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[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]

   READY FOR LIFTOFF: THE IMPORTANCE OF SMALL BUSINESSES IN THE NASA 
                              SUPPLY CHAIN

=======================================================================

                                  HEARING

                            	BEFORE THE

             SUBCOMMITTEE ON AGRICULTURE, ENERGY AND TRADE

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                              JULY 12, 2016

                               __________

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 
                               

            Small Business Committee Document Number 114-068
              Available via the GPO Website: www.fdsys.gov
              
                               ___________
                               
                      
                   U.S. GOVERNMENT PUBLISHING OFFICE
20-702                 WASHINGTON : 2017                   
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                      STEVE CHABOT, Ohio, Chairman
                            STEVE KING, Iowa
                      BLAINE LUETKEMEYER, Missouri
                        RICHARD HANNA, New York
                         TIM HUELSKAMP, Kansas
                         CHRIS GIBSON, New York
                          DAVE BRAT, Virginia
             AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
                        STEVE KNIGHT, California
                        CARLOS CURBELO, Florida
                         CRESENT HARDY, Nevada
                         WARREN DAVIDSON, Ohio
               NYDIA VELAZQUEZ, New York, Ranking Member
                         YVETTE CLARK, New York
                          JUDY CHU, California
                        JANICE HAHN, California
                     DONALD PAYNE, JR., New Jersey
                          GRACE MENG, New York
                       BRENDA LAWRENCE, Michigan
                       ALMA ADAMS, North Carolina
                      SETH MOULTON, Massachusetts
                           MARK TAKAI, Hawaii

                   Kevin Fitzpatrick, Staff Director
                       Jan Oliver, Chief Counsel
                  Michael Day, Minority Staff Director
                            
                            
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Carlos Curbelo..............................................     1
Hon. Grace Meng..................................................     2

                               WITNESSES

Mr. Chris Carberry, CEO and Co-Founder, Explore Mars, Inc., 
  Beverly, MA....................................................     5
George Davis, Ph.D., President and Founder, Emergent Space 
  Technologies, Greenbelt, MD....................................     7
Ms. Carol Craig, President and CEO, Craig Technologies, Cape 
  Canaveral, FL..................................................     8
Mr. Stephen Gorevan, Chairman, Honeybee Robotics, Ltd., Brooklyn, 
  NY.............................................................    10

                                APPENDIX

Prepared Statements:
    Mr. Chris Carberry, CEO and Co-Founder, Explore Mars, Inc., 
      Beverly, MA................................................    21
    George Davis, Ph.D., President and Founder, Emergent Space 
      Technologies, Greenbelt, MD................................    25
    Ms. Carol Craig, President and CEO, Craig Technologies, Cape 
      Canaveral, FL..............................................    29
    Mr. Stephen Gorevan, Chairman, Honeybee Robotics, Ltd., 
      Brooklyn, NY...............................................    31
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    Letter from David A. Nesbitt, President, Matrix Composites, 
      Inc........................................................    36

 
   READY FOR LIFTOFF: THE IMPORTANCE OF SMALL BUSINESSES IN THE NASA 
                              SUPPLY CHAIN

                              ----------                              

                         TUESDAY, JULY 12, 2016

                  House of Representatives,
               Committee on Small Business,
     Subcommittee on Agriculture, Energy and Trade,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 11:00 a.m., in 
Room 2360, Rayburn House Office Building, Hon. Carlos Curbelo 
[chairman of the Subcommittee] presiding.
    Present: Representatives Curbelo, Brat, Meng, and Lawrence.
    Chairman CURBELO. Good morning. I call this meeting to 
order.
    Thank you all for joining us today as we examine some of 
the challenges small businesses face when doing business with 
the National Aeronautics and Space Administration, or NASA. We 
have an excellent panel of witnesses, and I look forward to 
hearing their testimony.
    During the 114th Congress, the Small Business Committee has 
held numerous hearings on government contracting and 
subcontracting issues, always seeking ways to make it easier 
for small firms to do business with the Federal Government. 
What we have learned over this time is disturbing. Over the 
last 5 years, the number of contract actions with small 
businesses fell by almost 60 percent, and one of the more 
disturbing figures is that there are over 100,000 fewer small 
firms registered to do business with the Federal Government 
than there were in 2012. This data means we have a real 
problem.
    Another disturbing trend is that, starting in 2008 and 
continuing to this day, we are seeing more business deaths than 
we are business births each year. Small businesses are the 
canary in the coal mine. When their role in Federal contracting 
declines, we lose innovation, job creation, and competition, 
leading to higher costs to the Federal Government. This is 
obviously untenable going forward, and we at the Committee 
remain dedicated to finding solutions to stop these trends, be 
they regulatory, tax, capital access, or government contracting 
related.
    When most people think about the way NASA works, they think 
of Cape Canaveral in Florida and the Kennedy Space Center in 
Houston. While those certainly are main hubs, the small 
businesses that work with NASA, be they prime contractors or 
subcontractors, are located in all 50 States and in nearly 
every single congressional district. NASA's presence throughout 
the United States is larger than many might think.
    Back in my home state of Florida, NASA spent nearly $487 
million last year with $120 million of that going to small 
businesses. In my congressional district, $1.1 million in small 
business contracts have been signed for fiscal year 2016. 
Flagship space programs, such as the current Space Launch 
System, or SLS, and the Orion Spacecraft, are increasingly 
important in providing opportunities for the small business 
community. However, over the past few years, with the 
retirement of the space shuttle program and the starting and 
stopping of the Constellation program, we have seen signs of 
uncertainty crop up in the supply chain. Too often small firms 
are unsure as to what an administration will do with their 
priorities or what Congress may or may not choose to fund 
moving forward. These challenges discourage some small shops 
from signing space contracts, instead opting for more reliable 
general aviation contracts.
    Certainty is essential in any business endeavor but is 
absolutely mission critical for an exceptionally innovative and 
forward-thinking space program. Designing next-generation 
spacecraft requires time and, in recent years, thankfully, 
there has been bipartisan consensus on the path forward for 
human exploration of deep space. With a new administration 
taking office in January, we must build upon that commitment 
and provide the certainty the industry needs to continue 
growing, innovating, and building our economy to ensure our 
Nation continues its preeminence in human space flight.
    Thank you again, and now I would like to yield to the 
Ranking Member, Ms. Meng, for her opening remarks.
    Ms. MENG. Thank you, Mr. Chairman, for holding this hearing 
today. Since its inception, NASA has been providing young 
children with aspirations of going to space. While not everyone 
can make it through the vigorous training required to be an 
astronaut, the missions undertaken by the agency have opened up 
many opportunities for research businesses. Small businesses 
have had many successes at NASA as various projects within the 
agency have provided a platform for allowing these firms to 
come up with inventive research and technologies that have 
permitted us to explore deeper into space.
    The space shuttle program in particular provided a long-
term project in which small businesses would continue 
developing technology and to explore other uses of this 
technology. As a result, there have been many small business 
contributions that have now been incorporated into our daily 
lives. For example, tiny LED chips originally used to grow 
plants on the space shuttle and the International Space Station 
have made their way into a noninvasive, handheld medical device 
that provides relief for muscle and joint pain, and can also 
help reduce certain side effects of chemotherapy.
    Additionally, the autonomous rendezvous and docking 
technology used to assist the space shuttle in servicing 
satellites resulted in an eye-tracking device used in Lasik 
vision correction surgery.
    Yet, as we will hear today, the end of this program in 2011 
and the changes in the space industry, have left many small 
businesses in the supply chain looking for ways to continue 
participating in the marketplace. This is particularly 
troubling since small businesses affiliated with NASA are found 
in every state across the nation.
    In 2014, commercial space activities accounted for more 
than 76 percent of spending in the industry. The United States 
in particular has seen its share of commercial activities 
increase. Of 86 global launches in 2015, 26 percent globally 
were commercial, while 40 percent of U.S. launches were 
commercial.
    With this new reliance on commercial space providers and 
many of these companies performing much of the manufacturing 
themselves, it is vital that NASA ensure that its supply chain 
is maintained for future space missions. This means renewed 
emphasis on subcontracting opportunities and inclusion of small 
businesses' technologies and new projects.
    NASA has been successful in including small businesses in 
its recent missions. Some of our witnesses here today have been 
involved in the various Mars missions, and there are more than 
800 small businesses contributing to the Orion mission designed 
to carry astronauts further into the solar system than ever 
traveled before.
    However, we are seeing a decline in small business 
participation overall at NASA. Since fiscal year 2013, the 
agency has seen a decrease in dollars awarded to these firms. 
Although NASA surpassed its prime small business goal of 17 
percent, the dollars awarded to these firms did not grow 
despite NASA seeing an increase of nearly $1 billion in dollars 
eligible for award to small businesses.
    In the other small business categories, NASA failed to meet 
its goals for all groups except that of small disadvantaged 
businesses.
    Additionally, while NASA surpassed its overall small 
business subcontracting goal, the agency still saw a decline of 
over 30 percent from its fiscal year 2014 goal. We can also 
expect participation to decrease in the current fiscal year as 
the fiscal year 2016 goals set by the agency, in conjunction 
with the Small Business Administration, have been set lower 
than the previous year's goal. That is lower than NASA's actual 
achievement level.
    During today's hearing, I look forward to hearing about 
challenges facing small businesses contracting with NASA and 
its primes and how we can ensure that the new innovative ideas 
small firms bring to the table continue to play a role into the 
future of space exploration.
    I thank all of the witnesses for being here today, and I 
yield back the balance of my time.
    Chairman CURBELO. Thank you, Ms. Meng.
    If Committee members have an opening statement prepared, I 
ask that they be submitted for the record.
    I would like to take a moment to explain the timing lights 
for you. You will each have 5 minutes to deliver your 
testimony. The light starts off as green. When you have 1 
minute remaining it will turn yellow. Finally, at the end of 
your 5 minutes it will turn red. We ask all witnesses to do 
their best to abide by the time.
    Now, I would like to start introducing our witnesses. First 
is Mr. Chris Carberry, CEO and co-founder of Explore Mars, 
Inc., a nonprofit which was created to advance a goal of 
sending humans to Mars within the next two decades. The 
organization also encourages the use of STEM curriculum in the 
classroom to instill a desire to pursue space exploration for 
future generations. As CEO, he acts as the main liaison for 
efforts in project ventures. He has been an international 
spokesperson on behalf of various space-related entities on 
numerous occasions.
    Prior to joining Explore Mars, Mr. Carberry served as 
executive director of the Mars Society. In his early career, he 
acted as a member of the steering committee where he organized 
congressional outreach efforts around the country. An author of 
dozens of articles and op-ed pieces concerning space policy and 
politics, Mr. Carberry has been featured on NBC Nightly News, 
BBC World, NPR, and many other news outlets. Thank you for 
being with us today, Mr. Carberry.
    Up next we have Dr. George Davis, president and founder of 
Emergent Space Technologies in Greenbelt, Maryland. He received 
a Ph.D. in Aerospace Engineering from the University of Texas 
at Austin for his research into the precise orbit determination 
of low altitude satellites using the Global Positioning System. 
His M.S. in aerospace engineering, also from the University of 
Texas, was on on-orbit assembly operations for lunar and Mars 
spacecraft. His interests include GPS applications, autonomous 
spacecraft navigation, and orbit determination.
    Prior to starting Emergent, he worked for the Technical 
Services Division of the Orbital Sciences Corporation as a 
support contractor at the NASA Goddard Space Flight Center. Dr. 
Davis worked in the GPS Technology Group providing systems 
engineering, algorithm development, receiver testing, and data 
analysis support to a variety of missions, including the 
International Space Station. Thank you for being here, Dr. 
Davis.
    Next, we have Ms. Carol Craig, founder and CEO of Craig 
Technologies in Cape Canaveral, Florida. A self-described 
accidental entrepreneur and unconventional CEO, Carol grew 
Craig Technologies from 1 person in 1999 to nearly 400 
associates today. Craig Technologies offers high-end custom 
engineering and technical support services to include software 
design and development, systems engineering and integration, 
multidisciplinary engineering, training, and courseware 
development, modeling and simulation, information technology 
support, and integrated logistics support. She holds a B.A. in 
Computer Science from Knox College, a B.S. in computer science 
engineering from the University of Illinois, and a M.S. in 
electrical and computer engineering from the University of 
Massachusetts at Amherst, and is currently pursuing a Ph.D. in 
systems engineering at Florida Tech. Thank you for your 
participation in this hearing, Ms. Craig.
    I now yield to Ms. Meng for the introduction of our next 
and final witness.
    Ms. MENG. It is my pleasure to introduce Mr. Stephen 
Gorevan. Mr. Gorevan is the chairman of Honeybee Robotics 
located in Brooklyn, New York. After only 3 years in operation, 
Honeybee received its first NASA contract in 1986, and since 
then has continued to design and develop innovative, reliable 
systems for space. In fact, the company has supplied NASA with 
critical technologies for its last three Mars missions. Mr. 
Gorevan currently serves as a co-investigator on the science 
teams for the Mars exploration rovers and the Mars Science 
Laboratory SAM instrument, and is a member of the Venus Science 
Definition Team. Welcome, Mr. Gorevan.
    Chairman CURBELO. Well, with that, we will begin our 
testimony, but I should say first that this is probably the 
most impressive panel that I have been able to listen to since 
arriving in Congress, so this is very exciting, and I am sure 
Ms. Meng shares that sentiment.
    Mr. Carberry, you may begin. Thank you.

