne, Hon. Admiral Patrick, U.S. Department of Veterans Affairs ................. 19

PANEL II 

Shear, William, Government Accountability Office .............................................. 44

Dreyer, Ian Alexander, Perez APC ......................................................................... 46

Jones, Edwin, EJES, Inc. ........................................................................................ 47

Pequeno, Ricardo, Mid-South Plumbing ................................................................ 49

Priestley, Charles, Hummingbird Aviation, LLC .................................................. 50

APPENDIX 

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 63

Westmoreland, Hon. Lynn ...................................................................................... 65

Melancon, Hon. Charlie ........................................................................................... 69

Preston, Hon. Steven C., U.S. Small Business Administration ........................... 71

Doan, Hon. Lurita, General Services Administration .......................................... 75

Strock, Hon. Lt. Gen. Carl A., U.S. Army Corps of Engineers ............................ 85

Schneider, Hon. Paul, U.S. Department of Homeland Security .......................... 90

Finley, Hon. Dr. James I., U.S. Department of Defense ...................................... 98

Dunne, Hon. Admiral Patrick, U.S. Department of Veterans Affairs ................. 105

Shear, William, U.S. Government Accountability Office ...................................... 108

Dreyer, Ian Alexander, Perez APC ......................................................................... 124

Jones, Edwin, EJES, Inc. ........................................................................................ 126

Pequeno, Ricardo, Mid-South Plumbing ................................................................ 128

Edmonds, Kenneth, River Parish RVs ................................................................... 130

Priestley, Charles, Hummingbird Aviation, LLC .................................................. 132

(V) 

(1)

FULL COMMITTEE FIELD HEARING ON 

PARTICIPATION OF SMALL BUSINESS 

IN HURRICANE KATRINA RECOVERY 

CONTRACTS 

THURSDAY, APRIL 12, 2007

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

New Orleans, LA 

The Committee met, pursuant to call, at 2:00 p.m., at the Louisiana Supreme Court, 400 Royal Street, New Orleans, Louisiana, 

Hon. Nydia M. Vela ́zquez [Chairwoman of the Committee] Presiding. 

Present: Representatives Vela ́zquez, Jefferson, and Westmoreland. 

Also Present: Representative Melancon. 

OPENING STATEMENT OF CHAIRWOMAN VELA ́ ZQUEZ 

ChairwomanVELA ́ ZQUEZ. The House Small Business Committee 

is called to order. First, let me thank everyone for being here today. 

It has been 18 months since this nation witnessed one of our country’s largest natural disasters, Hurricane Katrina. 

We have never seen a more resilient community, people coming 

together to rebuild their neighborhoods on these vibrant streets. 

This is an important hearing to hold in a city whose very foundation is built on small business and the entrepreneurial spirit. 

There is no question that we still have a long way to go in repairing and rebuilding New Orleans. And the Federal Government 

must be a partner in this process. This path for many of these entrepreneurs has been delayed by massive backlogs, paperwork, and 

lengthy application processes. 

Last month, this committee passed the Recovery Act of 2007 creating a grant program to help local businesses that were declined 

a disaster loan. It also addresses the Federal Government taking 

Road Home grants away from entrepreneurs ensuring entrepreneurs will finally have the assistance they need to get their 

businesses back on track. 

The focus of today’s hearing is to make sure that as we move forward, small businesses are not left out of the rebuilding process. 

Early indications are that the Federal Government is not where it 

should be. 

Of the contracts that have been awarded, so far only 7 percent, 

and I repeat, 7 percent have gone to local entrepreneurs. And for 

2

those small businesses fortunate enough to get work, over half of 

these contracts were less than $100,000. 

This is clearly unacceptable and undervalues the contributions 

and capabilities of these local firms. Sadly, the outlook has been 

even worse for minority entrepreneurs who have been more underrepresented in the rebuilding process receiving only 4 percent of 

the contracts. 

Given the significant role minority entrepreneurs play, particularly here in Louisiana, it only makes sense that minority businesses are at the center of rebuilding their own communities. 

To begin addressing this problem, the committee has passed H.R. 

1468, the Disadvantage Business Disaster Eligibility Act introduced by representative William Jefferson, giving minority contractors more flexibility as they recover from Hurricane Katrina. 

This is a first step, but by no means an end to when it comes 

to this committee work to meet the needs of the minority business 

community. 

Shortly after Katrina hit, President Bush stood just a few blocks 

from here and said, and I quote, ′′As all of us saw on television, 

there is also some deep persistent poverty in this region as well. 

We have a duty to confront this poverty with bold action. When the 

streets are rebuilt, there should be many new businesses including 

minority-owned businesses along those streets,′′ end of quote. 

If we fail to follow up on this commitment, it will be nothing 

more than empty rhetoric, which is why today we will hear from 

the heads of six agencies who represent over 95 percent of the total 

spending as part of the Katrina relief effort. We will also hear from 

small businesses about their experiences in securing Federal contracts in the recovery process. It is the goal of the committee to examine the efforts of the agencies represented and to ensure that 

local entrepreneurs are given adequate opportunities for Federal 

work. 

More than 110,000 small businesses were destroyed or severely 

impacted by Hurricane Katrina. As we all know, the impact was 

enormous destroying houses, businesses, critical infrastructure 

adorning this historic city. 

Clearly it demands a response of the same proportion. That includes doing everything possible to ensure that local small businesses have the opportunity to rebuild their own communities and 

the Gulf Coast economy. 

Many small businesses are willing and able to perform these contracts. They are not asking for handouts here. The truth is that 

these local firms know this area and they know what it needs to 

get it back on track. 

It is important to acknowledge that we can stimulate the economy in small business growth by strategically using debt revitalization process of this city. 

For the past year and a half, we have seen a lack of action from 

our Federal Government. Today’s hearing is not going to be a onetime event. 

The agencies that are present here today will be expected to live 

up to their commitments and responsibilities. This is not a matter 

of coming here and saying one thing and then leaving and doing 

another. 

3

We will continue to hold these agencies accountable for ensuring 

local small businesses are included in the rebuilding of this valuable community. 

I thank you, and I look forward to hearing the testimony of today’s witnesses. 

And I now recognize Congress Member Westmoreland, ranking 

member of the subcommittee on regulations and health and also 

his feeling toward Ranking Member Steve Chabot. 

OPENING STATEMENT OF MR. WESTOMRELAND 

Mr.WESTMORELAND. Thank you, Madam Chairwoman, and thank 

you for holding this important hearing today to discuss the participation of small businesses in the Hurricane Katrina recovery effort. 

It’s my honor to be here on behalf of Ranking Member Chabot. 

I sincerely appreciate the opportunity to come to this great City of 

New Orleans as I have many times before, but this time to examine the topic of a devastating effect that happened here in 2005. 

As we have all seen and heard, the Gulf Coast region was absolutely devastated by this unprecedented storm that hit here in 

2005. These disasters will long be remembered for disrupting families, changing and ending lives, and enforcing Americans to rethink 

our vulnerability to Mother Nature’s wrath. 

Over 1,800 lives lost and countless billions of property and infrastructure losses. Nobody can deny that this natural disaster will 

forever change our assumptions of what we should be ready for 

when disaster strikes. 

We will never forget these images, but today we want to focus 

on something bigger and decidedly better that has come from this 

tragedy. The inevitable American spirit to take the hand that it is 

given and make it into something greater. 

Immediately following the hurricanes, countless Americans offered charitable assistance to the Gulf Coast region sending funds, 

food, and necessities and in many cases themselves in order to help 

the survivors begin rebuilding their communities and their lives. 

American small businesses have played an integral part in these 

events. Small mom and pop shops ship their wares to the areas as 

part of the massive outpouring of charity. 

Small business owners gave their employees time off to travel to 

the area and assist in the clean up. And donated millions of dollars 

in relief to the aid and to the American Red Cross and numerous 

other charitable organizations. 

Small businesses can and will have a major impact in the rebuilding effort, as well through the Federal contracting system. The 

supreme goal of the infrastructure and reconstruction in this area 

is to rebuild this city and the entire Gulf Coast as quickly and efficiently as possible in order to provide these citizens with a safe and 

stable home to live in, to have places to go to work and to worship 

and to get their children back in local schools. 

Because of the size and scope of this reconstruction, there are 

many advantages for the Federal Government to seek out opportunities to work with the small businesses. 

For example, their ability to innovate and find new niches that 

their larger counterparts cannot allow the flexibility in addressing 

these problems. 

4

Additionally and perhaps more importantly, Madam Chairwoman, small businesses are job creators. Awarding contracts to 

exiting and new local small businesses invigorates the local economy providing jobs for displaced New Orleans, income and potentially health benefits for their families and a renewed sense of stability and community that has made this area such a strong contributor to our nation’s prosperity in the past. 

Historically, small businesses in the U.S. has received a share of 

Federal procurement dollars, not quite in the size that is relatively 

important in the U.S. economy. 

While 99.7 percent of all employer firms are small, they receive 

about 23 percent of direct Federal procurements and close to 40 

percent in subcontracting dollars. The Federal Government must 

do a better job to ensure that the Federal marketplace is open to 

any and all companies that can do the task at hand. Of course, that 

includes our nation’s small business community. 

Madam Chairwoman, I want to thank you again for holding this 

hearing. I want to thank Congressman Jefferson and his efforts towards this relief and reconstruction, and I look forward to hearing 

from our distinguished panel today in working with you and others 

to address this important issue. 

And Madam Chairwoman, I yield back the balance of my time. 

ChairwomanVELA ́ ZQUEZ. Thank you. And now I recognize the 

member of the Small Business Committee Mr. William Jefferson 

and also - this is your district, right? 

Mr.JEFFERSON. Yes, ma’am. 

ChairwomanVELA ́ ZQUEZ. Mr. Jefferson has been very helpful in 

providing legislative alternatives and actions in Congress to help 

provide relief for small businesses in this area, particularly minority businesses. 

OPENING STATEMENT OF MR. JEFFERSON 

Mr. Jefferson, you are recognized. 

Mr.JEFFERSON. Thank you, Madam Chairlady. I want to welcome 

you to our city and to our region. And to thank you for bringing 

the Small Business Committee here. I want to thank Mr. Westmoreland. I understand it’s not his first trip here. He’s come before, 

just after the storm and he’s been deeply interested in this area as 

well. So I thank him again for his return and the committee for its 

visit. I—we often say that the overarching question here with respect to our recovery is recovery by whom; that is to say—I’m 

sorry, recovery for whom; that is to say everyone who was here before the storm, is this recovery going to be for them, for all of them 

and not just for a few who were left here on high ground. And recovery by whom meaning, will our people have a chance to recover 

their city or will it be done by folks from the outside or folks who 

don’t really bring a whole lot to restore our economy, but who take 

the money away and don’t believe in lasting recovery for us. 

And my objective is to make sure the recovery is for the people 

who were here before the storm and by the folks who were here 

before the storm to the extent possible. 

And that’s what I think all of this is about. I would like to also 

thank the witnesses who are here and welcome them to the region. 

Many have been here before, I know. And some have not. I underVerDate 0ct 09 2002 14:08 Jan 10, 2008 Jkt 033615 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\34826.TXT LEANN
5

stand that one actually lived in the Lower 9th Ward, and you will 

hear about that, I’m sure, in a little bit. 

But we’ve encountered many problems since the storm struck, 

and not the least of these have been our problems, small businesses have been overwhelmed, not only by the physical damage 

caused by the storm and by the levee breaches, but also by the 

inept policies, poor excuse strategies, and in many cases just being 

locked out of the Federal contracting processes after the storm. 

The storm left 80 percent of New Orleans under water for well 

over two months leaving 110,000 businesses—as our Chairlady has 

said, 80,000 of those in New Orleans—I’m sorry, in the State of 

Louisiana—businesses damaged and destroyed in the wake of the 

storms. 97 percent of which were small businesses that were left 

shut and unable to recover from their losses. 

We are relying on General Strock and the Corps to get it right 

this time. We have no choice. And I’m sure with all of the attention 

they are paying and others are paying to it, that it will get done. 

But for many of us, we know that the storm, itself, was not the 

immediate cause of the drowning of the city. The more immediate 

cause was the breach of the levees, and we take that as a Federal 

responsibility that didn’t get done properly; and, then, therefore, 

we think there’s more of an obligation on the part of the Federal 

Government to help restore us. 

And it ordinarily would be the case where we might just say, 

Well, we had bad luck here; and we just want to have the government help us out, in some humanitarian way reach out to us. But 

here we think it’s more substantial than that because of what happened with the levees. 

The events that followed after the storm have made the road to 

recovery that much more difficult, especially for local contractors 

looking to have a hand in rebuilding their communities. 

In the time just following the storm, 90 percent of the 2 billion 

dollars in initial contracts were awarded to companies based outside of the three primary affected states and to large concerns. 

Minority businesses took an even harder hit as they received just 

1.5 percent of the first 1.6 billion dollars spent here. Women-owned 

businesses received even less. This was the outcome in spite of 

laws such as the Stafford Act, which required contracting officials 

to prioritize towards local businesses and to reach a goal of 5 percent of the contracts to minority-owned businesses. 

Davis Bacon was also temporarily suspended opening the door up 

for low-wage workers to take work away from our local firms. A 

prime example of the struggle that local contractors have faced is 

that of the Knight Enterprises, LLP, a New Orleans minority firm 

owned by Mr. Al Knight. Mr. Knight had a contract to wire Louisiana storm damaged Alvin Callender Naval Air Station. It was 

abruptly canceled, lost to a larger national firm putting his workers, primarily African American workers, out of work. 

The firm that ultimately received the contract to complete the 

work was BE&K out of Alabama and lower-wage workers without 

benefits. BE&K was working for Kellogg, Brown, and Root, a subsidiary of Halliburton Company. 

And I would ask unanimous consent, Madam Chair, for this, the 

record of The Wall Street—I’m sorry, Washington Post be inserted 

6

into the record, dated October 7, which chronicles this one horror 

story, which unfortunately is not—it’s just one of the many. 

I want to mention something else that’s been happening with our 

contractors here. I know my time has rapidly expired, but I just 

want to mention this if I might have another little time, Madam 

Chair. 

We’ve had—one of the major things, I hope you-all think 

through, is minority contractors and others and women, small 

women-owned businesses are winning contracts because—and they 

decide on how they want to bid—expenses for one aspect of the contract let’s say for deactivation, they may bid it low; for maintenance, they bid high. Overall though, the thing wins because overall it’s lower than the other bidders. 

And after that, there are reviews that take place. And the reviews say, goodness, in this one area where you have these high 

numbers, we can do better than this; let’s redo this. 

And, in effect, they come back and take the contracts away from 

folks who won them in fair and square bids before. And they’re just 

tearing them apart as they go along, and it’s making it awfully 

hard to get this done. 

One of the biggest issues that I hope we will talk about also is 

this issue of bundling today. I don’t know whether you call it bundling or something else. But they are making the contracts so large 

until small businesses can’t reach them. 

And there are two problems with that. Number one, they don’t 

have the capacity to reach them. And, Number two, when they get 

so large, they can’t meet the bonding requirement. And they are 

being shut out in that way as well. And I hope we find some way 

to address these concerns. 

I want to say one last thing, Madam Chairwoman, if I might, on 

behalf of our local small business folks, they’re doing an excellent 

job trying to do what they can, but they are sorely undermanned. 

In fact, four or five years ago, we had 30 people in our small 

business state office down here, and now we have nine. How in the 

world can we stage a recovery here with so much at stake, so much 

for the SBA to do without having the requisite number of folks. 

And nobody has asked me for an office to make this argument. 

I’m just saying, if we are going to be real about this, we really have 

to have this agency have what it needs to oversee this recovery, 

Mr. Preston. Somehow we’ve got to fix this problem for them. 

I’d just yield back—I don’t have any time to yield back. But I 

thank the Chairlady for letting me go on past my time, and we’ll 

have a lot to talk about here today, and I appreciate it. 

ChairwomanVELA ́ ZQUEZ. Thank you. 

And now I recognize Congress Member Charlie Melancon, whose 

district was devastated by Hurricane Katrina. And I just want to 

acknowledge the hard work and how instrumental Mr. Melancon 

has been in helping us draft legislation that has occurred in helping small businesses in this region. 

OPENING STATEMENT OF MR. MELANCON 

Mr.MELANCON. Thank you, Madam Chairwoman, I appreciate it. 

First, I would like to thank Chairwoman Vela ́zquez, and I’m sorry 

Mr. Chabot is not here, but, Mr. Westmoreland, thank you for takVerDate 0ct 09 2002 14:08 Jan 10, 2008 Jkt 033615 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\34826.TXT LEANN
7

ing the time to come to New Orleans and Louisiana, for their continuing commitment to helping us rebuild the Gulf Coast. 

Over a year and a half has passed since Hurricanes Katrina and 

Rita have devastated South Louisiana and the Gulf Coast area. I’m 

pleased my colleagues remain committed to seeing us fully recover 

and rebuild. 

I’d also like to join my colleagues in welcoming the local small 

business owners that have come here today to tell their stories. I 

know you are tired and you are frustrated, but I appreciate you 

taking the time to come here and testify about your experience 

since the storms. 

I also understand that you’re tired of talk and that you want action and we do too. 

These hearings are our way of letting Congress know how to help 

remedy the current problems that still persist on the ground and 

also how to prevent the same problems from happening in the future to other homeowners, business owners, and non-profit organizations and individuals. 

You survived two of the worst natural disasters in our nation’s 

history. And then on the heels of those hurricanes you faced a manmade disaster, one of the most disorganized and chaotic Federal responses in the history of this country. 

Many of these Federal agencies that were created to help you recover wound up making matters worse. And this is inexcusable. 

Today we will put a spotlight on one of these instances in which 

the Federal Government’s response was hurtful rather than helpful. 

After Katrina, there were millions if not billions of dollars worth 

of disaster work that needed to be done. Everything from debris removed to maintaining FEMA trailers to supplying and delivering 

emergency supplies across the Gulf Coast. 

Many of these contracts were awarded to out-of-state businesses 

rather than the local businesses who were victims of the storm, the 

people who needed to work the most. 

Small business owners that were struggling to survive after the 

storm had to watch on the sidelines as large contractors came from 

out of state and performed the recovery work that the locals could 

have also shared in. 

Many local business people and skilled workers who had already 

lost their homes, but were still hoping to find work were replaced 

by undocumented workers, by contractors looking to make more 

money. 

I have a situation in St. Bernard Parish, and I understand it also 

exists in several other parishes where parishes contracted their 

own debris removal. It is just abysmal that these people have not 

been paid. It is outrageous. And every time we do a meeting, we 

get promises; and that’s all we’ve gotten. Our people that did get 

some work need to be paid just as other people from out of state 

got paid. 

I hope this hearing today will not only shed the light on what 

went wrong, but also ensure that this serious problem doesn’t continue. Small businesses are the lifeblood of Southeast Louisiana’s 

economy. And for that matter, it’s the lifeblood of this country. To 

continue denying them the opportunity to get their businesses back 

8

up and running is hindering the Gulf Coast recovery. And this is 

totally unacceptable. 

Again, thank you to the Committee for holding this hearing 

today and continuing Congress’s focus and attention on rebuilding 

the Gulf Coast. Thank you, Ma’am, I yield back my time. 

ChairwomanVELA ́ ZQUEZ. And now I welcome the first panel. And 

our first witness is the Honorable Steven Preston. He’s the administrator of the U.S. Small Business Administration. This is his 

third appearance before the committee for Mr. Preston who was 

confirmed in July. 

Welcome. And normally we allow for a five-minute presentation. 

I’m going to be a little more flexible today. And I will use my gavel 

if you are taking too much time. But I just want for you not to 

rush. 

As you-all know, it is important for us to be able to allow for you 

to make a presentation as to all of the things that you are doing 

in making sure that we provide the assistance and recognize the 

role that local small businesses can do in the rebuilding of the Gulf 

Coast. 

Mr. Preston. 

STATEMENT OF THE HONORABLE STEVEN PRESTON, 

ADMINISTRATOR, U.S. SMALL BUSINESS ADMINISTRATION 

Mr.PRESTON. All right. Thank you very much, Chairwoman 

Vela ́zquez. Also Congressman Westmoreland, Congressman Jefferson and Melancon, thank you very much for having me here to testify before you. 

