FULL COMMITTEE HEARING ON 

SMALL BUSINESS PARTICIPATION IN THE 

FEDERAL PROCUREMENT MARKETPLACE 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

March 24, 2010 


Congress.#13
FULL COMMITTEE HEARING ON SMALL BUSINESS PARTICIPATION 

IN THE FEDERAL PROCUREMENT MARKETPLACE 

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

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55–594 PDF 2010

FULL COMMITTEE HEARING ON 

SMALL BUSINESS PARTICIPATION IN THE 

FEDERAL PROCUREMENT MARKETPLACE 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

March 24, 2010 

Small Business Committee Document Number 111-061 

Available via the GPO Website: http://www.access.gpo.gov/congress/house 


Congress.#13
HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

DENNIS MOORE, Kansas 

HEATH SHULER, North Carolina 

KATHY DAHLKEMPER, Pennsylvania 

KURT SCHRADER, Oregon 

ANN KIRKPATRICK, Arizona 

GLENN NYE, Virginia 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

DAN LIPINSKI, Illinois 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

JOE SESTAK, Pennsylvania 

BOBBY BRIGHT, Alabama 

DEBORAH HALVORSON, Illinois 

SAM GRAVES, Missouri, Ranking Member 

ROSCOE G. BARTLETT, Maryland 

W. TODD AKIN, Missouri 

STEVE KING, Iowa 

LYNN A. WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

BLAINE LUETKEMEYER, Missouri 

AARON SCHOCK, Illinois 

GLENN THOMPSON, Pennsylvania 

MIKE COFFMAN, Colorado 

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KAREN HAAS, Minority Staff Director 

(II) 

STANDING SUBCOMMITTEES 

Subcommittee on Contracting and Technology 

GLENN NYE, Virginia, Chairman 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

KURT SCHRADER, Oregon 

DEBORAH HALVORSON, Illinois 

MELISSA BEAN, Illinois 

JOE SESTAK, Pennsylvania 

AARON SCHOCK, Illinois, Ranking 

ROSCOE BARTLETT, Maryland 

W. TODD AKIN, Missouri 

MARY FALLIN, Oklahoma 

GLENN THOMPSON, Pennsylvania 

Subcommittee on Finance and Tax 

KURT SCHRADER, Oregon, Chairman 

DENNIS MOORE, Kansas 

ANN KIRKPATRICK, Arizona 

MELISSA BEAN, Illinois 

JOE SESTAK, Pennsylvania 

DEBORAH HALVORSON, Illinois 

GLENN NYE, Virginia 

MICHAEL MICHAUD, Maine 

VERN BUCHANAN, Florida, Ranking 

STEVE KING, Iowa 

W. TODD AKIN, Missouri 

BLAINE LUETKEMEYER, Missouri 

MIKE COFFMAN, Colorado 

Subcommittee on Investigations and Oversight 

JASON ALTMIRE, Pennsylvania, Chairman 

HEATH SHULER, North Carolina 

BRAD ELLSWORTH, Indiana 

MARY FALLIN, Oklahoma, Ranking 

LOUIE GOHMERT, Texas 

(III) 

Subcommittee on Regulations and Healthcare 

KATHY DAHLKEMPER, Pennsylvania, Chairwoman 

DAN LIPINSKI, Illinois 

MELISSA BEAN, Illinois 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

BOBBY BRIGHT, Alabama 

LYNN WESTMORELAND, Georgia, Ranking 

STEVE KING, Iowa 

VERN BUCHANAN, Florida 

GLENN THOMPSON, Pennsylvania 

MIKE COFFMAN, Colorado 

Subcommittee on Rural Development, Entrepreneurship and Trade 

HEATH SHULER, North Carolina, Chairman 

MICHAEL MICHAUD, Maine 

BOBBY BRIGHT, Alabama 

KATHY DAHLKEMPER, Pennsylvania 

ANN KIRKPATRICK, Arizona 

YVETTE CLARKE, New York 

BLAINE LUETKEMEYER, Missouri, Ranking 

STEVE KING, Iowa 

AARON SCHOCK, Illinois 

GLENN THOMPSON, Pennsylvania 

(IV) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

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

Graves, Hon. Sam .................................................................................................... 2 

WITNESSES 

Ms. Hillmer, Linda, President & CEO, CorpComm, Inc., Fredericksburg, VA .. 3 

Mr. Brown, Justin, Legislative Associate, Veterans of Foreign Wars ................. 5 

Mr. Sprole III, Robert, President & CEO, Therm, Inc., Ithaca, NY, On behalf 

of Aerospace Industries Association ................................................................... 6 

Mr. Denlinger, Stephen, President & CEO, Latin American Management 

Association ............................................................................................................ 8 

Ms. Gentile, Bobbie, President, Q-Mark, Inc., Kettering, OH, On behalf of 

National Association of Manufacturers and Representatives .......................... 10 

Mr. Woods, John, Woods Peacock Engineering Consultants, Alexandria, VA, 

On behalf of American Council of Engineering Companies .............................. 12 

APPENDIX 

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 23 

Graves, Hon. Sam .................................................................................................... 25 

Ms. Hillmer, Linda, President & CEO, CorpComm, Inc., Fredericksburg, VA .. 28 

Mr. Brown, Justin, Legislative Associate, Veterans of Foreign Wars ................. 34 

Mr. Sprole III, Robert, President & CEO, Therm, Inc., Ithaca, NY, On behalf 

of Aerospace Industries Association ................................................................... 42 

Mr. Denlinger, Stephen, President & CEO, Latin American Management 

Association ............................................................................................................ 46 

Ms. Gentile, Bobbie, President, Q-Mark, Inc., Kettering, OH, On behalf of 

National Association of Manufacturers and Representatives .......................... 142 

Mr. Woods, John, Woods Peacock Engineering Consultants, Alexandria, VA, 

On behalf of American Council of Engineering Companies .............................. 146 

Statements for the Record: 

Government Withholding Relief Coalition ............................................................. 155 

′′Increasing the Capacity of the Nation’s Small and Disadvantaged Businesses,′′ Thomas Boston and Linje Boston, EuQuant Company, Commissioned by the Congressional Black Caucus Foundation, October 16, 2007 ..... 158 

′′Race, Sex and Business Enterprise - Evidence from the State of Maryland,′′ 

Jon Wainwright, et. al., NERA Economic Consultants Group, March 2006 ... 220 

′′Availability of Financing to Small Firms Using the Survey of Small Business 

Finances,′′ SBA Office of Advocacy, Karlyn Mitchell and Douglas Pence, 

May 2005 .............................................................................................................. 243 

′′Testimony Concerning the Challenges Faced by Disadvantaged Business 

Enterprises in the Transportation Sector,′′ Jon S. Wainwright, Vice President, NERA Economic Consulting, Austin, Texas, Before the Committee 

on Transportation and Infrastructure, United States House of Representatives, March 26, 2009 ........................................................................................... 316 

RELM Wireless Corporation ................................................................................... 359 

(V) 

(1) 

FULL COMMITTEE HEARING ON 

SMALL BUSINESS PARTICIPATION IN THE 

FEDERAL PROCUREMENT MARKETPLACE 

Wednesday, March 24, 2010 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 1:00 p.m., in Room 2360 

Rayburn House Office Building, Hon. Nydia Vela ́zquez [chairman 

of the Committee] presiding. 