STATEMENTS OF CHRIS CARBERRY, CEO AND CO-FOUNDER, EXPLORE MARS, 
  INC.; GEORGE DAVIS, PH.D., PRESIDENT AND FOUNDER, EMERGENT 
   SPACE TECHNOLOGIES; CAROL CRAIG, PRESIDENT AND CEO, CRAIG 
  TECHNOLOGIES; STEPHEN GOREVAN, CHAIRMAN, HONEYBEE ROBOTICS, 
                              LTD.

                  STATEMENT OF CHRIS CARBERRY

    Mr. CARBERRY. Thank you, Chairman Curbelo, Ranking Member 
Meng, and members of the Subcommittee, for the invitation to 
testify at today's hearing. I am honored to be here to discuss 
the importance of small businesses to NASA supply chain and the 
significant contribution such companies make to our Nation's 
space program.
    Explore Mars is a small, nonprofit space advocacy 
organization that communicates regularly with industry, 
including small businesses. As such, we are well-positioned to 
report on fluctuations, as well as progress, space policy, and 
how uncertainty impacts American business.
    When the space shuttle was retired in 2011, it was not to 
retreat from human space flight but because of safety concerns 
in the wake of the Columbia accident and to free up funds to 
build new launch systems for access to low Earth orbit, as well 
as to take our Nation to destinations such as the Moon and 
Mars. Unfortunately, uncertainty caused by politics and 
budgetary fluctuations resulted in a growing gap between the 
space shuttle program and these follow-on programs.
    NASA's annual procurement numbers show that the space 
program funding goes to small businesses in every State. Small 
businesses received about $5 billion in contracts in fiscal 
year 2015 and about $2.5 billion were awarded directly to small 
businesses and prime contracts.
    According to two recent NASA small business reports, more 
than 800 small businesses from 47 States played a role in the 
Orion crew capsule program, NASA's next-generation spacecraft 
and, similarly, more than 800 small businesses in 43 States 
have supported the Space Launch System, or SLS, NASA's new 
exploration class rocket. With these vehicles and other 
capabilities, NASA hopes to land humans on Mars beginning in 
the 2030s.
    But Mars is not a new goal. It has been one of NASA's 
official goals under multiple administrations and Congresses, 
as demonstrated by the enactment of the NASA Authorization Acts 
of 2005, 2008, and 2010. Most recently, the House passed its 
version of the NASA Authorization Act of 2015, stating that the 
goal of the administration's exploration program shall be to 
successfully conduct crude missions to the surface of Mars 
beginning human exploration of that planet. Recent national 
polling also suggests very strong support from the general 
public, particularly when they are made aware that NASA 
accounts for less than half of 1 percent of the Federal budget.
    Today NASA, along with U.S. industry, international 
partners, and others, is gearing up to achieve this goal. While 
much work needs to be done, we are on the verge of restoring 
American access to space for our astronauts. Hardware for deep 
space missions is actually being built, and the first workshop 
to discuss the potential landing zones for humans on Mars 
actually just recently took place. Thanks to Congress, NASA's 
budgets have achieved some stability in growth recently, but 
only a few years ago budgetary uncertainty hit NASA and the 
space industry particularly hard, leaving the space community, 
including large and small businesses in crisis.
    I recall meeting with a high-ranking NASA official a few 
years ago who did not know whether his directorate budget would 
be increased by $2 billion or reduced by $1 billion the 
following year. In other words, he had $3 billion in budgetary 
uncertainty, which is a tremendously large amount for any NASA 
directorate. Needless to say, this directly impacted industrial 
partners and subcontractors along the supply chain. In the same 
timeframe, I spoke to numerous prime contractors who also 
mentioned that this budgetary uncertainty impacted their 
decision-making. They were hesitant to spend funds, which once 
again resulted in a disproportionate impact on small 
businesses.
    Space exploration is clearly not just the business of large 
corporations as I am sure will be made clear by the other 
witnesses. Small businesses play an essential role in the 
success of our space program, producing a myriad of products 
and capabilities. To assure support for these businesses, we 
must not be a penny wise and a pound foolish with NASA's 
budget. It makes absolutely no sense to allow an even modest 
reduction in NASA's budget, while at the same time removing any 
prospect of NASA achieving its mandate for Mars, particularly 
when only a little more and consistent funding will serve 
taxpayers in a manner that will provide tremendous benefits to 
our entire society and be remembered for millennia. There are 
not too many Federal programs that can achieve anything 
comparable.
    We are approaching another major hurdle with the upcoming 
change in administrations. Will we shift directions again and 
throw our space program into turmoil or embrace our current 
policy of sending humans to Mars? We have come so far in recent 
years and it benefits no one if we radically change course 
again, not NASA, not large businesses, not small businesses, 
and certainly not the taxpayers of the United States.
    In closing, Explore Mars would like to thank you for 
holding this hearing to highlight this Nation's small business 
innovations. We will be sending humans to Mars in the very near 
future and it will be accomplished in large measure based on 
the support we show for, and the efforts of, small businesses 
around the United States.
    Once again, thank you.
    Chairman CURBELO. Thank you, Mr. Carberry.
    Dr. Davis, you are recognized.

                   STATEMENT OF GEORGE DAVIS

    Mr. DAVIS. Chairman Curbelo, Ranking Member Meng, and 
members of the Committee, thank you for giving me the 
opportunity to speak to you today.
    Emergent Space Technologies, which I founded in 2001, is a 
60-person aerospace engineering and software development firm 
headquartered in Greenbelt, Maryland, with employees in 
Maryland, Virginia, Texas, New Mexico, Colorado, and 
California. We provide technical services and perform research 
and development for NASA, NOAA, the Air Force, and DARPA.
    NASA is our primary customer, and it is known for large, 
complex space programs, so one might think that only large 
businesses are capable of supporting its missions. In fact, 
small businesses form a vital part of NASA's contractor 
workforce. Simply look at the Orion Crew Vehicle, the Space 
Launch System, the James Webb Space Telescope, and the Mars 
2020 Rover, NASA's latest engineering marvels. You will see 
that we are providing unique, technical expertise and 
innovative engineering solutions.
    Nonetheless, small businesses in the NASA supply chain face 
many challenges. Chief among them is a diminishing supply of 
small business set-asides. This is sometimes driven by contract 
bundling in which smaller prime contracts are combined with or 
bundled into larger contracts that are required under full and 
open competitions, but is also due to the manner in which NASA 
uses NAICS codes to establish prime contracting and 
subcontracting opportunities for small businesses.
    The North American Industry Classification System, or 
NAICS, is used by federal agencies to classify businesses when 
collecting, analyzing, and publishing statistical data related 
to the U.S. economy. The Small Business Administration has 
established size standards that are matched to the NAICS codes, 
and they specify how large a business can be and still qualify 
as small for federal contracts. These contracts are expressed 
in either millions of dollars or numbers of employees. For 
example, the NAICS codes for engineering services uses a 
standard of $38.5 million in revenue for small businesses. The 
NAICS for computer programming services uses a standard of 
$27.5 million in revenue. These codes are most relevant to my 
company and hundreds like us. However, their size standards are 
roughly equivalent to a 150- to 250-person company, or about 3 
to 4 times our size. The NAICS code for research and 
development is used most frequently by NASA for small business 
contracting considerations.
    In February 2016, the SBA changed the standard from 500 
employees to 1,000. This is 15 times larger than Emergent. For 
another comparison, consider the U.S. Census Bureau's 2013 
statistics of U.S. businesses, which shows that 99 percent of 
our country's 5.7 million firms have less than 500 employees.
    I recently studied the NASA prime contracts whose primary 
requirements are science, engineering, or software, and are 
strategically aligned with Emergent's business interests. There 
are roughly 50 of such contracts. Of these, only 35 percent are 
full and open competitions for companies of any size. That is 
the good news. The bad news is only 14 percent are set aside 
using the NAICS codes for engineering services or computer 
programming services.
    The standards set by the NAICS codes and the way they are 
used by NASA to establish prime contracting opportunities for 
small businesses is important. In government contracting, size 
does matter. The more billable employees you have, the more you 
can spread your G&A costs over those hours, and so your rates 
are lower which makes you most cost competitive. Moreover, you 
can afford more nonbillable employees for business development 
and proposal writing, which is the lifeblood of our industry.
    Given these advantages, it is extremely difficult for 
companies of our size to compete with those that are 10 times 
larger, especially when you have so few chances to develop 
experience as a prime contractor. Emergent and other small 
businesses like us have had to adapt to the shrinking 
opportunities for prime contracting by focusing more on 
subcontracting. The downside of being a subcontractor is that 
we have less control over our own business destinies. We have 
to work on multiple proposals with multiple primes, usually 
simultaneously, just to increase the statistical likelihood 
that we maintain our businesses, let alone grow them. Growing a 
company through subcontracting alone is very difficult. As a 
result, the most stable, successful small businesses in NASA's 
supply chain are able to prime contracts. This is where we want 
to be.
    Two changes that NASA could make to help small businesses 
are, one, expand its use of small business set-asides under the 
engineering services and computer programming NAICS codes; and 
two, use a size standard for emerging small businesses, which 
is defined as 50 percent of the NAICS standard. This would help 
create new small businesses and also give existing ones like 
ours more opportunities to gain experience as a prime 
contractor. Otherwise, it is virtually impossible to compete 
for the larger set-asides under research and development.
    In closing, I would again like to thank you for your time 
today. I know you understand the importance of small businesses 
as the backbone of our economy. All the great large businesses, 
from Lockheed Martin to Boeing, to Microsoft and Apple started 
out as small businesses at one time. In order for this trend to 
continue in the aerospace industry, we need for NASA to expand 
small business opportunities through set-asides targeted for 
companies our size, not just the large small businesses.
    Working on NASA projects is a dream come true for me and 
for my employees. It is why we get up in the morning and go to 
work, to play a role, even a small one, in advancing our 
nation's knowledge of the universe and exploring our solar 
system.
    I have touched on some of the challenges in being a part of 
the NASA supply chain, and there is more that I could discuss, 
and I would therefore be happy to follow up with you and your 
staff at your convenience.
    Chairman CURBELO. Thank you, Dr. Davis.
    Ms. Craig, you are recognized.