In the reconstruction of the Gulf today, small business participa- tion has been about 29 percent of the more than $15 1/2 billion 

that’s been awarded. 

Of those amounts, about 7.9 percent has gone to small, disadvantaged businesses. I know the committee is also interested the performance of the Federal Government in contracting with local businesses as you’ve mentioned. 

According to our preliminary data, local businesses of all sizes in 

Alabama, Louisiana, and Mississippi have received approximately 

22 percent or about 3.4 billion of that 15 1/2 billion in contracts. 

And of that amount, the 3.4, about 57 percent has gone to small, 

local businesses. 

Here in New Orleans, 58 percent of our district office portfolio of 

8(a) firms has actually received government contracts. We at the 

SBA are committed to making sure that small businesses receive 

a fair opportunity in reconstruction efforts. After Katrina, SBA devoted five procurement center representatives specifically to work 

with Federal agencies contracting and subcontracting opportunities 

for firms in the Gulf region. 

All other PCRs nationwide were directed to search for small business contracting opportunities. We sent our district director from 

Chicago Judith Roussel with a long New Orleans history. She’s a 

native down here. A former head of our 8(a) program of our government contracting programs. We brought her down here to support 

the effort because of the extent of it. We also partnered with the 

Department of Commerce and other agencies to establish the hurricane contracting information center, which is a portal for small 

9

businesses to access assistance and contract information from various contracting agencies. 

The HCIC contracting specialists took thousands of calls. The 

web site got nearly 57,000 hits. The operation of that has now been 

turned over to the SBA, and we will use that to support us in future disasters. We also adapted our business matchmaking initiative in conducting a six city mobile registration tour in the Gulf. 

That mobile tour provided help for small businesses with electronic 

registration in the central contractor registry and business counseling was also provided by the SBA resource partners through the 

SBDC and SCORE network. 

Following the registration events, our PCRs worked with over 

700 small businesses to match capabilities of the firms with the 

needs of the procurement activities. 

Those registered small businesses have receive more than 650 

million in contracts and their profiles have been uploaded to the 

GSA’s electronic notification system for procurement opportunities. 

We’ve held small business matchmaking sessions with many of 

the major agencies. We’ve held dozens of small business outreach 

events in coordination with state and local and Federal groups, 

which have been extremely well-attended. 

And as I’ve shared my written testimony, in the interest of time, 

I won’t get into it. We have many success stories to highlight. 

In addition to prime contracts, obviously subcontracting puts 

much needed dollars in the hands of local small businesses in the 

Gulf. The SBA worked extensively with the minority business councils, New Orleans Youth for Prosperity, and other groups to locate 

other small businesses here in New Orleans and in Mississippi to 

support the subcontracting needs. 

I personally entered my ninth month in the job this week. I have 

personally made disaster recovery a top priority for me. Since I’ve 

come into the job, this is my ninth trip to the Gulf. 

Since my nomination, I’ve met with many leaders at the state, 

the local and congressional level. I’ve held homeowner and business 

outreach forums, participated in numerable outreach events and 

have taken much of that very, very valuable feedback I’ve gotten 

and implemented changes in the agency to address those concerns. 

At the height of our recovery effort we had approximately 100 

disaster centers operating down here to support disaster victims. 

And our overall staff in the Gulf last year exceeded 1,600 people. 

That was mostly for our disaster loan program. 

But we’ve also trained and counseled over 20,000 people in Mississippi and Louisiana through our resource partners last year 

alone. We also guaranteed over 200 million in small business loans 

last year alone in addition to the disaster loans that we put out 

there. 

And we also think that because of the work we’re doing that 

2007 could be a record year for the SBA in guaranteed business 

lending here in the New Orleans district. 

The agency is committed to utilizing all of our programs to help 

the Gulf Coast recover. We’ve disbursed approximately 1.2 billion 

in physical and economic disaster loans to small businesses 

throughout the Gulf Coast in addition to more than 4.3 billion to 

homeowners. 

10

We’ll also build on these kinds of successes to expand small business Federal contracting opportunities. 

Going forward, assisting small businesses can be absolutely critical for us in this area. We’ll work with small businesses to develop 

forward marketing strategies, for example, protecting financial information after a disaster and planning for possible future events 

not only in this region but other regions in the country. We will 

be working with our district offices and our resource partners to coordinate matchmaking and registration and training events to increase small business contracting opportunities; and we’ll also continue to use, should anything in the future happen, the hurricane 

contracting information center as an important source of coordination. 

We continually work with GSA and a number of the other agencies to establish up-to-date sourcing list for small businesses and 

we’re building upon all of this progress in small business contracting and subcontracting awards that we’ve seen here in the 

Gulf Coast. 

While small business goals do apply to government contracting 

as a whole, we and the other Federal agencies recognize their importance especially along with their other responsibilities under the 

Stafford Act as a guide for accomplishment in disaster recovery. 

So Chairwoman Vela ́zquez, thank you very much for your time, 

and I look forward to your questions. 

[The statement of Mr. Preston may be found in the Appendix, on 

page 71.] 

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Preston. Now we have 

the Honorable Lurita Doan. Ms. Doan was sworn in as the Administrator of General services in May 2006. 

Welcome. 

STATEMENT OF THE HONORABLE LURITA DOAN, 

ADMINISTRATOR, U.S. GENERAL SERVICES ADMINISTRATION 

Ms.DOAN. Thank you, Chairwoman Vela ́zquez, Congressman Jefferson, and Congressman Melancon, and Congressman Westmoreland. It’s a pleasure to be back in my hometown of New Orleans 

and it’s a privilege to testify before this committee on such an important topic. 

The house I grew up in is located just a few miles from here in 

the 9th Ward, and it’s now a shell. It’s smashed and it’s been abandoned. And I have a personal interest in this hearing because one 

of the reasons I accepted this, President Bush’s nomination to become the administrator, was because I wanted to retool GSA’s 

abilities in national emergencies. 

In particular, as a black woman and a former small business 

owner, I’m on a crusade to remove bureaucratic barriers to small 

business women, service disabled veterans, and HUBZone minority 

businesses in dealing with the Federal Government because I know 

that the playing field is not always even. 

During the past ten months, GSA has had some good successes 

in opening doors to small minority businesses. We have a very extensive record, which has been submitted in my written testimony, 

so I’m just going to highlight a few things. 

11

Since coming on board, we directed that the restoration of GSAs 

most destroyed property and most valuable property in New Orleans, the U.S. Customs House had subcontracts performed by small, 

minority, and local-based companies. 

We awarded millions in contracts to a variety of small, local businesses that are performing on this contract now even as I speak. 

It used to be hard for small companies to get on the GSA schedule 

in order to successfully gain access to the Federal procurement system, but during the past 10 months, we have slashed the amount 

of time it takes for a small company to apply for and receive a GSA 

schedule from 157 days to 30 days, and I actually went over there 

and solicited a few more gentlemen to get a few more local businesses on the schedule before the hearing. 

Madam Chairwoman, I know first-hand experience that the Gulf 

South is a hot bed of entrepreneurship. My grandmother started a 

business just a couple of blocks away from here 99 years ago. 

That same vitality is still very much alive in the Gulf region, and 

I’m going to keep cutting red tape and pushing to make sure that 

any small company with a great idea is going to have a much easier task getting on the schedule than ever before and to make sure 

that GSA does a much better job of tracking that participation. 

This is my fourth official trip back home in ten months, although 

actually since it’s my home, I’ve been back a few more times. But 

GSA has already had four events here in the past few months. We 

are going to have more national and regional conferences in this region for I know that if we can push the Federal Government to 

come here, indirectly we are also helping small business owners 

around the region that would otherwise—business that would otherwise go to different places. 

GSA employees have discovered their entrepreneurial energies 

and are finding better ways to save taxpayer money and drive business to the region. 

Our Region 7 Administrator Scott Army is here. And, Scott, could 

you just stand so they can see you? GSA put in place a new disaster response vendor database with 1,400 companies already listed. It will be a significant asset after future disasters. 

GSA has hosted or participated in more than 25 small business 

events in this region. And as I said, and as the GAO report indicates, this has resulted in the 71 percent of the Federal GSA 

spending going to small and minority businesses. Our new disaster 

recovery purchasing program for state and local governments allows state, local, and tribal agencies to access the GSA schedule to 

speed recoveries from a major disaster or an act of terrorism. So 

we are doing good things. 

But let me be the first to admit: It’s not enough; we can do more. 

We need to do more. And as long as I am administrator, we will 

do more. 

Since I became administrator, GSA has completely retooled its 

emergency response capability and created a single office of emergency response and recovery that reports directly to me. 

In this way, all of GSA’s abilities and resources have been more 

sharply focused and our ability to respond has been fundamentally 

improved. During Katrina, we had so many different folks trying 

to do so many different things, without the concerted push and 

12

support that was needed from the top, and we have fixed that problem. 

I want to compliment our GSA Federal contracting officers and 

support people that have been working hard on the recovery of 

New Orleans and the Gulf. Our employees belaboring as best they 

could in a broken system. Too often they were stymied by too much 

red tape, influx of old bureaucratic processes that inhibited their 

ability to do the right thing. 

Their needs to be better balance between contract compliance 

and accountability, and I think that our Federal contracting officers actually should have more leeway to take effective actions and 

make good decisions. 

And I will, depending on their initiative and professionalism to 

make decisions that the nation would be proud of. And our improved tracking processes will verify these results. 

Madam Chairwoman, one of the many things I’ve learned over 

the past few weeks is that I cannot do this alone. And I am going 

to need your and the committee’s help and support in order to 

make this happen. 

When Federal contracting officers make difficult decisions under 

pressure, we need to support them in every way. I do not want our 

contracting officers to be so fearful of making a tough decision that 

they become paralyzed into inaction. 

We have terrific people who work in our contracting shop. And 

I think if we have the wisdom and courage to let them perform, we 

will see a fundamentally improved performance during our next 

national disaster. 

I want to change with your help the culture of Federal contracting to one based on accountability to the taxpayer, one that 

awards innovative Federal contracting officers who identify problems and solve them early when they can do the most good. 

And in 1965, my dad chopped a hole in our roof because we had 

to escape from Hurricane Betsy. He tied a rope around me and my 

brothers and my sisters. And we sat on the roof and watched our 

possessions and an occasional dead body float by as we waited for 

rescue. And while we were waiting, the one thing that I still remember from this is it is so important when you are in a crisis, 

when you have a national disaster to believe and trust that the 

government will not abandon you and that help will be on the way. 

So when the next hurricane hits or any disaster, I want all of my 

GSA employees to be focused more on the outcome than on the bureaucratic process, to be thinking about more what can be done to 

help those stranded on roofs than hiding behind excuses of compliance. 

GSA is justifiably proud as the GAO report indicates—page 11, 

by the way, guys—that approximately 71 percent of all GSA—all 

Katrina procurement dollars in the Gulf region went to small and 

minority, service disabled veterans, and women-owned business. 

And even with a standard margin of error 5 to 7 percent, 64 percent is still an extraordinary performance. 

We are even more proud of our recent efforts to champion and 

provide opportunities to local businesses. And I intend to continue 

this strong commitment. 

13

The Gulf region is home to our history, our heritage, and our 

hope for the future. You have my commitment that GSA, under my 

administration, will not, not ever, give up. And we will not abandon it. Thank you for giving me this opportunity, and I look forward to your questions. 

[The statement of Ms. Doan may be found in the Appendix, on 

page 75.] 

ChairwomanVELA ́ ZQUEZ. Thank you, Ms. Doan. Now I welcome 

the Honorable Lieutenant General Carl Strock. General Strock is 

Commander and Chief of Engineers for the U.S. Army Corps of Engineers. 

Welcome. 

STATEMENT OF THE HONORABLE LIEUTENANT GENERAL 

CARL A. STROCK, COMMANDER AND CHIEF OF ENGINEERS, 

U.S. ARMY CORPS OF ENGINEERS 

GeneralSTROCK. Madam Chair, thank you very much and Members of the Committee. I am Lieutenant General Carl Strock. I am 

the Chief of Engineer and Commander of the U.S. Army Corps of 

Engineers. 

Thank you for the opportunity to testify before you today concerning small business participation in the rebuilding of the Gulf 

region in the aftermath of Hurricane Katrina. 

Following this disaster, our first priority was public safety and 

meeting the needs of the people impacted by this natural disaster. 

We then turn to setting the conditions for the recovery of the region, the recovery of the physical infrastructure and the environment, also the economics of the region. 

In the latter effort of economic recovery, I want to ensure you 

that I am personally committed and the U.S. Army Corps of Engineers is institutionally committed to using small businesses in the 

performance of our work, both in the normal course of business and 

in the times of natural disaster. 

As always, we’ve accomplished our mission through working with 

the private sector and as both the public interest in our own agencies to vocalize as much of that capacity as possible. And small 

businesses represent a tremendous amount of capacity necessary 

for us to accomplish our missions. 

Under the National Response Plan, the Corps is assigned as coordinator for emergency support function or ESF 3, public works and 

engineering and support other ESFs in addition to our own missions. 

During disasters, the Corps is the primary agency for response 

activities such as ice, water, debris removal, temporary power, and 

temporary roofs. And wherever possible, we use our program all of 

the advance contract initiative or ACI to competitively award contracts for future execution of these missions before the disaster 

strikes. 

Due to the unprecedented magnitude of Hurricane Katrina, the 

Corps needed to award debris contracts in excess of those that were 

pre-placed under the ACI program. 

Based on the large scale of the required works, we were awarded 

four more contracts following the emergency to remove debris in 

Mississippi and Louisiana. Each contract was valued at $500 milVerDate 0ct 09 2002 14:08 Jan 10, 2008 Jkt 033615 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\34826.TXT LEANN
14

lion with an option to increase each contract by an additional $500 

million. This requirement was open to any company under a shortened advertisement and proposal period. 

For these additional contracts, we realized that the accomplishment of this mission would require substantial subcontracting by 

the prime contractor. We included aggressive small business subcontracting goals in these contracts and negotiated a small business subcontracting goal of 73 percent for three of the contractors 

and 60 percent for the remaining one. 

Small businesses have played an important role in the Corps 

Gulf region recovery activities. As of March 2007, 88 percent of our 

subcontracting dollars went to small businesses for work in Louisiana. And 84 percent in Mississippi. As well as the Corps is 

doing, though, regarding disaster recovery subcontracting efforts, 

there is room for improvement. 

We have learned valuable lessens that will improve our practices 

and procedures in the future. I’m committed to ensuring that we 

maintain complete and accurate subcontracting information on all 

applicable contracts. 

We will continue to hold our large business partners accountable 

in fulfilling their small business obligations. We will ensure that 

proposed subcontracting goals are realistic and attainable, but 

challenging. 

Our large business partners who demonstrated their commitment to small businesses will be awarded higher ratings during 

proposal evaluations. When subcontracting plans are not required, 

we will ensure proper justifications are contained in the contracting 

file. 

And finally in our small business program, we are developing a 

formal subcontracting training module that will be delivered Corpswide. 

I welcome independent reviews of our small business program. In 

addition to the GAO review in January of 2007, I directed the 

Corps’ inspector general to conduct an evaluation of our small business program office. At the end of this inspection, the IG will provide a report to me containing findings, observations, and recommendations for any corrective actions. 

Our commitment to small business is not limited to subcontracting opportunities. I’m also committed to expanding our base to 

small business prime contract awards. Traditionally, the Corps of 

Engineers gives over 40 percent of its multi-billion dollar effort to 

small businesses as prime contractors. We are currently working 

on acquisition plans with the re-competition of several or our ACI 

contracts. These new plans work to include small disadvantaged 

businesses as prime contractors and are more friendly to small 

business firms. 

With this new business model after initial planning the Corps 

will consider the small disadvantaged business and HUBs—will 

first consider the small disadvantaged business and HUBZone 

goals. 

Subcontracting goals will be higher in small business categories. 

The Louisiana recovery office has identified approximately 16 new 

small business prime contract opportunities worth over $150 million for this fiscal year alone. 

15

The Corps is in the process of repairing, restoring the hurricane 

protection system in New Orleans. And we have developed an acquisition plan as we move forward to execute this mission. Of the 

total of $5.8 billion appropriated for this work, the acquisition plan 

includes approximately 34 percent of this work or 1.98 billion for 

small, disadvantaged, HUBZone, and service disabled veterans, 

and small businesses as prime contractors. 

The approximate number of planned contract awards is 150 and 

101 of those will be set aside for those small business categories 

as described above. 

Of the 43 contracts awarded to date, all but three have been 

awarded to small businesses. Of the $236 million obligated on this 

contract, 137 million has been obligated to small businesses on 

prime contracts. 

In addition to the prime contract plan discussed here, each unrestricted prime contract that is awarded to a large firm will require 

a subcontracting plan and goals that include small businesses. 

To close, thank you once again, Madam Chair, for allowing the 

Corps of Engineers the opportunity to be available before this committee to discuss the Corps subcontracting procedures during times 

of emergencies. Many Corps personnel have served our nation by 

helping in response to the natural disasters in Texas, Louisiana, 

Mississippi, Alabama, Florida and elsewhere in the nation and the 

world. 

We are proud to do so. I would be happy to answer any questions 

the committee members may have. 

[The statement of LtG. Strock may be found in the Appendix, on 

page 85.] 

ChairwomanVELA ́ ZQUEZ. Thank you. And now I welcome the 

Honorable Paul Schneider. Mr. Schneider is the Under Secretary 

for Management of the U.S. Department of Homeland Security. 

Welcome, sir. 

STATEMENT OF THE HONORABLE PAUL SCHNEIDER, UNDER 

SECRETARY FOR MANAGEMENT, U.S. DEPARTMENT OF 

HOMELAND SECURITY 

Mr.SCHNEIDER. Thank you, Madam Chairwoman and Members of 

the Committee for the opportunity to discuss the Department of 

Homeland Security’s small business participation in the rebuilding 

of the Gulf Coast in the aftermath of Hurricane Katrina. 

I have been the Under Secretary for about 100 days. For the previous 3 1/2 years, I was a defense and aerospace consultant. Prior 

to this, I was a career civil servant for about 38 years. 

My last three government positions were Senior Acquisition Executive at the National Security Agency; Principal Deputy Assistant Secretary of the Navy for Research, Development, and Acquisition; and Senior Civilian of the Naval Sea Systems Command of 

the Navy’s largest shore command. 

The Small Business Act requires Federal agencies to establish an 

office of small and disadvantaged business utilization. The goal is 

to foster an environment where these highly-skilled businesses can 

on their own merits compete successfully for a fair share of DHS 

contracts. 

16

We have a solid track record of exceeding the small business, 

women-owned, and small and disadvantaged business, prime contracting goals every year. 

FY-O6 DHS achieved 32 percent in small business prime contracting, which is 9 percent greater than the Government-wide 

goal. Government-wide small disadvantaged business goal is set at 

5 percent yet we target small disadvantaged business for 8 percent 

of our contracting this fiscal year. 

Following Hurricane Katrina, FEMA has played a key role in engaging the small business community and directing the maximum 

share of dollars back into local economies. 

FEMA has adopted new procedures and strategies that facilitate 

the maximum level of engagement with the local contracting communities. Prior to FEMA issuing any solicitation, FEMA field 

branches conduct market research to determine whether the local, 

small business can meet programming requirements. If so, then a 

solicitation is structured as either a set aside or local preference. 

If no such capability is available, then the scope of the solicitation is expanded to include larger local businesses. If still no capability exists, then the geographic scope of the solicitation is expanded to the state level, to the Gulf Coast region and finally to 

a national pool of contractors. 

Response to Hurricane Katrina and Rita, DHS issued 28 percent 

of its contract dollars to small business and 8 percent to small, disadvantaged businesses. DHS has also exceeded the SBA’s goal of 

5 percent target for women-owned business and 3 percent for 

HUBZone businesses. 

Additionally, FEMA has engaged the local business community 

by obligating 21 percent of all prime contract dollars to local businesses in the Gulf Coast region. 

In addition to the many contract awards issued to small and 

local businesses for requirements that would transition from the individual assistance, technical assistance contracts, FEMA has 

issued several other major procurements which support DHS’s 

goals of maximizing contracting opportunities with the small and 

local businesses. One example of an upcoming solicitation targeted 

at small businesses is the Gulf Coast Site Restoration and Design 

Bill. This solicitation will support group site restoration needs and 

a development of future sites on an as-needed basis and will be 

limited to small businesses in Louisiana and Mississippi. 