Present: Representatives Vela ́zquez, Dahlkemper, Clarke, 

Graves, Buchanan and Luetkemeyer. 

Chairwoman VELA ́ ZQUEZ. Good afternoon. 

This hearing is now called to order. 

Whether we are talking about the credit crunch or the small 

business regulatory burden, there’s no question that the last few 

years has been challenging for entrepreneurs. According to a recent 

survey, however, their greatest stumbling block isn’t a lack of capital or an excess of a red tape—it is a shortage of customers. With 

consumer spending sluggish and new clients in short supply, the 

federal marketplace has become an increasingly attractive option. 

In the last decade, it has more than doubled in size—outpacing by 

virtually all other markets and reaching $528 billion in 2009. 

Given its remarkable growth, you would think this sector would 

be an oasis of small business opportunity. In reality, it’s more of 

a mirage. While it is true that the U.S. Government is the single 

largest buyer of goods and services, the fact of the matter is that 

it has purchased very little from small firms. Small companies represent 99 percent of American businesses, and yet they account for 

than a quarter of federal contracts. When you factor in overseas 

contracts, the market share shrinks into the teens. 

In today’s hearing, we will examine the state of small business 

procurement. In doing so, we will look for ways to improve the 

process for entrepreneurs, and ensure they have the tools they 

need to win contracts and create jobs. 

In 2009, federal agencies missed their small business goals by 2 

percent. Procurement officers will tell you that number is negligible, and no big deal. But while a two percent shortfall may not 

sound like a lot, it ultimately cost entrepreneurs $10 billion in 

missed opportunity. Or, to put it another way, it cost American $10 

billion in lost job creation. Small contractors, like all other firms, 

create roughly 70 percent of all new jobs. So when their ability to 

win contracts is compromised, employment number are too. 

2 

SBA’s contracting programs should be a critical tool for small 

firms. However, many of these initiatives are outdated, and have 

fallen into disrepair. In some cases, the agency has failed to implement altogether. Recent reports from the IG and GAO suggest significant room for improvement. Perhaps most notably, investigators 

have uncovered hundreds of billions of dollars in fraud within both 

the HUBZone and Service Disabled Veterans programs. As a Committee, we have held several hearings on that issue, and are working to root out waste, fraud and abuse at SBA. 

But the Committee’s concerns are not limited to SBA programs 

alone. Overall, procurement has become increasingly complex for 

small companies. Misguided efforts to streamline the process have 

contributed to a surge in contract bundling and a culture of cutting 

corners. Yes, these changes have made things simpler for agencies 

and easier for procurement officer—but at what cost to our economy? Every one percent increasing the small business contract 

share generates 100,000 new jobs. With unemployment at 9.7 we 

should not be looking for ways to make the process easier for bureaucrats—we should be looking for ways to make it easier for entrepreneurs to find work. After all, they are the ones out there creating jobs. 

We are always talking about the need for diversification in business models. The recession has made that particularly important, 

especially for small firms. For these businesses, government contracts put another option on the table. By restoring integrity to the 

federal marketplace, we can ensure entrepreneurs have an opportunity to win new customers in a new market. This is key, because 

while our economy is showing promise, the recovery remains fragile. Before we can really turn a corner, we will need to see significant job growth—the kind that can only come from small businesses. 

With that, I would like to thank all our witnesses for being here 

today. I know that you are quite busy trying to get contracts in the 

federal marketplace. So I want to thank you for being here. 

I now yield to Ranking Member Graves for his opening statement. 

Mr. GRAVES. Thank you, Madam Chair, for holding this hearing 

on the role small businesses play in the government contracting 

process. 

And I also want to thank all of our witnesses for being here 

today. 

Each year the government dedicates nearly half a trillion dollars 

to the purchase of goods through federal contracts. Because this is 

a significant amount of federal dollars, we owe it to the taxpayer 

to make sure that we are using them wisely and efficiently. 

Government contracting offers a unique opportunity to invest in 

small businesses while also stimulating our economy. Small businesses play a central role in our economy and job growth, creating 

7 out of every 10 private sector jobs in recent years. With unemployment still hovering around 10 percent, it is more important 

than ever to invest in small businesses that support our communities and provide opportunities for our families. 

While several important provisions have been built into the federal procurement system in an effort to ensure small businesses reVerDate Aug 31 2005 10:30 Jun 25, 2010 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\55594JB.TXT DARIEN
3 

ceive a fair share of government contracts and opportunities, these 

provisions are not being properly enforced. Programs are abused 

and significant portions of contracting dollars are not properly allocated. As members of the House Small Business Committee we 

must make it a top priority to fix these problems, not only to make 

sure taxpayer dollars have maximum impact, but also for the sake 

of our economy. 

To start, we should reduce the flawed practice of contract bundling which occurs when the government consolidates smaller contracts into very large contracts for the sake of convenience. This 

process can virtually shut small businesses out of the contracting 

opportunities because they simply lack the capacity or resource to 

fulfill the requirements of a bundled contract. 

Additionally, we must work to strengthen the enforcement mechanisms built into the federal contracting system. Managers and 

senior executive personnel should be held accountable for not 

reaching out or not reaching outlying small business goals or for 

failing to properly enforce subcontracting plans. All federal agencies need to make this a priority, which may require reallocation 

of resources in order to ensue that no one is able to gain an unfair 

advantage of the contracting process. 

In coordination with limiting contract bundling and strengthening enforcement mechanisms, we should also increase the percentage of federal contracting funds that are set aside for small 

businesses. This is an easy step that would provide smaller firms 

with more opportunities to do business with the government and 

expand their operations and work force. By addressing these problems, we can help small businesses compete in a national marketplace, we can foster job growth in our communities and we can ensure that we will stretch the taxpayer’s dollar even further. 