                    STATEMENT OF CAROL CRAIG

    Ms. CRAIG. Thank you. Good morning, Chairman, Ranking 
Member Meng, and the members of the Committee. I appreciate the 
opportunity to testify today.
    In 1999, I started Craig Technologies at my kitchen table. 
My husband is a Navy officer and our repeated moves and 
transitions led me down the entrepreneur path. By 2010, the 
company was successful, profitable, and reputable. With 
revenues topping $20 million and through strictly organic 
funding I knew there was more opportunity to serve both 
commercial and government clients with our brand of superior 
service, and so I made the move into manufacturing.
    My foray into manufacturing started small. I had a need for 
quick and quality work and realized I could do it internally 
with the correct approach. I purchased the assets of a small 
machine shop and then invested wisely in supplemental 
equipment, providing the company with a nimble production 
facility that quickly garnered interest from existing NASA 
supply chain members.
    When KSC, Kennedy Space Center, leadership decided to 
pursue a non-reimbursable Space Act Agreement with a company in 
order to take over the remains of the NASA Shuttle Logistics 
Depot, Craig Technologies bid on and eventually won the 
opportunity to house and maintain the manufacturing equipment 
for a period of 5 years and utilize it for any commercial 
purpose. Now, keep in mind this was a non-reimbursable Space 
Act Agreement, and so no money was exchanged, no contracts, it 
was purely an entrepreneurial opportunity.
    Since that time, I made the conscious decision to utilize 
the profits from the successful engineering and technical 
services division to fund the emerging aerospace solution side. 
I did not utilize outside capital in order to preserve the 
culture and autonomy that makes Craig Technologies so different 
than other government contractors. We grew from $20 million in 
2010, to $45 million today. We continue to provide outstanding 
service and product to all of our customers with NASA as the 
largest. As the commercial space industry grows around Cape 
Canaveral and KSC continues to pursue public-private 
partnerships through commercial crew and commercial cargo 
contracts, the feature for astro and aerospace manufacturing in 
Brevard County is poised for explosive growth and relevant 
economic impact.
    I tell you this backstory because it leads to where I am 
today, at a crossroads of how to keep the manufacturing side 
afloat while waiting for delayed payments, extended NASA 
contract decisions, and lack of access to working capital 
because of stringent banking regulations imposed by the federal 
government. I have effectively robbed Peter to grow Paul. I did 
so because it was the right thing to do, for our business, for 
our employees, and for our community. I believe in our free 
market system and always strive to offer the very best product 
and service for the price agreed upon.
    Unfortunately, the cards remain stacked against the small 
business entrepreneur, even one who overcomes the odds and 
makes it to the next level. Unforgiving and uninformed 
covenants by lending institutions lead to myopic attitudes 
towards growth in the government sector and the milestones that 
point toward long-term stability and success.
    Creating valuable employment opportunities in my community 
still remains my number one goal and priority, but money has to 
come in the front door on a logical and planned timeline in 
order to properly budget and ensure the books remain solvent.
    Manufacturing built this country. We lost it to cheaper and 
inferior overseas suppliers and then we complained when the 
jobs went away. Now there are numerous folks like myself who 
are laying it all on the line to recover the industry. We need 
help and we need it now. We do not want handouts, but rather a 
fair and predictable system that ensures that payments are made 
and contracts are satisfied without political whim. What if 
more and more companies my size, like myself, are unable to 
succeed and close their doors? The impact on communities and 
our nation will be devastating.
    NASA continues to explore and innovate and their supply 
chain remains critical to both long and short-term success.
    I urge you to report to the full body that commitment to a 
clear path and mission with 10-year budget cycles is crucial to 
the continuation of small business partnerships with NASA, and 
collaboration with lending institutions through small business 
offices within the agency will allow the banking world to 
understand the nuances of our government contracting and work.
    Pursuant to your questions, I offer my thanks for your 
time.
    Chairman CURBELO. Thank you, Ms. Craig.
    Mr. Gorevan, you are recognized.