In order to facilitate further collaboration with the small business community, FEMA is taking the following steps: Outreach forums to the small business communities including vendors and 

subcontractors in the Gulf Coast, potential establishment of an office of small and disadvantaged utilization for the Gulf Coast region. Networking with representatives of U.S. Small Business Administration in Louisiana district office and local small business 

development centers and a creation of a database of contact information and portfolios for local, small, service disabled, veteranowned, 8(a), HUBZone, and women-owned businesses to be utilized 

by the contracting professionals. 

In summary, the Department of Homeland Security is firmly 

committed to a unified team approach to support the critical HomeVerDate 0ct 09 2002 14:08 Jan 10, 2008 Jkt 033615 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\34826.TXT LEANN
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land Security Commission and meet an important public policy objective of including small businesses in the Federal marketplace. 

I want to thank the members of this committee for your support 

of the Department of Homeland Security and its small business 

program. I will be happy to answer any questions that you may 

have. 

[The statement of Mr. Schneider may be found in the Appendix, 

on page 90.] 

ChairwomanVELA ́ ZQUEZ. Thank you, sir. Our next witness is the 

Honorable Dr. James Finley. Dr. Finley is a Deputy Under Secretary of Defense for Acquisition and Technology at the U.S. Department of Defense. 

Welcome, sir. 

STATEMENT OF THE HONORABLE JAMES I. FINLEY, DEPUTY 

UNDER SECRETARY OF DEFENSE FOR ACQUISITION AND 

TECHNOLOGY, U.S. DEPARTMENT OF DEFENSE 

Mr.FINLEY. Thank you, Chairwoman Vela ́zquez, and members of 

the House Committee on Small Business. Thank you for inviting 

me here today to appear before you and discuss small business participation in the aftermath of Hurricane Katrina. 

I come to you—I’m new to the Government. Like many of my colleagues here, I’m in my first year as a Federal Government employee. First time I’ve ever been in the Federal Government in any 

position. I have about 40 years of industry experience. 

My experience ranges from the Fortune 50 companies at the 

highest levels and corporate boards to small business as a small 

business owner. You will find me to be entrepreneurial and innovative and an extraordinary advocate of small business. 

As you know, several military installations have been impacted 

by Hurricane Katrina, including Keesler Air Force base in Biloxi, 

Mississippi; Maxwell Gunter Air Force base in Montgomery, Alabama; Naval Air Station, New Orleans, Louisiana; Naval Air Station in Pascagoula, Mississippi; and the Marines Corps Reserves 

headquartered here in New Orleans, Louisiana; as well as shipyards and production facilities. 

Tens of thousands of Department of Defense personnel including 

the military and civilian active workforce, the military and civilian 

retirees contractors, local businesses and families in support of the 

Department of Defense were directly affected. 

The Department of Defense completely agrees with the March 

2007, GAO report recommendations and has initiated actions in 

support of those recommendations to, one: Issue guidance reinforcing importance of the subcontracting plan requirements; and, 

No. 2, ask the Department of Defense inspector general to conduct 

a review of the appropriate future data to ensure the subcontract 

planned guidance is being followed. 

The GAO found at the time the report was issued that one contract action could not be explained with respect to the lack of a 

subcontracting plan. That one finding has since been addressed. It 

was attributable to a contract award by the Defense Logistics 

Agency with the Campbell Soup Company. 

18

The GAO has since been provided with that information, a full 

explanation provided and has concurred with the Department of 

Defense’s explanation. 

The GAO report states that small business receives 28 percent 

of the $11 billion in contracting dollars from DHS, GSA, and 

United States Army Corps of Engineers and the Department of Defense. 

Local business of all sizes in Alabama, Louisiana, Mississippi receive 18 percent or 1.9 billion of the 11 billion. Of the 1.9 billion, 

small business receives 66 percent of the awards to provide trailers, administrative and service buildings, restoration activities, 

clean up activities, excavation, debris removal, and temporary ripping installation. 

The Department of Defense has issued an interim rule amending 

the Federal Acquisition Regulation Supplemental Part 218 for 

emergency acquisitions. This rule enables flexible acquisition management and provides a single reference that may be used to facilitate and expedite acquisition supplies and services during emergency situations. 

In addition, the defense procurement and acquisition policy office 

has established an emergency procurement committee that meets 

weekly and includes membership of the Department of Defense 

Small Business Program Office. 

Outcomes from these meetings have resulted in a number of initiatives based on lessons learned. For example, a contingency contracting guide in the form of pocket-sized handbook is being developed for the Department of Defense and military and civilian acquisition workforce. 

Initiatives are being taken for improved processes to expeditiously procure goods and services in emergencies and contingency 

operations. Third web-based community of practice has been established on the Defense Acquisition University web site, 

www.dau.mil. 

Our capacity drives our nation’s economy, provides for our national security, and enables our technological leadership role of the 

Department of Defense. The Office of Small Business Programs 

which oversees an annual budget of $1.3 billion to the Department 

of Defense small business innovative research program is a key 

compliment of that effort. Approximately, 3,000 contracts were 

awarded annually to these research programs in small business. 

These innovative research awards enable our agility and flexibility 

to maintain our decisive advantage for existing and future challenges to protect our freedom and respond to national disasters. 

Small business prime and subcontract dollars have virtually doubled between 2000 and 2005. This mainstream of small business 

industrial base coupled with innovation provides additional momentum for our military and civilian workforce at the Department 

of Defense to protect our country. 

In addition to mainstream industry presence and the innovative 

research programs, the Department of Defense also utilizes comprehensive subcontracting programs and mentor/protege programs 

incentivized small business to participate in opportunities at the 

Department of Defense. 

19

For example, today the Department of Defense has 152 mentor/

protege agreements with small business companies that encompass 

40 states. Examples of these small business products and services 

include things from high accuracy global positioning equipment to 

thermo batteries for sonar and display systems to manufacturing 

and development methods of improvement for canvas, modeling 

and simulation capabilities, information security, advanced surface 

mount board manufacturing capabilities and sensor integration solutions. 

We took the opportunity while here to visit with our office of 

PTAC. PTAC is our Procurement Technology Assistance Center 

based here in New Orleans. There are three individuals that have 

been here with the Department of Defense for decades. We were 

here before Katrina, some prior to Katrina, and now we’re in the 

aftermath of Katrina. 

Some of these individuals have lost everything. They have experienced first-hand to help and facilitate small business interests 

with the Department of Defense on the ground here in real time. 

We intend to use and keep a very close conduit with their activity here in New Orleans as to how we go forward in the future reconstruction of New Orleans. 

In summary, we at the Department of Defense are very committed to the health and welfare of our people in our nation. We 

have a strong small business program, and we are planning to 

build on that strength to provide more agility and flexibility for the 

acquisition of products and services to protect our country and provide emergency help in the time of need for natural disasters here 

on the home front or abroad. 

I thank the committee for their time today and their leadership 

in addressing small business participation in the aftermath of Hurricane Katrina. I will be happy to answer your questions. Thank 

you. 

[The statement of Mr. Finley may be found in the Appendix, on 

page 98.] 

ChairwomanVELA ́ ZQUEZ. Thank you. Our next witness is the 

Honorable Admiral Patrick Dunne, Admiral Dunne is the Assistant 

Secretary for Policy, Planning, and Preparedness at the U.S. Department of Veterans Affairs. Thank you. 

STATEMENT OF THE HONORABLE ADMIRAL PATRICK DUNNE, 

ASSISTANT SECRETARY FOR POLICY, PLANNING, AND PREPAREDNESS, U.S. DEPARTMENT OF VETERANS AFFAIRS 

AdmiralDUNNE. Thank you, Madam Chair, Members of the Committee. I greatly appreciate the opportunity to testify at this hearing about VA’s ongoing commitment to small businesses in New 

Orleans and the greater Gulf Coast region. 

VA is a proud and longtime neighbor in each of these communities. Veterans in these areas count on us for healthcare and benefits delivery. We recognize the importance of small business to VA 

operations. By partnering with VA, they help underwrite the quality care we provide to veterans. 

Our mutual success is tied to one another in so many ways. We 

too want to see a vibrant economic recovery take root and reinvigorate small businesses in this region. 

20

In early 2006, VA took positive steps in this regard. On March 

7th, VA’s Office of Small and Disadvantaged Business Utilization 

in concert with the Veterans Health Administration, veterans service organizations and representatives from National Task Force on 

Veterans Entrepreneurship hosted an event in Biloxi, Mississippi, 

attended by approximately 100 veteran-owned small businesses. 

These firms were provided information, process guidance and 

networking opportunities for VA’s post Katrina recovery acquisition 

opportunities. A similar event was held the next day, March 8, at 

the Veterans of Foreign Wars hall in Metairie, Louisiana, and attended by 85 veteran-owned small businesses from Louisiana. 

These programs discussed requirements for bonding, teaming 

and joint ventures to help veteran entrepreneurs prepare their 

firms to be responsive to upcoming contracting opportunities. 

To gauge the effectiveness of our efforts, we have to look at the 

Federal contracting record of the firms that received advice during 

these two events. Of the 185 firms that signed in at the March 

events, we found that during the following year, 24 of those firms 

were awarded multiple contracts totaling over $43.4 million. 

We would like to think that the efforts of VA and our partners 

were instrumental in the success of those contractors. 

In June of 2006, VA participated in the Minority Business Development Agency’s Business-to-Business Linkage Forum in New Orleans. This forum brought together 8(a) firms from Louisiana and 

Mississippi, with out-of-state minority businesses to explore 

partnering opportunities on upcoming Federal and State contracts. 

In December of 2006, VA participated in the U.S. Army-sponsored National HUBZone conference held in New Orleans. In addition to providing presentations on VA’s acquisition operations and 

opportunities, representatives from VA’s Office of Small and Disadvantaged Business Utilization along with an accusation professional of the New Orleans VA Medical Center, conducted one-onone counseling sessions with small businesses in attendance. Many 

of these firms were from areas affected by Hurricane Katrina. 

Our outreach efforts continue in this region. Personnel from VA’s 

Office of Small and Disadvantaged Business Utilization will soon 

attend small business events in Vicksburg, Mississippi, and Birmingham, Alabama. 

VA plans to participate in the PostKatrina Economic Development Summit in New Orleans, June 5-7th of this year, hosted by 

the National Community Development Organization, Incorporated. 

The summit is billed as bringing America’s top corporations, Government agencies and small businesses together to discuss acquisition opportunities to rebuild an economically strong Gulf Coast. 

VA is using small businesses in its recovery efforts in the affected areas. VA’s Office of Construction and Facilities Management has three 8(a) contracts in place worth approximately $1.6 

million. By June of 2007, award of several additional contracts for 

recovery work in New Orleans under Section 8(a) are contemplated. 

The values of these contracts are estimated at slightly over $4 million. 

An additional three to four 8(a) contracts with values of up to 

$12 million total are contemplated for Gulfport, Mississippi, along 

with additional awards to service-disabled, veteran-owned small 

21

businesses. VA intends to award another $600,000 in contracts 

with a service-disabled, veteran-owned small business and Section 

8(a) contractor in Biloxi, Mississippi. VA’s National Cemetery Administration is spending over $1.6 

million with small businesses, small disadvantaged businesses, veteran-owned and HUBZone small businesses in postKatrina recovery work at their facilities throughout the Gulf Coast region. These 

contracts were set aside for small businesses. A project to construct 

the replacement VA Medical Center in New Orleans alongside a 

new Louisiana State University healthcare facility will create additional opportunities for local small businesses. Construction of this 

approximately $625 million project is due to begin in 2008, once the 

State of Louisiana has committed funds and acquired the land. Although projects of this magnitude provide very limited opportunities at the prime contracting level, VA is committed to promoting 

maximum practicable opportunities for small businesses at the subcontracting level. 

VA’s healthcare facilities in New Orleans, Gulfport and Biloxi are 

operated by the South Central VA Healthcare Network. As with 

VA’s senior leadership, the South Central VA Healthcare Network 

is committed to ensuring business opportunities for small businesses in the areas affected by Hurricane Katrina. This commitment is evidenced in the socioeconomic accomplishments for the entire network in this region. 

In Fiscal 2006, the South Central VA Healthcare Network reported expenditures for supplies and services in excess of $574 million. Over 37 percent of these dollars were spent with small business. Broken down by socioeconomic category, over 3.6 percent 

were spent with service-disabled, veteran-owned small businesses. 

Over 9 percent with veteran-owned small businesses, almost 9 percent with small disadvantaged businesses, over 6 percent with 

women-owned small businesses, and 4.35 percent HUBZone small 

businesses, each of these exceeding the congressionally mandated 

goals. 

Despite the incredible damage sustained by our facilities in the 

surrounding area, the VA Medical Center in New Orleans and the 

VA Gulf Coast hospital care system located in Biloxi continue to 

support small businesses. The VA Medical Center in New Orleans 

spent nearly 44 cents of every acquisition dollar with small business. And the VA Gulf Coast Veterans Healthcare System spent almost 50 cents of every dollar with small businesses. 

Their accomplishments in each of the small business socioeconomic categories are equally impressive. The socioeconomic accomplishments for the South Central VA Healthcare Network will 

be submitted for the written record. 

In closing, I want to reassure you VA is committed to small businesses in general, and to those in the Gulf Coast region in particular. 

Thank you for convening today’s hearing. I welcome your interest 

and any questions you may have. 

[The statement of Mr. Dunne may be found in the Appendix, on 

page 105.] 

ChairwomanVELA ́ ZQUEZ. Thank you, sir. And I thank all of you 

for your testimony. Let me just say that we hear a lot of talk about 

22

small business and local businesses, but we don’t hear anything 

about local small businesses. 

And here we are and with your own numbers and the data from 

this Federal Government, the Federal Procurement Data System 

that tells us only half percent of contracting opportunities has been 

provided to small businesses right after Congress strengthened the 

requirements for the use of local business. 

Numbers don’t lie. What we have seen here is a mere 7 percent 

of contracting opportunities with local businesses, local small businesses. So I would like to ask each one of you, starting with Mr. 

Finley, Ms. Doan and Mr. Dunne: What are you going to do to 

change this in this area? 

Mr.FINLEY. Thank you, Madam Chairwoman. What we are going 

to do is we are working to expedite the law that has been passed 

in Congress to make it into the FAR. Right now that is not into 

the farmers as an official Federal acquisition regulation. It requires 

to be processed. We are going to accelerate that processing and expedite that processing such that we can have that truly in law in 

accordance with the paperwork that’s been passed by the Congress, 

you know, this year. We are committed to make—

ChairwomanVELA ́ ZQUEZ. All I want to know is: How this is going 

to get those numbers up? We carry local, small businesses here in 

the region. 

Mr.FINLEY. I believe we will take that act, Madam Chairwoman, 

and we will implement that into actionable efforts that will be focused on our local businesses here in New Orleans. We will implement that through our PTAC organization that’s based here in 

New Orleans to help facilitate that network of small businesses already established here in New Orleans. 

ChairwomanVELA ́ ZQUEZ. I will be coming back to you, sir. Ms. 

Doan? 

Ms.DOAN. Madam Chairwoman, I believe that leadership matters. And the way that I intend to make this happen is because it’s 

something that’s really important to me. So I look at this on a regular basis. However, the changes have already begun to happen. In 

the ten months since becoming administrator, our numbers are 

really nothing short of extraordinary. 

We have in this region, Gulf region, 55.8 percent of our procurements going to local, small businesses. In addition to that, we have 

a disaster and emergency operations vendor profile which we have 

now begun. I mentioned it in my speech. But we have already registered 1,400 businesses. We will be utilizing this on a regular 

basis. 

But I believe that the only way, Committee and Madam Chairwoman, that we can really make this happen is the heads of the 

agencies have got to say that this is a priority. 

Now, for me, I will tell you—maybe it’s because I’m from this 

area, but this is a priority. And one of the things you have to do, 

for example, right here, these are our guys. You look at them. You 

look at the list of who these businesses are, and you can say—you 

can eyeball them and say, Is that really a small business? Isn’t it? 

You have to do that. And if the heads of the agencies are going to 

be committed, that will make the difference. 

23

ChairwomanVELA ́ ZQUEZ. Would you say that 7 percent of contracting opportunities awarded to local businesses is enough? 

Ms.DOAN. Madam Chairwoman, I am the leader of GSA. GSA 

has a stellar performance. I cannot account for my other fellow 

agencies. I would like to see them do more. Believe me as a small, 

black, former woman-owned business, there is not enough that can 

be done. This is something that—we have to do a great thing. What 

I can do is focus on my agencies. What I’m asking is that every 

other agency head do the same. 

ChairwomanVELA ́ ZQUEZ. I hear you. Yes? 

GeneralSTROCK. Yes, ma’am. We too are—

ChairwomanVELA ́ ZQUEZ. Mr. Dunne? 

I will ask you a specific question later. Mr. Dunne? 

AdmiralDUNNE. Thank you. The VA will continue to conduct our 

outreach as I mentioned in my statement, we have plans to continue that this year. We also have plans to provide guidance to our 

contracting personnel about the details of the Stafford Act. And we 

have personnel right here in the area who are aware of the business opportunities here and will continue to pursue those throughout our outreach. 

ChairwomanVELA ́ ZQUEZ. Well, we have a real problem here. I 

mentioned to you that only 7 percent have been provided to local 

businesses. And the problem is that this number is not only a disaster by itself and shows a lack of commitment of our Federal Government in helping the recovery process here, but the true number 

is most likely to even go lower than the 7 percent. 

This Committee has examined who agencies claim are the local, 

small businesses. And the truth is that many of them are neither 

local nor small. 

Let’s take for example Homeland Security. Listed contract with 

the United States Services of Maryland and Fastenal Company of 

Minnesota a small business award. Neither of these companies 

identifies themselves as small. Fastenal actually owns and operates 

over 2,000 stores with locations in all 50 states as well as Canada, 

Mexico, Puerto Rico, Singapore, Europe, and China. 

And you are going to come here today and say that it is a small 

business? GSA counted contracts with Oshkosh Truck Corporation 

of Wisconsin; Coleman Company of Wichita, Kansas; Analytic Systems Ware, a Canadian Company; Americold Logistics of Georgia 

towards small business achievement. 

None of these companies themselves are small. Americold has 

6,100 employees and handles over 60 billion pounds of freight. 

DOD has taken credit for URS Group as a small business contract, 

a company that is not identified as small. 

Additionally, the agency included contracts with Americold 

Group of Indiana. And another company in Ohio despite the fact 

that these businesses are subsidiaries of large companies and cannot be considered small. URS has over 25,000 employees in over 

300 offices. It’s stocks traded on the New York Stock Exchange. 

And achieved a $3.292 billion in revenue for fiscal year 2005, and 

you are going to come here and paint a rosy picture as to how 

much your agencies are doing in providing contracting opportunities to local, small businesses in this region? 

24

Army contracts were awarded to August, Inc. (Phonetically 

spelled), a Canadian company. And the list goes on and on and on. 

Mr. Schneider, I will start with you. Since you paint such a rosy 

picture in your testimony in reference to the number of contracts 

going to small businesses, let me say that it’s easy to get those 

numbers when the businesses that you are counting are not small 

businesses, but large and out of state. 

Here, I have a list of 150 companies that we examined. And this 

is your own data system, 150 companies valued at nearly $70 million. And you took credit as local businesses that are neither local, 

small businesses nor small, 150. Mr. Schneider, 61 of them are 

from your agency. So I want to ask you what is your priority here; 

making sure local, small businesses get contracts or making your 

numbers look good? 

Mr.SCHNEIDER. As I indicated, Madam Chair, in my testimony, 

the procedures that we’ve instituted with FEMA once the—with 

the amended Stafford Act in terms of priority that should be given 

to local, small business, in fact, that they are—once we go out with 

surveys, we determine the fact if we have at least two companies 

that are capable of doing that particular work. 

ChairwomanVELA ́ ZQUEZ. Sir, sir—

Mr.SCHNEIDER. That is our policy. 

ChairwomanVELA ́ ZQUEZ. Sir, how could you explain 61 companies, large companies, being miscoded and claiming credit as small 

companies? What kind of system do you have in place? This is the 

law. The law requires contracting with small businesses. And you 

should not be coming here and saying that you not only achieve but 

you went beyond. 