Again, I would like to thank the Chairwoman for holding this important hearing. I will look forward to hearing testimonies from our 

witnesses. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

And it is my pleasure to welcome the first witness, Ms. Linda 

Hillmer. She is the President and CEO of CorpComm located in 

Fredericksburg, Virginia. 

CorpComm is a small HUBZone certified woman owned business 

that offers a full range of communications and media related to the 

Federal Government. 

Welcome. 

STATEMENT OF LINDA HILLMER, PRESIDENT & CEO, 

CORPCOMM, INC. 

Ms. HILLMER. Madam Chair, Ranking Member Graves, members 

of the Committee, thank you for the opportunity to testify today. 

My name is Linda Hillmer, and I am the founder, owner, President and CEO of CorpComm, a small professional services contractor to the Federal Government, specializing in digital media 

production and strategic communications. 

I started the company in 2001 after having served in the Federal 

Government myself, including about 10 years in the procurement 

and acquisition arenas and marketing and communications. Let me 

just say that I absolutely love my job. I love supporting the United 

4 

States Government and I love creating an environment where people can come to work and be creative, have fun, grow in their career and make a difference. I would not trade it for the world, 

which is why I am here today. I want to make sure that the government gets the benefits of working with companies like mine, 

companies that have a culture that drives innovation, ownership 

and hard work. 

My testimony today will address three issues and make five recommendations. 

The three issues are: The federal acquisition workforce; contract 

bundling, and; subcontracting to large primes. 

As the acquisition workforce is rebuilt, there needs to be a deliberate effort to put policies in place that resolve small business 

issues. For example, the small business contracting responsibility 

is usually one of many given to a contracting officer or a specialist. 

It is an other duties as assigned type of job with limited time and 

training. And to top it off, these specialists often report to managers who are not held accountable for small business achievement 

and enforcement. 

So how do we solve this problem? First, we establish a dedicated 

core of small business specialists with defined responsibilities and 

authorities. 

Second, we put accountability where it belongs: On senior executives. I applaud the recent bills put forth by the House addressing 

small business issues, especially the tying of goal accomplishment 

to senior executive pay bonuses. Please remember, though, that the 

SESs in charge of small business do not work in a vacuum. All senior executives in an agency, especially the senior procurement executive, need to have accountability and responsibility for meeting 

small business goals. 

Now let us talk about bundling. By bundling or consolidating requirements in contracts, the government is trying to reduce its 

workload and hold large primes responsible for small business 

goals. The use of bundled or consolidated contracts appears to be 

growing and work being performed by small businesses is rolling 

into these vehicles in the name of contract management efficiencies. We simply should not rely on large prime contractors to 

manage the government’s small business program. 

A part of the solution is to require incentives, transparency and 

accountability in how large businesses subcontract with small businesses over the entire life of the government contract. 

Another part of the solution is to strengthen the criteria and approval authorities necessary to even consider bundling. Small businesses such as mine do not have visibility into planning for bundled or consolidated requirements even when I’m the prime contractor performing the work that may be bundled. 

Greater transparency will also help address the issues with subcontracting. Subcontracting to large primes is often the easiest way 

for small businesses to begin getting government experience. It is 

how I got my first government contract. The problem comes when 

large businesses use small businesses to meet goals to win the initial award and then after award, the large businesses either never 

allow the small businesses to work or they initially award them 

work but then slowly ease them out. We can solve this problem by 

5 

requiring large primes to be transparent and accountable in their 

small business practices over the execution of the life of the contract. 

In conclusion if the government institutes these recommendations, American’s small businesses such as mine will answer the 

call to create many meaningful jobs and provide innovative products and services to the Federal Government. 

I look forward to continuing to work with members of Congress 

to strengthen small business participation in our government. 

Thank you for the opportunity to testify today. 

[The statement of Ms. Hillmer is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Our next witness is Mr. Justin Brown. He’s the Legislative Associate of the Veterans of Foreign Wars. The VFW is the nation’s oldest major veterans group with more than 1.7 million veterans who 

have served our nation overseas. 

Mr. Brown is also a veteran of the United States Navy, serving 

one deployment in support of Operation Southern Watch and two 

deployments in support of Operation Iraqi Freedom. 

Mr. Brown, welcome, and thank you for your service. 

STATEMENT OF JUSTIN BROWN, LEGISLATIVE ASSOCIATE, 

VETERANS OF FOREIGN WARS 

Mr. BROWN. Thank you, Chairwoman. 

Madam Chairwoman, Ranking Member Graves and members of 

this Committee on behalf of the 2.1 million members of the Veterans of Foreign Wars and our auxiliaries, I would like to thank 

this Committee for the opportunity to testify and for your efforts 

to expand small business opportunities for veterans. The issues 

under consideration today are of great importance to our members 

and to the entire veteran population. 

During this economic recession the number of unemployed veterans has increased to 1,124,000 as of February. The unemployment rate of our youngest veterans has reached a staggering 21 

percent, and there are more unemployed OEF/OIF veterans than 

there are service members in Iraq and Afghanistan. During these 

tough economic times, that have proven tumultuous for America’s 

newest veterans, the prospect of starting a business is particularly 

appealing. Veterans, if given the opportunity, will succeed in small 

business because they understand the concept of hard work, can 

adapt quickly to changing times, and are goal oriented. However, 

for a veteran interested in entrepreneurship, the reality is quality 

resources are scarce, disjointed and available to few. 

In order for veterans to succeed in the federal procurement marketplace we need training: as there is a lack of geographically viable options for veterans, we need access to capital as there has 

been less than 153 loans distributed under the Patriot Express 

Loan program, we need compliance with existing laws and statutes 

as a host of federal agencies that after more than a decade continually, and willfully, fail to abide by their public mandates. 

And we need agencies that work together and for veterans. 

We must do more, and we ask that Congress continue to hold 

these agencies accountable with rigorous oversight. 

6 

In 2008, the Federal Government was roughly halfway to providing 3 percent of all federal contracts to small disabled veteran 

owned small businesses. In 2009, preliminary numbers suggest 2 

percent of all federal contracts went to them. 

The Department of Defense barely surpassed 1 percent of contracts for small disabled veteran owned small businesses in 2008. 

The fact that the largest federal agency continues to fail its former 

service members that were disabled in service to it is absolutely 

unequivocally unacceptable. It is shameful that the Department of 

Defense has so egregiously failed their own population for more 

than a decade. 

The VFW calls on all federal agencies to absolutely reach their 

3 percent goal in fiscal year 2010. Preliminarily, the American Recovery Reinvestment Act is proving that the 3 percent goal can be 

met. Our understanding is that 4 percent of Recovery dollars have 

gone to small disabled veteran owned small businesses. With the 

unshakable will of Congress, and this Administration, there should 

be no reason for the 3 percent mandate to be unmet for the 11th 

consecutive year. 