                  STATEMENT OF STEPHEN GOREVAN

    Mr. GOREVAN. Mr. Chairman, Ranking Member Meng, and 
distinguished members of the Subcommittee, thank you for the 
opportunity to share my perspective as a small business 
contractor to NASA. NASA, working with small businesses, is 
creating amazing technologies for flight, for our exploration, 
and together we help keep American innovation the envy of the 
world.
    Honeybee Robotics is a company I cofounded in 1983. The 
company has been supporting NASA from our headquarters in the 
Brooklyn Navy Yard and from our facilities in Colorado and 
California. We build robots and mechanisms for tough 
environments, such as planetary exploration spacecraft, and we 
have worked for most of NASA's centers. To get an idea of the 
kinds of things we do, I point to the Mars program, where 
Honeybee Robotics has designed, built, and integrated vital 
devices onboard all four spacecraft NASA has landed on the 
surface of Mars since the year 2000. We have achieved several 
firsts, including developing the first tools to break into 
rocks on Mars and the first tool to sample ice on Mars.
    Now I will take a little time to humbly make some 
observations and suggestions with respect to NASA and small 
businesses. First, while manned programs such as the Shuttle 
and Orion are important to small business, NASA's Earth 
science, planetary science, and exploration R&D are also 
critical areas where small business can contribute to the 
agency's mission.
    Second, the ability for small businesses to deliver useful 
technologies is dependent on long-term mission clarity. 
Unfortunately, even when a small business has its technology 
selected for flight, delays are frequent and project 
cancelations are an ever-present risk. Small business 
contractors often bear that risk and pay the price when the 
nation's political leadership changes NASA's mission 
priorities.
    Third, small businesses face significant headwinds 
competing for contracts that require matching investment. This 
is because most space exploration innovations lack immediate 
commercial application and matching requirements, which 
effectively boxes out small businesses in favor of more highly 
capitalized large businesses. Eliminating or reducing matching 
investment requirements for small businesses, particularly new 
small businesses, will liberate NASA to choose from companies 
with the best technology, not only from those with sufficiently 
large internal budgets.
    Finally, I would like to say a word about the terrific 
Small Business Innovation Research program, a program that has 
proven vital to both small businesses and NASA. I submit here 
two suggestions to improve the program, neither of which 
requires new appropriations. First, if Congress would gradually 
increase the share of funding that federal agencies allocate to 
SBIRs from the current rate of about 3 percent up to 5 percent, 
it would provide for a dramatic lift, I think, especially if 
the new funding were spent to support technology once it exits 
the phase two program. At that point, a company often finds 
itself having developed a functional system but facing the so-
called valley of death before it can demonstrate commercial 
viability or flight readiness.
    Second, the SBIR program's success depends on the ability 
to match NASA's needs. NASA currently places a communication 
ban between companies and the agency when it releases its 
solicitation. Instead, I suggest NASA take a page from the 
Department of Defense, which holds a month-long prerelease 
period when a small business can ask questions about the 
technology requests. I believe that having this window of 
dialogue prior to the formal NASA SBIR solicitation release 
will produce higher quality, better targeted technology 
development.
    Today, Honeybee Robotics has grown and works in many 
different fields for Uncle Sam and for private industry around 
the world. We are having a fantastic run, actually, but in my 
heart it all stems from NASA. I was one of those first graders 
marched into our school cafeteria with the rest of the student 
body and set before a stage-mounted television to watch the 
launch of Friendship 7 carrying John Glenn to orbit. I have 
never forgotten it and I was hooked hard. I wanted to work for 
NASA ever since.
    Blessedly, my childhood dream has come true, and now as a 
professional and adult I have found NASA understands very well 
the ways in which the small business community can help it 
succeed with its mission. Thank you.
    Chairman CURBELO. Thank you very much, Mr. Gorevan. Now, we 
will begin the first round of questions. I will recognize 
myself for 5 minutes.
    Mr. Carberry, let us go big picture first because I think 
it is important for our constituents to understand why we are 
here and why we are having this conversation. Why is it so 
important for the United States to push the limits of science 
and space exploration? How does society broadly benefit from 
this exercise?
    Mr. CARBERRY. Frankly, it would be a much different world 
if we had not done that. If we had not had the space program, 
if we had not gone to the Moon, and done all the other things 
we have done in space, and exploration in general. It has 
benefited society enormously. One of the main reasons we should 
push is to try to inspire kids to get a STEM education, get 
into technical fields that benefit our entire society. It is 
not just the economics that are affected directly by hiring 
small businesses that are very important, but also think by 
inspiring goals. Big goals like going to Mars or going back to 
the Moon or elsewhere. It shows the country, and it shows the 
world that we are still capable of big things, and I think this 
translates into the economy as well. When the country has a 
positive outlook and, can see that we are doing great things, 
that translates directly to our economy. We have all seen that 
economies are largely based on psychology; anybody watching the 
stock market can see that. When the country feels that we are 
doing exciting, bold things, and we are pushing the boundaries, 
I think that has a dramatic impact on the overall feel of the 
country and the economy as well.
    But as for actual programming, I think it is very important 
that we have to find a way, stick with the program, and show 
people that we actually mean it. We have had a problem over the 
last, well, multiple decades, actually, when starting programs, 
then there is a change in administration, then we shift 
directions and we start from scratch again, and we never seem 
to make traction. People begin to lose faith that we are 
actually going to get it done. As a number of people have 
mentioned, we are at a very pivotal moment right now going into 
the next administration. If we can really continue the momentum 
and start accelerating that momentum into the next 
administration, I think we can achieve some really remarkable 
things that will impact the country dramatically, as well as 
the entire world.
    Chairman CURBELO. Thank you, Mr. Carberry.
    Dr. Davis, you mentioned something about prospective 
employees and their preferences for small firms, particularly 
younger workers. What do you think they find attractive about 
working at small firms as opposed to the larger, better-known 
firms?
    Mr. DAVIS. That is an experience I had. Before I started 
Emergent, I was working for a large company, and then I took a 
hiatus from the aerospace industry and I worked for an IT 
company for a couple of years. It was a very different 
environment over there. Aerospace is a very top-down, military 
style chain of command, with lots of rules and regulations. I 
go to an IT company where people wear shorts and flip-flops, 
and I can just go walk into the president's office and have a 
conversation with him. That would never happen in the company I 
worked for.
    When I started Emergent, I wanted to have that same kind of 
atmosphere and feel. This was in the early 2000s. I noticed it 
was not as hard to recruit young engineers to a small aerospace 
company, and I think it is because growing up with the Internet 
and social media, they just have this idea that work should not 
be as formal as the way mom and dad did it. They want to go to 
these smaller companies where culture is very important.
    So I am sure at your company, Craig Technologies and at 
Honeybee, we know our employees. We know their children. There 
is this sense of camaraderie and teamwork, and that is what 
young people want at work. It is the kind of place that we 
wanted to start and have as our businesses. I think it is 
increasing, you know, I started out having to make comparisons 
between, hey, you come work for me and it might be a little 
more risky than going to the larger companies but at least you 
will have more say in what you do. That is another aspect of 
it.
    I have to make that case less and less now. I just tell 
them, hey, come work for Emergent. We do really cool stuff. We 
do cutting-edge research. We work for these customers on these 
projects. They walk around our building and they talk to people 
and they just say, you know what? This is the kind of firm that 
I want to be in. I think for recruiting the younger engineers 
who have advanced degrees, 60 percent of our employees have a 
master's or a Ph.D. in engineering or computer science, they 
want to come work for these smaller businesses. It is critical 
for the aerospace industry, is recruiting that high-tech talent 
to the space program.
    Chairman CURBELO. Thank you, Dr. Davis.
    Now I would like to recognize Ms. Meng.
    Ms. MENG. My question is for Mr. Carberry, or anyone can 
probably answer. Like many other agencies, and as you have all 
mentioned, NASA has seen its budget reduced and fluctuated. Mr. 
Carberry, in your testimony, you discuss how budget uncertainty 
results in cautious spending from major contractors. Do you 
have examples of how this has disproportionately impacted small 
businesses, and do you believe that NASA has made necessary 
adjustments to ensure that small businesses still receive their 
fair share of contracting opportunities regardless of the 
budget, and what more should NASA do?
    Mr. CARBERRY. I can send you specific examples, but I think 
one of the biggest problems was, and this was a few years ago, 
largely coming out after the retirement of the shuttle, but 
also after the change in administrations we shifted course 
again. For a while, because there was a lot of disagreement 
within the space community itself, everybody was in limbo. It 
was similar in the budget itself. The budget was fluctuating at 
the time, so people were not as anxious to invest money in 
NASA. We did not quite know where we were going, when there is 
not a clear path, it is difficult. At least from the experience 
I had talking with the prime contractors, they are not quite 
sure which direction, if we are going to go to the Moon, we are 
going to go to Mars, we are going to go to an asteroid. If we 
are not quite sure what the direction is and what the timeline 
is on that, it is very difficult for them to plan. If they are 
not planning, they are very hesitant to actually invest the 
funds.
    I can actually get you more specific information directly 
on it, as it filtered down or did not filter down to small 
businesses, but I recall very clearly in all these 
conversations, how worried everybody was and they did not know 
where we were going. In addition to budget, it is overall 
direction and keeping clarity in policy because even if you 
have a full budget, if you do not know where you are going, it 
is hard to make these investments.
    Ms. MENG. Do you think NASA has done an adequate job, or 
what more should it do in helping transitioning these small 
businesses from programs that have concluded, like the shuttle 
program, to its newer missions? In terms of more clarity in 
policy and vision, do you all feel that that is the major 
issue?
    Mr. DAVIS. There is a number of missions that are much 
smaller and less visible than the shuttle, the station, SLS, 
and those kinds of things, the planetarium missions, Earth 
science and space science missions. All of those missions feed 
the NASA pipeline, and cancellation of any of those missions 
can have a devastating effect on a small business. Much larger 
businesses who have deeper pockets might be able to ride out a 
cancellation while they find work elsewhere. Maybe they lose 
some profit. Small business can have its subcontract canceled 
and people can lose jobs. When someone loses their job, they 
may exit the industry and not come back.
    I go back to what Mr. Carberry said about having certainty 
in the planning of how, these missions are funded and how, they 
are appropriated. We even look into the legislation to see what 
is coming, and we expect those to be there, and we plan on 
those being there. Our customers, NASA and their primes, expect 
all those things to be there. When those get suddenly canceled, 
there is not much NASA can do about that, it is out of their 
control sometimes. So I would have to say that the budgetary 
certainty is just critical.
    Mr. GOREVAN. This is a very tough problem and I really 
cannot point to a specific solution, but the cancellations are 
especially difficult.
    I worked on a joint U.S.-European mission, and I can tell 
you, there are some things about the way the European Space 
Agency works with respect to competition that I do not really 
like myself, but there is a reputation among the Europeans, for 
some reason, they are more consistent. When they say they are 
going to do a mission, they finish it. I am not an expert on 
why that is, but I think that NASA or Congress should try to 
look into why this is so.
    Back when the Rosetta Mission started, NASA was part of it, 
and I was part of the JPL version of that mission, and it was a 
little embarrassing. I mean, we had terrific technology, and we 
went down the road and we were canceled. I mean, the American 
segment. Rosetta went on to glory, but the American segment was 
canceled and it was in stark contrast to the Europeans 
continuing on for 12 more years to a very successful mission.
    Ms. MENG. Thank you. I yield back.
    Chairman CURBELO. Thank you, Ms. Meng.
    Mr. Brat, you are recognized for 5 minutes.
    Mr. BRAT. Chairman, I yield my time to the chair.
    Chairman CURBELO. I thank the gentleman.
    Ms. Lawrence, you are recognized for 5 minutes.
    Ms. LAWRENCE. Thank you.
    Many people do not associate the State of Michigan, which I 
am from and represent, as being associated with the space 
exploration, but small businesses in my state play a major role 
in manufacturing products. In the fiscal year 2015 alone, NASA 
awarded contracts to over 50 small businesses in the State of 
Michigan. One example is SpaceX, a major design and 
manufacturing company focusing on rockets and spaceships, which 
spent over $22 million with suppliers in Michigan, including 
$3.3 million to businesses in my district. More importantly, 75 
percent of Space X suppliers are small businesses, so that is 
something I am very proud of. Your comments today really 
resonate with me because it has a direct impact on my small 
businesses.
    Dr. Davis, I co-chaired a bipartisan caucus, the 
Congressional Investment in American Skilled Trade Workforce. 
You spoke of the educational level of your employees. I am 
always looking for ways to get younger Americans interested in 
the STEM professions. I am sure you employ, all of you, skilled 
trade workers, and you also know that the average skilled trade 
workers are in their fifties, and we are not generating the 
next workforce to replace them when they decide to retire. Many 
of us grew up and got excited about the space industry by being 
forced in our classes to sit down and watch it on TV, like you 
Mr. Gorevan, but in your opinion, what are the best ways to 