Mr.SCHNEIDER. Well, two points: First, there clearly has been errors in coding in the data. That’s been pointed out, I believe, in the 

GAO report, and we are taking action to fix the coding. 

The other thing we are doing is we’re working closely with GSA 

and a total government team to fix the system by which you enter 

the coding. I have personally looked at the details of how you enter 

coding in the system and what happens is you find that it forces 

people that enter the coding to fundamentally make a choice. 

ChairwomanVELA ́ ZQUEZ. I hear you. 

Mr.SCHNEIDER. And so what happens is, the logic flow of the system is flawed and needs to be fixed. We believe—

ChairwomanVELA ́ ZQUEZ. And that is why I ask you now: Are you 

going to follow the recommendation made to you by the General 

Accounting Office regarding having the inspector general or why is 

it that you decided not to go with a General Accounting Office recommendation, but to have your own team to review contracting 

practices by the Acquisition Oversight Team and the Defense Contract Management Agency? 

Mr.SCHNEIDER. The Defense Contracting—

ChairwomanVELA ́ ZQUEZ. Doesn’t this look like a conflict of interest to you? 

Mr.SCHNEIDER. The Defense Contracting Management Agency is 

independent from the Department of Homeland Security. It’s a separate organization. They do not report to the Department. We use 

them as an independent auditing agency. 

25

ChairwomanVELA ́ ZQUEZ. Let me ask you: Why is it that the 

Army Corps is going to have the IG and you cannot have the IG? 

So you are going to come here and say to me that it is okay for 

your people to police themselves instead of having an independent 

like the IG? 

Mr.SCHNEIDER. I respectfully submit that the Defense Contract 

Administration Agency is, in fact, independent from the Department of Homeland Security. It is not a Homeland Security organization. 

ChairwomanVELA ́ ZQUEZ. Same with the IG, sir. 

Mr.SCHNEIDER. We elected to use the CAA. 

ChairwomanVELA ́ ZQUEZ. Well, it shows the real commitment that 

you have in order to correct the errors that you are making and 

the miscoding that you are making. 

Now I recognize Mr. Westmoreland. 

Mr.WESTMORELAND. Thank you, Madam Chairwoman. You know, 

we have to understand that these two storms, natural disasters hitting as quick as they did, I don’t know that any of the agencies—

I know that several of you have mentioned that you came on board 

after this mother nature’s wrath hit this Gulf Coast region. 

And I’m sure that each one of your agencies felt the urge to get 

these jobs done as soon as possible. And I’m sure that each one of 

you in your agencies have certain criteria that a contractor must 

meet or certain qualifications that they may have. 

I know that I’m a small businessman, at least I was a small businessman, and I would like to think of myself as one. Mom and pop 

contracting, we did restorations. We did new construction, remodeling other parts. And I don’t know that what—although, I would 

have loved to have come down and gotten some contracts and some 

capabilities, I don’t know to what extent I would have been capable 

of doing some of the major jobs that were required here. And I 

think Congressman Jefferson mentioned the bundling process. And 

I’m sure in trying to get some of these things done as soon as possible, you probably did bundle a lot of these things to some larger 

companies. And then they may have, in fact, turned around and 

subcontracted out to smaller companies. 

I know we had a tree cutting company from Georgia that was actually the sub of a sub of a sub. Now, I’m not saying those are good 

things because I think they can really be bad things because sometimes that sub of the sub of the sub doesn’t make any of the money 

and the subcontractor or the original contractor is kind of the fat 

cat in this whole thing, and makes all of dough; and the subcontractor doesn’t. 

So I’m not making any excuses for that. But I think that a lot 

of these contracts that you made were good intentions of trying to 

get the work done to make sure that the people of the Gulf Coast 

could get back to a normal way of life as soon as possible. 

Now, Mr. Preston, I have a specific question to you and it comes 

too from Congressman Jefferson’s question about the number of 

PCRs that are stationed in the New Orleans Gulf Coast area, the 

Procurement Center Representatives. 

How many are actually down here and how many have been 

added since Katrina and Rita? 

26

Mr.PRESTON. Right now physically down here there’s one PCR. 

He’s at the Army Corps of Engineers right now working specifically 

with them on their contracting activities. 

At one point, we had five people down here right after the storm 

working on a number of things. But I think the important thing to 

recognize with that is it’s not just PCRs that are physically present 

down here because all of the purchasing doesn’t take place down 

here. PCRs across the country were directed to focus on supporting 

small businesses in their efforts to get contracts down here as well. 

I think that the other thing to say is in addition to the PCR, our 

district office is also very active both in working with contracting 

activities down here and with local business to make sure there is 

conic activity between those opportunities. 

Mr.WESTMORELAND. I think it’s important that you may have 

more than five people down here with this magnitude and the devastation that was down here. And I’m sure Mr. Melancon or Mr. 

Jefferson would agree that the people down here who were so devastated by this storm that changed their lives forever didn’t really 

care who was doing the work as long as the work was getting done. 

And getting done in a satisfactory manner. And that’s the thing 

that has really bothered me about the administration’s position and 

really Congress’ position in the fact that they felt like if they threw 

money at the situation, that it would just fix itself. 

I think if you ride around even today, almost two years after, you 

would see that money is not necessarily the answer to all of these 

problems down here. And your agencies are really kind of what 

we’re depending on to bring this area back to where it was. 

So I want to ask the entire panel a question, and as I stated before, I know some of you have not been on board but a short period 

of time. In the short period of time that you have been on board 

and listening to the other people in your agencies, what would you 

say was different today, if anything, as your approach to small 

business and bundling of contracts and really being prepared to 

handle a crisis such as this? What’s different today than when 

these two storms hit? And any of you, I will be glad to hear from. 

Mr.SCHNEIDER. I’ll start. Thank you for the question. You’re absolutely right. We had in the initial aftermath of Katrina those 

bundling contracts. In the case of DHS, we had four big ones. And 

the reason for that was we frankly had no people on the ground. 

We had very few people on the ground in the area. We had no contracting officers. We didn’t have people that could integrate a large 

amount of effort. We really didn’t have my term, military term, situational awareness relative to the capabilities of the businesses in 

the Gulf Coast. Quite frankly, we did not have good command and 

control in terms of how things got executed. 

It was so bad we had to use a corps of contracting officers at 

headquarters to contract for local efforts down here. So what happened was some of these major contractors—these efforts were bundled frankly because we did not have the resources on the ground 

to do the proper integration and oversight of the individual effort. 

As it turns out, my understanding is that a large percentage of 

those efforts did, in fact, go to small businesses, local businesses, 

etcetera. But the thing that’s different today is that gave—well, we 

put a lot of people on the ground. We have lots of contracting ofVerDate 0ct 09 2002 14:08 Jan 10, 2008 Jkt 033615 PO 00000 Frm 00032 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\34826.TXT LEANN
27

fices throughout the Gulf Coast. We think we have a pretty good 

organizational structure. We have Deputy Director of FEMA that’s 

down here for the Gulf Coast rebuilding effort. We think we have 

pretty good situational awareness. And that brought us a lot closer 

to understanding the individual capabilities of the small businesses 

in the area, which is why we don’t have these large contractors, 

contracts anymore. We have individual contracts that have been 

awarded, basic wording agreements. And frankly, the opportunity 

that was given to the small businesses under these bundling contracts has enabled them now to compete and be prime contractors 

themselves. 

So I think it’s a matter of people, situational awareness on the 

ground, contracting officers who could execute. And just better organization is what I would consider to be a significant change from 

what I understand the situation was in the initial aftermath of 

Katrina. 

Mr.WESTMORELAND. So, Mr. Schneider, if I understand it correctly, what you’re saying is when this first hit, because of your inadequate number of people that you had on the ground, these contracts were bundled. But I hope what you are saying is, now, almost two years afterwards, that you have more people on the 

ground and that you will be able to give some of these contracts 

to some small business people. 

And as you have said, some of these small business people have 

now earned their way into probably doing some of the bigger contracts. 

Mr.SCHNEIDER. They have. In fact, we don’t have these big bundled contracts. We have individual contracts because we have people on the ground that are capable of managing them. So we don’t 

need to pay a prime contractor or a large contractor to manage the 

integration effort. 

Another thing is we go out actively with outreach within the 

community. There’s a lot of mentor/protege work going on down 

here on the Gulf Coast. We encourage all businesses to register. We 

keep a web-based type of analysis pool so that all of our contracting 

officers in the Gulf Coast know of the capabilities of all of the businesses in the Gulf Coast. So just the sheer numbers of resources 

has dramatically changed. We have what I consider to be a very 

robust contracting organization down here on the Gulf Coast. What 

we did actually was take somebody from headquarters and FEMA, 

move her down here to the Gulf Coast. She supervised the initial 

aftermath and the building up of the contracting infrastructure 

down here. And then we moved her back to Washington as the 

head of the contracting organization in FEMA. 

So we have somebody at headquarters that personally understands, has spent a year down here on the Gulf Coast, understands 

the situational awareness. So you have a very, what I would consider, unique relationship between contracting organizations down 

here on the deck plate, so to speak, and the head of contracts up 

in Washington. That is totally different. 

ChairwomanVELA ́ ZQUEZ. Time expired. Now I recognize Mr. Jefferson. 

Mr.JEFFERSON. Thank you, Madam Chair. We are very familiar 

with the history that you are referring to, Mr. Schneider. These big 

28

companies are still around, still doing the work from the initial, big 

contracts they got, for the most part. 

There have been, of course, other opportunities. We are talking 

about the early stages here. I wanted to ask you something, and 

then I want to ask Mr. Preston a question. There is a group called 

′′CorpWatch,′′ a report done by Dr. Rita King, which talks about ′′Big Easy′′ money. The report was released sometime ago. 

But it talks about FEMA contracting down here and how the 

small companies missed out on the money and the local companies 

did. And basically what it said is that of the $6 billion of hurricanerelated contracts granted by FEMA, only 13 percent or 780 million 

were awarded to local firms, she said. 

Are you familiar with that report and do you agree with that or 

have you found it incorrect? 

Mr.SCHNEIDER. Congressman, I am not personally familiar with 

that report. 

Mr.JEFFERSON. The report cites incident after incident as the 

Chairlady has of big companies that have come and done extraordinarily well, and they have not been local firms. They have not 

been small firms. But I would like to ask you to turn your attention 

to that because it does reveal some interesting information. 

We are talking about the small part of this thing whole thing, 

though. Down the road, the big issue is going to be recovery—I 

mean, rebuild. And that’s going to be a lot more money and a lot 

more things are going to come through the whole FEMA structure. 

And we have time now to handle that correctly. 

I want you to know that we’ve been having a lot of local firms 

that have been subbing and have been happy to have some work, 

but very unhappy that they didn’t have any margin of a profit. And 

the profit was made by the guy on the top. And sometimes—Charlie and I were talking about it a minute ago, you have four or five 

different tiers here, maybe more, and every one of them, the money 

they made was—all of the work was done by the guy on the lower 

end and then the money made by the guys on the topside of it. And 

that’s, of course, not fair in all of this process. 

But since you don’t know about the CorpWatch, I can’t ask you 

anything about it. I will let that slide for a minute and ask you to 

please take a look and see if you agree with that. I’d like to know 

how you feel about it. 

Mr. Preston, you have a responsibility—or your agency does anyhow, to I guess be in contact with the rest of these other 24 agencies out there. If you need to, beat up on these guys to make sure 

they are providing small business opportunities. And under the 

aegis of which we are working, small and local business opportunities. This Stafford Act requires that we get small business folks to 

do local work. 

You have had a vacancy in this job called the Associate Administrator for Government Contract for a good long time. But I understand somewhat recently filled that job. I want to know what your 

agency is doing to—first off, before you even get to the local question, to make sure they are setting aside small business opportunities down here in our region, and tell me exactly what you are 

doing to make sure this agency is working properly; and that we 

are getting accurate results out of it. 

29

Mr.PRESTON. Well, we have very extensive interaction with all of 

the agencies at the table, both in the individual contracts and 

under plans. We held outreach events with all of them. We’ve held 

matchmaking sessions to make sure that we get the right business 

to the right place. 

Mr.JEFFERSON. Let me ask it differently: What is the new emphasis you place on it now since you have someone who’s filled that 

job? I mean, you’ve been doing something with it, perhaps a lot 

with it as you say. What is he going to do more than you have done 

so far? And what more could be done or what should be done? 

Mr.PRESTON. He’s and our entire contracting staff down here will 

do two things—three things, really. Continue with aggressive outreach, continue with coordination with these agencies, but also continue specifically to look at the contracting actions that are taking 

place to determine whether or not they should be going to small 

business or not. 

Although, I would commend the agencies at the table for a lot 

of the great work they’ve done, I think we’ve made some terrific 

progress down here. I will say this office down here has issued 27 

Form 70 actions on contracts. 

So in addition to a coordinating and cooperation role, we are also 

playing a role where we getting in front of these contracts that are 

not going to small business and asking that they be redirected to 

small business. 

Mr.JEFFERSON. That’s a critical part of your role to advocate for 

small businesses. These contracts are coming out of the Corps. The 

Corps not too long ago was putting out a contract for $90 million. 

I think it was for some—it might have been for debris, at this late 

date, I think it might have been. And we had a big fight trying to 

get this thing into pieces where local, small business folks would 

have a chance at it. What’s happening with that? 

GeneralSTROCK. Sir, I’m not sure what specific contract you are 

talking about. It could well be at this late date we’re talking about 

demolition requirements of these structures damaged beyond repair 

in the city. Today our policy is that all demolitions will go to local, 

small businesses. If that’s what you are talking about, then I think 

that’s been solved in that way. 

Mr.JEFFERSON. Let me ask a question because I want to see how 

this is interpreted. There may be a couple of ways to think about 

this local preference in the Stafford Act. You could say all things 

being equal, we’ll prefer a local company. Or you can say if a local 

company has capacity, we prefer a local company without worrying 

about all of the things out there being equal, everybody else and 

the whole wide world. 

Which way do you look at this as you go about deciding on who 

ought to have the procurement opportunity here? Which way do 

you look at this local preference? 

GeneralSTROCK. Sir, I think it’s really in Dr. Finley’s lane to talk 

about the policy and then we will follow whatever policy emanates 

from DOD on how we implement the Stafford Act. So we are prepared to do whatever. 

I absolutely concur with the idea that local firms—and by the 

way, Stafford Act, as you know, only says local. It does not refer 

to small business. I certainly agree with that philosophy that local 

30

firms must participate in the recovery. Because that very participation is part of the recovery. So there is only goodness there to rely 

as heavily as we can on local, small business firms. 

Mr.JEFFERSON. When you’re in a state like ours, almost every 

firm is small. Local kind of turns out to mean local small, for the 

most part. 

GeneralSTROCK. Yes, sir. 

Mr.JEFFERSON. The big issue for us is how this thing gets looked 

at. Your agency did something that FEMA didn’t do some time ago. 

It did test out this issue by issuing Louisiana only procurement opportunities. And you’ve got a suit about it, and you ended up winning it, which means that it can be a Louisiana only procurement 

as we understand it now. 

GeneralSTROCK. Sir, I think that was actually in Mississippi. 

And we attempted to do a geographic set aside in the State of Mississippi. It was protested by the contract, the current contract. By 

the time we got through all of the protests, much of the work had 

been done, and we did not award the contract. 

So that particular action did not rise to precedent setting. So I’m 

not sure we really validated the fact that we have the authority to 

do that. But we believe we do or we wouldn’t have done that. 

I think the language contained in the modification of the Stafford 

Act is more prescriptive and more clear. It says that if you have 

contracts in place after the declaration of disaster, the agency shall 

transition to local firms. 

So it’s much more clear for us. And I think for the industry as 

we move ahead. I think that language helps clarify. Of course, 

again, there’s a process to convert that language into policy and application. And that’s what we are waiting for, for that process to 

be identified. 

Mr.JEFFERSON. Let me ask one thing here that is tearing up the 

local contractors. I mentioned in my opening statement, and anyone can react to it, and tell me how we fix this. 

If I’m Company X, and I just want to be a Y. And I decided how 

I was going to present my bid to win. I was going to say that for 

maintenance I would bid low and lose money. On the deactivation, 

I would bid a little higher and make money, and all together when 

you count it all, deactivation and maintenance, my bid was lower 

than somebody else’s bid; and, therefore, I won. 

Then you come back and have some folks reviewing the contract. 

You say, My goodness, now it’s a new person, maybe somebody who 

just came on. And they say, My goodness, on the deactivation side, 

this is way too high. This guy is getting too much money over here. 

We ought to undo this thing. That is happening over and over with 

our local people. How do we fix that? I mean, why do we go back 

and review and undo these contracts? Folks have won in a fair bid. 

Because we wanted to examine parts of the contract and say we 

can do better. And it’s really ruining them. 

GeneralSTROCK. Sir, I’m not aware of any specific instances of 

that. That’s something I’ll take aboard and go work with our contracting people and see if that sort of thing happens, if we do a 

post-award revocation based on review after the fact. 

Again, I’m not sure that we have done that. 

31

Mr.JEFFERSON. Has anyone at the table heard about this problem? 

[No response from the panel is given.] 

Mr.JEFFERSON. I hear about it all of the time. It’s quite odd. 

Mr.MELANCON. It’s happening in St. Bernard. 

Mr.JEFFERSON. Maybe it’s not getting to your level, but I wanted 

to bring it to your attention. It’s happening. And it’s a big problem 

for our local contractors. 

GeneralSTROCK. Sir, we would be happy to talk to the specific 

contractors involved that that’s occurred. I’m informed by the New 

Orleans district that we do not revoke a contract if we review 

something and say, Gosh, we should not have done it different. Our 

policy is not to revoke contracts after we award them. 

Mr.JEFFERSON. Is that FEMA’s policy too, Homeland Security’s 

policy? 

Mr.SCHNEIDER. No. 

Mr.JEFFERSON. It’s happening. I don’t know where it’s happening 

at. 

Mr.SCHNEIDER. As far as I know, we don’t revoke contracts. 

What happens is, there needs to be a cost realism determination 

made as part of the source selection. And so it depends on what 

the criteria for—

Mr.JEFFERSON. I’m told that it isn’t—it doesn’t amount to a revocation. It simply says we just stop them from doing the work, 

which amounts to the same thing. It’s not an actual revocation, but 

they say you can’t do anymore work in this area and end up giving 

it to somebody else. So it works for them like a revocation. 

Mr.SCHNEIDER. My guess is it depends on how the contract is 

structured, what’s the nature of the individual work items, and 

whether or not the Government elects to continue based on how 

those things are specified in the contract and individually priced. 

And there’s also in some circumstances a contracting officer that 

has the responsibility to make responsibility determination as to 

whether or not the contractor can successfully execute the contract 

at certain points in time, whether mods are made or whether options are exercised. 

GeneralSTROCK. Sir, on reflection, I think that a potential scenario there would be a multiple award task on a contract where we 

have a contractor that actually wins a contract. But as we complete 

task orders—as we look at that contractor’s bid, we may elect not 

to go with that contractor based on how his bid is structured and 

go with another, based on what their proposal for that task was. 

So it’s possible to win a contract for us for task orders for a blank 

purchase agreement where we evaluate task orders independently. 

And that could well be what’s happening. 

Mr.JEFFERSON. Madam Chairlady, you have been very liberal 

with me, just last thing, if I might ask. 

ChairwomanVELA ́ ZQUEZ. Sure. 

Mr.JEFFERSON. Mr. Preston, I made the remark about our local 

office. They have a big responsibility here, and not just to carry out 

the day-to-day responsibilities, like one might have in Minnesota or 

someplace. But also to oversee this disaster and try to make some 

sense of it, and also train workers coming in from out of state who 

might serve as folks who are just working on the disaster, itself. 

32

You have the officer working pretty much bare-bones. Have you 

looked into this and what we can do about getting this office 

staffed up again? From 39 in the midst of all of this disaster—we 

need to do better than that. 

Mr.PRESTON. Sir, I would like to talk to you about the historical 

staffing numbers. I’m not sure if they sync with the ones that I 

have, but what I can tell you is—

Mr.JEFFERSON. What do you have? What are your numbers? 