As America’s largest group of combat veterans, we thank you for 

allowing the Veterans of Foreign Wars to present its opinion on 

this very important matter. 

We also thank you, Madam Chairwoman, this Committee and 

your staff for your rigor in passing legislation that will make these 

long overdue, much needed changes for America’s veterans. Entrepreneurship if encouraged is a win/win for everyone, including the 

government and America’s taxpayers. 

Madam Chairwoman, this concludes my testimony and I will be 

pleased to respond to any questions you or the members of this 

Committee may have. 

Thank you. 

[The statement of Mr. Brown is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. Our next witness is Mr. Robert Sprole 

the Third, who is the President and Chief Executive Officer of 

Therm located in Ithaca, New York. Therm, Inc. has provided solutions to the needs of many customers for over six decades. 

Mr. Sprole is testifying on behalf of Aerospace Industries Association. 

Welcome 

STATEMENT OF ROBERT SPROLE, III, PRESIDENT AND CEO 

THERM, INC. ON BEHALF OF AEROSPACE INDUSTRIES ASSOCIATION. 

Mr. SPROLE. Madam Chairwoman Vela ́zquez, Ranking Member 

Graves, members of the Committee, thank you for giving me the 

opportunity to meet with you today to discuss federal contracting 

issues and their impact on small business. 

My name is Bob Sprole. I am the President and Chief Executive 

Officer of Therm, Incorporate, a manufacturer of jet engine turbine 

air foils. I am also a member of the Aerospace Industries Association which represents almost 300 aerospace and defense companies. 

Members of the association are large original equipment manufacturers as well as small suppliers. Many of our member firms are 

small businesses. 

7 

In the aerospace business small companies contribute about 70 

percent of all manufactured items. One of the major customers for 

the aerospace sector if the Federal Government, specifically the Department of Defense. Companies such as ours have found three 

major challenges in doing business with the Federal Government. 

The first challenge is that it is difficult to get started doing federal contracting. Getting started usually requires someone to guide 

a small business through the qualification process. The use of consultants or attorneys can be prohibitively expensive. More assistance in helping small businesses through this process would enable 

more competition for both businesses and the government. 

Similarly, challenges posed by the export control system discourage many small businesses from seeking to complete globally. Modernizing the current export control system could help small business increase competitiveness and add jobs while still protecting 

our national security and foreign policy interests. 

Even after qualifying, a business will need to make unique structural changes to satisfy government requirements. For example, 

many government requirements require a noncommercial cost accounting or CAS compliant accounting system even for common 

commercial items. Other kind of traps require earned value management systems. Unless a small business can earn several contracts, this investment will have limited return and serves as a deterrence. 

If entry can be achieved, the second challenge is trying to operate 

in the unique government environment. Government contracting 

rules are designed for large businesses, not small ones. Creating an 

overhead structure to meet reporting and compliance requirements 

post-award, you know results in small businesses having noncompetitive cost structures. For most small companies people have 

to wear many hats. Therefore, responding to government requirements often means neglecting other duties for an extended period 

of time. Let me point to four examples of this problem. 

Federal contracts, particularly those with the Department of Defense, are subject to audit by the Defense Contract Audit Agency 

or the DCAA. These audit requirements strain small businesses because we do not have the ability to create a separate compliance 

staff. If DCAA finds inefficiency, like the failure to provide data in 

a reasonable time, the contracting officer can remove the ability for 

automated payments and require manually billing or even payment 

withhold. Manual billing and payment withholds significantly impact cash flow, the life blood of any business. 

DoD has recently proposed a new procurement rule that will 

make this problem worse. If a deficiency is found in a business system, DoD proposes to automatically withhold 10 percent of each 

payment on all contracts using that system. Depending on how 

many systems are found deficient and how serious the contracting 

officer believes the deficiency to be, the withhold could be as high 

as 100 percent. 

Since our existing remedies for addressing business system deficiencies, Congress should direct the DoD not implement this new 

rule and if existing remedies are not effective, DoD should hold a 

public hearing to determine a better way forward. 

8 

Requirements that might be difficult for large businesses can be 

fatal for small ones. For example, the Tax Increase Prevention and 

Reconciliation Act of 2005 mandates that federal, state and local 

governments withhold 3 percent of nearly all their contract payments. It is said to become effective on January 1, 2012. While this 

3 percent withhold is levied against governments that we pass on 

to contractors along with the cost of administration of the program, 

the DoD estimates this cost to be $17 billion annually for that 

agency alone. Congress should repeal this tax withhold requirement and support the Administration’s proposals to focus on tax 

delinquencies. 

The Federal Government tries to contract with commercial companies, but the government’s version of a commercial contract describe in FAR Part 12 requires noncommercial clauses. The number 

of federal unique clauses that can be imposed in FAR Part 12, 

prime contract for example, has grown to about 50 provisions. Not 

all of these provisions are required to be flowed down to subcontractors, but when the provisions are imposed on subcontractors 

this flow down diminishes the ability of primes to access small 

businesses that sell commercial products and cannot afford to comply with these clauses. And given the number of these clauses, 

commercial small businesses have even fewer opportunities to be 

prime contractors. Eliminating flow down of these clauses will help 

small businesses compete. 

Companies need a fair return on investments in order to continue to do business and grow. However, there is continuing pressure on returns for companies doing business with the government. 

For example, for the fiscal year 2008 National Defense Authorization Act restricts the use of commercial contracting procedures for 

commercial services by authorizing a contracting officer to request 

information regarding the basis for the price or cost. This congressional direction should be revised to mandate the use of price analysis rather than cost and pricing data for small businesses. 

The third and final challenge is simply staying in business with 

the government. Large prime contractors establish small business 

contracting plans. The members of AIA who are prime contractors 

take the requirement of developing small businesses seriously— 

Chairwoman VELA ́ ZQUEZ. Time has expired. And you will have 

more time during the question and answer period. 

Mr. SPROLE. All right. Thank you. I will be happy to take your 

questions, Madam Chairman. 

[The statement of Mr. Sprole is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. Our next witness is Mr. Stephen 

Denlinger. 

He is the President and CEO of the Latin American Management 

Association. LAMA has been an advocate for the Hispanic minority 

and small business community since 1972. 

STATEMENT OF STEPHEN DENLINGER, PRESIDENT AND CEO 

LATIN AMERICAN MANAGEMENT ASSOCIATION 

Mr. DENLINGER. Thank you, Congresswoman Vela ́zquez. It’s a 

pleasure to be here today. Thank you, Ranking Member Graves 

and other members of the Committee. 