attract young individuals to pursue a career in your field?
    Mr. DAVIS. I serve on the External Advisory Committee for 
the Aerospace Department at the University of Texas at Austin, 
so I get to interact with students quite a bit. One change I 
have seen in the last 10 years at the university level has been 
hands-on engineering experience building CubeSats and small 
UAVs. The students are working on these projects. We did not do 
this back in the 1980s when I was in school. They come out with 
hands-on experience building things and are learning how to 
solder and learning how to wire, and learning how these systems 
work so when they are done they have significant confidence and 
experience and they want to go do bigger things.
    Now you see high schools are building CubeSats. Thomas 
Jefferson High School in Virginia has been building CubeSats 
for about 5 to 7 years, and I have been to the International 
Space Station Utilization Conference a couple of times. Last 
year it was in Boston and they had a whole panel session on 
high school students from Chicago and other cities that were 
working on CubeSats and projects that would go up into the 
station as part of a hosted payload experiment. So I think 
pushing that further down into middle schools and into 
elementary schools, and it does not have to be a CubeSat. You 
know, building a model plane and then going outside and flying 
it, the technology, the products are there. You go to a hobby 
shop and you can buy things now and build it yourself that was 
not available to us 20, 30 years ago. So I think it is that 
hands-on. Kids need to be engaged.
    My kids look at the space program as what Dad does. That is 
cool, but when they go on the Internet or they go to the movie 
theater they see things that look almost real, they say, how 
come you are not doing that? And I am like, well, son, that is 
not real, but some day it will be if people like you get the 
education and go on and do it. We need to start early, earlier 
than we thought. High school is not early enough. You need to 
get them in middle school, and if you can, in elementary 
school.
    Ms. LAWRENCE. I thank you for your understanding of our 
challenge in America. To sustain your economy and your 
industry, we must invest in the skilled trade workforce. I 
encourage you to not only talk individually to your family, but 
also provide opportunities to connect to your local 
communities. Have a day in your facility where you bring in 
young people and expose them to what you do. We do have to 
connect it to the movies or else they do not get it. Say, you 
can go into this field and create what you see on the movies.
    I heard what you said about the changes in administration, 
and that is something that has resonated. I thank you for 
bringing that to our attention because I think about the 
funding and sources that are available but not about how that 
change of administration that directly impacts the investment 
into your company. Thank you so much for being here.
    I yield back.
    Chairman CURBELO. Thank you, Ms. Lawrence.
    I recognize myself for 5 minutes.
    I think at least one of you said that your firm was 
starting to look at other sources of business, such as general 
aviation, because it is more stable and because it is more 
predictable. Is this prevalent among small firms like yours, 
like these? What are the risks for NASA if that trend 
continues? Ms. Craig, maybe do you want to take that?
    Ms. CRAIG. Sure. Actually, since I started the company, 
diversity was very, very important to me for that very reason. 
You cannot count on necessarily the Department of Defense or 
NASA with all the different budgets. In our manufacturing 
facility, we were kind of a victim of the same thing we have 
been talking about, the planned programs and budget cuts that 
you expected. Everyone was excited because the shuttle 
capability could be maintained and we are today where we are 
now 4 years later. We should have been there 2 years ago. But 
we absolutely had that plan and have done it where you need to 
diversify.
    The problem that happens at NASA is they are counting on 
the timelines. They are counting on their suppliers to deliver. 
Even if the timeline is solid, there might be changes in 
specifications, design engineering, and you have to be held, a 
requirement by NASA, they still need those timelines to be met. 
There is no flexibility for a supplier to say, oh, but I have 
another customer that needs this done at this same time so you 
are going to have to slide to the side. I think that is the 
challenge, and that is why we start to look for diversification 
into other areas. But what is going to happen is pretty soon no 
one is going to want to do business with NASA at the expense of 
the other customers.
    Chairman CURBELO. So yours is not the only firm that is 
doing this, you are seeing this from colleagues?
    Ms. CRAIG. Yes. I have colleagues who have said I will not 
do business with some of the large tier one suppliers to NASA 
anymore. They are smaller organizations but their are varied 
reasons. One is the regulations, all the paperwork, the 
certifications and, all that, but also the sliding timelines, 
lack of payment, and things like that. There are a lot of those 
decisions being made.
    Chairman CURBELO. Do you consider this a midterm or long-
term threat to NASA's ability to meet its mission, if suppliers 
are focusing on other business opportunities?
    Ms. CRAIG. I would say so because it also takes NASA time 
to build up a supplier, then if the supplier no longer wants to 
do business or can no longer do business, now they have to move 
and find more suppliers. So it is costing them money as well. 
So yeah, I think that is a significant problem. The budgets are 
a significant problem, too, because quality is important, set-
asides are somewhat important, but it all becomes dollars.
    Chairman CURBELO. Does anyone else want to add to that? Dr. 
Davis?
    Mr. DAVIS. Yes, I would like to add to that.
    We have looked at diversifying our customer base. The DOD 
and the intel communities have much larger budgets than NASA, 
and space situational awareness is becoming an increasingly big 
part of what these organizations are looking at, so it is a 
natural place for us to go. It is difficult, but when you are 
faced with uncertainty with NASA and, not a lot of opportunity 
to prime, at least we know that the DOD budgets are going to be 
stable and funded over long periods of time. If we are going to 
make that commitment, there is probably some payoff. It may 
take a while to get to there, but we are also looking at 
branching out into health care and other sectors just because, 
again, the budgets there are much bigger and seemingly more 
reliable.
    I have talked to young people, high school and college age, 
who are aware that NASA's budget changes with administrations 
and there is uncertainty in that. And so they are like, well, I 
am not going to go into aerospace engineering. I am going to go 
into civil engineering because my parents have told me that 
NASA is just not a reliable place to go work. To me, it is sad 
that our nation and the young people who are getting the 
education to become the workforce of tomorrow cannot rely on 
the space program as a place to get good, high-paying, high-
tech jobs that are going to be there.
    Chairman CURBELO. Let me take you back to NAICS, which you 
mentioned during your testimony as well. Do you think that is a 
potential quick fix for some of the challenges firms like yours 
are facing? Do you have any specific recommendations on how we 
may reclassify these firms or come up with new definitions?
    Mr. DAVIS. Sure. I think the biggest challenge is a company 
of my size, if we are going to compete for a proposal, you are 
going up against three or four other companies and it is knock-
down, drag-out competition. To take on a company that is much, 
much larger than us is an unfair fight. It is like putting a 
featherweight against a heavyweight, you are not going to win 
that battle very often. Using those NAICS codes, the 
engineering services and the custom computer programming 
services more often as a small business set-aside gives us more 
of those chances. But even then, if you want to start new 
businesses, you have to create a new code or a standard that is 
even smaller than that. Right? A 250-person company is still 4 
times larger than mine, so if I am going to compete with them 
for a proposal, they are going to have 4 times the advantage in 
my opinion. But if there was a smaller code that, say, limited 
the size to 100 or maybe $15 million, $10 million in revenue, 
that would make the competition a lot more fair and balanced, 
and I think that would encourage new small businesses to start 
up.
    It is intimidating to write a proposal, the transaction 
cost to write a NASA proposal is quite high. You have to put 
together a 100-, 150-page book that has technical, management, 
costs, past performance, and then all the plans that go along 
with that. Obviously, larger companies have a big advantage in 
that. If you want the new small businesses to come up, you have 
to narrow the competition down and you have to make the 
transaction costs lower.
    Chairman CURBELO. Thank you, Dr. Davis.
    Ms. Meng, do you have any additional questions?
    Ms. MENG. I just wanted to inquire about the online 
resources that NASA has to help individuals and small 
businesses interested in working with NASA. Are small 
businesses using these resources at all or do you rely on trade 
associations for guidance? How can the online resources be 
improved if they are not being used enough? Maybe Ms. Craig or 
Mr. Gorevan?
    Mr. GOREVAN. I am sorry, online resources for finding 
people to work for you?
    Ms. MENG. Business opportunities with NASA.
    Mr. GOREVAN. Oh, business opportunities with NASA.
    Ms. MENG. Yes.
    Mr. GOREVAN. Of course,we use online resources at my 
company. The SBIR program is heavily based online and we make 
quite a bit of use of these types of things. I think since 2013 
alone we have had 61 NASA contracts that all came from online 
sources, so I would say that they are very useful. I cannot 
really point to any improvements that are really necessary 
except I think perhaps maybe identifying some of the contacts 
that we could talk to. As I mentioned in my testimony, 
sometimes when these online solicitations are released we are 
not allowed to speak to anyone, and as I said, the Department 
of Defense does allow a month period where you can talk to 
people. I think it would be better for both parties if that was 
allowed to happen at NASA.
    Ms. CRAIG. I will comment on that, also. When we were about 
10 employees, I had initially tried to pursue what you are 
talking about, the online resources, whether it was for--there 
is one FedBizOpps or it is the NASA, trying to find 
opportunities, but increasingly was told if you are looking 
there you are behind the power curve. We had to invest in 
third-party companies or products. There are some other, 
GovWin, e-pipeline at the time, and then you are able to get 
all the information to really more effectively bid on 
opportunities. There is somewhat of an issue and that may be 
government-wide, globally when it comes to finding those 
opportunities, and that is some of the struggles of small 
business. You have to be out there making your case and it 
takes 18 months or more to be able to make that case, 
understand what the customer wants, go in and speak with them 
and be intelligent enough to bid on a particular opportunity. A 
lot of that is done through subcontracting, but that is a long 
timeline, and a lot of companies cannot survive that long, 
especially on the uncertainty of whether or not you are going 
to have that opportunity. So there could be ways to improve by 
providing more information and more opportunity to come in and 
discuss, like you said, with the SBIRs. They do it very well. 
That would be helpful, but, it is a challenge, especially for 
the really small companies that cannot afford third-party 
companies.
    Mr. DAVIS. I would like to add to that. We use GovWin, 
which is a third-party service, and then the NASA online 
resources are kind of secondary. So you start with GovWin and 
then you go to the online resources. The one online resource 
that NASA could improve is the forecast, and that forecast 
needs to be updated regularly. It is supposed to be updated 
quarterly. That does not always happen. Then the information 
that is in there has to be true and accurate. They do not 
always update who the person is, who is the CEO or the COTAR or 
whatever. I will see an opportunity on GovWin and I will get 
all I can get from GovWin, but then I will also go to this 
forecast for the various NASA centers and then try to match 
that up with what I see from GovWin. Just having that more 
accurate and updated timely would be good.
    I think the biggest challenge is that in government 
contracting there is no how-to manual for us to start our 
businesses. No one said, hey, this is what you do, step one, 
step two, step three. This is how you do business with NASA. 
When I have read those things I am like that is not how you do 
business with NASA, if you did that you would have no business. 
They should probably engage with some small businesses that 
have some real war stories to tell that can say this resource 
is not really useful, and neither is this one. You get these 
small business specialists, and bless their heart, they are 
trying to work hard and help us out, but a lot of times I just 
feel like they do not really know the challenges that we face 
and the things that we have to overcome, and the actual 
information that we do need.
    For example, when I started my company, I was blissfully 
ignorant of the need for a contract vehicle. I just thought you 
could start a company and be smart and have good ideas, and 
somehow you would be connected up to this money that would come 
to you to do work. It turns out, no, you have to have a 
contract vehicle, you have to have a prime contractor. That 
prime contractor may or may not let you on their contract. Even 
if NASA wanted that company, I need that company, the prime 
contractor may say, no, they were on my proposal team so I do 
not need to have them on. I have seen that happen. That has 
happened to me, and that is a barrier. The blocking and 
tackling of being a small business in the government 
contracting world, that kind of information could be very 
useful to small businesses. I do not see that in the online 
resources.
    Ms. MENG. Thank you. I yield back.
    Chairman CURBELO. I want to thank all of you for your time 
this morning. We have learned a lot, and our goal here is to 
make sure that the small business community in our country can 
thrive and grow and create opportunities for every American, 
but especially for those who need them the most. Young people 
who are looking for work, immigrants, low-income people, small 
businesses have unique access to those types of individuals, 
and I am very grateful to all of you and to all of our 
colleagues who participated today.
    For more than 50 years, American global leadership in human 
space exploration and space science has been a bright shining 
light of innovation, technological advancement, and scientific 
achievement. Small businesses are the foundation of the 
industrial base needed to maintain and build upon that 
advantage. We here at the Small Business Committee are 
committed to expanding small business opportunities to conduct 
business with NASA and throughout the Federal Government.
    I ask unanimous consent that members have 5 legislative 
days to submit statements and supporting materials for the 
record.
    Without objection, so ordered.
    We are adjourned.
    [Whereupon, at 12:06 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

