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

 
 THE CUMULATIVE BURDEN OF PRESIDENT OBAMA'S EXECUTIVE ORDERS ON SMALL 
                              CONTRACTORS

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

                                HEARING

                               before the

    SUBCOMMITTEES ON INVESTIGATIONS, OVERSIGHT, AND REGULATIONS AND 
                       CONTRACTING AND WORKFORCE

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                           SEPTEMBER 13, 2016

                               __________

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                               
                               

            Small Business Committee Document Number 114-071
              Available via the GPO Website: www.fdsys.gov
              
              
              
              
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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

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

                           OPENING STATEMENTS

                                                                   Page
Hon. Cresent Hardy...............................................     1
Hon. Alma Adams..................................................     2

                               WITNESSES

Mr. James P. Hoffman, P.E., President, Summer Consultants, Inc., 
  McLean, VA, testifying on behalf of the American Council of 
  Engineering Companies..........................................     5
Ms. Donna S. Huneycutt, Co-Owner and Chief Operating Officer, 
  WWC, LLC, Tampa, FL, testifying on behalf of the National 
  Defense Industrial Association.................................     7
Mr. Jimmy Christianson, Regulatory Counsel, Associated General 
  Contractors of America, Arlington, VA..........................     8
David Madland, Ph.D., Senior Fellow & Senior Advisor to the 
  American Worker Project, Center for American Progress, 
  Washington, DC.................................................    10

                                APPENDIX

Prepared Statements:
    Mr. James P. Hoffman, P.E., President, Summer Consultants, 
      Inc., McLean, VA, testifying on behalf of the American 
      Council of Engineering Companies...........................    25
    Ms. Donna S. Huneycutt, Co-Owner and Chief Operating Officer, 
      WWC, LLC, Tampa, FL, testifying on behalf of the National 
      Defense Industrial Association.............................    34
    Mr. Jimmy Christianson, Regulatory Counsel, Associated 
      General Contractors of America, Arlington, VA..............    39
    David Madland, Ph.D., Senior Fellow & Senior Advisor to the 
      American Worker Project, Center for American Progress, 
      Washington, DC.............................................    54
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    Statement of Chairman Richard Hanna..........................    65
    
    

 THE CUMULATIVE BURDEN OF PRESIDENT OBAMA'S EXECUTIVE ORDERS ON SMALL 
                              CONTRACTORS

                              ----------                              

                      TUESDAY, SEPTEMBER 13, 2016

                  House of Representatives,
               Committee on Small Business,
         Subcommittee on Investigations, Oversight,
                                   and Regulations,
                                     joint with the
         Subcommittee on Contracting and Workforce,
                                                    Washington, DC.
    The Subcommittees met, pursuant to call, at 10:00 a.m., in 
Room 2360, Rayburn House Office Building, Hon. Cresent Hardy 
[chairman of the Subcommittee on Investigations, Oversight, and 
Regulations] presiding.
    Present: Representatives Hardy, Knight, Hanna, Kelly, 
Adams, and Lawrence.
    Chairman HARDY. Good morning. I would like to call this 
hearing to order.
    I would like to start by thanking our witnesses, especially 
the small business owners who have traveled from different 
parts of the country, for being here.
    Today, we are going to take a look back at all the 
executive actions President Obama has taken throughout his 
presidency that have a direct effect on the Federal 
contractors. More specifically, we want to examine how these 
actions have affected small firms that do business with the 
Federal Government.
    Throughout this Congress, our full Committee, as well as 
several of our Subcommittees, including mine and Mr. Hanna's, 
have held hearings highlighting the negative outcomes of 
several of these actions, doing our best to defend the small 
business community. Regrettably, President Obama either was not 
listening, or worse, he simply ignored our appeals.
    For example, last September, Mr. Hanna and I held a joint 
hearing discussing the negative outcomes small businesses would 
have faced should Executive Order 13673, commonly referred to 
as ``the Blacklisting rule,'' become final. We received 
testimony at that hearing that would undermine the government's 
longstanding policy of maximizing contracting opportunities for 
small businesses and that it was an opportunity to extort 
settlements out of small businesses. These pleas were ignored 
by the Department of Labor, and the Blacklisting rule became 
final on August 24th.
    The Blacklisting rule is one of many new Federal 
regulations that have been spawned by the President's decree 
hampering economic growth in our small business communities.
    Aside from the circumventing of the Congress' legislative 
authority, I am particularly concerned that these executive 
actions will lead to fewer small businesses participating in 
the Federal marketplace.
    We need a healthy industrial base with many small 
businesses working to provide the government with innovative 
goods and cost-effective services. When fewer small businesses 
compete for federal contracts, the outcome will be less 
innovation and a higher cost to taxpayers.
    Regrettably, this exodus has already started. We currently 
have 100,000 fewer small businesses registered to do business 
with the Federal Government than we did just 4 years ago. This 
is not good for the United States.
    In meeting after meeting with my constituents back home in 
Nevada, and listening to small business after small business 
testify before this Subcommittee, I have come to the conclusion 
that Washington regulators, and particularly those appointed in 
the Obama administration, do not understand how much their 
actions affect the day-to-day operations of small firms.
    This is unfortunate, and I hope to work with this 
administration to make them understand just how difficult they 
are making it for small Federal contractors.
    We have an outstanding panel here today with us this 
morning, and I am very interested in hearing how bad it is 
getting out there for our small federal contractors. We will 
keep yelling, and maybe the President will finally hear us.
    Now I yield to the Ranking Member, Ms. Adams, for her 
opening statement.
    Ms. ADAMS. Thank you, Mr. Chairman, for holding this 
important meeting. To our panelists today, our witnesses, for 
your presence and your participation, I thank you as well.
    Each year, the Federal Government spends over $400 billion 
in taxpayer dollars to pay private companies for goods and 
services. In the past, Congress has used this significant 
financial might to help drive forward a number of policy goals. 
One such policy goal that is a priority for this Committee and 
for Congress is the participation of small businesses in the 
federal marketplace. As such, we have passed legislation aimed 
at ensuring all small businesses get a fair shot at these 
projects. Likewise, this Committee has worked in a bipartisan 
manner to help women- and minority-owned businesses navigate 
the procurement process, recognizing that as the country's 
largest consumer of goods and services, the Federal Government 
has the ability to use its buying power to advance priorities 
important to our Nation.
    President Obama signed several executive orders and 
presidential memorandum setting standards for contractors doing 
good work for the government, and while funds received from 
Federal contracts boost local economies and allow firms to hire 
more employees, some firms play by their own set of rules to 
win these lucrative dollars. As a result, law-abiding 
businesses are disadvantaged and pushed out of the marketplace. 
Therefore, these executive actions are aimed at leveling the 
playing field for all contractors. From ensuring that 
contracting officers are looking at labor law violations when 
evaluating a firm's responsibility to protecting employees from 
discrimination on the basis of sexual orientation and providing 
sick leave and a higher minimum wage, these executive actions 
cover a wide range of areas to not only protect employees, but 
also protect the government from undue risk. So we should be 
clear of the businesses that perform work for the government. 
The overwhelming majority comply with laws and do right by 
their employees while providing excellent goods and services at 
competitive prices.
    However, this Committee has heard of a number of bad actors 
that skirt the law and continue to receive Federal contract 
work. For instance, according to one report, almost half of the 
total initial penalty dollars assessed for Occupational Safety 
and Health Administration violations in 2012 were against 
companies holding Federal contracts. However, these businesses 
were rarely debarred or suspended from the federal marketplace 
as a result of their unsafe working environments.
    Labor laws are crucial to a healthy economy. Allowing 
habitual violators to continue working with the federal 
government without requiring remedies puts employees at risk of 
injury and the government at risk of delays and additional 
costs.
    So with regards to the executive orders on increasing wages 
and protecting employees seeking equal pay, studies have shown 
that higher wages lead to better quality of services, lower 
employee turnover, and more robust bidding by high-road 
employers, all of which improve the efficiency and the economy 
of federally contracted work.
    While these executive actions have resulted or will result 
in new processes and procedures for Federal contractors, many 
of the changes will fit into the existing procurement process 
with the contracting officer using additional criteria to 
consider. Yet, as we hear today, many small firms are concerned 
with the cumulative impact impacting all executive orders will 
have on their businesses. Small businesses provide quality 
goods and services at affordable prices, meaning a better deal 
for the government and the taxpayer, yet they have smaller 
margins, and new regulations can be harder for them to absorb. 
With small businesses creating over two-thirds of new jobs, our 
economy needs both small businesses and sufficient employee 
protections to properly operate. Accordingly, it is important 
that we find the balance in which small businesses are not 
overly burdened by complying with the guidelines, while not 
diluting the protections afforded to law-abiding contractors 
through these executive orders.
    With that, I look forward to hearing the witnesses' 
perspective on these important topics, and I yield back. Thank 
you, Mr. Chair.
    Chairman HARDY. Thank you, Ms. Adams.
    I would like to turn some time over to the chairman of the 
Subcommittee on Contracting and Workforce, Chairman Hanna.
    Chairman HANNA. Thank you, Chairman. I appreciate it.
    I am going to forego my statement today. So much of this is 
self-evident and it is often mostly, most of the time it is the 
case that witnesses have much more insight, and I do not want 
to take up any time to read my statement because I have a lot 
of questions and I want to get some feedback and want to take 
the time to do it. So thank you, Chairman.
    Chairman HARDY. Thank you, Mr. Chairman.
    If the Committee members have any opening statements 
prepared, I would like to ask that they submit them for the 
record.
    Now, I would like to explain how things kind of work around 
here, which many of you probably already know.
    You will have 5 minutes to deliver your testimony. The 
light will start out as green. When you have 1 minute 
remaining, the light will turn yellow, and finally, when your 5 
minutes is up, it will turn red. I ask you to adhere to this 
time limit if you could, please.
    Now, I would like to introduce our witnesses.
    Our first witness is Mr. James Hoffman, president of Summer 
Consultants, Inc., a small mechanical, electrical, and plumbing 
engineering firm in McLean, Virginia, testifying on behalf of 
the American Council of Engineering Companies. He possesses 24 
years of experience preparing studies and designs of federal 
historic and institutional facilities and complex renovation 
projects. Mr. Hoffman is a Project Manager for indefinite 
delivery, indefinite quantity contracts with Baltimore District 
of the Army Corps of Engineers Naval Facilities, Engineering 
Command Washington, and the National Institute of Standards and 
Technology. Other past and current federal experience includes 
work with the Architect of the Capitol, the 11th Wing of the 
Department of the Air Force, and the General Services 
Administration. Thank you for being here, Mr. Hoffman.
    Up next we have Ms. Donna Huneycutt, Chief Operating 
Officer and Co-owner of the Wittenberg Weiner Consulting, 
testifying on behalf of the National Defense Industrial 
Association, or the NDIA. Prior to joining the WWC, she 
practiced business immigration law representing Fleet Boston 
Financial and Vertex Pharmaceuticals. Previously, Ms. Huneycutt 
practiced corporate law in New York, focusing on private 
placement startups and structured finance. She holds a B.A. 
from the University of California-Berkeley, and a J.D. from 
Columbia University. She is an active member of the Committee 
on Acquisition Management and Small Business Division 
Legislative Affairs and Policy Team of the NDIA. She co-chaired 
the Small Business Committee on Pathways to Transformation, 
Response on Acquisition Reform prepared by the NDIA at the 
request of the Senate Arms Service Committee and the House Arms 
Service Committee. Thank you for being here, Ms. Huneycutt.
    Next, we have Jimmy Christianson, Regulatory Counsel for 
the Associated General Contractors, or the AGC. Working with 
AGC for nearly 6 years, Mr. Christianson lobbies Congress and 
federal agencies on transportation authorizations and 
appropriations, procurement, public-private partnership, labor, 
and environmental bills. He has success in this which he has 
led the enactment of favorable provisions in the National 
Defense Authorization Act for the fiscal years 2014, 2105, and 
2016; the Water Resources Reform and Development Act of 2014; 
and various appropriation bills. He also works with the 
association members from CEOs of multibillion-dollar companies 
to middle managers and business owners to identify, prioritize, 
and advance industries' legislative and regulatory agencies. He 
received his B.A. from the University of Pennsylvania and his 
J.D. from the University of Maine. Thank you for your 
participation, and we look forward to hearing from you, Mr. 
Christiansen.
    Now, I would like to yield to Ms. Adams to introduce our 
next witness.
    Ms. ADAMS. Thank you, Mr. Chair.
    It is my pleasure to introduce Dr. David Madland. Dr. 
Madland is a Senior Fellow and a Senior Advisor to the American 
Worker Project at the Center for American Progress. He has 
written extensively about the economy, including the middle 
class, economic inequality, retirement policy, labor unions, 
and workplace standards, such as the minimum wage. He has 
appeared frequently on television shows, including PBS 
NewsHour, and has been cited in publications such as The New 
York Times, The Wall Street Journal, and The Washington Post. 
Dr. Madland has a doctorate in government from Georgetown 
University and received his bachelor's degree from the 
University of California-Berkeley. Welcome, Dr. Madland.
    Chairman HARDY. Again, I would like to thank you all for 
being here.
    Mr. Hoffman, we will start with you. You have 5 minutes.