9 

Just a quick note. I’m not going to be talking about modernization of the 8(a) program today. We have testified on that before and 

have provided the Committee with numerous position papers on 

those issues. We appreciate your work on 8(a) modernization. I will 

say in passing that LAMA and USHCC support parity among all 

the socioeconomic procurement programs. None of them should receive priority over the other. It’s time to let the contracting officers 

do their job and make sure that they meet all the goals in the socioeconomic programs. 

As I ponder where we go from here, and I think back about our 

almost 40 year history and our initial meetings with companies like 

Lockheed Martin and FMC and IBM where minority contracting 

was almost nonexistent. Over that 40 year period virtually all the 

federal agencies have established robust small and minority business programs, as have major prime contractors. I am not suggesting for a moment that they are all in perfect shape, but in the 

main the goals are being met. So the question is where does we go 

from here? If we’re succeeding in general, is there any justification 

for continuing these programs? 

In a word, the answer is yes. Disparity studies across the United 

States indicate that, when MBE programs are in effect, MBE contracting takes place. When MBE programs are not effect, little or 

no MBE contracting takes place. So we recommend the reenactment of the SDB program and that the Congress hold hearings to 

amass the evidence necessary to prove widespread discrimination 

that would serve as a foundation of evidence to prevent further 

court cases like Rothe from dismantling the SDB and 8(a) programs. 

Moving on, I am concerned about missed goals on the part of the 

agencies, Congresswoman, as you have over the years. And as I 

think about that and think about the usefulness of PEA, price evaluation adjustment, our recommendation is that we utilize PEA not 

just for the SDB program, but for all socioeconomic programs and 

small businesses programs across the board any time a federal 

agency is failing to meet its small business goal. The Air Force, for 

example, failed to meet its goal in FY ’09 by a wide margin, achieving 16 percent instead of 23 percent. Air Force, DoD, Education, 

USAID are examples of agencies wherein the PEA should be used 

to make sure that they meet their goals. 

We believe it’s time to substantially increase the small business 

goal in federal contracting. There’s no reason for large business to 

receive three-quarters of the federal procurement dollar. There’s 

ample evidence that this is timely. Many agencies routinely exceed 

their 23 percent goal by wide margins, including HUD, USDA, 

DOC, State Department, Homeland Security, Interior, DOT and so 

forth. 

We also see that many large or small businesses are successfully 

performing contracts through the Small Business Set Aside program in the range of $50 million, $100 million, $400 million and 

even a billion dollar contracts. The $400 million contract is with 

the Air Force Western Range in California. The billion dollar contract is with NASA. Those small businesses are performing contracts of that nature quite successfully. 

10 

In addition, the socioeconomic programs eat up about 20 percent 

of the 23 percent goal, when you include the 8(a) portion. So we 

need to expand the small business goal. We recommend that the 

small business goal be increased from 23 to 40 percent. 

In the subcontracting arena, as you well know, we continue to 

have problems of prime contractors not meeting their goals and engaging in bait and switch tactics, as Ms. Hillmer has referred to. 

The missing ingredient in those subcontracting programs is what? 

A contract. If there’s a contract between the SDB and the prime 

contractor, contracting will take place. There is a self-enforcing aspect to this approach because we do not need a government bureaucracy, we do not need penalties to ensure enforcement. When 

the prime contractor fails to abide by the terms of the contract, the 

small business can simply go to court and seek redress. 

Eligibility fraud is rampant in HUBZone and SDVOSB programs, 

as your Committee and other studies have proven and demonstrated. We need simplified and cost effective ways to reduce the 

cost of enforcement. And we recommend something we call the 

REI, Recorded Eligibility Statement. A REI is a simple procedure 

wherein SBA would put on record under oath any and all businesses that are self-certified for these programs. We think that 

that would literally overnight eliminate a lot of this fraud because 

it’s one thing for a business owner to tell a contracting officer yes 

they qualify; it’s quite another to go on record, under oath, stating 

that that individual meets all the eligibility criteria. 

At the end of my written testimony you’ll find a suggested REI 

that gives you the types of questions that could be asked of that 

individual, the business owner, under oath. That could take place 

remotely at any Kinkos in any location anywhere in the country. 

SBA staff would not have to travel anywhere and, nor would the 

company owner have to travel either. 

Chairwoman VELA ́ ZQUEZ. Mr. Denlinger? 

Mr. DENLINGER. Yes. 

Chairwoman VELA ́ ZQUEZ. Time has expired. 

Mr. DENLINGER. All right. Thank you so much. 

[The statement of Mr. Denlinger is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. Our next witness is Ms. Bobbie Gentile. She is the President of Q-Mark, locating in Kettering, Ohio. QMark, Inc. was founded in 1990 as a manufacturer’s representative 

to companies that produce electronic components. 

Ms. Gentile is testifying on behalf of the National Association of 

Manufacturers and Representatives which seeks to inform and educate its members on key issues effecting the federal procurement 

marketplace. 

Welcome 

STATEMENT OF BOBBIE GENTILE, PRESIDENT, Q-MARK, INC. 

AND ON BEHALF OF NATIONAL ASSOCIATION OF MANUFACTURERS AND REPRESENTATIVES. 

Ms. GENTILE. Good afternoon, Chairwoman Vela ́zquez and members of the Committee. On behalf of myself and the staff of Q-Mark 

and Innovative Supply Source I would like to thank you for granting me the opportunity to speak with you today regarding the afVerDate Aug 31 2005 10:30 Jun 25, 2010 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\55594JB.TXT DARIEN
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fect that contract bundling and other DoD contracting practices 

will have on small businesses. 

I am the President of the National Association of Manufacturers 

and Representative, and I have been hearing from small businesses 

nationwide concerned about contract bundling. 

For years small businesses have been valuable partners to the 

federal procurement system. Now we find ourselves in the position 

of being displaced, due to contract bundling. 

Since I last testified, I opened Innovative Supply Source in order 

to team with the prime contractors that won the bundles. 

On the Tobyhanna Initiative, we teamed with the winning contractor and ISS was asked to participate in the Mentor-Protege 

program, which we did. Once we teamed with this company, we 

found that they were under investigation by the government and 

facing possible debarment and were not allowed to supply parts to 

DLA. 

My question is how could this happen that large prime contractors were awarded a bundle order while under investigation? I now 

need to find someone within the government to help dissolve my 

Mentor-Protege relationship with this contractor, as I do not wish 

my company’s reputation to be jeopardized. 

In our teaming process on the Tobyhanna Initiative, the prime 

contractor did not understand how to purchase the proper product. 