Mr.PRESTON. Most recently, right now, we are at a staffing level 

of nine. Several years ago—my understanding was—it was the low 

to mid teens. And a lot of that was due to the restructuring of how 

we do that operation. 

I mean, the field in SBA used to do a lot of things that they don’t 

do anymore, like processing loans, which are processed centrally 

and those types of things. 

What I would like to do is sit down with your staff to understand 

where you think we’re missing the grade locally; where you think 

we are not performing effectively and by virtue of having a deeper 

staff, we would be able to do a better job. Because I would like to—

considering staffing issues, match the problem with the solution. 

Mr.JEFFERSON. Yeah. There are certain positions that aren’t in 

the field like the loan directors in the field. That’s pretty basic. 

There’s nobody there. The administrator does it all, but there is no 

one there who is a loan director. There is no one there who does 

the education part of it. There’s no one there that does the technology. There’s four or five positions that used to be filled that 

aren’t filled now that are really critical, we think. 

But anyway, I just think it’s very important that we have this 

office up and going. I don’t think I can sit with you and evaluate 

because I don’t think the performance of the office is really a big 

question. They are working hard. They just can’t do everything. 

And they can’t do enough, although, I think they are working very 

hard. 

ChairwomanVELA ́ ZQUEZ. Mr. Melancon. 

Mr.MELANCON. Thank you, Madam Chair. Ms. Doan, first let me 

say I hear the passion in your voice, and I appreciate that. There 

are several of you that are new at the agencies, I hope that you 

would take the passion that she has for this area and apply it to 

your agencies to respond if, in fact, she’s doing the things, and I 

believe she is, to try and get this region of the country back up. 

It’s a model that I think every agency needs to start following. 

We are sitting here talking about contracts and bids and such as 

that. And right after the storm in the immediate aftermath, Mr. 

Jefferson referred to Knight Contractors, and they got a bid to go 

out and do I think it was electrical work based down in Belle 

Chasse. 

Now, here we are 19 months later and we’re talking about letting 

bids and because they expire, then we changed the price and, et 

cetera, et cetera. In the midst of everything that was going on, 

somebody found the time to go bust those guys out of there and replace them with somebody else that was doing cheaper labor. 

Now, maybe there wasn’t a contract with these people. Maybe it 

wasn’t a bid, but that’s the kind of things that I have been getting 

since day one that bother me. You know, we talked about the pubVerDate 0ct 09 2002 14:08 Jan 10, 2008 Jkt 033615 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\34826.TXT LEANN
33

lic bids. We’ve talked about coming back in, General Strock, coming 

back in and saying, Oh, their price is too high now. When you find 

that price too high is that because some contractors come in and 

said, I will do it cheaper than now or is there a public bid that’s 

actually put out. Because what I’m appearing to see is that somebody comes in and summarily—whether it’s from the Corps or from 

FEMA or DHS or whoever, somebody is summarily coming in and 

saying we’ve got to renegotiate. And renegotiate back to day one. 

And that concerns me. How do we do that to these people? 

GeneralSTROCK. Sir, it’s conjecture that that’s what we’re talking 

about here. Let’s take, for example, the blanket purchase agreements that we have to provide helicopter services. We have three 

companies that do that. Each one of those competed for that. We 

looked at their proposals. We said, yes, we think you have the capacity and the price looks okay. 

Each time we need a helicopter, though, we compete that need 

among those three vendors. And at that time, they can change it 

based upon the nature of the mission and their availability of the 

aircraft so forth. 

And if they come in with a bid that’s better than the other two, 

we give it to that contractor. So it may appear to the others that 

I bid and I got accepted on the team, and now you are changing 

the rules. That’s how these things work. 

Mr.MELANCON. I can understand a task for helicopters. 

GeneralSTROCK. Yes, sir. 

Mr.MELANCON. I’m talking about on the ground. The equipment 

is there. The manpower is there. The people aren’t getting paid. 

They are all of a sudden being told that they are not going to get 

paid retroactivity for work that has been done and completed because now somebody says they will do it at a lower price and come 

in after all of the big work has been done, after hard work has been 

done and all of the equipment has been ripped apart; and then 

they haven’t got paid. 

And then what happens is there’s a bid that’s being let on another job in the same parish I’m talking about—I think we know 

which one that is; I don’t think it’s complicated—to pump out this 

sewage pump station, and nobody wants to bid on it because they 

are not getting paid right now so what the hell are they going to 

do, go bid for a contract they are not going to get paid on? And why 

do we relet it? I mean, do you stop the work? And that seems to 

be what goes on in these agencies. It’s like go forward for a foot 

and then stop; we need to back up two feet. 

So, you know, if you could, explain that to me. If you can’t do 

it here today, I need to get an explanation or at least sit down with 

the people I can get—I get sessions. When I get a session, I get 

good feeling conversations when I intervene. Then as soon as I step 

away again, it goes to hell in a handbasket. I need to know, General, are these—are you aware of these things? Or is this something that’s happening on the ground with your subordinates who 

are here running the task and operations? 

GeneralSTROCK. Sir, again, I think we need to look at the specifics of each situation to truly understand what’s going on. I can 

say it’s our policy once we issue a task order for a contract, we do 

not go back and say, Well, we’ve changed our mind; we found someVerDate 0ct 09 2002 14:08 Jan 10, 2008 Jkt 033615 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\34826.TXT LEANN
34

body who could do it; stop work. We don’t do that routinely. Our 

policy is to stay with that contractual obligation we have because 

those obligations work both ways. 

We do however—I understand anecdotally we’re hearing that 

some subcontractors are not getting paid. We have a prompt payment requirement to primes. And it’s up to the prime to pay subs. 

And it could be that some of these that are not being paid are subcontractors. 

And we don’t have the ability to reach down and force the payment of subcontractors. 

Mr.MELANCON. I understand that. This wasn’t in that situation. 

What I would like to ask you to do because what I happen to have 

is a situation this week where I’ve pushed them to get together. 

They’ve gotten together and they were supposed to report back that 

night, never reported back. And that was about four days ago. 

I think it’s just they came in just to let them go a little bit 

longer. 

I would like to ask you: When I can get them all back together 

in a room, I want you to come listen to these meetings; and I want 

you to listen to what’s going on. Because it’s all this (gestures). Everybody is blaming everybody else and we’re getting nowhere. And 

that’s the frustration. 

GeneralSTROCK. Sir, I will attempt to do that. My experience is 

it’s best to solve problems at the lowest level possible where people 

really understand what they are talking about. And we would prefer to solve those here with the New Orleans district or Mississippi 

Valley. But if it requires my presence, then I can make every effort 

to be there for that. 

Mr.MELANCON. Well, if it gets to the attention of the people that 

you command, and if I’ve got to get the generals and the National 

Guard that are involved in GOSEP, that’s what I’m going to do. 

And the next step is going to be going to Congress and ask for subpoenas and whistleblower status and whatever because it’s gone on 

too long. 

GeneralSTROCK. Yes, sir. 

Mr.MELANCON. Mr. Preston, when we talk about the number of 

people that are here in the New Orleans area, was there an office 

here before the storm? 

Mr.PRESTON. Yes, there was an office. 

Mr.MELANCON. How many people did we have in the office? 

Mr.PRESTON. I don’t have the number right before the storm, but 

I can get that to you. 

Mr.MELANCON. And we brought some people in. What, nine people, I think I heard? 

Mr.PRESTON. Yeah. I think what’s important to understand is we 

do a lot of different things. What the Congressman has been talking about is our district office. 

We also have disaster loan people down here. I mean, that number was—a little over a year ago, 1,600 people down here throughout the Gulf. We had about 100 locations. So this is really the office 

that is in place for a longer period of time. 

Mr.MELANCON. Well, the district office that was here before, how 

many people do we have in there now? 

Mr.PRESTON. That’s nine people. 

35

Mr.MELANCON. That’s nine people. But was it bigger before? 

Mr.PRESTON. It was somewhat larger a few years ago, but I don’t 

have that number for you. 

Mr.MELANCON. One of the comments that I heard—not just one, 

I’ve had several people call me—that after the storm, offices were 

set up and then in recent times they will call and the numbers 

have been disconnected; they’ve moved to a new location; the numbers of people that were handling the claim are gone because SBA 

just said, We don’t need you anymore, even though they’ve got a 

stack on their desk. Is that, in fact, going on? 

Mr.PRESTON. What you are probably referring to is the disaster 

loan site. 

Mr.MELANCON. Yeah. 

Mr.PRESTON. And I will tell you even into last summer and into 

last fall, we had tremendous backlogs. People had been waiting 

months for any number of reasons, which we can get into detail at 

some point if you would like to. We have very significantly reformed that operation. And I think we are down—you know, when 

we came in last summer, we had about 120,000 people backlogged. 

And a relatively low level of disbursements. We’ve now disbursed 

$5.4 million dollars. We are down to the last 18 thousand people. 

16 of those 18,000 have already gotten some of their money. It’s 

mostly people who are having challenges like, Can I get contractors; can I get insurance? Trying to—you understand. Right now 

we’re down to the toughest areas where people don’t know whether 

they are going to move forward or not. 

Mr.MELANCON. And I understand that because it’s a real bad 

problem. 

Mr.PRESTON. If you continue to hear issues with that, please call 

my staff directly. The feedback we’ve gotten is that we’ve made a 

lot of progress there. And we’re really proud of the reforms. But 

any issue with people getting disaster loans or paperwork getting 

lost, I would ask you to call my staff directly in Washington because we’re trying—you know, I think we’ve made a tremendous effort. And hopefully that’s largely cleaned up. 

Mr.MELANCON. One of the things that concerns me when you’re 

telling me the dollar amounts of loans that have been approved as 

compared to how much money is supposed to be put into the pot. 

It’s starting to sound to me that we had more people on the ground 

than we had payouts to small businesses. And I would like to see 

what those numbers compare. I mean, 1,800 people, I know they 

didn’t come cheap, and they were putting them up in hotel rooms 

and every available place in town. And that’s a whole other issue 

about FEMA trailers. Keeping people from coming in because the 

contractors were in all of the available housing in the city. And 

people wanting to come back, but there was no place to come. And 

that’s not your—I’m not going to hit you with that one. But I think 

I’ve run over my time. And I thank the Chairwoman for her patience. 

ChairwomanVELA ́ ZQUEZ. Thank you. Mr. Preston, it seems in my 

first round, I wasn’t able to make it to you and I didn’t want to 

leave you out. 

Mr.PRESTON. Thank you. 

36

ChairwomanVELA ́ ZQUEZ. So in discussing the level of agency 

views of local small businesses, I understand that this issue may 

not be first and foremost with some of your colleagues here sitting 

at the table. But clearly at the SBA, that is not the case. And due 

to the nature of your agency, it has not had a substantial direct 

role in letting prime contracts. 

But in taking a look at the SBA Katrina-related contracts, I was surprised to find 32 valued at almost $32 million. Of this, only one 

was awarded to a local small business. None was awarded to minority-owned companies. So, Mr. Preston, my question to you is: 

How is it that the agency which is supposed to be the one advocating for small businesses in the Federal Government do almost 

no work with these companies? 

Mr.PRESTON. I know that our small business record here in the 

Gulf on the businesses related to these efforts was over half. So 

about over half went to small business. I don’t have the specific 

numbers for those contracts, but I will absolutely follow up on that 

and get back to you. 

ChairwomanVELA ́ ZQUEZ. I know that most of these contracts 

were awarded by the previous administrator. What I want to hear 

is: What are you going to do to make sure that this pattern will 

be changed by the agency whose mission is—

Mr.PRESTON. Yeah. 

ChairwomanVELA ́ ZQUEZ. What are you going to do? 

Mr.PRESTON. Absolutely. If we are in a role where we’re charged 

with bringing these businesses to the table and helping to get contracts more broadly, we have to set the stage. So I will leave here 

and work with your staff specifically to get you back the information and look into it. So thank you. 

ChairwomanVELA ́ ZQUEZ. Thank you. Ms. Doan, we all know and 

you know because you are from here that New Orleans has a significant minority population. And I just want for you to explain to 

the Committee how is it that your agency ranked next to last of 

the agencies represented here today in terms of contracting with 

local minority businesses? What could possibly explain this? 

Ms.DOAN. I actually would like to see that statistic. That’s not 

the statistic that I believe that we have. 

ChairwomanVELA ́ ZQUEZ. This is based on the data from your 

agency and the data provided by—

Ms.DOAN. Our data is that in disadvantaged businesses, we have 

6.9 percent went to disadvantaged businesses, 9 percent to womenowned, 2.4 to HUBZone, and 71 percent—

ChairwomanVELA ́ ZQUEZ. Ms. Doan, I would strongly suggest that 

you go back and check your numbers. 

Ms.DOAN. I’m happy to do it. 

ChairwomanVELA ́ ZQUEZ. Those are not local minority businesses. 

Those are nationally. The scope of this hearing is not about small 

businesses nationwide. It’s about small businesses, local small businesses, minority businesses here from the Gulf region. 

When you use that data, then we are going to have very good 

numbers to report. But those are not the numbers that were requested. 

Ms.DOAN. I will look into this. If it’s something happening, I will 

fix it. I would like to also point out that one of the programs which 

37

I mentioned which is U.S. Customs House has been a local, small 

business that we have worked with and it also is a HUBZone business that’s subcontracting. We have—

ChairwomanVELA ́ ZQUEZ. HUBZone—the businesses that goes 

into HUBZone are not necessarily minority businesses. 

Ms.DOAN. Yes, I know. But under that one alone, we had 6.3 percent for small disadvantaged. What I would like to do, though, is 

follow up with you on this because it’s so important to me, we will 

work on it. 

ChairwomanVELA ́ ZQUEZ. Okay. 

Ms.DOAN. Could I ask to just plug real quickly—

ChairwomanVELA ́ ZQUEZ. No. No. Because I have a question—

Ms.DOAN. —gsa.gov, if we could just get people to go—honestly, 

every time you guys get someone local, tell them to go to gsa.gov, 

please, gsa.gov, please, have them register for us. This is our best 

way to make this happen. Oh, by the way, if they are having problems, have them e-mail me directly. I respond to all of my e-mails. 

I will move this along. This is important to me. 

ChairwomanVELA ́ ZQUEZ. Well, let’s talk about the fact that GSA 

earlier this year requested bids on ADA contract for architectural 

and engineering services for Katrina-related repairs to a GSA 

building in the region. Prior to that solicitation, GSA would have 

had to first make that determination that two or more qualified 

8(a) firms existed that could do the work. Given the significance, 

and we just mentioned it, local minority population, my guess is 

that it shouldn’t be difficult to find two 8(a) contractors here. 

Yet after offering that contract on their 8(a), it was never let. Recently GSA has come out with a new proposal that does not use 

the 8(a) program. So small businesses, as you know, have to be 

strategic in what business opportunities they pursue because this 

is going to cost them. 

So when I see this type of poor planning on an agency’s part and 

given the poor track record that your agency has when it comes to 

minority contracting opportunities, I want to know why this is happening. And if you will commit yourself today to replacing this contract with similar work for this industry. 

Ms.DOAN. Congresswoman, I don’t know why this is happening. 

But it is important to me. What I also don’t know why is honestly, 

guys, LuritaDoan@gsa.gov, pick up the phone, e-mail me, call me. 

You don’t even have to get me to come here to this hearing. I would 

have looked into this immediately. I will look into it as soon as I 

get out of this hearing. 

I will commit to you to doing whatever is legally possible to circumvent this. I think if you guys look at my track record in the 

last ten months since I came on board, I have grabbed so many 

bundled opportunities. I have made them available to the 8(a) and 

minority community. 

This is something that’s important to me. I have a great track 

record for ten months on this and I will continue that. Let me work 

with you. 

ChairwomanVELA ́ ZQUEZ. Your words sound good, but measurement is done through numbers here. 

38

Ms.DOAN. I absolutely agree and let me make those numbers 

count. Please, work with me on this. If you know of something, call 

me. 

ChairwomanVELA ́ ZQUEZ. The first thing I would suggest that you 

do is go back and sit down with your staff and look at this contract, 

the architectural contract. 

Ms.DOAN. I intend to as soon as we—as soon as I get back to 

D.C. I appreciate this opportunity. If I could just say once more, 

please, please, please, give me a chance to make it right. Alert me 

as soon as you’re made aware by either your constituents or any 

small business, please, let me know. 

ChairwomanVELA ́ ZQUEZ. Ma’am, I’m telling you—

Ms.DOAN. We’re together. Believe me, we are aligned. We are 

kindred spirits on this. 

ChairwomanVELA ́ ZQUEZ. Look, if you read the papers and you 

watch TV news, you know what is happening in this region. You 

don’t need for me to come and tell you. 

Ms.DOAN. I live—I am living this nightmare every day. 

ChairwomanVELA ́ ZQUEZ. You don’t need me to come and tell you 

that your agency ran next to last when it comes to minority contracting opportunities. So I will suggest to you, go back and make 

sure that you implement a plan. 

Ms.DOAN. I’m happy to do that. What was past is prologue. From 

ten months onward since I have been in this, I am committed to 

this and I will continue to do that as long as I am the Administrator. 

ChairwomanVELA ́ ZQUEZ. Thank you. 

Ms.DOAN. You have my promise. 

ChairwomanVELA ́ ZQUEZ. Thank you. 

Mr. Dunne, the VA has more than 36 million in Katrina-related 

contracts, but have awarded less than 245,000 to local minority 

businesses. What is the Veterans Department doing to target and 

ensure that minority business that can do this work—we’re not 

talking about handouts—are getting their fair opportunity? 

AdmiralDUNNE. The VA is reaching out to small businesses, local 

businesses in the area to ensure that they are aware of the opportunities. And I would offer up as an example that since the Stafford Act was passed, 14 of 16 contracts that have been let were for 

local contracts representing $240 million out of a total of $257 million contracting. We need to keep this emphasis on, and we will 

continue to do that and continue to use the Stafford Act and the 

other legal guidelines in order to make sure that we fulfill our responsibility. 

ChairwomanVELA ́ ZQUEZ. Mr. Dunne, do you know what really 

troubles me or concerns me when I read your testimony, that you 

are so quick to dismiss small business ability to serve as a prime 

contractor for the VA hospital. Why is that? 

Mr.DUNNE. The reason for that is our historical experience. We 

are more than happy to learn that there is an ability to do that—

ChairwomanVELA ́ ZQUEZ. What kind of experience? 

AdmiralDUNNE. An experience that we have had in other contracting environments. We work with the prime contractor when 

we have the ability to set guidelines within the contracting, and 

then get the prime contractor to work with subcontractors on a 

39

local basis, on a minority basis, on a veterans basis and incorporate 

them into the overall contract. 

ChairwomanVELA ́ ZQUEZ. So are you telling me that small businesses are not able to be a prime contractor to build the VA hospital here? 

AdmiralDUNNE. I’m saying that—

ChairwomanVELA ́ ZQUEZ. I would like you to base that in some 

type of analytical analysis, not experience—traditional experience, 

historical experience. 

AdmiralDUNNE. I think oftentimes it becomes an issue of bonding. We are in the process of talking with the Small Business Administration about that specific issue. If it is possible to get a local, 

small business, any small business could be involved in our contracting, we welcome that opportunity. 

ChairwomanVELA ́ ZQUEZ. Mr. Dunne, in developing the purchasing strategy for this program, did the SBA engage your agency 

to make recommendations as to how local, small businesses would 

be used? 

AdmiralDUNNE. I would have to get back to you on the answer 

to that. 

ChairwomanVELA ́ ZQUEZ. Mr. Preston, who is the PCR assigned 

to VA? 

Mr.PRESTON. I don’t have the name of that person. 

ChairwomanVELA ́ ZQUEZ. Are you going to work with the VA to 

make sure that the PCR will work with VA to make sure that 

there is going to be small business participation in this project? 

Mr.PRESTON. Yeah. That’s the PCRs job, and it’s also the local 

office—

ChairwomanVELA ́ ZQUEZ. But this is—you know, we all know for 

months now that this project is coming here, $300 million. We have 

witnesses that will be testifying here later today in the second 

panel that have been prime contractors. One of them built a 

Harrah’s hotel for half billion dollars. So if it’s good for the private 

sector to turn and hire a small business as a prime contractor, why 

is it that it’s not good for you? 