    STATEMENTS OF JAMES P. HOFFMAN, P.E., PRESIDENT, SUMMER 
   CONSULTANTS, INC.; DONNA S. HUNEYCUTT, CO-OWNER AND CHIEF 
  OPERATING OFFICER, WITTENBERG WEINER CONSULTING, LLC; JIMMY 
     CHRISTIANSON, REGULATORY COUNSEL, ASSOCIATED GENERAL 
 CONTRACTORS OF AMERICA; DAVID MADLAND, PH.D.,SENIOR FELLOW & 
  SENIOR ADVISOR, AMERICAN WORKER PROJECT CENTER FOR AMERICAN 
                            PROGRESS

                 STATEMENT OF JAMES P. HOFFMAN

    Mr. HOFFMAN. Subcommittee Chairman Hanna, Chairman Hardy, 
Ranking Member Adams, and members of this Committee, I 
appreciate the opportunity to testify before you today about 
the issues surrounding the cumulative burden of President 
Obama's executive orders on small contractors.
    My name is James Hoffman, and I am the President of Summer 
Consulting, a mechanical, electrical, and plumbing engineering 
firm, headquartered in McLean, Virginia. Summer Consultants is 
a small business with 36 people, and we have been in the 
federal marketplace for over 50 years.
    My firm is an active member of the American Council of 
Engineering Companies, the voice of America's engineering 
industry. ACEC's over 5,000 member firms represent hundreds of 
thousands engineers and other specialists throughout the 
country that are engaged in a wide range of engineering work 
that propel the Nation's economy and enhance and safeguard 
America's quality of life. Almost 85 percent of these firms are 
small businesses. ACEC appreciates the efforts that the 
Department of Labor and the FAR Council play to ensure 
compliance with labor laws. The industry is committed to 
following the rules, but the Federal Government must understand 
the burdens on the private sector and that the cost is passed 
on to the government with duplicative requirements.
    The blacklisting rule creates burdens for engineering firms 
and other contractors working for federal agencies. While we 
understand the rationale behind the order, it should be noted 
that the bad actors are less than 0.01 percent of the total 
contracting workforce. Let me repeat that, less than 0.01 
percent of the total contracting workforce.
    The Sick Leave Executive Order also creates unnecessary 
administrative and financial burdens on contractors. While the 
Council supports paid sick leave, the amount of reporting and 
the changes required to implement the rule create more expense 
for contractors and the government. Most of the Council's firms 
offer equivalent paid sick leave, so the requirement is 
repetitive.
    These orders create a more burdensome and expensive process 
for federal contractors, which drives up taxpayer costs while 
driving businesses out of the Federal market. For example, my 
firm is a prime contractor and manages many subcontractors. 
Under the blacklisting rule, I will have to preclear my 
subcontractors before I develop a response. Developing a 
response takes time and focus away from other business as I 
develop the full scope of the requirements to make sure that 
the subcontractors have the business and ethical credentials to 
help me win the work. I question that I will be able to consult 
with both the contracting officer and the agency labor 
compliance advisor to find out if these subcontractors are 
okay, and I am concerned about the alleged labor violations, or 
violations that are beyond the 3-year period will be held 
against my firm or any subcontractors during the solicitation 
and within the context of the contract.
    My firm already reports compliance with the required rules 
and orders up to the applicable agency. Adding another set of 
reporting that is duplicative increases my overhead. 
Engineering firms across the Nation complain that contracting 
officers are looking to reduce firm overhead and expenses in 
this tight budget environment.
    Under the Sick Time rule, engineering firms also face 
increased overhead by mandating employee weekly sick time 
reports. This requires new systems and potentially adds 
employees to implement the changes, and generally, firms are 
typically paid on a monthly or biweekly cycle and report sick 
leave and other time off with each pay period. Member firms 
respond that implementation costs in the first year are 
estimated to be in excess of $50,000, with additional costs in 
the subsequent years.
    Both these rules will add to the overhead that the 
government is already trying to limit. Implementation of these 
rules will further add to those overhead expenses, putting 
firms in a difficult situation of possibly leaving the federal 
marketplace, which dilutes competition for critical services as 
taxpayers or adding costs to the agency if the expenses are 
accepted.
    I ask that the Committee consider asking the FAR Council 
and the Department of Labor to withdraw the proposed sick time 
guidance and the final blacklisting guidance, to redraft it to 
better align with the current contracting process. I also ask 
that the members of this Committee support either the House or 
Senate NDAA language to limit implementation of the FAR rule 
and DOL guidance.
    Thank you for the opportunity to participate in today's 
hearing, and I will be happy to respond to any questions from 
the Committee members.
    Chairman HARDY. Thank you for your testimony.
    Ms. Huneycutt?