They called to inquire if parts manufactured in 1978 were acceptable for use. Only after entering into this teaming agreement did 

we discover that these contractors were not experienced enough to 

procure electronic products properly to support the war fighter. 

We have also experienced unethical practices by large prime contractors involved in bundling. ISS was contacted by one of the government’s largest prime contractors who stated that if I dissolve 

my relationship with NAMR, and make no waves or not testify 

against building, they would allow ISS to team with them. But if 

I continued to protect small business, they would not consider 

teaming with my company. 

Recently, NAMR was involved in challenging a bundle under the 

time Maritime Initiative, which was eventually canceled in February of this year. Now we find the initiative is being issued in 

smaller segments, though they still constitute bundled actions. 

The procurement center representative at Defense Supply Center 

Columbus forwarded an appeal package on the original Maritime 

Initiative to SBA. The SBA negotiated an agreement with DLA regarding this initiative. Thus, that negotiation was not made public, 

however the initiative went forward with a new acquisition strategy. 

The ability to participate in the federal procurement processes is 

going to be eliminated with contract bundling. Items will be purchased behind closed doors, industry will lose the opportunity to 

bid on items the government is purchasing. There will be no fair 

and open competition. It will destroy the industrial base, create 

higher prices, cause longer delivery times and reduce military readiness. 

Fair and open competition must be maintained. It is crucial to 

saving taxpayers’ money and maintaining readiness as I can attest 

on behalf of one NAMR member. This company, which specializing 

12 

in designing and manufacturing spare parts for the military, has 

been able to save the Federal Government and in turn the taxpayers, millions of dollars by being able to see items the government is buying. This company saves the government money by 

manufacturing replacement for spare parts that the OEM or prime 

contractors manufacture and sell the government at inflated prices. 

Under current contracting regulations all interested companies 

can bid on any item the government is buying. If the items are 

bundled, companies lose the opportunity, the government will 

spend millions of dollars more. And in addition, the government 

will spend millions more in mark-ups on these items as they pass 

through multiple layers of distribution. 

And now there is talk about the Federal Government implementing the so called ‘‘High Road’’ contracting rules. The Administration is considering requiring that federal contracts go to businesses that pay high wages and provide benefits; a policy clearly 

meant to help labor unions and large corporations. 

Contract bundling has all but eliminated fair competition for contracts. If the Administration adds their ‘‘High Road’’ contracting 

rule, the role of small business in government contracting will further be diminished and costs will increase. 

Bundled contracts will drive companies out of business, put the 

government into sole source situations, and result in higher prices. 

As President of NAMR, Q-Mark, and ISS, and a member of 

NFIB, I urge you to pass legislation to stop contract bundling, ensure ‘‘High Road’’ contracting rules not be implemented. 

And thank you very much for taking the time to hear our testimony today. 

[The statement of Ms. Gentile is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Our next witness, Mr. John Woods. He’s the co-founder of Woods 

Peacock Engineering Consultants based on Alexandria, Virginia. 

Woods Peacock Engineering Consultants provides structural engineering and product management services. Mr. Woods is testifying on behalf of the American Council of Engineering Companies 

which was founded in 1909 and has more than 5,300 firms 

throughout the country. 

Welcome 

STATEMENT OF JOHN WOODS, WOODS PEACOCK ENGINEERING CONSULTANTS AND ON BEHALF OF AMERICAN COUNCIL OF ENGINEERING COMPANIES. 

Mr. WOODS. Madam Chair, and Ranking Member Graves and 

members of the Committee, I appreciate the opportunity to testify 

before you today about small business participation and the federal 

procurement marketplace and specifically about the unique nature 

of architectural engineering or A/E services procurements. In addition, I will address the composition of the engineering industries, 

why small specialized firms like my own compose the majority of 

this industry, how we view federal government polices and individual recommendations to enhance the results to our firms and us, 

the taxpayers. 

My name is John Woods, and I am a founder and principal of 

Woods Peacock Engineer Consultants, a ten year old consulting enVerDate Aug 31 2005 10:30 Jun 25, 2010 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\55594JB.TXT DARIEN
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gineering firm located in Alexandria, Virginia. We are a small service disabled veteran owned firm with 16 employees, three of whom 

we have hired this past year. 

All of the members of our staff are committed to providing our 

clients structural sound designs for various sized architectural 

building projects as well as work in the anti-terrorism force protection at home and around the world. Additional bio information is 

available in my written comments. 

My firm is an active member of the American Council of Engineering Companies, the voice of America’s engineering industry. Of 

the almost 6,000 member firms employing more than a half million 

engineers, architects, land surveyors and other professionals and 

responsible for more than $500 billion of private and public works, 

almost 70 percent of these firms are small businesses with less 

than 30 employees, many with less than ten. 

My 40 years of experience includes private and public sector 

projects, both domestic and international. I will discuss the issues 

of my participation of my firm in several current projects in a moment. 

Architectural and engineering firms provide services in a number 

of technical separate or combinations of disciplines, such as architecture, mechanical, electrical, civil structural, et cetera. States require state issued professional licenses for the individuals responsible for this technical or designed related work. 

In the Commonwealth of Virginia, 67 percent of the ownership 

of privately held professional services firms providing services must 

be held by individuals licenses in the Commonwealth in their respective disciplines as well as for the requirement for the firm to 

be licensed to provide these services. 

The code of ethics for licensed professionals to retain our licenses 

require us to perform work only for which we are qualified based 

on the education and experience. This is true in all states. 

Because of the state licensed majority ownership requirements in 

most states, privately held architectural and engineering firms are 

often localized, small and specialized. Since the work is performed 

by individuals, the quality of services offers is independent of size. 

For the federal project and in many state and local projects the 

public user and taxpayer is the benefactor because architects, engineers are selected for work based on being the most qualified for 

the particular project or series of tasks and then a fee negotiated 

as codified by the Brooks Act, Public Law 92-582 for federal work. 

To its credit, Congress created the Small Business Competitive 

Demonstration Program 20 years ago with the goal of enabling federal agencies to facilitate greater participation opportunities for 

small businesses. By unrestricting competition for A/E services the 

program recognizes the composition of the industry, qualification 

emphasis and the need for agency to carefully plan contracts that 

small firms can perform. 

Let me share several of my firm’s experiences winning and doing 

work. The good news is that on one of the three recently awarded 

GSA A/E contracts using the Brooks Act selection for the new Main 

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14 

ington, we are one of several small firms included on the winning 

design team. 

The construction contract for the adaptive reuse and restoration portion of the project has been estimated at nearly $300 million. 