   Ready for Liftoff: The Importance of Small Businesses in the NASA 
                              Supply Chain

                 United States House of Representatives

                      Committee on Small Business

             Subcommittee on Agriculture, Energy, and Trade

                      Testimony of Chris Carberry

               Chief Executive Officer, Explore Mars, Inc

                             July 12, 2016

    Thank you Chairman Curbelo, Ranking Member Meng, and 
Members of the Subcommittee, for the invitation to testify at 
today's hearing. I am honored to be here to discuss the 
importance of small businesses to NASA's supply chain and the 
significant contributions such companies have made in the past 
and will continue to make to our nation's space exploration 
programs.

    Explore Mars is a small, non-profit, space advocacy 
organization that communicates regularly with industry, 
including small businesses, on an ongoing basis. As such, we 
are well-positioned to report on the fluctuations, as well as 
progress, in space policy over the last few years and how 
budgetary and policy uncertainties impact American businesses, 
in particular, small businesses.

    When the Space Shuttle was retired in 2011, it was not to 
signal an American retreat from human space flight. Rather it 
was because of safety concerns in the wake of the Columbia 
accident as well as to enable the United States to transition 
to new generations of more cost-effective launch vehicles and 
to build systems capable of taking our nation beyond Low Earth 
Orbit (LEO) to destinations such as the Moon and Mars. 
Unfortunately, uncertainty caused by politics and budget 
fluctuations caused a gap between the Space Shuttle program and 
these follow-on programs.

    NASA's annual procurement numbers show that space program 
funding supports small businesses in each and every state. 
Small businesses received about $5 billion in contracts during 
Fiscal Year 2015, including about $2.5 billion awarded directly 
to small businesses in prime contracts. According to two recent 
NASA small business reports, more than 800 small businesses 
from 47 states have played a role in the Orion crew capsule 
program--NASA's next generation spacecraft designed to carry 
astronauts to deep space destinations. Similarly, more than 800 
small businesses in 43 states have supported the Space Launch 
System (SLS)--NASA's new exploration-class rocket. This supply 
chain is not limited to human space flight. Innumerable small 
businesses have supported other valuable programs at NASA, such 
as the Mars Science Laboratory, with the Curiosity rover that 
has been robotically exploring Mars for the past four years, as 
well as other science and technology programs.

    Indeed, NASA's supply chain provides tens of thousands of 
jobs around the country. These are good, high-paying jobs that 
contribute in many ways to their local economies. In addition, 
opportunities to work on NASA's space programs--to accomplish 
that which humanity has never accomplished before--serve to 
inspire our nation's youth to go into science, technology, 
engineering, and math (STEM) fields, building the highly-
skilled workforce of the future.

    NASA currently hopes to land humans on Mars beginning in 
the 2030s. Landing humans on Mars is not a new goal. It has 
been a priority since the days of the Apollo Program, and it 
has been one of NASA's official goals under multiple 
Administrations and Congresses, as demonstrated by the 
enactment of NASA Authorization Acts of 2005 (P.L. 109-155), 
2008 (P.L. 110-422), and 2010 (P.L. 111-267). Most recently, 
the House of Representatives passed its version of a NASA 
Authorization Act of 2015, stating in Section 201(a) that 
``Human exploration deeper into the Solar System shall be a 
core mission of the Administration. It is the policy of the 
United States that the goal of the Administration's exploration 
program shall be to successfully conduct a crewed mission to 
the surface of Mars to begin human exploration of that 
planet...'' Recent national public opinion polling has also 
shown that there is overwhelming support by the American people 
for this goal. This is particularly true when they are made 
aware that our space program is not (as is the subject of myth) 
an expensive luxury, but actually accounts for less than one-
half of one percent of the federal budget while providing 
critical benefits to our economy, our national security, and 
our leadership position in the world.

    Today NASA, along with U.S. industry, international 
partners, and others, is gearing up to achieve this goal. We 
are on the verge of restoring American access to space for our 
astronauts, while hardware for deep space missions is now 
actually being built, and the first workshop to discuss 
potential landing zones on Mars was recently held (with more to 
come). We are bringing our nation back to deep space with 
American innovation, ingenuity, and technical prowess and 
manufacturing--U.S. industry is hiring highly-skilled engineers 
and technicians, building state-of-the-art facilities, bending 
metal and test-firing engines that will get humans back to 
beyond Earth's orbit for the first time in over 40 years. As 
CEO of Explore Mars, I am afforded the opportunity to work with 
NASA, academia, and industry that together are developing 
architectures our nation needs to regain access to deep space 
and get to Mars within our lifetimes. Explore Mars hosts 
several events every year to not only bring space exploration 
stakeholders together to review potential architectures, but 
these events also inform the public and our elected officials 
of how deep space exploration inspires innovation, technology 
development, and job growth throughout the nation--from large 
corporations to small businesses. We need to continue with this 
momentum and work with our elected officials to ensure we 
continue on this Journey to Mars with NASA supported by 
America's small businesses.

    In order to sustain this momentum, however, adequate 
funding is critical. But almost equally important is budgetary 
and policy stability. Without all three, it will be impossible 
to move forward.

    Thanks to the support of Congress, NASA's funding has 
achieved some stability and growth recently. But only a few 
years ago budgetary uncertainty hit NASA and the space industry 
particularly hard--leaving the space community--including 
businesses, both big and small--in crisis and in a state of 
immense uncertainty. I recall meeting with a high ranking NASA 
official several years ago who didn't know whether his 
directorate's budget would be increased by $2 billion or 
reduced by $1 billion the following year. In other words, he 
had $3 billion in budgetary uncertainty--which is a 
tremendously significant amount for any NASA directorate. 
Needless to say, this directly impacted industrial partners and 
subcontractors along the supply chain. Such uncertainty and 
fluctuations are especially tough on small businesses that 
often get hit the hardest by cutbacks. In this same timeframe, 
I was told by more than one of the major contractors that 
because of an unclear policy and budget director, they were 
forced to be very cautious about spending and investing funds, 
which results in a disproportionate impact to the small 
businesses in the supply chain. This is no way to run a long-
term project, let alone a space program.

    Space exploration is not JUST the business of large 
corporations--as I am sure will be made clear by the other 
witnesses. Small businesses play an essential role not just in 
the success of our space program, but in the nation's aerospace 
and defense industries overall. The major players in space 
procurement do not make all the nuts, bolts, pins, fabric, 
windows, switches, wiring harnesses and the other myriad parts 
in a spacecraft inside their own factories. These items are 
contracted out, much of it to small businesses that can make 
these parts in bulk at a much cheaper rate and for other 
customers as well. Unlike many other contracts, NASA contracts 
often have more value than just the `dollar value' would 
indicate. An example if this appeared in an article in the San 
Jose Mercury News a few years ago. It highlighted the pride a 
worker felt for his contribution to the Apollo Program that 
landed humans on the Moon. He had not worked on life support, 
propulsion, or some other major system. He had installed some 
hooks that supported the astronaut's hammocks while on the 
surface of the Moon. Yet he felt, and rightfully so, that he 
had contributed to humanity's first voyages to the Moon.

    One thing is clear: We must not allow the uncertainties of 
the past to prevail again. We must advance--and accelerate--
into the next administration. There is strong bi-partisan 
support for the goal of sending humans to Mars, and there is 
clear excitement about that goal from the general public. We 
must harness that strong consensus.

    We must not be ``penny wise and pound foolish'' with the 
NASA budget. It makes no sense to allow even a modest reduction 
in NASA's budget, while at the same time removing any prospect 
of NASA achieving its mandate. Particularly when only a little 
more--and consistent--funding will serve the taxpayers in a 
manner that will provide tremendous benefits to our entire 
society and be remembered for millennia. There are not many 
federal programs that can achieve anything comparable.

    We are approaching another major hurdle, and that is the 
uncertainty that traditionally accompanies a change in 
Administrations. Will we once again shift directions and throw 
our space program--and the small business community upon which 
its success depends--into turmoil, or will we fully embrace our 
current policy of sending humans to Mars? We have come so far 
in recent years, and it benefits no one if we radically change 
course again. Not NASA, not large businesses, not small 
businesses, and certainly not the taxpayers of the United 
States.

    In closing, Explore Mars would like to thank you for taking 
the time to hold this hearing and highlight this nation's small 
business innovations! We WILL be sending humans to Mars in the 
very near future. And it will be accomplished in large measure 
based upon the support that we show for, and on the efforts of, 
those small businesses around the United States.

    Again, thank you!
                              Testimony of

                        Dr. George W. Davis, CEO

                   Emergent Space Technologies, Inc.

                               before the

       U.S. House of Representatives Committee on Small Business

   Ready for Liftoff: The Importance of Small Businesses in the NASA 
                              Supply Chain

                             July 12, 2016

    Chairman Chabot, Ranking Member Velazquez and members of 
the Committee on Small Business, thank you for giving me the 
opportunity to speak to yo on the importance of Small 
Businesses in the NASA Supply Chain.

    Emergent Space Technologies is a 60-person aerospace 
engineering firm headquartered in Greenbelt, Maryland. With 
additional locations in Texas, New Mexico, Colorado, California 
and Virginia, we provide technical services and perform 
research and development for NASA, NOAA, the Air Force and 
DARPA. Our offerings include space mission design, development, 
and integration and test services, as well as flight and ground 
software technology development.

    NASA is known for large, complex programs such as the Space 
Shuttle, the International Space Station, the Hubble Space 
Telescope and the Mars Science Laboratory, so one might think 
that only Large Businesses are capable of supporting its 
missions. In fact, Small Businesses form a vital part of NASA's 
contractor workforce. Simply look at today's engineering 
marvels: Orion Crew Vehicle, Space Launch System, James Webb 
Space Telescope and Mars 2020 rover, as well as dozens of 
smaller, lesser known programs. You will see that we are making 
unique contributions to NASA's most challenging missions.

    Small Businesses typically start up around their founders' 
technical expertise. For Emergent, it was my background in 
spacecraft Guidance, Navigation and Control, or GN&C. GN&C is 
critical for any space mission, but especially for those that 
require, for example: precise pointing; rendezvous, proximity 
operations and docking; deep space navigation; and entry, 
descent and landing. NASA and its Large Businesses prime 
contractors once had a monopoly on GN&C expertise, but many of 
today's engineers, especially the younger ones, prefer smaller 
companies. This is also true for software engineering. When I 
started Emergent in 2001, I had taken a hiatus from the 
aerospace industry to work in the IT industry. It is there 
where I saw how modern software was developed. I wanted to 
combine it with expert GN&C algorithms to help NASA and the Air 
Force enable autonomous space missions. This takes great 
software, so you need great software developers, most of which 
are lured to Silicon Valley, rather than NASA.