                STATEMENT OF DONNA S. HUNEYCUTT

    Ms. HUNEYCUTT. Thank you. Good morning.
    Subcommittee Chairman Hanna and Chairman Hardy, Ranking 
Member Adams, and members of the Committee, thank you for the 
opportunity to appear before you this morning.
    I am here on behalf of the National Defense Industrial 
Association, the Nation's oldest and largest defense industry 
association, comprised of nearly 1,600 corporate and 90,000 
individual members.
    Small businesses are a critical component of the U.S. 
economy, serving as a catalyst for economic development, 
providing employment opportunities, and as the engine of new 
ideas and innovations. Accordingly, the federal government has 
established programs to ensure participation opportunities to 
small businesses to fulfill the public policy objectives of the 
Federal Acquisition Regulation, and access a source of 
innovative products and services for federal government 
customers. Explicit and implicit in the desired outcomes for 
small business programs is achieving effective competition by 
maximizing small business participation and enabling small 
businesses to grow through diversification of the goods and 
services they provide and expansion into the nongovernmental 
marketplace.
    As outlined at the onset of the FAR, the guiding principles 
of the federal acquisition system are to satisfy government 
customers by maximizing use of commercial products and 
services, utilizing contractors with superior past performance, 
and promoting competition. At the same time, the federal 
acquisition system shall minimize operation costs, conduct 
business with fairness and integrity, and fulfill policy 
objectives. The EOs attempt to fulfill the latter two guiding 
principles, but in the process, undermine each of the others.
    The rationale for the procurement-related EOs have been to 
``promote economy and efficiency in procurement'' through their 
intended outcomes. Industry does not necessarily disagree with 
the logic, but rather, how that efficiency and economy is 
achieved. Supporting documentation for the EO on Fair Pay and 
Safe Workplaces states, ``The vast majority of federal 
contractors play by the rules.'' However, the implementation 
approach to each of the EOs punishes that vast majority of good 
actors through costly, government-unique compliance 
requirements, a particularly inefficient means to promote 
efficiency.
    The most efficient and economic means to fulfill the policy 
objectives of the EOs is to alter government buying practices. 
For example, the rationale for the Fair Pay and Safe Workplace 
EO is, ``Contractors that consistently adhere to labor laws are 
more likely to have workplace practices that enhance 
productivity and increase the likelihood of timely, 
predictable, and satisfactory delivery of goods and services to 
the federal government.'' Thus, if the government makes 
contract awards based on the offeror that provides a good or 
service for the best value, it would have already chosen an 
offeror that adheres to existing labor laws and has workplace 
practices that enhance productivity. Unfortunately, as industry 
has long pointed out, the government has poor buying habits 
that have equated ``best value'' with ``lowest cost,'' and 
valued compliance to government-unique requirements over actual 
performance in delivering goods and services, creating a 
perverse incentive to ``race to the bottom'' to win contracts.
    Congress has already passed sufficient legislation to 
ensure protections of federal contractor employees and to 
ensure that the government only contracts with responsible 
sources. The federal government should focus on enforcing the 
objectives of existing laws, rather than using EOs to prescribe 
in excessive detail how to comply.
    A major frustration for small businesses is that in many 
cases they agree with the intended outcome of an EO, such as 
providing for the well-being of federal contractor employees or 
making sure that competitors play by the rules, but object to 
the process by which the EOs have been developed and 
implemented.
    Small businesses are not only concerned with the collective 
impacts of the EOs on their bottom line, but also the 
detrimental impacts they will have on government customers and 
their ability to carry out missions, the most consequential of 
which is national security. In recent years, the Department of 
Defense, the federal government's biggest spender by a 
substantial margin, has placed a renewed emphasis on an 
innovation and acquisition reform, led by top officials in the 
Office of the Secretary of Defense and the Services.
    Unfortunately, the EOs undermine these initiatives. The 
resultant accumulation of government-unique requirements and 
their compliance costs will continue to deter new suppliers 
from entering the government marketplace and drive exits by 
firms already selling to the government, restricting 
competition.
    In closing, several of the recent EOs have, through flawed 
processes, installed burdensome, unnecessary, inefficient, and 
in many cases duplicative and overlapping regulatory regimes 
that have the cumulative effect of dramatically increasing the 
cost of doing business with the federal government. Over time, 
these will decrease efficiency and economy in federal 
procurement, while undermining small business growth and 
development, and limiting the federal government's access to 
innovative products and services to fulfill their needs.
    Thank you again for the opportunity to appear before you 
this morning, and I am happy to answer any questions you may 
have.
    Chairman HARDY. Thank you, Ms. Huneycutt.
    Mr. Christianson?

                STATEMENT OF JIMMY CHRISTIANSON

    Mr. CHRISTIANSON. Chairman Hanna, Chairman Hardy, Ranking 
Member Adams, and members of the Committee, thank you for 
inviting the Associated General Contractors of America to 
testify today on this important topic. My name is Jimmy 
Christianson. I am Regulatory Counsel for AGC, which represents 
more than 26,000 union and open-shop commercial construction 
companies throughout the Nation.
    The construction industry has historically supported and 
provided opportunities for small businesses. It includes more 
than 660,000 firms throughout the United States, of which 93 
percent have fewer than 20 employees. Generally speaking, those 
employees may include cost estimators, proposal managers, 
superintendents, craft labor, equipment operators, and other 
staff whose primary purpose is construction work.
    The business of a construction small business is 
construction. When it comes to compliance issues, many small 
businesses may have one or two employees that handle safety, 
labor, human resources, and environmental compliance for the 
entire company. In many companies, the safety director is also 
the environmental compliance director. The human resource 
director is also the accountant and the general office manager. 
The reality is that small business employees are often working 
``double duty'' because small businesses have extremely limited 
resources.
    That stated, abiding by laws and regulations is part of the 
cost of doing business. The requirements of the statutes and 
regulations imposed, however, can also represent barriers to 
entry for small emerging businesses and barriers of growth to 
existing ones. Laws and regulations are necessary to help 
maintain a level and competitive playing field. Nevertheless, 
not all laws are necessarily good laws, and similarly, not all 
regulations are necessarily good regulations or practical. Laws 
and regulations enacted and finalized, even with the best 
intentions, can have unintended consequences and needlessly 
duplicate or confuse existing legal frameworks.
    Of the more than 400 executive orders and presidential 
memoranda issued by President Obama, AGC has identified 22 that 
impact the construction contracting industry and its small 
businesses. Several of those actions, which I am happy to 
discuss in detail during the question-and-answer period, will 
individually and cumulatively expose small business 
construction contractors to significant legal costs, legal 
liabilities, and other risks. Small business contractors will 
have to consider these executive actions in the context of the 
potential risks versus rewards of participating in the federal 
construction market.
    Given the overall state of the economy today, as we 
experience a workforce shortage, more than two-thirds of our 
members say they are looking for workers. The private market, 
other markets out there are more competitive. They will have to 
consider whether they will continue to work in the federal 
market or, as they have told me, plan to or strongly consider 
walking away. The administration probably did not intend to 
drive small businesses out of the Federal market in 
implementing these actions; nevertheless, it appears to be a 
realistic impact.
    AGC looks forward to working with this Committee on ways to 
prevent small businesses from leaving the Federal market and 
addressing the problems with several of these executive 
actions. I hope today that we can talk about the practical 
realities that these executive orders place on small 
businesses. I hope we can talk about the reality that many 
small businesses already in the construction industry have 
Davis-Bacon requirements that require them to pay prevailing 
wage rates. How will these different executive orders on paid 
sick leave take into account, because many of them do not, 
existing statutory requirements that are already in there? We 
will also remember that most small businesses, veteran-owned 
small businesses, minority-owned small businesses, the small 
businesses we represent, consider their workers in many cases 
to be part of their family, just as many of you consider your 
employees and your congressional staff to be part of your 
family, and it is hard when rules and regulations come down 
that make them have to make decisions that have to say we have 
to let go of some members of our family.
    I look forward to your questions. Thank you.
    Chairman HARDY. Thank you, Mr. Christianson.
    Dr. Madland?