The bad news is as a disabled veteran owned firm and a desire to 

reach agency goals by the contracting personnel, it was asked if our 

firm might be the structural engineer of record with two larger 

structural firms with whom we are collaborating contracted to us 

and us to the prime contractor. This is unsatisfactory because not 

only are we not qualified to accept the level of responsibility or risk 

for the project size, we cannot obtain the professional liability insurance needed. 

Furthermore, the total structural engineering fees would exceed 

the normal level of annual fees and push us above the small business standard of 4.5 million. 

We would also pay in Virginia a gross receipts tax. 

With the approval of all the concerned parties we have now negotiated an appropriate scope of work for a fair and reasonable fee 

for a firm of our size. 

Several years ago at an industry— 

Chairwoman VELA ́ ZQUEZ. Mr. Woods, time has expired. You will 

have an opportunity in the question and answer period. 

Mr. WOODS. Thank you, ma’am. 

[The statement of Mr. Woods is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. I would like to ask all the witnesses do 

you believe that the 23 percent small business contracting goal 

should be raised? Ms. Hillmer? 

Ms. HILLMER. I say go ahead and raise it, but let us look at is 

a goal sufficient or should it be a requirement? Because by just 

having a goal, they strive to reach the goal but if they do not reach 

the goal, nothing happens to them. 

Chairwoman VELA ́ ZQUEZ. Mr. Brown? 

Mr. BROWN. Thank you for the question, Madam Chairwoman. 

I would concur with Ms. HIllner in the sense that it has been ten 

years since Public Law 106-50 was passed for small disabled veteran owned small businesses. And we’re only 2 percent there. So 

I think if it was raised, we could potentially look at expanding 

small business opportunities for veteran owned businesses. But we 

would like to get to 3 percent first. 

Thank you. 

Chairwoman VELA ́ ZQUEZ. Mr. Sprole? 

Mr. SPROLE. Thank you, Madam Chairwoman. 

I do not think there should be a goal at all because too often 

goals become ceilings. I think it is much better that the government work to unwind the maze of laws and regulations that make 

it so difficult for small businesses to compete on a level playing 

field and open up opportunity for businesses to earn the government contracts on their own. 

Chairwoman VELA ́ ZQUEZ. Mr. Denlinger? 

Mr. DENLINGER. Yes. As I explained in my testimony, we believe 

the goal should be substantially increased. There is no reason for 

the large businesses to receive three-quarters of the federal contracting dollar, especially when small businesses have demonstrated the ability to perform larger, more significant contracts. 

15 

Thank you. 

Ms. GENTILE. Yes, I believe the goals should be increased. However, I believe that we need to strive for more efforts to enforce the 

goal as the Department of Defense continues to get away with not 

reaching the goal and displaying our businesses. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Woods? 

Mr. WOODS. In our industry we would prefer that the contracting 

goals be based on dollars, not percentage of what is subcontracted 

out. Because what often happens is the contract may be worth $10 

million, but they only subcontract out a $100,000 to all of the small 

firms. There is really nothing there. But if we did it on the basis 

of dollars, much like the Metropolitan Washington Airport Authority, I think the goal might become meaningless. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Based on the testimony that we heard today, it is clear that contract bundling continues to be a major obstacle for small firms. So 

I asked for any of the members of the panel if you could make one 

suggestion for addressing contract bundling, what would it be? 

Ms. Gentile? 

Ms. GENTILE. I believe that there needs to be something written 

into the Defense Authorization Bill to totally displace contract bundling. It has not worked. When you team with people it does not 

work. The rules are not enforced by it. And they continually get 

away with renaming it so that it does not become a bundle. 

Chairwoman VELA ́ ZQUEZ. Mr. Woods? 

Mr. WOODS. We would prefer that rather than bundling, that we 

increase the number and the training of procurement professionals 

in the government. Because part of the reason that bundling occurs 

is that they don’t have sufficient resources or the time to write all 

of the contracts that would be necessary if they did not bundle. 

Chairwoman VELA ́ ZQUEZ. Mr. Denlinger? 

Mr. DENLINGER. Despite all the Committee’s good efforts with respect to controlling bundling, it really has not happened yet. Bundling continues at a pace. We do not have the ability to control it. 

If bundling is going to continue to take place, one of the things that 

we can do is require agencies that are bundling large contracts to 

set aside for competition among small businesses, 23 percent of 

each bundled contract. In other words every large bundled contract 

would have a small business prime contractor component that 

would ensure small business involvement. 

Chairwoman VELA ́ ZQUEZ. Mr. Sprole? 

Mr. SPROLE. If bundling is something that is likely to continue, 

I think the way that it has gone about should be changed so that 

it is viewed from a much higher level with an intent of focusing on 

the impact on the industrial base for any contracts that are selected for bundling. And if there’s not a valid reason for doing so, 

is to not put random contracts together in such that it freezes 

small companies out of the market. 

Chairwoman VELA ́ ZQUEZ. We also heard a lot of issues with subcontracting goals. Mr. Woods, can you elaborate on why this is such 

a problem for firms such as yours? 

Mr. WOODS. Well, as a small firm, quite frankly, we do not care 

in our industry whether we are prime or the subcontractor. What 

16 

we are looking for is a fair and reasonable amount of the work and 

an opportunity to perform. 

Chairwoman VELA ́ ZQUEZ. Okay. Some of you have raised the 

issue of the 3 percent withholding requirement. And I just would 

like to hear each one of you to just give me yes or no answer. 

I would like to ask you if you think that this requirement should 

be repealed before it goes into effect? 

Mr. Woods? 

Mr. WOODS. Absolutely. 

Ms. GENTILE. Yes. 

Mr. DENLINGER. Yes. 

Mr. SPROLE. Yes, Madam Chairwoman. 

Mr. BROWN. Yes. 

Ms. HILLMER. Yes. And I would like to enter for the record— 

Chairwoman VELA ́ ZQUEZ. Yes. 

Ms. HILLMER. —a letter from the Government Withholding Relief 

Coalition about this issue. 

Chairwoman VELA ́ ZQUEZ. Okay. Without objection, so ordered. 

[The attachment to Ms. Hillmer statement fellows:] 

Chairwoman VELA ́ ZQUEZ. Mr. Sprole, for a small company breaking into the GSA schedule can be a daunting experience. What sort 

of assistance should be available to small firms to be listed on the 

schedule? 

Mr. SPROLE. GSA should have dedicated assistant teams available to help small businesses through the process to become familiar with the requirements to work with the Federal Government 

and to expedite and to facilitate the development of small business 

contracting. 

Chairwoman VELA ́ ZQUEZ. Okay. Mr. Brown, currently GSA 

schedule are sent from the small business provision of the Federal 

Acquisition Regulation. Should small businesses set asides be explicitly applied to GSA federal supply schedule programs? 