So, Mr. Preston, are you going to direct a PCR to look into this? 

Mr.PRESTON. Yes. We will look into it. 

ChairwomanVELA ́ ZQUEZ. Mr. Dunne, since the work of the VA 

hospital has been divided into five phases—general design, SAL 

utility phase, energy planned phase, foundation phase, and a buildout phase—will your agency commit to at least one of those phases 

being awarded for a local, small business? 

AdmiralDUNNE. The agency will commit to following the contracting process in giving of all able contractors an opportunity to 

bid on any element of our contract. 

ChairwomanVELA ́ ZQUEZ. Let me ask you: Portions of these 

phases could easily be done through the 8(a) program either as a 

set side or for those contract portions over 3.5 million competitive 

among just 8(a); will the VA commit to this? 

AdmiralDUNNE. The VA will commit to continuing the contracting in accordance with all of the legal capabilities that we 

have in making opportunities available to every qualified contractor. 

40

ChairwomanVELA ́ ZQUEZ. Let me say this to you, sir, and to the 

SBA, Mr. Preston, we are going to be watching what your agency 

is going to do. We are not asking you to give a handout to small 

businesses. We are asking you to follow the law. And we are going 

to look and see what contracting goals you have established for 

small businesses and minority and women-owned businesses. 

Mr.PRESTON. Chairwoman, my district rep just informed me that 

we are working through the district office to provide a recommendation for local businesses to the VA and to see what we 

could do to help with that particular contract. 

ChairwomanVELA ́ ZQUEZ. Thank you. I know that Mr. Westmoreland has to leave, and he would like to make a statement. 

Mr.WESTMORELAND. Thank you, Madam Chairlady. My grand 

mamma used to say sometimes you get between a rock and a hard 

place. And I see six people between a rock and a hard place down 

there because I know that your agencies are probably doing everything they can to work at the fastest pace possible to bring this region back to—if it ever could be brought back to a normal condition 

that it was prior to these two natural disasters. 

And while right now you are maybe getting talked to about not 

using the right percentages of minority contractors or small businesses, at the same time, if you weren’t as far along down the road 

as you are today with what you have completed, you would be getting hollered at about not getting this work done. And sometimes 

those things just don’t mix and match as quick as you would hope 

they would. So my hat’s off to you for the job that you-all have 

done so far. 

And I will just leave with this little bit of advice about—and I 

hate to leave you-all. We’re having such a good time, but I have 

got to go back to Atlanta—let me just say this to you, you can’t 

imagine what it’s like to sit on this end that we sit on. And Mr. 

Melancon, and Mr. Jefferson, and Mr. Pickering, and Mr. Wicker, 

Mr. Jo Bonner, the boys along the Gulf Coast that have suffered 

this kind of damage. And I’m sure they hear constantly from their 

constituents about these things that we don’t understand about 

how Government operates. And my suggestion would be simple to 

you. And I can’t believe that you-all haven’t done this or maybe 

you-all have done this, I don’t know. I would have somebody from 

my office assigned to each one of those congressional offices and I 

would go by once a week and I’d find out what was going on in 

their district. Because I promise you, if you go to the grocery store 

or if you go to the Rotary Club or Kiwanis Club or wherever you 

go, you are going to hear from your constituent about some thing 

that the Government didn’t do for them or that the Government 

did to them. 

So I suggest that you-all stay in constant communication. That 

you are able to discuss these issues. And for the Chairlady, I have 

sat on this committee for three years with her. I can promise you 

that she is not going to be satisfied until she sees an increase in 

the minority businesses, in small businesses, especially those minority small businesses get a fair crack at government contracts, 

which we all believe that they should. 

41

So my suggestion to you on that is I would give her a report once 

a month as to how you’re coming and especially in these projects 

along this Gulf Coast region. 

Madam Chairwoman, I want to thank you for having me down 

and letting me participate in this. And if it’s okay with you, I’m 

going to leave and go catch a flight. Thank you. 

ChairwomanVELA ́ ZQUEZ. Mr. Jefferson? 

Mr.JEFFERSON. Thank you, Madam Chair, I want to ask about 

the bonding program because it’s come up with the VA and a few 

other places. I’ll go back to Mr. Preston and ask him about this. 

Just after Hurricane Katrina, the SBA delayed the schedule fee 

increase and the surety bond guarantee program for six months 

from October 1st, 2005 to April 3rd, 2006, to assist small contractors needing bonds to participate in the rebuilding of the Gulf 

Coast area. 

However, that period, of course, has long since passed. One idea 

that’s been proposed in the previous Congress would allow the SBA 

administrator to use rates approved by the local insurance commissioner in the state in which the contract is let or is to be performed. 

Removing these bonding barriers, whatever they are, to small 

businesses is really the key to making these available. If they set 

aside contracts to whatever they do, and then the small business 

folks can’t meet the bonding requirement, it’s really all for naught. 

Do you have any ideas as to how we can assist in this area more 

than you are already doing to make sure that when these contracts 

are broken down and they are reachable by small business folks, 

that they’ll be bonding capacity in place for them to help them to 

meet the requirements to do these jobs? 

Mr.PRESTON. Yeah. I think part of the challenge is the bonding 

limit. And part of the challenge is the size of the bonding program. 

And we would be open to talk about working with you-all to expand 

that limit. 

Mr.JEFFERSON. What should we do to do that, though? Whatever 

we need to do, we need to know it because we want to do it to 

make sure it’s available here. 

Mr.PRESTON. Right. I think we would be happy to work with you 

on that. The other thing that we can do pretty actively is work to 

joint venture numerous small businesses together to expand their 

capacity as well, which can partially address that issue. 

Mr.JEFFERSON. What’s the bond limit now that you are working 

with? 

Mr.PRESTON. It’s $2 million. 

Mr.JEFFERSON. Now, explain that to me. 

Mr.PRESTON. It’s the amount that we would guarantee. It’s the 

amount that we would back the insurance company for behind 

that. 

Mr.JEFFERSON. Madam Chairlady, with the bill that you have 

pending in Congress to be passed, we haven’t yet gotten out from 

the floor yet, huh? 

ChairwomanVELA ́ ZQUEZ. Next week. 

Mr.JEFFERSON. All next week. This bonding issue is a real key 

part. But I don’t know to the extent we addressed it, but it is still 

addressable, I’m sure next week, if we wanted to. And I would just 

42

like to know if the Administrator would back the notion that we 

raise the bonding guarantee limit from $2 million to some other figure that would permit more opportunity down here in the Gulf region especially. 

Mr.PRESTON. Yeah, we’ll work with your staff on it. We’ll actually call the Chairwoman’s staff to work on it. 

Mr.JEFFERSON. Because this could be included as early as next 

week in legislation that’s on the floor which I’m sure we could pass 

out of there without any problem with the Chairlady’s leadership 

on that. 

ChairwomanVELA ́ ZQUEZ. Mr. Melancon? 

Mr.MELANCON. Thank you, Ma’am. General Strock, I have got a 

question that I asked in the Katrina Committee of the Corps, and 

they told me they were going to get me that information. The 

Katrina Committee ended and I still have yet to see that, the cost 

paid or the price paid by the Corps per cubic yard of material collected and disposed of at the top, first primary contractor. 

If you could do that for me, I would appreciate it. 

GeneralSTROCK. Is that just in general, sir, on this specific parish? 

Mr.MELANCON. Yeah. We went to Federal Court trying to get 

this number and they say it’s not public information. I beg to differ, 

and I hope I don’t have to speak for it; but somebody ought to be 

able to give us that number. And, you know, everybody said, Well, 

I don’t know. And we’re 19 months, and we’ve picked up how many 

million cubic yards? Several hundred million cubic yards? 

GeneralSTROCK. About 100 million, yes, sir. 

Mr.MELANCON. And so somebody has got to know that number. 

If you could, get that for me. And I would like it pretty quick because I know somebody has got to have it over there. 

GeneralSTROCK. Sir, I will give you that number, and I’ll tell you 

why we cannot do that, but I guarantee I’ll get an answer to you. 

Mr.MELANCON. Okay. 

GeneralSTROCK. You’re looking for the tiering—

Mr.MELANCON. That number may settle a whole lot of problems 

we’ve had in this area. 

GeneralSTROCK. You’re looking for the tiering; what the prime 

got versus the second sub, third sub and so on. 

Mr.MELANCON. Yeah. One of the things that I have been told and 

told this by a contractor, or a representative, I should say, of a contractor, that Mississippi has less tiers than Louisiana. Is that so? 

Do you know that? Is that a frequent event? Or is that just maybe 

one contractor? 

GeneralSTROCK. Sir, I don’t know that, but one thing I can tell 

you that we learned in this event is that in future contracts, we 

will specify as part of the proposal how they plan on subcontracting, how many tiers and so forth. We will require them to tell 

us in advance. 

Mr.MELANCON. Why can’t we make that change since we have 

been making changes with the price on the jobs that they are 

doing, why can’t we make that change now? 

GeneralSTROCK. I don’t know the answer if we can do it or not. 

Mr.MELANCON. We ought to be able to at least find out exactly 

what every contractor that’s the prime, whether it’s the low bidder 

43

or whoever, what they are collecting, how many tiers they have 

going down. I’m told in Mississippi it’s three tiers. In Louisiana, 

I’m told it’s five to seven depending on who you are talking to. And 

I’m also told that the price per cubic yard that’s being paid over 

here might be as much as three times more than what is being 

paid in Mississippi. 

I don’t know that. I can’t get the numbers. 

GeneralSTROCK. Sir, I will get that to you if I can. Each contract, 

though, is a little different. Debris here in an urban environment 

in New Orleans is significantly different than the debris you will 

find in a rural environment in Louisiana and Mississippi. So it’s 

very difficult to compare one contract and one situation to another. 

We’ll do what we can. 

Mr.MELANCON. And I agree with that. I don’t think St. Bernard 

and Lower 9th Ward are going to have a whole lot of difference depending on the contract work. 

Mr. Preston, we talked a while ago—I think you said 22 percent 

of the contract—and maybe the Chairlady got it, and I didn’t pick 

it up—22 percent of the contracts are small businesses. And with 

her asking about the different corporations or businesses that are 

doing it, does that squirrel your number? 

Mr.PRESTON. I guess 22 percent of the contracts were local businesses. Actually, 29 percent, I believe, overall were small. But the 

Chairwoman’s comment is that they are not small, local businesses. 

My number is somewhat higher than hers. I think my number is 

12 but we’ll work with you-all to reconcile the number. But it’s 

still—it’s a solid number, but it’s not enormous. 

Mr.MELANCON. I think what I would like to try to do, Madam 

Chairwoman, is if we could try and get—because, as you know, we 

can make numbers do whatever we want them to do. And what I 

think we need to get is for all agencies numbers with regard to 

small business contracting, with regard to 8(a) contracting, we need 

to get everybody on the same formula, the same basis. And if we 

could, maybe we could get staff to work with an agency, get one 

and then let’s go back and look and see what those numbers really 

are a comparative basis. If that’s possible. 

I don’t know if I’ve got any time left. I have very little. I give 

it back to you. 

ChairwomanVELA ́ ZQUEZ. Okay. Mr. Preston, earlier this year at 

the Committee’s budget hearing, we asked as a part of the record 

that the agency provide information on all of the local, small business contracts that SBA had worked with the other agencies to secure it. 

SBA wasn’t able to identify seven. So given that, Mr. Preston, 

Administrator Preston, would you commit to meeting with each of 

the agencies that are at this table to identify five prime contracting 

opportunities for small and minority businesses including a process 

to ensure that local companies are included? And I am going to ask 

you to do that and report back to this committee in 30 days. 

Mr.PRESTON. Great. I’m surprised we were only able to provide 

seven. 

ChairwomanVELA ́ ZQUEZ. I have your answer right here. 

Mr.PRESTON. Okay. We’ve worked with just numerous businesses. 

44

ChairwomanVELA ́ ZQUEZ. We just received a letter from your office two weeks ago. 

Mr.PRESTON. Okay. My understanding of—in fact, we talked 

about it earlier today—my understanding is the request was for the 

number of Form 70s that we issued on HUBZone companies. So 

there may have been some confusion on the request because we’ve 

actually issued 27 Form 70s and worked with hundreds of small 

businesses. 

ChairwomanVELA ́ ZQUEZ. Sir—

Mr.PRESTON. So I apologize if we misunderstood the request. 

ChairwomanVELA ́ ZQUEZ. We will work with your staff, but that’s 

not correct. 

Mr.PRESTON. Great. Thank you. 

ChairwomanVELA ́ ZQUEZ. I’m going to excuse the panel now. I 

want to thank all of you for coming here today. As I mentioned to 

you, we will continue to monitor the situation about procurement 

practices with local and small businesses. And I will excuse you 

with one caveat. On the second panel, we are going to have local, 

small businesses participating. I will ask for each one of you to 

identify the staff person for the record that will remain in this 

hearing. 

Mr. Preston? 

Mr.PRESTON. Tee Roe. 

ChairwomanVELA ́ ZQUEZ. Ms. Doan? 

Ms.DOAN. Karen Kurksy. 

GeneralSTROCK. I’ll stay myself. 

Mr.SCHNEIDER. I’m going to stay. 

Mr.FINLEY. I will stay. 

ChairwomanVELA ́ ZQUEZ. Mr. Dunne? 

AdmiralDUNNE. I will be here also. 

ChairwomanVELA ́ ZQUEZ. Thank you very much. The panel is excused. 

ChairwomanVELA ́ ZQUEZ. On this second panel, our first witness 

is Mr. William Shear. Mr. Shear is the Director of Financial Markets and Community Investment at the U.S. Government Accountability Office. Thank you, Mr. Shear, and welcome to the Committee for the second time recently. 

STATEMENT OF WILLIAM SHEAR, DIRECTOR, FINANCIAL MARKETS AND COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE 

Mr.SHEAR. And I’ll thank you again. It’s a pleasure to be here, 

Madam Chairwoman, and Members of the Committee. I am 

pleased to be here in New Orleans to discuss small business participation in the rebuilding of the Gulf Coast in the aftermath of 

Hurricane Katrina. 

My statement today is based on a report we issued last month 

under the Controller General’s authority describing the extent to 

which small businesses participated in these Federal contracting 

opportunities. 

Our report addressed contracts awarded by the Department of 

Homeland Security and Defense, U.S. Army Corps of Engineers, 

and the General Services Administration. 

45

Here, I will discuss first the amounts that small and local businesses receive directly from these contracts with these agencies for 

relief and recovery efforts related to Hurricane Katrina. And second, the extent to which small businesses receive subcontracts for 

relief and recovery efforts. 

In summary, small businesses receive a total of 28 percent for relief and recovery efforts. In summary, small businesses received a 

total of 28 percent of the $11 billion in contracting dollars that 

these agencies directly awarded in response to Hurricane Katrina, 

between August of 2005 and June of 2006. 

DHS awarded the highest dollar amounts to small business and 

GSA awarded the highest percentage of its Katrina-related contracting dollars directly to small businesses. Small businesses in 

Alabama, Mississippi, and Louisiana, received 66 percent of the 

$1.9 billion awarded to business in these states. With respect to 

small business subcontracting opportunities, required information 

was not consistently available in official procurement data systems 

for these agencies. 

For example, the systems had no information on whether DHS 

or GSA required small business subcontracting plans for 70 percent 

or more of the contracting funds. 

In addition, the agencies often did not provide reasons for their 

determinations that plans were not required, even though Federal 

rules require such documentation. And such information should 

have been readily available. 

Because of the incomplete information about subcontracting, we 

were not able to determine the extent to which agencies complied 

with contracting rules and gave small businesses maximum opportunities to win subcontracts. 

We concluded that demonstrating compliance with the rules 

about subcontracting compliance is important for reasons beyond 

just documentation. 

By requiring these plans, agencies commit prime contractors to 

specific goals providing opportunities to small businesses and give 

themselves tools, incentives as well as sanctions that they can use 

to ensure that contractors engage in good faith efforts to meet their 

small business subcontracting goals. 

In doing so, the agencies ensure compliance with Federal procurement regulations, and that small businesses have all of the 

practical opportunities to participate in Federal contracts that they 

are supposed to have. 

Therefore, we made recommendations to the agencies to more 

transparently disclose the extent to which subcontracting opportunities are available to small businesses. We recommended, first, 

that the agencies issue guidance reinforcing the need to document 

in publicly available sources their decisions regarding subcontracting plan requirements; and, second, consider asking the Inspector’s General to conduct reviews to ensure that this guidance 

and requirements are being followed. 

The agencies generally agreed with our recommendations and describe various steps that they are taking to implement them. We 

plan to follow up with the agencies on their efforts to implement 

these recommendations. 

46

Madam Chairwoman, this concludes my prepared statement. I 

would be happy to answer any questions. 

[The statement of Mr. Shear may be found in the Appendix, on 

page 108.] 

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Shear. Our next witness is Mr. Ian Alexander Dreyer. Mr. Dreyer is Vice President of 

Perez, APC, a 60-year-old architectural and engineering design 

firm based in New Orleans. 

Welcome. 

And I would recommend to make a presentation for about five to 

seven minutes, but close to five minutes, please. 

STATEMENT OF IAN ALEXANDER DREYER, VICE PRESIDENT, 

PEREZ, APC 

Mr.DREYER. Thank you, and good afternoon. Chairwoman 

Vela ́zquez and members of the Committee, thank you for giving me 

the opportunity today to discuss the role small businesses are playing in rebuilding the Gulf Coast. 

My name is Ian Alexander Dreyer, as previously stated. I am 

Vice President of Perez, APC. We are a 67-year-old company based 

here in New Orleans that provides architectural and engineering 

design services. 

Our recent projects included: Ascension Parish Courthouse in 

Gonzales, Louisiana; Pearl River Junior High School; and the 

Natchitoches Events Center. 

Owned by a Hispanic female, Perez, APC has qualified as an 8(a) 

firm. Even before joining the 8(a) program, we had done work as 

a subcontractor for the Air Force and as a prime contractor for the 

Louisiana Air National Guard and Army Corps of Engineers. We 

are currently working on three subcontracts for the Army Corps of 

Engineers. 

In October, we bid on a GSA contract for architectural and engineering services in Louisiana. The solicitation was for Katrina-related repairs to GSA buildings throughout Louisiana. There was an 

8(a) set aside. We were perfect for the contract as initially solicited, 

but it was later canceled. 

During our telephone debriefing, I was told that we fulfilled all 

of the requirements, but they feared our firm was too small to handle the number of task orders and that we would be overwhelmed. 

The contract has been offered a second time, but with no set 

asides. The solicitation is due later this month. 

We have demonstrated over the years that we are able to expand 

based on the size of the contract. We were recently the prime architecture and engineering firm on the construction of Harrah’s Casino, a project worth $400 million. For that contract and similar 

projects, we grew to meet the demands of the workload. In the last 

10 years, our staff has been as small as five people and as large 

as 50, all employees, not including contract labor and sub-consultants. 

In fact, all businesses manage their labor force in this way. It is 

extremely rare for the timing of contracts to be so perfect that a 

new one starts exactly as the last one ends. Businesses do not need 

to have idle employees sitting around waiting for contracts. Both 

large and small companies deal with the same staffing issues. 

47

If anything, small businesses handle these fluctuations better 

and with lower overhead. They can hire people much faster when 

heavy project loads require it. Many of us at the company have 

worked for huge, multi-national architecture and engineering firms 

and have found that our small firms compete with them very well, 

for the same work, and produce as well or better than they do in 

part because of our inherent flexibility. 

I believe that GSA and all of the Federal agencies participating 

in the rebuilding effort should be selecting local small businesses 

to participate in rebuilding contracts based on their track records 

and experience. 

Through our past service to Federal agencies and successful 

management of simultaneous IDIQs and large-scale projects, we 

have demonstrated that, though we are a small firm, we are wellequipped to do the work. 

There are many small businesses in our area that, like us, stand 

ready and willing to help rebuild Louisiana. 

Thank you again for this opportunity to present our experiences. 

I look forward to answering your questions about how local small 

businesses can help rebuild the area. 

[The statement of Mr. Dreyer may be found in the Appendix, on 

page 124.] 

ChairwomanVELA ́ ZQUEZ. Thank you, sir. Our next witness is Mr. 