    Emergent responded to this ``scarcity of talent'' problems 
by developing a network that spans both industry and academia 
and leverages modern social media such as Facebook and 
LinkedIn. As a result, we have found a niche in the aerospace 
industry by finding top talent in both GN&C and in software 
development, often in the same person. These are a rare breed, 
so you have to be intentional about your search. In this 
manner, Emergent, and Small Businesses like us, play a vital 
role in recruiting new and necessary talent to NASA programs.

    Small Businesses are also critical sources of innovation 
for NASA. Over the last 20 years, NASA's R&D budget has been 
drastically reduced. NASA's budget is largely driven but its 
missions, and missions largely do not pay for R&D. They pay for 
low-risk, flight-proven space technology, particularly when it 
comes to the spacecraft bus, the launch vehicle and the ground 
system. As a result, NASA has increasingly relied on Small 
Businesses to come up with innovative solutions to challenging 
problems through the Small Business Innovation Research (SBIR)/
Small Business Technology Transfer Research (STTR) program. 
Emergent is an active participation in this program, generating 
roughly 15% of our revenue. The SBIR-STTR program helps pay for 
NASA research while also creating good, high-skilled jobs for 
our economy.

    Despite our role in the NASA Supply Chain, Small Businesses 
face many challenges. Chief among them is the diminishing 
supply of adequate Small Business Set-Asides, especially for 
Emerging Small Businesses. This is often driven by contract 
bundling, in which smaller prime contracts are combined with, 
or bundled into, larger contracts that are acquired under full 
and open competitions that only Large Businesses can 
realistically prime. While it might seem more efficient for 
NASA to do so, it is our experience that economies of scale 
generally do not apply to government contracting. More 
importantly, it takes away opportunities to grow from the Small 
Businesses, especially new ones and those without the 
``disadvantaged'' designation. A good way to look at this issue 
is through the federal government's use of NAICS codes.

    The North American Industry Classification System, or 
NAICS, is the standard used by federal agencies in classifying 
businesses for the purpose of collecting, analyzing, and 
publishing statistical data related to the U.S. economy. The 
Small Business Administration (SBA) has established Small 
Business Size Standards matched to the NAICS codes. The size 
standards are expressed in either millions of dollars or number 
of employees and specify how large a business can be and still 
qualify as a Small Business for federal government contracts. 
Engineering Services are assigned the NAICS code 541330, and 
the associated SBA standard limits the Small Businesses to 
$38.5M in revenue when using the Military and Aerospace 
exception. Similarly, Custom Computer Programming Services are 
assigned NAICS code 541511 and this limits the Small Business 
to $27.5M in revenue. These codes are roughly equivalent to 
150-200 employee companies, or 2-4 times the size of Emergent. 
The more frequently used standard for small-business set-asides 
is NAICS code 541712, or Research and Development in the 
Physical, Engineering, and Life Sciences. As of February 2016, 
this standard limits Small Business at 1,000 or 1,250 
employees, depending on the requirement. This is 8-10 times 
larger than the standard set by the 541330 and 541511 codes. 
According to the U.S. Census Bureau's 2013 Statistics of U.S. 
Businesses, 99% of the United States' 5,775,055 firms have less 
than 500 employees. This seems inconsistent with the Small 
Business size standard set by NAICS code 541712, which limits 
Small Businesses to 1,000 or 1,250 employees!

    I recently studied the NASA prime contracts whose primary 
requirements are science-, engineering- or software-related and 
are strategically aligned with our business capabilities and 
interests. There are roughly 50 such contracts. Of these, 60% 
are Small Business Set-Asides. That is the good news. The bad 
news is that over half are set aside with the 541712 NAICS 
code. Only 4 are set-aside using 541330 and 3 are set-aside 
using 541511, and these numbers appear to be dwindling over 
time. For example, a contract at NASA Kennedy Space Center was 
recently changed from a small business set-aside under 541330 
to full and open competition. This contract has been 
successfully managed by Small Businesses for more than a 
decade, but was for some reason changed despite there being 
more than adequate competition.

    The standards set by the NAICS codes and the way they are 
used by NASA to establish prime contracting opportunities for 
Small Businesses is important. In federal contracting, size 
does matter. The bigger you are, the lower your rates, which 
makes you more competitive in cost-driven competitions. 
Moreover, the bigger you are, the more personnel you can afford 
to develop your business opportunity pipeline and write 
proposals, which is the lifeblood of our industry. It is 
extremely difficult for companies of our size to compete with 
those that are 8-10 times larger, especially when you have so 
few chances to develop past performance experience.

    Emergent and other Small Businesses like us have had to 
adapt to shrinking opportunities for prime contracting within 
by focusing more on subcontracting and also by looking to 
Department of Defense opportunities. For many companies, the 
latter is just not practical or even feasible. The downside to 
being just a subcontractor is that we have to work multiple 
proposals, usually simultaneously, just to increase the 
statistical likelihood that we maintain, not grow, our revenue. 
Losing contracts and therefore personnel can put you out of 
business.

    Two changes that NASA could make to help us out are to (1) 
expand its use of small business set-aside under the 541330 and 
541511 NAICS codes, and (2) use the size standard for Emerging 
Small Business, which is 50 percent of the NAICS standard. This 
would give more opportunities for companies like Emergent to 
gain experience as a prime contractor and grow our base so that 
we can eventually pursue the larger set-asides that use the 
541712 NAICS code. It comes down to risk versus reward. I can 
spend a tremendous amount of time and money trying to beat out 
a 1,000-person company for a prime contract, assuming I can 
assemble a credible team for the broad scope typically 
associated with these large contracts, or I can try to get on 
multiple prime contractor teams as a subcontractor teammate and 
hope we win one or more of the opportunities being pursued. In 
the latter case, I have little to no control over the destiny 
of my company.

    Another challenge Small Businesses face in supporting NASA 
is the long-term stability of the SBIR-STTR program. Many U.S. 
Small Businesses rely on the SBIR/STTR program for seed funding 
in developing a unique product. Others, like Emergent, rely on 
it to perform strategic R&D for NASA, Air Force and DARPA. 
Ultimately this funding translates into jobs, both now and in 
the future. As Albert Einstein once said, ``if we knew what we 
were doing, we would not call it research.'' Congress can help 
Small Businesses by continuing its strong support of the SBIR-
STTR program, especially when it comes to reauthorization in 
FY2020. Any delay or disruption in this vital program could 
result in the loss of thousands of job across the country. 
Specifically, for NASA, I would like to see the well-known 
``valley of death'' problem addressed. As you may know, a Phase 
I SBIR contract is 6 months in duration and results in a proof-
of-concept demonstration. A Phase 2 SBIR contract is 24 months 
in duration and results in a prototype. While the Phase 1 
contract is being executed, however, the performing firm has to 
write and submit its Phase 2 proposal. The time it takes to 
evaluate and award the Phase 2 proposal takes months, causing a 
funding gap which in turn causes the Small Business to redeploy 
its personnel, or worse, lay them off. The Department of 
Defense SBIR/STTR program addresses this funding chasm by 
requiring the Small Business proposers to also bid a 4-month 
Option Period as part of their Phase 1 proposal. If awarded 
Phase 2, the Option Period contract provides continuity until 
the Phase 2 contract can be executed. This would prevent loss 
of revenue and valuable personnel, which as I have previously 
stated is not easy to find.

    In closing, I would again like to thank Chairman Chabot, 
Ranking Member Velazquez and members of the Committee for 
giving me the opportunity to testify on the importance of Small 
Businesses to NASA's Supply Chain. Working on NASA projects is 
a dream come true for me and my employees. It's why we get up 
in the morning and go to work: to play a role, even a small 
one, in advancing our nation's knowledge of the universe and in 
exploring our solar system. I have touched on some of the 
challenges in being a part of the NASA Supply Chain, and there 
is more that I could discuss that my brief time will not allow. 
I would therefore be happy to follow-up with you and your staff 
at your convenience. In the meantime, please continue to give 
NASA your legislative support.
    Ms. Carol Craig, President and CEO of Craig Technologies, 
Cap Canaveral, FL

    In 1999, I started Craig Technologies at my kitchen table. 
My husband is a Navy officer and our repeated moves and 
transitions led me down the entrepreneur path. By 2010, the 
company was successful, profitable and reputable. With revenues 
topping $20 million and strictly organic funding, I knew there 
was more opportunity to serve both commercial and government 
clients with our brand of superior service. My foray into 
manufacturing started small. I had a need for quick and quality 
work and realized I could do it internally with the correct 
approach. Purchasing the assets of a small machine shop and 
investing wisely in supplemental equipment provided the company 
with a nimble production facility that quickly garnered 
interest from existing NASA supply chain members. When KSC 
leadership decided to pursue a Space Act Agreement with a 
company in order to take over the remains of the National 
Shuttle Logistics Depot, Craig Technologies bid on and 
eventually won the opportunity to house and maintain the 
manufacturing equipment for a period of 5 years and utilize it 
for any commercial purpose. Since that time, I made the 
conscious decision to utilize profits from the successful 
Engineering and Technical Services Division to fund the nascent 
Aerospace Solutions side. I did not utilize outside capital in 
order to preserve the culture and autonomy that makes Craig 
Technologies so different than other government contractors. We 
grew from $20 million in 2010 to $45 million today. We continue 
to provide outstanding service and product to all of our 
customers with NASA as the largest. As the commercial space 
industry grows around Cape Canaveral and KSC continues to 
pursue public/private partnerships through Commercial Crew and 
Commercial Cargo contracts, the future for astro- and aero-
space manufacturing in Brevard County Florida is poised for 
explosive growth and relevant economic impact.

    I tell you this back story because it leads to where I am 
today--at a crossroads of how to keep the manufacturing side 
afloat while waiting for delayed payments, extended NASA 
contract decisions and lack of access to working capital 
because of stringent banking regulations imposed by the Federal 
Government. I've effectively robbed Peter to grow Paul. I did 
so because it was the right thing to do--for our business, for 
our employees and for our community. I believe in our free 
market system and always strive to offer the very best product 
and/or service for the price agreed upon. Unfortunately, the 
cards remain stacked against a small business entreprenuer--
even one who overcomes the odds and makes it to the next level. 
Unforgiving and uninformed covenants by lending institutions 
lead to myopic attitudes towards growth in the government 
sector and the milestones that point toward long term stability 
and success. Creating valuable employment opportunities in my 
community remains my number one goal and priority. But money 
has to come in the front door on a logical and planned timeline 
in order to properly budget and ensure the books remain 
solvent. Manufacturing built this country. We list it to 
cheaper and inferior overseas suppliers and then complained 
when the jobs went away. Now there are numerous folks like 
myself who are laying it all on the line to recover the 
industry. We need help and we need it now. We don't want 
handouts, but rather a fair and predictable system that ensures 
payments are made and contracts satisfied without political 
whim. What if more and more companies like myself are unable to 
succeed and close their doors. The impact on communities and 
our nation will be devastating.