                   STATEMENT OF DAVID MADLAND

    Dr. MADLAND. Thank you, Chairman Hardy and Chairman Hanna, 
Ranking Member Adams, and members of the Subcommittee. I very 
much appreciate the opportunity to be here.
    My name is David Madland. I am a Senior Fellow at the 
Center for American Progress Action Fund. CAP Action is an 
independent, nonpartisan, and progressive education and 
advocacy organization dedicated to improving the lives of 
Americans through ideas and actions.
    The President's executive actions that are the subject of 
today's hearing draw widespread support from a broad coalition 
of supporters. Not only do organizations representing workers, 
veterans, women, the elderly, and taxpayers support many of 
these actions, but so, too, do a number of small businesses. 
Many small businesses feel that these executive actions will 
help them compete on a level playing field and make the 
contracting process more welcoming to businesses like theirs. 
Indeed, in 2015, small business contracting, as a percentage of 
total government contracting, was at record high levels.
    Though I think the general points I make could be applied 
to most, if not all, of the President's contracting reforms, I 
will focus my remarks on those that address minimum wage, 
require paid sick, ban discrimination based on sexual 
orientation and gender identity, and ensure companies comply 
with workplace laws before getting new government contracts.
    The federal government has a long and successful history of 
starting important social changes with federal contractors. For 
example, President Lyndon Johnson prevented companies that 
contract with the federal government from discrimination on the 
basis of race, color, religion, sex, or national origin. 
Actions by President Richard Nixon furthered these protections. 
Ronald Reagan sought to promote minority contractors. Bill 
Clinton encouraged contractors in economically distressed 
areas. George W. Bush sought to ensure contractors employed 
only American citizens or legal residents.
    President Obama's efforts to raise standards for workers on 
federal contracts build on this history and are an important 
part of making the economy work for everyone, not just the 
wealthy few. In the United States today, wages have been 
stagnant for decades, while economic inequality is near record 
levels. Too many people are struggling to pay bills, especially 
those working in low-wage industries where wage theft is 
rampant as employers pay workers less than they are legally 
required. Many Americans cannot take time off if they get sick, 
and people often face discrimination because of their sexual 
orientation and gender identity. Discrimination based on race 
and gender still occurs, despite previous federal actions.
    At the same time these executive actions address important 
economic and social challenges, they also promote economy and 
efficiency in government contracting. The basic idea is that 
treating workers fairly leads to better results for taxpayers. 
Human capital is the core input into many federal contracts, 
and taxpayers receive the most efficient and effective 
utilization of all available manpower when workers are treated 
fairly.
    Not surprisingly, giving these benefits to taxpayers, 
businesses, and workers, many state and local governments have 
already implemented similar policies, and evidence shows that 
these policies tend to work pretty well. A study of New York 
City's paid sick leave found that after 1-1/2 years after the 
law went into effect, 86 percent of employers supported the 
policy.
    Studies examining LGBT contracting policies in state and 
local governments found that in almost all localities, any 
resistance to these policies was minimal and short-lived. The 
State of Maryland's living wage law conducted by the state 
found that the number of bids increased after the State adopted 
the policy by nearly 30 percent. Statements from officials in 
San Francisco and Los Angeles indicate that their responsible 
contracting systems have increased the pool of experienced 
firms willing to bid for their work. Private companies are also 
adopting similar wage and responsibility review processes.
    That is why there are a number of small businesses that 
support these kinds of policies. Indeed, a Maryland state 
contractor who first decided to bid only after the living wage 
was enacted said without these standards, ``the bids are a race 
to the bottom. That is not a relationship we want to have with 
our employees. Living wage puts all bidders on the same 
footing.''
    The president of American Small Business Chamber of 
Commerce explained that the President's executive order on the 
minimum wage will ``help level the playing field.'' A poll from 
the small business majority found that nearly 80 percent of 
small business owners support a law to ban discrimination 
against LGBT employees, and a hearing at this very Committee, 
construction contractor Bill Albanesi stated that the Fair Pay 
and Safe Workplace Executive Order ``makes good business 
sense.'' It makes good sense to vet the contractor before he 
gets a job. It is common in our industry. We do it all the time 
and we do not see it as being a burden to any legitimate fair 
contractor that is playing by the rules.
    In summary, executive actions help address problems in the 
economy and they are supported and help workers, businesses, 
and taxpayers. Thank you.
    Chairman HARDY. Thank you, Dr. Madland.
    I would like to begin our first round of questioning. I am 
going to yield myself along with everybody else as we go 
through.
    Mr. Hoffman, I would like to start with you. You know, a 
bad rule is a bad rule. But do you think some of these concerns 
that could have been alleviated by the DOL if they followed the 
Regulatory Flexibility Act and actually allowed small business 
firms to be part of that conversation to maybe come up with a 
better outcome. What are your thoughts on that?
    Mr. HOFFMAN. Yes, sir. Having a greater voice in these 
regulations is important, and the Office of Advocacy does an 
excellent job in listening to small businesses. We feel that 
greater input from the small and large business community into 
this far-reaching regulation is necessary to make it workable.
    Chairman HARDY. Thank you.
    Ms. Huneycutt, it is stated that there are about 100,000 
small businesses that have left the federal marketplace in just 
the last 4 years. Do you think any of these actions would make 
any of those small business firms ever want to come back doing 
business with the federal government with some of those actions 
that have been put in place?
    Ms. HUNEYCUTT. Well, I can tell you that there is a 
continuum along which each different firm is going to opt out 
of something. It might be with increasing layers of regulation 
which often conflict with each other or are hard to make work 
with state regulations or other agency regulations and require 
additional investments in, for example, recordkeeping systems 
and lawyers at 400- to $700 an hour. I can tell you that we 
recently spent $10,000 to implement a human resources 
information system that was totally compliant and is a 
commercial system, and now with the sick leave recordkeeping 
that will be required by the new EO, we will be required to 
potentially opt out of it or pay for special coding to have 
that work for us. So some firms are going to opt out, and my 
firm at this time does not engage in service contract work 
because the very prescriptive ways that the recordkeeping has 
to be done and things need to be structured are simply too 
pricey for us to implement and continue to run our business, 
although we actually do meet all of those objectives. So we 
have sick leave. We do not have any claims against us. And even 
still they are a barrier to entry to the SCA.
    Along that same continuum, unfortunately, what we are 
seeing is that there are a lot of firms that are opting out of 
compliance, and sinning first and asking forgiveness later. The 
contracting officers who are already so burdened with so many 
different pieces that they need to evaluate in a proposal 
really do not have the bandwidth or the autonomy to ensure 
compliance with those, especially in a lowest price, 
technically acceptable environment where costs are continually 
being driven down. So unfortunately, what we are seeing is that 
oftentimes the government is getting exactly the opposite of 
what it wants because it is rewarding the actors that are 
noncompliant without knowing it and driving compliant firms out 
of business.
    Chairman HARDY. Thank you.
    Mr. Christianson, in your testimony, you mentioned the use 
of project labor agreements for federal construction projects, 
executive order or your written testimony. Can you talk a 
little bit about how this might affect the open shop contractor 
or even those who are located in the right-to-work states?
    Mr. CHRISTIANSON. Sure. The fact is that the agency's 
position is that we leave it up to--we believe it is the 
decision of the contractor and laborer to come to a 
collectively bargained agreement, project labor agreement, and 
that government mandating those agreements is not a good idea 
because they do not have the expertise necessarily to do so. 
They do not have the parties in the construction industry to do 
so. But when you are dealing with open shop, take for example a 
very open shop area maybe in the middle of Nevada where there 
are not many union contractors, if you are all of a sudden 
mandating that there has to be some sort of union work in an 
area that is predominately open shop, you are going to have 
these companies basically change the way that they do work to 
do a project and they are probably just not going to fit the 
project.
    Chairman HARDY. Thank you.
    My time is expired. I would like to turn the time over to 
Ms. Adams.
    Ms. ADAMS. Thank you, Mr. Chair.
    Before we address the topic, I wanted to just get the 
panel's reaction to comments made by the CEO of Science 
Applications International Corporation, SAIC, last week in 
which the CEO indicated that small business set-asides and 
contract unbundling were making it harder for his company to 
get contracts. Do you feel like these comments are 
representative of what is going on in the federal marketplace? 
Anyone who would like to answer it?
    Mr. HOFFMAN. I will start. There are opportunities for 
large firms to participate with small firms in the federal 
market, there was recently passed legislation for mentor-
protege. There are also other agreements, and recently there is 
the new Small Business Multi-Tier rule that is allowing prime 
contractors to count small business subcontracts to their goal. 
Ultimately, this is helping the agency to meet their small 
business goals. I think there is still opportunity for large 
firms to partner with small firms to get work done.
    Ms. ADAMS. Dr. Madland, do you have a comment?
    Dr. MADLAND. Yes. As I said in my opening statement, the 
share of government contract dollars that are going to small 
businesses is at record highs, which indicates that the 
President's efforts to focus on small business are working. Yet 
I think there is significant room for large contractors to do 
quite well because the scope of government dollars going to 
government contracts over the past several decades has 
increased significantly, so there is more total work out there 
even if a significant percentage now is going to small 
businesses.
    Ms. ADAMS. Okay. Thank you.
    Would anybody else like to comment? Yes, ma'am?
    Ms. HUNEYCUTT. I would agree as a small business that we 
are the beneficiaries of set-asides. I think that has been 
working increasingly well in the last couple of years. I wonder 
whether some of the reasons SAIC is having trouble competing is 
because a lot of the statutes that currently exist that were 
passed by Congress are not being enforced and small businesses 
have an easier time staying under the radar, thereby lowering 
their prices and becoming more price competitive. If they 
choose, or not knowingly, if they do not comply.
    Ms. ADAMS. Thank you, ma'am.
    Okay, Mr. Christianson, with many construction firms doing 
business in the millions, why is it so difficult for these 
firms to keep track of their legal infractions over a 3-year 
period?
    Mr. CHRISTIANSON. Construction is an inherently regional 
business. In many states, different coasts, you have different 
projects in different areas. You are working out of trailers. 
Especially in small businesses, you may not have the technology 
that a multibillion-dollar company has to track these things. I 
think the more fundamental question is why do the agencies that 
actually charge these contractors with infractions not have 
these records? They are the ones that are ultimately bringing 
these actions. Why are they asking contractors to do this? 
Should they not already have this information?
    Ms. ADAMS. Okay. Let me follow up. There has been a lot of 
discussion about the negative impact that these executive 
orders will have on small businesses. However, are there any 
welcomed changes that help those in your industry or are there 
areas where you feel more action is needed?
    Mr. CHRISTIANSON. I do not think so, what is going on here 
is there is more problems that are created. I think many of 
these are solutions looking for problems in the sense that, for 
example, with paid sick leave, most of our union contractors as 
we found out, do not really provide paid sick leave, because 
through collective bargaining, they collectively bargain for 
higher wages than even Davis-Bacon wages to take into account 
things like you are not working. It is a seasonal industry, so 
you are not working all the time. If you have paid sick leave 
during the time that people should be on the job, you are going 
to change construction schedules. You are going to delay 
projects, you are going to add to costs. We had one company, 
for example, that said take off the entire month of December. 
But now, because of the paid sick leave executive order, they 
are not going to be able to do that. Take off extra time for 
the holidays, they are not going to be able to do it.
    The other thing is, in certain states and cities, you have 
state paid sick leave rules. You have city paid sick leave 
rules and now federal paid sick leave rules. So if you are on a 
federal contract, some of your employees may have federal paid 
sick leave requirements. If you have a state contract, you have 
state paid sick leave requirements. And then local, what do you 
follow? That is really the problem.
    Ms. ADAMS. Thank you, sir. I am out of time.
    Mr. Chair, I yield back.
    Chairman HARDY. Thank you. I would like to turn the time 
over to Chairman Hanna.
    Chairman HANNA. You know, it is pretty clear we are in slow 