Edwin Jones. Mr. Jones is the President of EJES, Inc., a multi-discipline engineering services firm. EJES has three offices around 

Louisiana. 

Welcome, sir. 

STATEMENT OF EDWIN JONES, PRESIDENT, EJES, INC. 

Mr.JONES. Madam Chairwoman, I want to thank you and the 

Committee for giving me the opportunity to speak on participation 

in this Gulf Coast region. I want to start by giving a background 

of myself. I’m born and raised here in the State of Louisiana, a 

Southern University graduate from the College of Civil Engineering in Baton Rouge. 

To give a quick history on EJES, we have completed over 75 different civil engineering infrastructure-type projects throughout the 

State of Louisiana. At the present time, we have prime consulting 

work with the City of Baton Rouge, with the City of Alexandria, 

the City of Shreveport, and also a subconsulting project with the 

New Orleans airport. 

The one thing I want to emphasize is that I’ve been doing work 

here with my company since 1998. So even before the hurricane 

came and devastated New Orleans, we were already existing and 

doing work and participating in Louisiana. 

One thing I want to key in on is: We have an existing IDIQ contract with the Tulsa District already. And at the present time, we 

got the contract signed about February of ’06. Still today, we have 

not done any meaningful work with the Tulsa District. 

So we went to the chief contracting officer. Rick Hendrick agreed 

to call the New Orleans District and say, We’ve got an 8(a) firm; 

they do good work. 

48

You know, we could do work here in New Orleans. The New Orleans District said, No, we know you guys have the qualifications, 

but we want you to have a New Orleans contract. 

I want to highlight something that I just got from the Corps on 

February the 6th. It says, ′′Your firm was among the most highlyqualified firms, but was not among the selected firms.′′ This is 

what the New Orleans District just wrote me on February 6th. It 

says, ′′Even though your firm was not among the selected firms, 

you are among the most highly-qualified, and will be notified if the 

workload requires additional contract award.′′ So we put together a complete team of minority companies and 

submitted it for a contract with the New Orleans District. We had 

four outstanding local firms on our team from BFM, Eustis Engineering, Parsons Brickenhouse (phonetically spelled) for this contract. And still, again, we get disappointing news on that contract. 

About three years ago we went up to Washington D.C.—maybe 

two years ago, we went up to Washington D.C. And Ms. Bernadene 

Greenhouse was in office then. And she talked to us about contract 

bundling and about being able to have strategic alliance team 

members in order to compete for the large-sized contracts. Because 

one of the excuses is: You don’t have the capacity in order to do 

a major Corps contract. 

So we assimilated a whole strategic alliance of small businesses. 

When we did that, we were successful to win the Corps contract. 

Also, immediately after the hurricane, Mrs. Kim Carter, which was 

representing the Department of Commerce, contacted me. I gave 

her all my financial information, all of my certifications to show 

that we were a vibrant business in Louisiana. And she responded 

back to us that we were one of the number one ranking firms to 

do business with the recovery work. Still again, from her conversation, she got frustrated because they were not serious about giving 

minority business contracts. So she said she went to another job. 

Also we have met with the New Orleans District on over ten occasions giving our work experience and giving them everything 

that we have to show that we can do this type of work. On every 

occasion, they looked at our experience and they said, You’ve got 

all of the experience; you’ve got all of the capabilities; you should 

win a contract. Still, again, nothing. 

I want to submit this for the record because this is from the 

Corps when they said that we are highly qualified. 

ChairwomanVELA ́ ZQUEZ. Without objection. It will be submitted. 

Mr.JONES. Thank you. And really quick to wrap it up, I want to 

submit this IDIQ that I have in place. I will give you a example. 

We have a Tulsa contract. About two weeks ago, another company, 

a major company called out of the Louisville District and said, We 

got work going on in the Tulsa District. But still yet we as an 8(a) 

firm, with a five year, $1 million a year capacity to $25 million, 

they still have not given us a meaningful contract. The only contract we have is a contract that a majority firm is doing $130,000 

of work. And as a team we’re getting 9,000. 

So something is wrong. I want to end with this: When the hurricane hit, it was very close to me, so close to me as an owner that 

I had families coming from New Orleans to stay with me during 

this period. So for me as an owner and native Louisianan and as 

49

a person that loves this State, I feel that it is a crime; and it’s a 

shame that putting all of our time and effort into Louisiana to 

build a business as a black owner with the 9th Ward being a majority black area, that we as black, African Americans are not getting our fair opportunity to do work under this recovery work. 

Thank you. 

[The statement of Mr. Jones may be found in the Appendix, on 

page 126.] 

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Jones. Our next witness 

is Mr. Ricardo Pequeno. Mr. Pequeno is the owner of Mid-South 

Plumbing, a 10-year-old company located in Louisiana. 

Welcome, sir. 

STATEMENT OF RICARDO PEQUENO, OWNER, MID-SOUTH 

PLUMBING 

Mr.PEQUENO. Thank you, everyone. Members of the Committee, 

thank you for the opportunity to be here today. My name is Rick 

Pequeno. I am owner of Mid-South Plumbing, LLC, in Slidell, Louisiana. 

Prior to the storm, my 10-year-old company was doing very well. 

We were growing thanks to the work on many commercial projects. 

We were involved in doing hotels, shutdowns, repairs, banks, you 

know, high-end houses; and I’ve even done hospitals in my apprenticeship program. 

But since the storm, the amount of work available to a businesses like mine has changed. It’s declined. There is virtually no 

commercial construction going on. Even though numerous office 

buildings were damaged by the hurricane, they are not being rebuilt at this time. My business has suffered as a result and is in 

danger of failing after 10 years. 

After the storm, at my accountant’s suggestion, I registered with 

the Central Contractor Registry, CCR. And to date, I’ve received no 

Federal contract work even with this registration. 

Because of the decline in our commercial work, which was the 

cornerstone of my business, I decided to apply for the SBA 8(a) program. I am already certified by the Louisiana Minority Business 

Council. I applied for 8(a) both electronically and with a hard copy 

application and mailed it in. 

My business was coded as 8(a) in the Central Contractor Registry, even though we had not been approved yet. The phone calls 

then flooded in. We received calls from military personnel who 

were suddenly very interested in our business. 

Later, I found out that my 8(a) application had been declined. 

The CCR, Central Contractor Registry, removed our 8(a) designation in the database and the phone calls stopped. 

I eventually learned that the SBA declined the 8(a) application 

because my brother, who lives 50 miles away, owns a company that 

is in the 8(a) program. On the application, one of the questions 

asked was whether or not I, as the applicant, have a family member in the program. I answered the question truthfully, that I do; 

but that I do not own any of his company, and he does not own 

any of my company. 

I was declined because the SBA decided—there is a quote in 

there. And this is a quote from their decline letter to me ′′Current 

50

8(a) program eligibility criteria, CFR 124.105(g), require that an 

applicant concern be declined if individuals determined to be disadvantaged for the purposes of one participant, their immediate 

family members, and the participant itself, may not hold an aggregate, more than 20 percent equity ownership interest in any other 

single participant. ′′The fact that your brother owns a current 8(a) participant, and 

you own more than 20 percent interest in the applicant firm′′— which I don’t—′′prevents you meeting 8(a) eligibility criteria.′′ This makes no sense to me. I am particularly frustrated because 

I’m not getting into the 8(a) program. And that has reduced my opportunity to get Federal work, which is the only work in town. 

Many additional barriers do remain. Federal work also requires 

bonding. Commercial work does not. I am working closely with my 

banker, Ann Watsky, First Bank, who has provided me with an increased line of credit, and will finance my company for larger 

projects. My banker and my suppliers recognize the important role 

that small businesses like mine have on this economy, both as employers and as the main source of community investment. 

I wish that the Federal Government would also recognize the importance of Louisiana small businesses and be as responsive as 

some local partners have been. My employees and I are ready to 

begin work and help rebuild our community. 

Thank you for your concern about Louisiana Businesses. I welcome any questions. 

[The statement of Mr. Pequeno may be found in the Appendix, 

on page 128.] 

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Pequeno. Our next witness is Mr. Charles Priestly. Mr. Priestley is the Managing Member and Director of Operations at Hummingbird Aviation, LLC. 

For the last seven years, Hummingbird has owned and operated 

helicopters and fixed-wing airplanes for transportation and cargo 

handling. 

Welcome, sir. 

STATEMENT OF CHARLES PRIESTLEY, MANAGING MEMBER, 

DIRECTOR OF OPERATIONS, HUMMINGBIRD AVIATION, LLC 

Mr.PRIESTLEY. Chairwoman Vela ́zquez and Members of the Committee, thank you gentlemen for the opportunity to talk to you 

today about the challenges my company has faced while trying to 

participate in the rebuilding efforts after Katrina. 

My name is Charles Priestley and I’m the Managing Member 

and Director of Operations at Hummingbird Aviation. For the last 

seven years, we have owned and operated helicopters and fixedwing airplanes for transportation and cargo handling. Our employees are based and supported out of Hammond, Louisiana. 

In our previous work on Federal contracts, including the Department of Defense, we have successfully navigated the agency processes, which can be very different from how we seek out work in 

the private sector. But since Katrina, we have found the difficulties 

associated in dealing with Federal agencies to be a real barrier to 

rebuilding our business, and our economy. 

We have a large variety of services that we could be providing 

to assist in cleanup and reconstruction projects. 

51

Unfortunately, many agencies do not realize how the work we do 

fits into what they need done. For example, when procurement officials see the name ′′Hummingbird Aviation,′′ they don’t know we 

work in debris removal, or picking up logs and other loads. We basically just kind of get a blank stare or a look of confusion. 

For this reason, I have invested time and money in both outreach 

and advertising. Vendor registries that are being utilized by the 

Federal agencies have proven unsuccessful for our line of business. 

Still, we found that there are very few ways to reach a decision 

maker at agencies and let people know what we have to offer. As 

a Louisiana resident, it’s especially important to me to reach out 

in the parishes and let people know we are available. Finding out 

where the right people are seems to be impossible. When I do make 

contact with someone, they always seem to be low-level staff members who simply cannot or will not run a small business up the 

chain when they admittedly do not understand how our business 

can provide solutions. 

Despite these road blocks, we have made numerous inquires and 

applications over the last 20 months. Each of these costs time and 

money to prepare. Although we are essentially presenting our company with our years of experience and previous work for the Federal Government, the process is different every time, meaning a 

new application procedure, new certification rules, more time and 

more money. 

We are the exclusive facility that conducts training for every helicopter inspector in the Federal Aviation Administration. We are 

an approved DOD air carrier by the Air Mobility Command and we 

operate under four different FAA certifications. 

The amount of redundancy in the process has prevented us from 

filling applications that just don’t seem worth the up-front expense. 

Ultimately, we want our qualification to be fairly considered. I’m 

tired of hearing from agencies that we do not have the necessary 

experience or are not viable. We were performing similar services 

before Katrina and have demonstrated our ability to do so now. 

I want future contracting with the Department of Defense and 

the Department of Homeland Security because I believe our company has an important service to offer, and we can do it competitively. 

Thank you, Ma’am. And I’ll be available for any questions. 

[The statement of Mr. Priestley may be found in the Appendix, 

on page 132.] 

ChairwomanVELA ́ ZQUEZ. Thank you for your testimony. And taking time out of your businesses to be here today. 

Mr. Shear, the General Accounting Office issued a report on 

small businesses and Hurricane Katrina on March 1st, 2007. What 

do you set out to find in your story? 

Mr.SHEAR. When we first started talking with House Small Business and Senate Small Business and looking at the issue, what was 

emphasized to us was that the Congress and the small business 

communities, in particular, in plain leadership in this area, had to 

know what the facts were. And the committees were very mindful 

of how the Federal procurement systems have shortcomings. But 

they said try to get behind it, try to dig for the numbers, try to give 

us the best picture possible of what opportunities small businesses 

52

have had with these contracts, both with respect to prime contacts 

and subcontracting. 

That’s what we set out to do. 

ChairwomanVELA ́ ZQUEZ. Mr. Shear, I gather from your testimony 

that you had difficulties finding subcontracting data. What specifically was the problem? 

Mr.SHEAR. The problem was that there were requirements as 

part of the Small Business Act, the Federal Acquisition Regulation, 

for contracts for large businesses over certain thresholds, where 

there are subcontracting opportunities, to provide information into 

the Federal procurement system on subcontracting plans. And 

when there aren’t subcontracting plans, the reasons why there 

weren’t subcontracting plans. 

So we found this terrible deficiency. So, again, in this context of 

trying to collect the most information to address this issue, this deficiency, in terms of the agencies reporting on subcontracting opportunities. 

ChairwomanVELA ́ ZQUEZ. Although the General Accounting Office 

didn’t address waivers in its report. GSA raised the issue in its 

comments. Have you given any thought to the waiver issue? 

Mr.SHEAR. Yes. And it’s true we didn’t address that during the 

course of our work, but in that comment letter and since, we have 

certainly thought about it among ourselves. We have talked about 

it, and we have discussed it with the agencies. And I think what 

is really important—and our thinking at this stage—and what it is, 

they’re thoughts, is that what alternatives are there to having 

waivers for Small Business Act provisions that really get to the 

heart of trying to include small business. And Stafford Act provisions of trying to involve local businesses. 

So what we have really focused on alternatives to waiver issues. 

So let me just kind of give an example of some of the thinking 

along here. 

Even though you could say that, This was an emergency, a disaster of major proportions, many of the contracts are of a long-term 

nature for response and recovery. By their very nature—a plan is 

important for any type of contracting measure. So I’d say contracting in kind of like our initial view is—contracting requires a 

plan. And part of that is a subcontracting plan and part of that is 

involvement of small businesses including small disadvantaged 

businesses and the other. 

So in most situations, I think that the provisions of the Small 

Business Act and what the Stafford Act is trying to achieve can 

work consistently with one another. 

There could be certain facts and circumstances where there could 

be some conflict. So let me just identify two of those areas. And, 

again, we’re thinking what are the alternatives—our major things, 

what are the alternatives to waivers? 

The first one would be it’s an emergency situation, you have to 

deliver ice. You have to deliver provisions over a short period of 

time. Well, with respect to that, one of the things that we have 

identified in this work and even in previous work and in previous 

testimonies, is the importance of planning. 

I know in front of this Committee I talked about the importance 

of planing in the SBA’s Disaster Loan Program. As an agency, 

53

we’ve talked about failures in planning for disasters of this magnitude. But one of the things that we’ve identified in contracting—

as far as planning, it can ease any tension when it does exist, between responding to an emergency and including small business. 

The role of prenegotiated contracts becomes very important to 

that. And part of prenegotiated contracts does and would include 

plans for small business involvement when those contracts actually 

do go to large businesses. 

The second area that I want to point out, in our initial thinking, 

we don’t really know whether waivers should even be the issue 

that’s discussed. Maybe it’s deferral. And that again might be very 

much under very specific, you know, facts and circumstances where 

you might require either a subcontracting plan, you know, at some 

later date. It could be days later after a contract. It could be weeks 

later. Maybe it could be more than that. But the idea is that maybe 

it would be deferral. That would probably require a statutory 

change. But a deferral could be an alternative where especially if 

the original contract stated you had to make good faith efforts to 

develop a plan and include small business, maybe there’s some avenue there. 

But, again, our focus on that as we’ve thought about it, isn’t to 

go out and change the Small Business Act, but the idea is what alternatives are there to try to address these emergency situations? 

ChairwomanVELA ́ ZQUEZ. Thank you, Mr. Shear. 

Mr. Dreyer, I guess you were here when I was asking the questions to the VA? 

Mr.DREYER. Yes. 

ChairwomanVELA ́ ZQUEZ. So you heard that he testified that 

there was no plan to use local small business prime contractors for 

the new VA Medical Center. Does the design work sound like something that your firm can do? 

Mr.DREYER. Absolutely. If not mine, I can easily refer them to 

many other small firms here in the New Orleans area and probably 

the larger Louisiana area that could easily handle that sort of 

work. 

ChairwomanVELA ́ ZQUEZ. Mr. Priestley, you mentioned in your 

testimony regulatory burdens associated with contracting. Could 

you expand on how that has limited your ability to secure Federal 

work? 

Mr.PRIESTLEY. Yes, Madam Chair. First off, I have to express a 

little level embarrassment here. We’re kind of an oddball company 

in that up until the past two weeks we had two business locations. 

One in Connecticut and one in Hammond, Louisiana. 

We got down here just as Katrina hit. So unfortunately, we are 

not a business that existed before Katrina in Louisiana. But in the 

process of responding, we were probably one of the heaviest used 

helicopter companies by FEMA during the response. And we kind 

of fell in love with the place and made a business decision to move 

here. 

We have since closed Connecticut and moved the entire operation 

into Hammond, Louisiana. So I just wanted to make that clear. On 

the regulatory burdens, I discussed—an example would be for contracting with the Department of Defense, which also includes the 

U.S. Army Corps of Engineers, there is a requirement and a just 

54

requirement that any commercial vendor be approved through this 

air mobility command. And that’s a Federal requirement under 

32CFR part 861. 

What we have found in trying to contract with other Department 

of Defense agencies is that the Navy, the Marines and even some 

tenants of the Air Force, they all have their separate, private certifications. And they don’t recognize the dedication and the expense 

that an operator takes in becoming AMC approved. 

To the Corps’ credit, I would say throughout the entire United 

States, they are pretty diligent in adhering to that. 

So what happens is for us to get an AMC certification it takes about four months and probably 20 to $30,000 in cash out of pocket. 

Now we go to contract with the Navy and they want another certification, another chunk of change. It just seems that there should 

be—there is a requirement and standardization by Federal law. I 

don’t know why they can’t follow it. 

ChairwomanVELA ́ ZQUEZ. You have had success in securing Federal contracts in the past. So in your observation, why has the 

work associated with Katrina recovery been so difficult to secure? 

Mr.PRIESTLEY. I have a couple of observations on that. I think 

one thing is, in general, as a small business interest, we’re limited 

in staff personnel. And several years ago as an example—the Central Contractor Registry, that popped up. And my understanding—

I’m not saying this is their true case—but in my understanding as 

an individual, the purpose of the Central Contractor Registry was 

to simplify the contracting mechanism and channel and make it a 

conduit to all of the Federal agencies. So that as a small business, 

I don’t have to almost have a full-time employee that can navigate 

all of the various Federal agencies and get on all of their individual 

registries and market to all of their individual solicitations. CCR 

was supposed to take care of that. 

Well, what I find is, whether it be DOD or other Federal agencies, sometimes it’s on Central Contractor Registry; sometimes it’s 

on a private, hidden registry associated with a specific military installation or Federal agency. 

So that’s a real problem. And the final part is, I don’t believe the 

registries work. And I’m in an oddball industry. We provide custom, on-demand services and tailor what we do to the customer’s 

need. 

If I made widgets or had a civil engineering practice or a law 

firm, maybe it would be easier. I don’t know that. So what I find 

is—if you-all remember, back when Katrina—when the initial response was going on just down the road here at Tulane Medical 

Center, all of that stuff was going on, you couldn’t get enough helicopters down here. 

Prior to Katrina, we were on the CCR registry, GCA, DHS, all 

of these registries listed as ′′helicopter′′ and having eight or nine 

NAICS codes listed, which clearly showed what we could do. We 

never got one call or e-mail from the Federal Government requesting our services as a helicopter operator. 

It just proves to me that they don’t work. 

ChairwomanVELA ́ ZQUEZ. Before I recognize Mr. Jefferson, I 

would like to ask a question to Mr. Jones. I understand that your 

55

company was told by GSA on competitive IDIQ 8(a) contract, that 

your business will be overwhelmed by the work. What was your reaction to that? 

Mr.JONES. Okay, thank you. Well, one of—most all of the time 

in 8(a) industry when you go in to pursue a Federal contract, they 

tie it specifically to capacity. And they said that we would be overwhelmed. But what they did not—they didn’t look at the total 

package of what I was bringing. I told you I had created a strategic 

alliance, members of small disadvantaged businesses. 

All of these businesses were proven and had excellent track 

records. And combined with all of the team members, we had an 

awesome team. But they looked strictly at EJES. Even EJES as a 

small business, we still, combined had about 23 full time and about 

seven part time on staff. So we did have the capacity. 