    NASA continues to explore and innovate. And their supply 
chain remains critical to both long and short term success. I 
urge you to report to the full body that commitment to a clear 
path and mission with 10 year budget cycles is crucial to the 
continuation of small business partnerships with NASA. And 
collaboration with lending institutions through small business 
offices within the agency will allow the banking world to 
understand the nuances of government contracting and work. 
Pursuant to your questions, I offer my thanks for your time.
                  Written Testimony of Stephen Gorevan

           Chairman and Co-Founder of Honeybee Robotics, Ltd.

                         The Brooklyn Navy Yard

                        Building 128, Suite 121

                      63 Flushing Avenue, Unit 150

                           Brooklyn, NY 11205

             Subcommittee on Agriculture, Energy, and Trade

                   House Committee on Small Business

  ``Ready for Liftoff: The Importance of Small Businesses in the NASA 
                             Supply Chain''

                             July 12, 2016

    Mr. Chairman and Members of the House Subcommittee on 
Agriculture, Energy, and Trade:

    Thank you for the opportunity to share our perspective as a 
small business contractor to NASA. We believe that NASA and 
small businesses have a strong and mutually beneficial 
relationship. Organizations such as ours play an important role 
in creating enabling technologies for NASA while doing our part 
to keep American innovation the envy of the world.

    I co-founded Honeybee Robotics in 1983, and my company has 
worked as a small business contractor to NASA for 30 years. Our 
headquarters is in New York, and we maintain satellite offices 
in Longmont, Colorado and Pasadena, California. Our specialty 
is in building robotic and electromechanical systems that 
operate reliably in the toughest environments, such as 
planetary exploration and spacecraft systems. Over the years we 
have worked with the majority of NASA's research and space 
flight centers, winning contracts for pioneering early-stage 
development as well as flight missions that range from 
planetary exploration to the Orion spacecraft.

    We have been fortunate to contribute flight hardware to all 
the spacecraft that NASA has landed on Mars since 2000, and in 
the process Honeybee has achieved a succession of firsts on 
Mars. Our Rock Abrasion Tools on the 2003 Mars Exploration 
Rovers Spirit and Opportunity were the first tools to access 
the inside of rocks on Mars. The Rock Abrasion Tool on 
Opportunity is operating in its thirteenth year, some fifty 
times its original mission life. Our Phoenix scoop for the 2007 
Phoenix Mars Lander was the first tool to sample water on Mars. 
Our Sample Manipulation System for the 2011 Mars Science 
Laboratory acts as a robotic laboratory assistant, moving 
samples to the rover's instruments so it can detect even traces 
of molecules associated with life. We designed and built all 
these systems in our New York headquarters--and as a lifelong 
New Yorker, I would venture that our facility's clean room was 
the most pristine place in all of New York City.

    Flagship manned space programs such as the Space Shuttle 
and Orion are certainly important in providing opportunities 
for the small business community, but NASA has set up a robust 
system for technology development outside these high-profile 
programs. From our perspective, the opportunities for small 
businesses outside these flagship programs--in areas such as 
Earth Science, Planetary Science, and Exploration Research and 
Development--are more numerous and in some ways more important 
for the sustained attention necessary for technology 
development. As a result, I would encourage the members to 
consider the effects of all NASA's programs, not only its 
highest-profile human space missions, in considering how small 
business can support NASA's mission.

    The Small Business Innovation Research (SBIR) program is an 
excellent mechanism by which small businesses are encouraged to 
deliver relevant technologies to NASA in a competitive manner. 
NASA also supports many other specific funding mechanisms that 
allow small businesses to grow and commercialize new 
technologies. The funding in these contracts is almost always 
spent quickly by the contracting company on skilled domestic 
labor, materials, and direct expenses. We believe this is an 
effective use of public resources to spur economic activity and 
innovation.

    Honeybee Robotics is a testament to the mutually beneficial 
relationship between NASA and the small business community. 
But, there are areas for improvement that will serve three 
purposes: to deliver better technologies to NASA; to strengthen 
the growth and commercial prospects for innovative small 
businesses; and to maintain the technology and economic 
leadership of the United States into the next generation and 
beyond.

    In preparing this testimony, Honeybee consulted several of 
our friends and business associates in the small business 
community. The statements to follow affect many of us, and 
reflect a shared perspective of ways that NASA could enhance 
the ways it engages small businesses. The goal is to level the 
playing field such that small businesses can compete with 
larger companies on technology and cost-effectiveness so that 
NASA can be as successful in its mission as possible.

    First, the ability for small businesses to develop and 
deliver relevant, cost-effective technology is highly dependent 
on long-term mission clarity. As resource-constrained 
organizations, we are sensitive to the prospect of developing 
technologies for missions that are cancelled in the next 
political cycle. The preparation and execution of mission 
requirements can take a decade or longer. It is exceptionally 
difficult to develop a technology to flight readiness.

    Unfortunately, when a small business does manage to get its 
technology selected for a flight program, the uncertainty, 
delays, and outright cancellation of funding remains a very 
real risk. Sometimes these delays are a result of Congressional 
budgeting, such as continuing resolutions that delay funding. 
Sometimes funding is at risk due to reductions in directed 
expenditures, the effects of which can flow through prime 
contractors and lead to small businesses losing subcontracts. 
And sometimes interruptions are a result of inconsistency in 
program development roadmaps, which can lead to long breaks 
between program stages that cause small businesses to lose 
talent and momentum while they wait months or years for the 
next phase to take effect. The net effect of uncertainty is 
that too often the small business contractors for NASA bear the 
risk and pay the price when Congress or the Executive branch 
changes the priorities it directs NASA to focus on.

    Second, I want to highlight the headwind small businesses 
face when they seek to develop flight technologies or 
commercialize systems through contracts that require private 
matching investment. I would recommend such investment be 
eliminated for small businesses due to the chilling effect it 
places on technology development and the inherent advantages 
more highly capitalized businesses have in this situation.

    As an example, NASA's 2016 Next Space Technologies for 
Exploration Partnerships (NextSTEP) is a public-private 
partnership model that seeks commercial development of space 
exploration capabilities for human missions beyond low-Earth 
orbit. This Broad Agency Announcement solicitation requires a 
minimum cost sharing threshold, i.e. private company 
investment, for businesses to be eligible. The details of this 
requirement pose problems. The solicitations often restrict the 
eligible in-kind investment to resources spent within the last 
year, so investments from years prior are not considered. They 
also require that a portion of the actual contract contain a 
matching investment (such as 50% of the investment must be made 
during execution of the contract). As a result, NASA is limited 
in the size of the award it can grant to a small business with 
relatively little capital to invest, independent of the value 
that NASA would get from the technology.

    Some form of private investment requirements can make sense 
for a device or technology that can be utilized in other 
industries, where a small business can make a ROI calculation. 
But in practical terms, much of the technology for space 
exploration does not have immediate commercial application. The 
effect of the cost-sharing model is to box out small businesses 
in favor of more highly capitalized large businesses that have 
more significant R&D budgets, even if those businesses do not 
make as efficient use of NASA funds for technology development.

    I would suggest that Congress consider the benefits of 
making small businesses exempt from the ``in-kind'' 
contribution requirement that now discourages and limits small, 
innovative companies from participating in projects that NASA 
has identified as important to its mission. To further enhance 
the extent that small businesses can participate, I would also 
suggest that the amount of money a large company contracts to a 
small business be directly deducted from the large company's 
contribution requirement. The effect of this change will be 
that large companies gain an incentive to work with small, 
innovative companies. Another option would be to include any 
money NASA has invested in SBIRs as deductible from a small 
business's private contributions, which is consistent with the 
spirit of the SBIR program and NASA's charter to encourage 
industry and innovation.

    Finally, with regard to the SBIR program, I would make two 
recommendations to strengthen this program that has proven 
critical to both small businesses and NASA alike. Neither 
requires new appropriations for Federal research and 
development budgets.

    First, the SBIR program is budget-neutral, but a critical 
source of funding for small business innovation. I recommend 
that Congress increase the share of funding that Federal 
agencies allocate to SBIR from the current sub-3% up to 5%, 
with increases enacted gradually over the next decade. The most 
effective use of these funds would be to direct most of the 
increase to maturing technology after the initial Phase II 
program. Small businesses such as Honeybee face what's known as 
a ``valley of death'' between Phase II, when we have a 
functional prototype, and commercialization or flight 
readiness. It is rare for us to find an immediate need at NASA 
where our SBIR-funded technology satisfies a specific problem. 
Instead, often the technology waits for a mission, or requires 
more investment to prove viability in a commercial or NASA 
application. Enabling a transition to greater technology 
development after Phase II, rather than straight to 
commercialization, would help small businesses contribute more 
to flagship projects.

    Second, the SBIR program's success depends on the ability 
to match NASA's needs with the capabilities of small businesses 
across the country. Unfortunately, it can be challenging for 
small businesses to understand the details of a technology 
request that NASA issues based solely on the written 
solicitation. NASA currently institutes a communication ban 
between companies and the Contracting Officer's Technical 
Representative once it issues the solicitation of SBIR and STTR 
topics. Our understanding is that the intent is to prevent one 
organization from gaining an unfair advantage with information 
not available to the larger community.

    On the other hand, organizations such as the Department of 
Defense have found a way to share information with a pre-
release of SBIR topics. During the pre-release, small 
businesses have one month to ask questions about the technology 
and how it fits into larger programs before the communication 
blackout takes effect. This enables the small business to 
better match its technology with the goals of the organization 
and present higher-quality development plans. We recommend NASA 
follow suit by opening communications on SBIR topics for a 
reasonable period before instituting a ban on contact outside 
the formal proposal response channels.

    In light of my suggestions above, I want to emphasize that 
for small businesses, NASA remains one of the Federal 
government's most supportive organizations. I believe NASA 
understands the ways in which the small business community can 
help it succeed with its mission, and it takes seriously its 
mandate to provide opportunities for small businesses such as 
Honeybee Robotics to thrive. We are excited for what the future 
holds and, along with our small business colleagues, look 
forward to the exciting and important missions ahead.
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