growth. Very slow growth. Historically slow growth. It is also 
true, Dr. Madland, that real wages have not gone up in a very, 
very long time, which nobody can be happy about.
    I have got 25 years in the Operating Engineers Union. I 
believe you are earnest in your perspective, but what bothers 
me about it, Dr. Madland, is so much of it is conjecture and 
subjective in its nature. I wonder, when you hear three other 
individuals say that these rules are burdensome and 
overcomplicated and are discouraging people from entering the 
marketplace--and of course, what you said is true, that there 
are more small businesses as a percentage of total government 
contracts, but it is also true that the number of distinct 
small businesses' actions has declined, and it is true that 
there are 100,000 less people.
    You do not believe these other three panelists? Do you 
think they are wrong or they are somehow saying something that 
is completely designed for their own self-interests? Because I 
hear this every day from business that it is not just the fact 
that these regulations are out there but that they are not 
considered in the process. It is the cumulative effect of it 
all. I do not see people out there trying to--I mean, one-tenth 
of 1 percent, sure they are bad actors, but why should you hold 
Mr. Hoffman responsible for every general contractor or 
subcontractor beneath him which he may or may not have any 
control over? Frankly, as you said, I think Mr. Hoffman 
mentioned that those are known people that it is the 
government's job to keep track of.
    This is not meant to be personal, but it is surprising to 
me that you can speak in such general terms about people and 
have very specific notions about overtime and new overtime 
rules and the 30-hour work week rule that even the 
Congressional Budget Office has said will cause up to 2 million 
people to leave their jobs. I am just interested.
    Dr. MADLAND. Sure. I think most of my testimony comes based 
on the experience when state and local governments implement 
similar policies. While I am by no means discounting the 
concerns that the panelists here have stated, you often find, 
before the policies get enacted, significant concerns, but 
after they go into a place they are less significant.
    Just to read one very small quote. This was San Francisco. 
The Vice President of the local Chamber of Commerce, which led 
the fight against the city's paid sick leave before it passed, 
reported that the law's impact was ``minimal,'' and that ``by 
and large paid sick days has not been much of an issue.'' We 
have actual evidence from, for example, I cited the Maryland 
study of the living wage where the first and only State to pass 
a living wage, much higher wages for government contracts, and 
they actually found that the number of bidders for state 
projects increased after they implemented the law.
    Chairman HANNA. I do not disagree that that person said 
that about that, and I do not know of the Maryland study. I 
will take your word for it. But do you think that really that 
is generally the preponderance of regulations and rules that--I 
mean, I was in business for 35 years. Mr. Hardy was. There is a 
point that people who have been successful in their lives say 
it is not worth it anymore. It is just too damn much work to 
keep up with the government. I am going to walk away. We have a 
lot of evidence to that, anecdotal and real, 100,000 businesses 
fewer. They are not sitting here whining at you. They are 
saying to you we want to do business with the federal 
government. We appreciate the opportunity, but at some point 
you are breaking our back and it is not worth it.
    I think that is the difference between the value system 
that you lay out which, one can prove individually yes or no, 
but that is what I hear, that we just kind of cannot take it 
anymore. Particularly, it strikes me that there is a point for 
a lot of people where they say, you know, I am out. It is not 
worth it. You are not worth it. The federal government is too 
complicated and too much in our face. I think that is a real 
concern.
    My time is up. Thanks.
    Chairman HARDY. Thank you.
    I would like to turn the time over to Congressman Kelly.
    Mr. KELLY. Thank you, Mr. Chairman and Chairman Hanna. 
Thank you both and Ranking Member. Thank all you witnesses for 
being here.
    Just as a follow-up, more in a comment than a question with 
Chairman Hanna. Having been a small business owner, throughout 
my August I spent almost every day at town halls and those type 
of things with local folk and small businesses, veterans, being 
a member of the Mississippi National Guard and serving for over 
30 years. I just left the National Guard Conference where I was 
there as a participant, not as a congressman.
    It confuses me that we have think tank people in here, and 
I am not just talking about this panel, but I am talking about 
the entirety of the panels that have been here in 14 months. We 
have think tank panels. We have government employees. We have 
academia people who say that these rules have no effect on 
small businesses, but I have yet to have a small business 
person sit at that table and say that they felt that we did not 
have any effect. Most of the people that we have in front are 
just like you, three small business owners who actually own 
small businesses who say it has a tremendous impact on how we 
do business and whether we do business.
    So I ask you to continue to fight as small businesses and 
continue to keep up the dialogue to let them know that these 
things impact because I, as you, and I think Mr. Christianson 
said this, as a small business owner, I know we pay our 
employers all that we can and we are going to preserve and keep 
and pay as well as we can, all small business employees because 
they are part of our family. They are. We want to see them do 
well.
    That being said, this week I had Kopis Mobile, which is an 
app business that does a lot with DOD, and they are anchored in 
Flowood, Mississippi. Aside from keeping small businesses from 
being created and putting small businesses out of business, I 
am also concerned about the negative impact these regulations 
are having on innovation.
    Ms. Huneycutt, can you talk a little more about how these 
actions will affect technological innovation?
    Ms. HUNEYCUTT. I have been following very closely the 
efforts to get Silicon Valley and more R&D-oriented commercial 
firms to participate in the bidding process for government 
work. I think it is something that is critical for maintaining 
our technological edge, particularly at DOD. They move at the 
speed of business.
    As an anecdote, I can tell you that we tried to team with a 
firm that provides a platform by which to--and we were looking 
at the State Department--by which to communicate through social 
media through a centralized hub that would send the same 
messaging out through Twitter and Facebook and all of these. 
They were flummoxed at the way that the process worked. They 
were flummoxed at all of the different ways that they would 
need to change their business model in order to be compliant, 
and the hoops, the time that it took. This is not how they are 
used to doing business.
    I would suggest, especially if you want to increase the 
participation of commercial firms in bidding for government 
work, you do not--either these regulations and these new 
requirements should be passed as comprehensive legislation. It 
is not unique to the government, so that everybody needs to 
engage in it. I would suggest that there be more enforcement of 
the way companies are characterizing the way they engage 
people, because oftentimes they will mischaracterize them as 
1099 subcontractors, have them sign a contract that says they 
are complying with everything, and then they get everything 
cheaper and there is not any real compliance there.
    I would suggest that you be aware that this puts commercial 
companies in a position where now they need to treat their 
government contract employees differently than their commercial 
contract employees, and they cannot treat them differently. 
That keeps them out of the government.
    Mr. KELLY. Mr. Hoffman, just briefly, have about 45 seconds 
left. What impact do all these new requirements have on the 
procurement process for small companies like yours?
    Mr. HOFFMAN. My question is how are we going to, for 
example, vet our subcontractors? I just had the opportunity to 
negotiate overhead rates with a government agency and they were 
pointing to one of the consultants as to having low overhead or 
lower rates on a different contract. I asked, well, what 
contract or what is the name of that firm so I can reference 
it? While they gave me the last four, they were not even 
willing to give me the name of the contractor. If they will not 
give me the name of the contractor in a straightforward 
environment, when will the government give me the name of a 
contractor which potentially is negative and they are worried 
about backlash or something like that? So I am concerned 
myself.
    Mr. KELLY. Thank you, Mr. Chairman. I yield back.
    Chairman HARDY. Thank you, Mr. Kelly. We will turn the time 
over to Mr. Knight.
    Mr. KNIGHT. Thank you, Mr. Chair.
    Just a couple of questions. I was reading through some 
articles and watching what government is doing and what 
business is trying to adhere to, and some of the comments by 
all of the panel today. It begs the question that if government 
does something, or they say they are going to do something and 
people rebel against it, but then it happens anyway, people 
just have to adhere to it and that is just the way it is. That 
is what I look at when we start talking about the overtime rule 
and we start talking about $15 an hour going across the country 
and what is happening in cities like Seattle since they have 
seen the biggest decline in jobs in restaurants since 2009 
since they have done the $15 an hour ordinance. So when 
government gets involved, too heavy-handed, then we tend to see 
a problem.
    But my questions are about something recently our Vice 
President said. He said, ``Because of the administration's 
efforts to rebuild the basic bargain, the economy has gone from 
crisis to recovery to resurgence. Today's expansion of overtime 
protections will build on this momentum.''
    Do any one of you or do all of you agree with this?
    Yes, sir?
    Dr. MADLAND. Yes. I think the overtime regulations are an 
important step forward to ensuring that workers, when they work 
more than 40 hours a week when they are lower income, will 
receive time and a half, which is the basic bargain of 
overtime. As you know, the standard had been eroded over 
decades so that very few salaried workers were receiving 
overtime. It used to be that the majority of salaried workers 
received overtime and the new regs will do that, which is part 
of how you ensure that workers have wages to spend that can go 
into the pockets of small business owners.
    Mr. CHRISTIANSON. We do not disagree necessarily that it 
has been a long time since the overtime wages have been 
increased or the thresholds have been increased. But the issue 
is the practicality of more than doubling that threshold and 
making small businesses have to adhere to that in under a 
year's time. To have to plan for that is really just not----
    Mr. KNIGHT. Before everyone continues I will put the second 
question on that, and maybe you can answer, too. Would any of 
your members be opposed to talking about an increase? We went 
from a little over 23,000 to almost 51,000. Would any of your 
members be opposed to talking about an increase that would 
probably put us into a more acceptable for small business, 
acceptable for continuing our economy to move forward? I am not 
trying to----
    Mr. CHRISTIANSON. We are always interested in talking. We 
did not really have the opportunity to talk. That is what 
happened here is we had an opportunity to talk about the 
impacts but it does not seem like the administration did any 
listening.
    Mr. KNIGHT. Okay. And again, I will say the flip side, too. 
It has been a long time since that has been changed. We do not 
keep minimum wage at 25 cents an hour. It moves and it ends up 
trying to be at a wage that is commensurate to the timeframe. 
Some people think that that is too low and some people think 
that the jumps are too high. But, when we talk about the 
overtime rule, and moving it, I think it is a 113 percent jump. 
That seems to me to be a jump that small business is going to 
not just push back on, but have a very difficult time adhering 
to.
    Mr. CHRISTIANSON. You know, you cannot get something from 
nothing. Small businesses are not all of a sudden going to be 
able to pay everyone overtime that are under this threshold. 
Some people are now going to be hourly workers. They basically 
feel like they have been demoted, which is not necessarily 
true, but just the reality if they want to stay on the job, the 
company has the same amount of finite limited amount of funds. 
They are going to readdress what level certain people are paid, 
how many hours people work, so that they can adjust 
accordingly.
    Mr. KNIGHT. In my last 20 seconds, do you think that that 
takes away some of the flexibility for small businesses? 
Because like you say, now we are going to turn some of them 
into hourly wages. In California, we have done some things that 
have taken away the ability for employers and employees to have 
a conversation, and say you have to have certain breaks at 
certain times, and if you do not have these certain breaks, 
then you are in violation. It takes away the flexibility. Then 
it turns it into, I am the employer, you are the employee, and 
that is the way it is and we do not talk and you follow the 
rules and I have to fill these forms out, and have a nice day.
    Yes, ma'am?
    Ms. HUNEYCUTT. My response is to what was discussed a 
little bit earlier. With the exempt rules referencing a higher 
salary point, I can tell you the practical impact that that has 
had on us where, actually, we have very few people that were 
below that point to begin with, but those that were near that 
point got pay raises because the cost of giving them another 
couple of thousand dollars raise was nothing compared to the 
cost of having to change our recordkeeping systems. But what 
that also means is that we are very hesitant to hire at that 
lower salary level or that lower wage level because, again, the 
cost of the recordkeeping, the cost of changing our payroll 
system. A lot of commercial payroll companies do not--actually, 
if that is global they will be abiding by that. If it is a 
government-specific thing, a lot of commercial payroll 
companies, human resources information systems companies, will 
not accommodate that. So you are back to square one having to 
look for another service or having to pay to customize their 