One of the things that I think that’s really biased in the government—and the reason I can say this is because before I started my 

company, I worked for the Federal Government. I worked for the 

Federal Aviation Administration. I know how they give out contracts. And I’m going to use this word so don’t anyone cringe when 

I use these words, but it’s a-good-old-boy system. 

The number one thing I want to say is that this it how it 

works—if it’s basketball, if it’s dancing, and football, they automatically think African Americans do it well. But in this industry 

of engineering, in this industry where it’s technical design and 

computation of different technical abilities, then they tend to cringe 

on our ability to perform this work. It doesn’t matter whether we 

worked for Bechtel. It doesn’t matter if you did major engineering 

projects. 

Before I came to own this company, I did $300, $400 million design projects as the engineer of record. That was fine through the 

agencies. But when we come as a company, they start talking 

about capacity, and then they question whether we really have the 

capability, even though we have tons of references, even though 

they can come and tell us that we are amongst the most highly 

qualified company. At the end, we don’t get selected. 

ChairwomanVELA ́ ZQUEZ. Well, would it be surprising to you no 

know that two-thirds of the contracts that were being awarded 

here, has gone to only ten companies? 

Mr. Jefferson. 

Mr.JEFFERSON. Thank you, Madam Chair. Your last comment 

was leading me to a question, but I’ll ask something a little different: Are you aware of other minority engineering companies in 

the area? I guess you would know who they all are? 

Mr.JONES. Yes. 

Mr.JEFFERSON. Do you know whether they have had the same or 

similar experience that you’ve had in trying to get the work 

through the various agencies? 

Mr.JONES. Yes. I talked to the owner of Julian Engineering. It’s 

a very popular African American company here. It’s the same story. 

They challenge us on capacity. They really just don’t want to believe that we can do this work. Even though—as far as myself—

I’m a licensed civil engineer in six states by exam, no grandfather, 

by exam, by a test from the national board. 

56

Mr.JEFFERSON. So no grandfather. Your grandfather was an engineer in other words. 

Mr.JONES. Yes, I hear that from a lot of the other A&Es, small 

businesses. And one thing I want to highlight. It’s different than 

small businesses. We have small businesses in this country with 

2000 people. But we are talking about small disadvantaged businesses. We are talking about the people that were totally affected 

here from this disaster. What about the small disadvantaged businesses that are out here? And that’s where I think they are missing the boat with these contracts. 

Mr.JEFFERSON. What do you think a firm like yours could bring 

to these projects that the other firms that aren’t from here might 

not be able to bring, that add value to the whole effort of recovery? 

Mr.JONES. I’ll tell you one thing that I know for sure that we 

bring, we bring—I bring along with EJES, itself, a tremendous 

amount of drainage, box cover, and infrastructure improving. But 

what I really bring is a strategic alliance of small businesses. And 

an example of what people really think about us is we have an opportunity right now in South Africa, I’m talking about out of the 

country, that we have been ranked No. 1 to do power generation 

and nuclear-type power plants. 

Now I think that says a lot about our strategic alliance. But still 

here in this city, in this state, in my home state, we can’t get a 

conversation when it comes to providing a service right here. And 

we do tons of infrastructure designs for major cities all over the 

U.S. 

Mr.JEFFERSON. I don’t want to put the burden on you, but I want 

to ask you this, and anyone else who wants to answer can: What 

steps do you think this Committee or the Federal Government, in 

general, ought to take to enhance your ability to secure contracts? 

What can be done to make this better, if you have any idea? 

Mr.JONES. I think it will come down to accountability from our 

earlier panel. Being held accountable to really, truly give firms like 

myself and the other gentlemen at the table—they have to give us 

an opportunity to do the work. 

I go back to this, they say I’m the one of most highly-qualified 

firms that they can get. They gave out four contracts. This is not 

an opportunity where one contract was given. This was four contracts. When they sent me this letter and told me that I did not 

qualify to be selected, I really had a problem with that. 

Mr.JEFFERSON. Let me ask you: What was the size of the contract that you were seeking in this instance? 

Mr.JONES. It was a $50 million contract, $10 million a year for 

five years in a row, a $50 million contract. And I want to echo this, 

because this is important. They called me for an interview. They 

called me one evening and said, You’ve got an interview tomorrow 

morning at 10:00. I said, Well, I’m at the Army Corps of Engineers 

Small Business conference in St. Louis. They said, It doesn’t matter. You get ready for that interview at 10:00. This is what I was 

told. I was at one of their conference in St. Louis, Missouri at the 

Army Corps of Engineers Small Business Conference. They called 

me—I got a call from my office saying, You’ve got the interview in 

the morning at 10:00. It was a phone interview. But still. I still 

was able to pull together all of my team members and go in and 

57

get that interview completed. And this is the result. It’s very frustrating. 

Mr.PRIESTLEY. Mr. Jefferson? 

Mr.JEFFERSON. Yes. 

Mr.PRIESTLEY. Mr. Jones brings up a couple of really good points. 

And to answer your question, two things: One is that I don’t think 

the Government agencies understand what small businesses do 

best; and that is expand and contract. I can understand the convenience to a contracting officer to go with a large—I’ll cut to the 

chase—bureaucratic company that has indefinite resources. But 

what they don’t understand is that small business is in a lot of 

cases a very good economical choice because we can’t can survive 

if we can’t contract and expand as contracts and opportunities 

come. We do it very well. 

Secondly, I don’t know if it’s intentional or it’s just a misunderstanding, but I don’t think the government contracting agencies 

fully understand how much of a penalty it is to us to issue us an 

IDIQ or a blanket purchase agreement without a schedule of services or some scope of money. 

Now, you can put me on an IDIQ and say, Well, we’ve got you 

on for three years, and you have given us a list of your prices, and 

we’ll call you when we need you. Now, how do I go to the bank and 

say, I’ve got this opportunity here, and I need to invest and go get 

another aircraft; or I need to hire a few more people or something? 

It doesn’t mean anything. And then you may never get the call. 

You are under contract for three years and you can advertise you 

are with Corps or DOD, but there’s no work. 

Mr.JEFFERSON. Let me ask this, Chairlady, it’s the last comment. 

Those of you who are missing these contracts, have you been 

watching who is getting them? She made a remark that some ten 

or so companies are getting the contracts over and over again. Is 

that your experience and what you are finding out there? Maybe 

the gentleman sitting between you can join in. 

Mr.PEQUENO. I’m in the plumbing industry. For instance, earlier 

they were talking about the U.S. Customs Building. I went to—my 

wife and I went to the meeting to see about getting the procurement through that. That didn’t develop. 

Keep in mind, I’m not registered 8(a) through the government. 

Now, in the state, I am. But not at the Federal Government level. 

And that’s one place there—plumbing, I’m a plumber. A 30-year career at it. So these trailers that were being installed—as I chased 

these contractors around, they were chasing me down because of 

my license, my qualifications, and everything that goes along with 

it, because we have a governing board in the plumbing department 

that governs the way we do things in the plumbing area. 

But, yeah, there were a lot of things myself that I’ve gone 

through, and it’s frustrating, it is really is. As a minority, myself—

I never considered myself one, I never looked at myself like one, 

still I am. And I probably wished I would have addressed this sooner in my career, but I didn’t. 

Either way, yeah, it’s happened to me too. The same way with 

other companies out there also. It’s unfortunate. 

Mr.JEFFERSON. Mr. Dreyer? 

58

Mr.DREYER. Yeah. We have noticed that certain, select firms—I 

can’t guarantee that this is Federal work, but specific to Louisiana 

work, that there are several local firms, though, on the larger side, 

who are repetitively chosen over and over again. 

And what’s curious about that is the variety of sizes. I don’t 

know if this is because they are politically connected, but competitive firms that aren’t any larger than Perez have been repeatedly 

chosen without offering any substantive difference, I would say, beyond sort of ownership being detected. Now, whether that relates 

to the Federal level, I can’t say for sure. 

Mr.JEFFERSON. Mr. Jones, you mentioned that some individual 

left an agency in frustration, did you say? 

Mr.JONES. Yes. We had a young lady by name of Kim Carter that 

represented the Department of Commerce. And she contacted us 

about four months after the disaster, and she started to get us to 

give her all of our financials. We sent in our tax financials for three 

years. We sent in our 8(a) certification. We sent in all of this information. And she basically told me after we—you know, over 

months and months of time we continued to call her. She said, 

Look, I’m frustrated with this issue. They are really not serious 

about giving minorities contracts. She stated to me that she was 

going to go and work for, I think, one of the majority firms. I don’t 

know what firm it was. But I have not heard from her since, so 

I’m assuming that. 

We lost all contact. But she was representing the Department of 

Commerce. 

Mr.JEFFERSON. Mr. Jones, your work, your effort has been with 

the Corps of Engineers for the most part or with FEMA? 

Mr.JONES. We have solicited the Veterans—

Mr.JEFFERSON. The VA? 

Mr.JONES. The VA. We solicited the VA out in Oklahoma. We solicited to pursue work there, but mostly we have—

Mr.JEFFERSON. Is this the VA here? 

Mr.JONES. No, not the VA here. We really targeted the Corps 

here. I mean, we were meeting with Mr. Falcon Hall (phonetically 

spelled) out at the Corps. And we met with them, that group over 

there on at least ten occasions. 

Mr.JEFFERSON. No other questions. 

ChairwomanVELA ́ ZQUEZ. Mr. Melancon. 

Mr.MELANCON. Mr. Shear, one of the frustrations that I experience is, you know, we pass laws, and we don’t break laws. And I 

don’t expect agencies to break laws. But we have rules and regulations that were drafted as guidelines to administer the laws or the 

programs that were passed by the Congress. 

My experience is that no Federal agency seems willing to ever 

waive a rule, even if it’s commonsensical, even if it’s practical; and, 

particularly, if it seems like it moves things forward, particularly 

in this disaster. 

I guess my question is: Have you ever waived rules in your agency? 

Mr.SHEAR. Have we waived rules that we are subject to? As far 

as subject to congressional oversight, for example? 

Mr.MELANCON. Rules that your bureaucrat—that when they got 

the law said, Okay, we are going to do this, and put it out for pubVerDate 0ct 09 2002 14:08 Jan 10, 2008 Jkt 033615 PO 00000 Frm 00064 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\34826.TXT LEANN
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lic notice; these are the rules that we abide by? You get a special 

interest. Has there ever been an instance that you have, from your 

knowledge in your agency, where they said, Well, maybe we can 

waive this one, so that we can work this better or get something 

moving or whatever, whether it’s an emergency or regular program? 

Mr.SHEAR. Well, I say that we’re a Congressional agency. The 

work we do is for the Congress. If we waive rules—my answer to 

that is no, certainly not, not that I’m aware. 

I think there are certain times, in terms of when we put out information to Congress and the public, when we do our strategic 

planning, we work within some flexibility that we have. And we 

are very transparent about how we use that flexibility to operate. 

But I don’t think we unilaterally say, Well, we don’t like that 

rule under this circumstance; we’re going to waive it. 

Mr.MELANCON. Have you every seen any other departments of 

the Federal Government as the accountability officer that has 

waived any rules or regulations to accomplish a task? And we’re 

talking about changing bid things in the middle. 

I’m not quite sure I understand some of these things—that 

phrase. So it sounds like, we can do it; but we can’t do it. So I don’t 

know how specific or detailed your agency gets; but is there some 

way to measure from the accountability standpoint when an agency 

has made an exception to a rule? 

Mr.SHEAR. There are certainly times where as an accountability 

agency—we find times where agencies may not follow the rules. 

And certainly, we find times when there’s regulatory—when there 

are certain regulations in place where there might be different interpretations of the rules, where we might take issue with an interpretation an agency has of the rules. 

So the answer to that is, have we observed times as an accountability agency? You know, at a minimum in our work we have investigators that look at fraud and issues of fraud. We certainly 

have issues where there might be regulations or rules that an 

agency didn’t follow. 

Mr.MELANCON. Is it common for attorneys or counsel in departments, for them to sit down with the leadership of the agency to 

advise, You shouldn’t set a precedent; you can’t waive that rule. I 

mean, is that, maybe, a normal occurrence in an agency where 

counsel says, Don’t do it? 

Mr.SHEAR. I don’t have the breadth of experience with the hypothetical you’re talking about. 

Mr.MELANCON. I guess, do any of the agencies call you before 

any action and say, Well, we would like to make some waivers? Or 

has your experience only been going in after the fact and found 

that maybe there were some exceptions to the rules or waivers? 

What I’m trying to get to is that, you know, we’ve had a precedent-setting event or events in the Gulf Coast. And all I keep getting is, Well, we can’t suspend the rule; we can’t waiver; we can’t 

do anything. But, yet, I see things going on day-to-day that in some 

instances looks like they can when they want to. 

And I don’t know how you audit that or is it possible to audit 

that? 

60

Mr.SHEAR. It’s possible to audit that. And I think that when you 

start talking about what we observed in this work looking at 

Katrina contracting, it was certain things that I haven’t observed. 

I don’t take the lead on many acquisition issues. We have an acquisition management team. 

I took the lead on this. And we took the lead on this within the 

agency working with our acquisition people because of the small 

business concerns. 

So I don’t have the breadth of experience here. For me, if you are 

asking for a personal reaction based on the work that I’ve seen at 

the GAO and work I’ve directed at the GAO, I was actually glad 

when GSA said, We know we don’t have the legal authority to 

waive a rule, but we had an emergency; and that’s how they accounted for it after the fact. So I was glad that they were forthcoming with us. But at the same token, I can’t relate it to any 

other experiences that I’m aware of. 

Mr.MELANCON. I’m glad in an emergency there’s somebody that 

will take the initiative. Last question, from the standpoint of auditing, per se, agencies, do you audit specifically for 8(a) contracting 

or small business contracting and things that are provided in the 

law? Because if they’ve got some requirements in the law, and they 

are not getting any contracts, it sounds like somebody is getting 

waivers or suspending the rule or just ignoring it. 

Mr.SHEAR. What we’ll do in many cases is we audit executive 

agencies and how they carry out the statutory responsibilities and 

their regulatory responsibilities. You know, their oversight responsibilities. So the focus is always on the agency. In our work for the 

report we issued on March 1st, our focus was on an even higher 

level than that. But not getting down to the individual contract 

level. To go to a phrase that I think you said as far as—you know, 

you said something to the effect of how people like to play with 

data. That is a real concern raised to us. And we think it’s an important concern. You know, even times we audit to see our agencies 

following the rules; are there ways the agencies can operate more 

efficiently, more effectively? 

The idea of bringing information—this audit in particular was 

kind of higher level in terms of can you account for us for what’s 

going on here, and even at a more macro level. 

But we aren’t in the business of auditing individual contracts, if 

that’s what at you are asking. But we certainly audit the programs 

of agencies and how they carry out their responsibilities. 

Mr.MELANCON. I don’t have any time, and I thank the Chairwoman for allowing me to go over. 

ChairwomanVELA ́ ZQUEZ. Mr. Jefferson. Do you have any questions? 

Mr.JEFFERSON. I want to thank the folks that are here because 

we tried to get a lot of folks here we know have problems. And they 

were really worried about testifying in the public about these 

issues, worried about not ever getting a contract. You don’t have 

one now, you’ll never get one. 

It shows a lot of courage and a lot of moxie to come here. Really, 

we couldn’t do the work without you having shown up. And I hope 

it doesn’t penalize you in any way whatsoever. I hope it just enVerDate 0ct 09 2002 14:08 Jan 10, 2008 Jkt 033615 PO 00000 Frm 00066 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\34826.TXT LEANN
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lightens the agencies as to what your qualifications are and helps 

you get the next job. 

I want to ask Mr. Shear, if I can, just one question: Have you 

found that the agencies that follow the rules with respect to 8(a) 

contracting and minority contracting and local contracting waste 

the Government’s money? Do you find that these things cost the 

Government money? Or do you think they add to the riches of the 

outcomes of the Government. 

Mr.SHEAR. I haven’t directed any work that has addressed 

whether there’s any potential deficiencies there. But what I would 

recognize in carrying out this work, the Congress has played a 

leadership role. And I think that—let’s say the information that I 

report, and this testimony, it’s to try to inform those decisions. 

So there certainly isn’t anything that we’ve seen in the record 

when we go out and do our audit work that would suggest that 

somehow the Congressional leadership or the statutory leadership 

or how the Federal Acquisition Regulation has been implemented. 

We don’t see any evidence to that. 

Mr.JEFFERSON. Let’s just talk about the small business. Obviously, larger companies have what we might call larger capacities 

than smaller companies have. So have you seen in your work just 

the idea of assisting small business ends up with the Government 

agency getting less in the ultimate product from the company? 

Mr.SHEAR. I think what I would like to do with that—if you’d entertain me on this—if that question is provided by the Committee 

to us, I will put together—we will put together information, reports, that we have done in the past that would specifically give 

you a specific answer. 

Mr.JEFFERSON. All of this business about capacity is worrying me 

here because they keep getting turned down saying they are not 

big enough. Well, the idea is if they have small concerns, they’ll 

never be as big as the big ones. And there’s a bit of assumption 

made in the law that that’s not necessary to do the job. And as 

they have said, the issue of how big a firm is depends on what they 

are required to do. Engineering and architectural firms expand and 

contract, other ones do, depending on if they have work or not. 

If they had steady work and one contract ended and another 

began, of course, they would never lay anybody off they would keep 

working them. But that’s not how it is in the world of small business. 

So we need to get past this whole issue and get some notice to 

the agencies out there to get away from this whole business about 

capacity. Get a real life view of this. And it may be helpful for you 

to help us get a full understanding of the question. 

Mr.SHEAR. Okay. I think that you are raising a very important 

issue. And if you would like us to follow up either with the Committee or with your staff to talk about, perhaps, what those have 

been, a variety of work in the acquisition area and contracting 

area, we’d be glad to entertain it with you. 

Mr. Jefferson, I want to address one statement in terms of what 

you said. I really want to say something on a very personal level 

to those who are on this Committee; and I’ll just say especially 

Representative Jefferson and Melancon as being representatives 

from here. 

62

I’ve been one of many directors who have directed GAO work 

looking at the Federal response to this absolutely awful natural catastrophe. And I’ll just say on a personal level that not only the 

greeting here and the pleasure of being here in New Orleans, but 

I’ll just say going back to December 2005, when I first lead our first 

team that was looking into the SBA’s disaster loan program, how 

generous many of your constituents, small business owners, and 

local officials have been in helping us do our work. 

And I just wanted—since you had just made that comment and 

have the pleasure of being here in New Orleans, I want to on a personal level say thanks to both of you and to many of your continuants for helping us do our work. 

Mr.JEFFERSON. I appreciate that. 

ChairwomanVELA ́ ZQUEZ. Before I ask my last question, to Mr. 

Pequeno, I would like to make a comment on the comment made 

by Mr. Jefferson. And that is that I want to thank you because you 

are being courageous in coming before our Committee to share with 

us your experience regarding contracting opportunities, Federal 

contracting opportunities. 

And Mr. Jefferson alluded to the fact that some small businesses 

were afraid. And, in fact, they were because we reach out to many 

of them. And I want for you to know that I personally will be 

watching over every Federal agency. And if you hear or if you know 

of any action or behavior that is punitive in nature regarding your 

participation here, those agencies will be coming before this Committee faster than they know it. 

So with that, Mr. Pequeno, you said in your testimony that your 

8(a) application was declined because, apparently, your brother 

owns an 8(a) company. 

Mr.PEQUENO. Yes, ma’am. 

ChairwomanVELA ́ ZQUEZ. But you also stated that you have no interest in this company. 

Mr.PEQUENO. Correct. 

ChairwomanVELA ́ ZQUEZ. So I am going to pursue this issue with 

my staff and the staff of the Small Business Administration, okay? 

Mr.PEQUENO. Thank you. 

ChairwomanVELA ́ ZQUEZ. With that, I conclude. I thank all of you. 

As I mentioned before, this is not going to be just one hearing. We 

will continue to monitor the Federal Government’s commitment 

and the responsibility in the Gulf region, the Gulf Coast region. 

And we are going to continue to reach out and to have a working 

relationship with all of the Federal agencies because not only are 

they eager to make sure that those numbers are improved, but the 

name of the game from this Committee is going to be oversight and 

accountability. With that, I thank you. 

This Committee concludes its work. 

[Whereupon, the committee was adjourned.]

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