recordkeeping.
    Particularly, a lot of the work that is done at the lower 
wage levels, a lot of it can be automated. I do think that some 
firms will be looking to automation or noncompliance or other 
ways to--from my point of view, for my company only, it is 
really the recordkeeping and changing. If you have 15 different 
categories of employees, it is very hard to keep track of what 
the rules are. The employees say, well, he is getting this, why 
can I not get that? It sows some havoc.
    Mr. KNIGHT. Thank you. My time is well expired. Thank you, 
Mr. Chair.
    Chairman HARDY. Thank you. There is a desire to go around 
with another round of questions, so I am going to start off 
with Ms. Adams if she would like.
    Ms. ADAMS. Thank you, Mr. Chair.
    Mr. Christianson, I wanted to follow up on something. You 
hinted about the lack of consistency between federal and state 
laws regarding regulations. If there were better consistencies 
between the federal and state statutes, would you be open to an 
executive order that promotes paid leave and other similar 
measures?
    Mr. CHRISTIANSON. The fact is an executive order cannot do 
that. It is not lawful. They cannot change state law by 
executive fiat. So the question itself is one that I do not 
think is even realistic.
    Ms. ADAMS. Well, not so much lawful, but what about 
consistency?
    Mr. CHRISTIANSON. If the federal government contracts were 
to fall in line with other requirements, that would be, 
beneficial assuming that requirement in itself is beneficial.
    Ms. ADAMS. Okay, Mr. Hoffman, much of the objections to the 
Fair Pay and Safe Workplace Executive Order center on 
blacklisting, the idea that contracting officers are spoiling 
to disqualify firms for superfluous reasons. Do you feel that 
these concerns have been addressed in the final rules that the 
Department of Labor has issued?
    Mr. HOFFMAN. Right now, it is not clear to me the concept 
of, first of all, that something is going to occur in 3 days. 
Our experience with contracting officers is things do not 
happen that quickly. If it is an issue of an allegation, 
perhaps there should be an investigation. Is that adequate time 
to do that? Are we going to provide records or provide 
information to the private sector so that we can select our 
teammates correctly? I gave an example earlier as to whether 
that actually happens. I gave a very simple example, we cannot 
even identify who is the prime contract on a contract number, 
though at some point I will figure it out. So, I have some 
doubts.
    Ultimately, it seems to me, Ms. Adams, that we have these 
different reports and the government collects them. If we could 
take the information that we already have and act upon that and 
put in a secure deposit repository, collect all the information 
that we are already collecting, that would be a good idea. It 
strikes me that the government has fantastic intentions, but we 
have a significant amount of regulation, and not all regulation 
is good. We would really like to go ahead and design innovative 
solutions for our clients and not looking back at forms and 
annual reports and this and that. Potentially hiring people to 
do administrative compliance is not growing the business.
    Ms. ADAMS. Thank you, sir.
    Dr. Madland, while we recognize the concerns that some 
small firms have expressed regarding the new overtime rules, as 
well as the increase in minimum wage, can you discuss some of 
the benefits for employers and the economy as a result of the 
changes?
    Dr. MADLAND. Sure. The basic story, as I said, wages have 
been stagnant for quite some time. They are just starting to 
tick up. That has caused a lack of overall demand in the 
economy, which has reduced new hiring by small businesses and 
all businesses because there is not enough new consumers out 
there. Raising people's wages through the minimum wage and 
through overtime will help boost overall demand in the economy, 
which can help create a virtuous cycle and grow the larger 
economy.
    Ms. ADAMS. Thank you. I yield back, Mr. Chair.
    Chairman HARDY. Thank you. I turn some time over to Mr. 
Hanna.
    Chairman HANNA. Thank you, Chairman.
    What I hear here is people who fundamentally agree with one 
another, but it is the preponderance and the lack of input that 
is given that is not adequate. In a national debate, it is 
really discouraging to hear both parties vilify small business 
in one way or another, because we both know the business of 
America is business and that is really where all the jobs come 
from and all the growth, the growth that we are not seeing 
right now.
    You had a phrase, Dr. Madland, that you used, and I am not 
taking a position on it. I am wondering what you mean by the 
term ``wage theft.'' I can imagine what you mean by it, but I 
think what I see out there is people who feel put upon that in 
order to run a business well, you cannot have every outcome 
perfect. A lot of time in the government's pursuit of a perfect 
outcome, it actually does what that common phrase is, it kills 
the goose. That a certain amount of slippage, which you may 
regard as something wrong or illegal or immoral or unethical, 
is really part of, not that anyone on any case would approve 
it, but the ability of business to do business in an 
environment that is welcoming and not punitive, where they are 
not always feeling like they are probably, likely, on every 
given day doing something wrong, is also important. Businesses 
need to be let to do what it is they do best and government 
does not always have the best answer for that. It has the 
outcome it likes, but it does not get there necessarily in the 
right way.
    The overtime rule. I have talked to a lot of people who 
have no problem with what the President has done other than 
they doubled it. I have spoken to a lot of businesses that say 
if you went to 35,000, we get it. I would be the first person 
to admit that there are companies out there that take advantage 
of that, just like Ms. Huneycutt talked about 1099s. There are 
companies that take advantage of the 1099 rule. You see that 
playing out in court, and I agree that is wrong because it 
denies benefits and keeps people out of a system that provides 
them with a decent lifestyle and hope for a decent--but what do 
you mean by ``wage theft?'' Do you feel as though businesses 
are bad somehow? I know you are going to say no, but what do 
you mean?
    Dr. MADLAND. Wage theft is when companies do not pay the 
legally required wages. That typically means they are paying 
less than, for example, the minimum wage. One of the key 
examples actually in support of the Fair Pay and Safe Workplace 
Executive Order was a worker named Helen Avalos, who worked up 
at Walter Reed as a contractor janitor. Her company just 
stopped paying her, stopped paying her and all the other 
workers. She has got rent, got kids. Does not have, you know, 
low income. What is she going to do? The company continued to 
receive new government contracts. That is kind of what I mean 
by wage theft. It is breaking the law by failing to pay legally 
required wages. The independent contractors----
    Chairman HANNA. But are there not laws that cover that in 
the State of Virginia? I mean, the minimum wage laws?
    Dr. MADLAND. Yes. But if they are not doing it, that is 
wage theft. That is what wage theft is, is breaking----
    Chairman HANNA. I mean, she has recourse without the 
federal government getting involved in it.
    Dr. MADLAND. She was working as a federal contractor and, 
no, she actually did not really have much recourse. She and her 
coworkers protested outside and said what is going on? It was 
weeks of not getting paid.
    Chairman HANNA. Okay. I accept that. I am sure it is true. 
I have no reason to believe otherwise. But how about the notion 
that one incident or a bunch of incidents would give you cause 
to react to affect thousands, if not millions, of businesses 
around the country so that the actual--and this is the common 
complaint--that the benefits of what you have done are real and 
positive, but yet they cost much, much more than they are worth 
and that the government does not really look at that?
    Dr. MADLAND. I think you are talking about the Fair Pay and 
Safe Workplaces. For most companies without legal violations, 
they will simply check a box certifying they do not have legal 
violations, akin to what is done for tax violations. For those 
that do, there will be some additional reporting requirements. 
However, again, the goal of those reporting----
    Chairman HANNA. I am sorry. Go ahead. I do not mean to 
interrupt you.
    Dr. MADLAND. The goal of those reporting requirements is to 
provide sort of a warning to have further review of the 
company's larger----
    Chairman HANNA. But you heard what Ms. Huneycutt said, that 
these recording requirements, which you say are a few hours, 
other people say are tens if not hundreds of hours, you do not 
have a good perspective on what it actually costs these 
businesses going forward, and that you are placing a 
disproportionate cost on tens of thousands of businesses 
without regard to that cost because of the outcome you desire, 
that perhaps that should be taken into account.
    Dr. MADLAND. Yes. Obviously, you need to weigh the cost and 
the benefits and the time that is required.
    Chairman HANNA. It does not feel like you do.
    Dr. MADLAND. Well, as I said, most of the time, most 
companies will have a very simple process. There will be a more 
involved process for companies with legal violations. But 
again, the goal is to get those companies into compliance with 
the law, that seems like a worthy goal. Also, the studies of 
the cost estimates suggest it is going to be less than a cent 
for every hundred dollars of federal contracts of the 
additional cost, and that is a burden, but also, you are 
helping draw in more law-abiding companies that then will want 
to contract with the government that are familiar with similar 
processes. Lots of private companies----
    Chairman HANNA. Losing a hundred thousand companies does 
not support that and does not support that notion. Also, the 
cost that we--excuse me, Mr. Hardy, just 1 second. Do you mind? 
The cost associated with it, I have never heard of anybody who 
would say to you it is 1 penny on a dollar. But with that I 
yield back. Thank you, Dr. Madland.
    Chairman HARDY. Thank you. And I would like to go ahead and 
let Ms. Huneycutt, she had the desire to address that question, 
and yield my time to it.
    Ms. HUNEYCUTT. Sure. It sounds to me like that situation is 
already addressed by DOL regulations, which do not permit an 
employer to have somebody work and then not pay them. There are 
very specific regulations regarding the timeliness of payment, 
so that already exists. Again, my concern remains the same, 
which is that if we diffuse the responsibility for enforcement 
to the contracting officers, then they really do not have the 
bandwidth to do this or the autonomy. They are going to say, 
well, that is really DOL's enforcement issue and I am not going 
to worry about it until DOL tells me something. DOL is going to 
say that is the contracting officer's responsibility and I am 
not going to enforce it until the contracting officer tells me 
something. My concern is that with the increasing layers or 
duplicative regulations there will be less accountability and 
more bad actors invited to leverage that.
    Chairman HARDY. Thank you.
    One quick question I would like to address, and of these 
100,000 contractors we have lost in the last 4 years, Mr. 
Christianson, being a small business owner myself in the past, 
and going from two or three employees and working your way up 
to 350 over time, when you step into the contracting world with 
the government agencies, do you believe that other small 
businesses that are say 50 and under will have the ability to 
step into this field? Because now you have grown your internal 
staff or office staff to two or three times the size that you 
would have had at a normal site. Do you believe these 
contractors, are you hearing that as some of the challenges? 
Would you like to elaborate on that? Anybody else who would 
like to?
    Mr. CHRISTIANSON. First of all, Mr. Kelly mentioned or 
acknowledged that I am a small business owner. I am not. I am a 
regulatory counsel. I do not have that honor of being a small 
business owner, I represent them.
    Chairman HARDY. But you work with many small businesses?
    Mr. CHRISTIANSON. Work with many, and I have my job in many 
thanks to the regulations and the confusion that the President 
has put forth. AGC created this position recently for me as a 
result of all the questions small businesses were asking. So I, 
in part, am part of the job growth lawyers as a result of this. 
I do not think that is what you all think of job growth when 
you think of small businesses.
    But on your question, in the commercial construction 
industry, small businesses could be $36.5 million or below. If 
you have a contractor that is $5 million versus $30 million, 
and you are going after the same set-aside work and now you 
have to comply with equally confusing and burdensome 
regulations, your overhead costs as a percentage if you are 
that $5 million company is going to be way higher than that one 
for that $30 million company. So you are now at a competitive 
disadvantage completely. You are going to have to hire, not me 
as the association lawyer, me as the outside counsel because I 
can tell you that I talked to our general counsel before 
coming. He does not know of any commercial construction company 
that had their own in-house lawyers or attorney below $100 
million. They hire outside counsel at $400 an hour and hire 
consultants to do this.
    Chairman HARDY. Thank you.
    Anybody else care to elaborate on that?
    With that, that is the final question. Again, I want to 
thank each of you [our panelists] for being here today and 
testifying.
    Small businesses play a critical role in our federal 
marketplace. A vibrant, competitive, and robust small business 
sector lowers prices, spurs innovation, and creates jobs. As 
all of us here at our Committee, Democrat and Republican alike, 
recognize the importance of having worked in a bipartisan 
fashion throughout the 114th Congress, passing numerous pieces 
of legislation designed to help small firms compete in the 
federal marketplace.
    Unfortunately, our President is either unable to understand 
how hard it is complying with these executive actions for small 
businesses, or worse, unwilling to listen. We here on the Small 
Business Committee, will continue to speak up and fight so that 
the folks have a seat at the table.
    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 11:21 a.m., the Subcommittees were 
adjourned.]
                            A P P E N D I X

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The Cumulative Burden of President Obama's Executive Orders on 
                       Small Contractors

        Testimony before the Committee on Small Business

             United States House of Representatives

   Subcommittee on Investigations, Oversight and Regulations

                              And

           Subcommittee on Contracting and Workforce

                       Donna S. Huneycutt

              Co-Owner and Chief Operating Officer

                            WWC, LLC

                         On behalf of:

            National Defense Industrial Association

                            10:00 AM

                  Tuesday, September 13, 2016

            Rayburn House Office Building, Room 2360

    Chairman Chabot, Ranking Member Velazquez, and Members of 
the Subcommittees, thank you for the opportunity to appear 
before you this morning. I am here this morning on behalf of 
the National Defense Industrial Association, the nation's 
oldest and largest defense industry association, comprised of 
nearly 1,600 corporate and 90,000 individual members. While 
several Executive Orders (EOs) issued in recent years have, or 
will have, a detrimental impact on small businesses that 
contract with the federal government, such as the Department of 
Labor's so-called ``Overtime Rule'', for the purposes of my 
testimony this morning I would like to focus on the EOs 
specific to government procurement or federal contractors.

    Small businesses are a critical component of the U.S. 
economy, serving as a catalyst for economic development, 
providing employment opportunities, and as the engine of new 
ideas and innovations. Accordingly, the Federal Government has 
established programs to ensure participation opportunities to 
small businesses to fulfill the public policy objectives of the 
Federal Acquisition Regulation (FAR), and access a source of 
innovative products and services for Federal Government 
customers. Explicit and implicit in the desired outcomes for 
small business programs is achieving effective competition by 
maximizing small business participation and enabling small 
businesses to grow through diversification of the goods and 
services they provide and expansion into the nongovernmental 
marketplace.

    Several EOs and Presidential Memoranda specific to 
government procurement or federal contractors have overwhelmed 
small business contractors and undermined small business goals. 
Small businesses have borne the cost of having to understand 
not only additions and changes to the Federal Acquisition 
Regulation (FAR) and regulations of various Departments and 
agencies, but also how the agencies will implement those 
changes. This requires careful study of resulting agency 
procedures, guidance, and instructions, in addition to 
projecting workforce behaviors, which are largely driven by the 
actual or perceived interpretation of the original regulations 
by oversight actors (Government Accountability Office, agency 
Inspectors Generals, etc.). Once those are understood, small 
businesses must incur significant initial and reoccurring 
compliance costs. These costs place a burden on small business, 
and take the place of investments in research and development 
(R&D), human capital, and other means to grow businesses.

    As outlined at the onset of the FAR, the guiding principles 
of the Federal Acquisition System are to satisfy government 
customers by maximizing use of commercial products and 
services, utilizing contractors with superior past performance, 
and promoting competition. At the same time, the Federal 
Acquisition System is to minimize operation costs, conduct 
business with fairness and integrity and fulfill policy 
objectives. The EOs attempt to fulfill the latter two guiding 
principles, but in the process, undermine each of the others.

    The rationale for the procurement-related EOs have been to 
``promote economy and efficiency in procurement'' through their 
intended outcomes. Industry does not necessarily disagree with 
the logic, but rather, how that efficiency and economy is 
achieved. Supporting documentation for the EO on Fair Pay and 
Safe Workplace states, ``the vast majority of federal 
contractors play by the rules.'' \1\ However, the 
implementation approach to each of the EOs punishes that vast 
majority of good actors through costly, government-unique 
compliance requirements--a particularly inefficient means to 
promote efficiency. In fact, the proliferation of government-
unique requirements imposed by the EOs undermines efficiency 
and economy by limiting the government to suppliers that are 
willing and able to comply. Their neither promotes competition, 
innovation, nor does it maximize the use of commercial products 
and services.
---------------------------------------------------------------------------
    \1\ See ``FACT SHEET: Fair Pay and Safe Workplaces Executive 
Order.'' Available at: https://www.whitehouse.gov/the-press-office/
2014/07/31/fact-sheet-fair-pay-and-safe-workplaces-executive-order.

    Further, the most efficient and economic means to fulfill 
the public policy objectives of the EOs is to alter government 
buying practices. For example, the rationale for the Fair Pay 
and Safe Workplaces EO is ``Contractors that consistently 
adhere to labor laws are more likely to have workplace 
practices that enhance productivity and increase the likelihood 
of timely, predictable, and satisfactory delivery of goods and 
services to the Federal Government.'' Thus, if the government 
makes contract awards based on the offeror that provides a good 
or service for the best value, or in other words, the offeror 
most likely to deliver or perform on time, predictably, and 
with satisfactory performance, it would have chosen an offeror 
that adheres to existing labor laws and has workplace practices 
that enhance productivity. Unfortunately as industry has long 
pointed out, the government has poor buying habits that have 
equated ``best value'' with ``lowest cost'' and valued 
compliance to government-unique requirements over actual 
performance in delivering goods and services, creating a 
---------------------------------------------------------------------------
perverse incentive to ``race to the bottom'' to win contracts.

    Congress has already passed sufficient legislation to 
ensure protections of federal contractor employees, and to 
ensure that the government only contracts with responsible 
sources. Rather than using EOs to alter the enforcement or 
interpretation of legislation, the Federal Government should 
ensure that they are enforcing existing laws to ensure 
protections for workers, and then alter buying practices to 
reward best value.

    A major frustration for small businesses is that in many 
cases they agree with the intended outcome of an EO such as, 
providing for the well being of federal contractor employees, 
or making sure that competitors play by the rules, but object 
to the process by which the EOs have been developed and 
implemented and the resulting burdens. This starts with the 
Federal Government's assessment of burdens on small entities. 
The Small Business Administration's (SBA) independent Office of 
the Advocate \2\ has commented that the Federal Government 
underestimated the compliance costs and entities affected in 
implementing regulations for Fair Pay and Safe Workplaces, Paid 
Sick Leave for Federal Contractors, and Establishing a Minimum 
Wage for Federal Contractors EOs. Unfortunately, since the EOs 
are published without the public vetting inherent in the 
legislative process, the public has no means of providing 
input, or accountability, on the likely burdens prior to 
publication.
---------------------------------------------------------------------------
    \2\ Regulatory comments by the SBA Office of Advocacy can be found 
here: https://www.sba.gov/category/advocacy-navigation-structure/
legislative-actions/regulatory-comment-letters.

    This lack of engagement with small businesses prior to 
development of the EO, or their implementing regulations, has 
resulted in unnecessarily burdensome requirements. For 
instance, the proposed rule to implement EO 13706, 
``Establishing Paid Sick Leave for Federal Contractors,'' 
requires federal contractors to ``calculate an employee's 
accrual of paid sick leave no less frequently than at the 
conclusion of each workweek,'' and provide an employee in 
writing their accrued sick leave at the employee's request. 
However, most companies have internal business systems 
calibrated for bi-weekly or semi-monthly pay periods, which is 
the same frequently for employees to input hours worked or 
taken for leave. Forcing small businesses to invest in 
customized business systems or man hours to adjust to these 
intervals, while accommodating the various standard and 
nonstandard employee schedules within their business, is 
unnecessary, and does not ``increase efficiency and cost 
savings in the work performed by parties that contract with the 
Federal Government,'' as the EO intends. Or in the case of the 
``Fair Pay and Safe Workplaces'' EO, the implementing 
``guidance,'' was not subjected to the rulemaking process, 
despite its ``regulatory nature,'' as pointed out by the SBA 
Office of the Advocate. Further, implementation of the EOs have 
not provided adequate compliance support for small businesses. 
For example, the FAR rules implementing EO 13627, 
``Strengthening Protections Against Trafficking In Persons In 
Federal Contracts,'' was made effective without 
Congressionally-mandated guidance to help contractors comply 
with new requirements, severely limiting the ability of small 
---------------------------------------------------------------------------
business to comply most effectively with new regulations.

    One EO in particular, Fair Pay and Safe Workplaces, is 
simply unfair to businesses of all sizes. Under this EO, small 
businesses would have to disclose alleged and adjudicated 
violations of 14 Federal laws and EOs in addition to yet-to-be 
fully-determined equivalent state laws in the preceding three 
years to either government contracting officers (COs), or the 
Department of Labor (DoL). Once disclosed, the DoL or CO (with 
help from agency labor compliance advisors [ALCAs]) would 
determine, based on the details of the alleged or adjudicated 
violations and any mitigating factors, whether they are 
serious, repeated, willful, and/or pervasive in making a 
responsibility determination.

    Aside from the enormous associated compliance burden, the 
EO unfairly places these subjective determinations in the hands 
of COs who are incredibly risk averse and untrained in labor 
law. Although they are able to seek the advice of an ALCA, DoD 
alone for instance, has nearly 24,000 contracting officers 
(COs) that enter into contracts worth billions of dollars 
annually, with only one DoD ALCA and a handful of 
representatives. Common sense indicates that the small-dollar 
contracts that SBs compete for as primes would at the bottom of 
the list of priorities for ALCAs, leaving the onus on COs to 
assess and interpret actual and alleged violations and a range 
of mitigating factors, and leaving scarce resources for the 
government to engage with small business to develop and 
implement labor compliance plans. This aligns with industry's 
long-stated contention that this EO is punitive-based, with the 
intent of blacklisting businesses, rather than the supposed 
intent of ``helping companies improve.''

    Small businesses are not only concerned with the collective 
impacts of the EOs on their bottom-line, but also the 
detrimental impacts they will have on government customers and 
their ability to carry out missions, the most consequential of 
which is national security. In recent years, the Department of 
Defense (DoD), Federal Government's biggest spender by a 
substantial margin, has placed a renewed emphasis on innovation 
and acquisition reform, led by top officials in the Office of 
the Secretary of Defense and the Services. These efforts have 
been initiated as a result of the current state of the 
acquisition process, which is unable to keep up with the rapid 
pace of technological innovation and security threats, and the 
reality that innovation is driven by private sector R&D, 
requiring DoD to access nontraditional and commercial suppliers 
that have historically been deterred from the government 
marketplace by procurement policies, to stay at the forefront 
of technological innovation.

    Unfortunately, the EOs undermine these initiatives. The 
resultant accumulation of government-unique requirements and 
their compliance costs will continue to deter new suppliers 
from entering the government marketplace and drive exits by 
firms already selling to the government, restricting 
competition. Further, Fair Pay and Safe Workplaces, alone, 
figures to drive a substantial increase in bid protests, 
slowing down the acquisition process even more.

    In closing, several of the recent EOs have, through flawed 
processes, installed burdensome, unnecessary, inefficient, and 
in many cases duplicative and overlapping regulatory regimes 
that have the cumulative effect of dramatically increasing the 
cost of doing businesses with the federal government. Over 
time, these will decrease efficiency and economy in federal 
procurement, while undermining small business growth and 
development, and limiting the Federal Government's access to 
innovative products and services to fulfill their needs, in 
direct contradiction of ongoing initiatives.

    Thank you again for the opportunity to appear before you 
this morning and I am happy to answer any questions you may 
have.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      Opening Statement of

                     Chairman Richard Hanna

               House Committee on Small Business

         Subcommittee on Contracting and the Workforce

Hearing: ``The Cumulative Burden of President Obama's Executive 
                 Actions on Small Contractors''

                       September 13, 2016

    Thank you, Chairman Hardy. I, too, would like to start by 
thanking the witnesses for taking time from their busy 
schedules to be with us. We really do appreciate it.

    Most of the issues we will examine today are not new. As 
Chairman Hardy mentioned in his opening statement, the Small 
Business Committee has done extensive work over the past two 
years to improve how small businesses work with the federal 
government. During the 114th Congress, our Committee has 
reported nearly 40 pieces of bipartisan legislation aimed at 
making it easier for small firms to do business with the 
federal government. Nearly 20 of these bills became law as part 
of last year's National Defense Authorization--and nearly 20 
more are still in play in this year's NDAA.

    The bipartisan work we have done here in the Small Business 
Committee is stark contrast to what President Obama has done 
during his time in office. Since 2009, the President has issued 
15 Executive Orders and presidential memoranda that 
specifically relate to government contracting. While these 
mandates may be well-intentioned, too often the cost 
significantly outweigh the benefits. In fact, it is estimated 
that compliance with unique government regulations costs almost 
30 cents of every contract dollar--a figure sure to increase as 
more of these executive actions are fully implemented.

    To make matters worse, we have seen time and time again 
that the proposed regulations stemming from these executive 
actions consistently fail to comply with the Regulatory 
Flexibility Act, or RFA. At its most basic, the RFA is a 
simple, yet critical law that mandates that federal agencies 
give small businesses a seat at the table when they are 
developing both proposed and final rules.

    In recent years, agencies' inability to comply with the RFA 
has created further difficulties for small businesses. For 
example, agencies frequently publish regulations that have 
significant flaws in their economic impact analyses or lack a 
discussion of significant alternatives that reduce impacts on 
small businesses.

    Agencies also certify rules as not having a significant 
economic impact on a substantial number of small businesses but 
fail to provide a factual basis for this conclusion as the law 
requires. Sometimes agencies do not conduct the kind of 
affirmative outreach that is required under the RFA and 
accordingly limit the opportunity for small businesses to 
provide adequate input in the rulemaking process. 
Unfortunately, the regulations that have come out of these 
presidential actions are no different in their lack of small 
business input. These issues cannot persist or we will continue 
to see innovative small firms exiting the federal marketplace, 
leaving taxpayers on the hook for more expensive products 
purchased by our federal agencies.

    We have an excellent panel with us today and I look forward 
to hearing their testimony. Again, thank you all for being 
here.
```