Mr. BROWN. I think if they’re capable of carrying out the work 

and carrying out the contract, I do not see a problem with it. 

One of the things I would be hesitant about in regards to the federal supply schedule is that we also do not want to become completely reliant on the federal supply schedules to meet our goals. 

What happens, and I think we are starting to see some of that with 

the VA, is that they are concentrating on their goals through the 

federal supply schedule and the folks in small businesses who may 

not operate with goods that are on the federal supply schedule are 

cut out of other contracts. 

Chairwoman VELA ́ ZQUEZ. Do any of the other witnesses have any 

opinion on this matter? Mr. Woods? 

Mr. WOODS. The federal supply schedule does not apply to the 

architectural engineer field at all. We are selected on a qualifications-based method. 

Chairwoman VELA ́ ZQUEZ. And with that, I recognize the Ranking 

Member. 

Mr. GRAVES. Thank you, Madam Chairman. 

To each of your extents and if you do not have any idea, you do 

not have to comment, but to the extent that you know in terms of 

bundling do you know of cases where it has cost the Federal GovVerDate Aug 31 2005 10:30 Jun 25, 2010 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\55594JB.TXT DARIEN
17 

ernment more money or the taxpayers more money as a result of 

that bundled contract over time? Go ahead. 

Ms. GENTILE. The best thing I can tell you is that we know for 

a fact when you start with the pricing schedules, it goes between 

five to seven layers of mark-up by the time it goes to the government. We could sell it to the Federal Government direct, I will use 

an example for $25. But by the time it gets purchased by, and the 

experience we have with Initiative Supply Source, I would buy it 

from somebody who would sell it for $25. I will mark it up. Then 

I will in turn have to sell it to a company who is the procurement 

agency for the bundled award. They will mark it up. Who in turn 

sells it to the winner of the bundle, who marks it up. Who in turn 

sells it to DLA, who in turn will sell it to the Army. 

I cannot see how that can possibly save money for the Federal 

Government. 

Mr. GRAVES. Right. 

Mr. Woods? 

Mr. WOODS. There are certain agencies typically quasi, such as 

the Federal Reserve that will bundle services under a facilities 

management contract and make that contractor responsible for hiring the architects and engineers rather than selecting us under a 

qualification based procedure And we feel that that happens because they do not have the necessary expertise or the time to go 

through all of the contracting that might be required. 

Mr. GRAVES. Anyone else? 

Thanks, Madam Chair. 

Chairwoman VELA ́ ZQUEZ. Ms. Clarke? 

Ms. CLARKE. Thank you, Madam Chair and Ranking Member 

Graves for holding this really vitally important hearing. 

And I would also like to thank the assembled witnesses for sharing your perspectives with us on how we can improve the procurement environment for the engines of our economy, America’s small 

businesses. 

My question is for anyone who can answer on the panel. Recently 

the Court of Federal Claims held the Small Business Act requires 

opportunities to be set aside for HUBZone firms over firms that 

participate in other small business development programs. I think 

Congress must act to address the outcome of this case, which could 

likely be a chilling impact on procurement opportunities for nonHUBZone firms. 

I think it is important for Congress to make its intent clear that 

each of the specialized procurement programs at SBA must be on 

equal footing. 

What would be appropriate to address this parity issue, number 

one? And two, how quickly do you think this issue needs to be addressed and in your opinion is it important to act right away or can 

this wait 

Mr. BROWN. Well, Congresswoman, I would be happy to address 

your question, and thanks for it. 

Obviously this decision by GAO last year is very concerning to 

small disabled veteran and small businesses as it would put 

HUBZone above small disabled veteran owned small businesses in 

those situations where a contracting officer may be looking at givVerDate Aug 31 2005 10:30 Jun 25, 2010 Jkt 000000 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\55594JB.TXT DARIEN
18 

ing it to this one, or this one. So in that sense, we would hope that 

Congress would act immediately to address this issue. 

Ms. HILLMER. We are a HUBZone firm. And I actually believe 

that parity ought to be across the board. By putting one program 

above another program, no matter what program it is, 8(a), 

HUBZone, service disabled, I think we are creating an atmosphere 

where small businesses are fighting against each other for small 

pieces of the pie instead of putting them altogether and growing 

the pie in general. 

Mr. DENLINGER. Yes. LAMA and U.S. Hispanic Chamber of Commerce support that position entirely. It is time for there to be parity across all socioeconomic procurement programs, and that should 

be done as soon as possible. 

Thank you. 

Mr. WOODS. We would not want to see a preference for any small 

business group. In fact, one of our complaints is that contracting 

officers try to meet all of their goals on every single contract. And 

we recognize as business people that in certain geographical locations, that’s really not possible. But as long as they make an honest 

effort and demonstrate that, we do not have any problem with division. 

Ms. CLARKE. There is an ongoing challenge being faced by small 

business subcontractor which re-enforces barriers to freer access to 

the federal procurement space. Subcontractors are being listed by 

prime contractors to secure federal contracts, only to be cast aside 

once the contract has been awarded. Something has to be don to 

ensure that subcontractors, typically smaller firms, are treated 

fairly by the prime contractors, typically larger firms. And I understand that was part of the testimony heard here today. 

Have you found this to be a significant issue? If so, may I draw 

your and my colleagues attention to H.R. 4134. The Subcontractor 

Fairness Act of 2009. It’s a bill that I co-authored with William 

Lacy Clay to hold prime contractors accountable for subcontracting 

proposals that they submit as part of the federal contract bid in the 

civilian or defense contacts. 

Can you give me your feedback? 

Mr. DENLINGER. Yes. We salute you for that bill. We supported 

it right here in our testimony. It is the foundation for what we 

think is needed in the subcontracting arena. The key piece that has 

been missing for all of these decades has been a contract between 

the SDB and the prime. And we would simply add to your bill a 

provision that, along with identifying the subcontractors, the scope 

of work and the dollar value, the terms of the subcontract agreement be part of the legislation as well. Otherwise the primes subcontract with you for a while and then move you out. 

Ms. CLARKE. Thank you, Madam Chair. I yield back the balance 

of my time. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Luetkemeyer? 

Mr. LUETKEMEYER. Thank you, Madam Chairwoman. 

Mr. Sprole, I am just kind of curious in your particular area of 

aerospace are you competing against any foreign companies that 

come in and bid on these aerospace contracts for small business 

now? 

19 

Mr. SPROLE. Yes. You know, the companies you know that we 

compete against are based in various parts of the world on defense 

articles and we have won and lost various contracts against companies in Israel and other countries. 

Mr. LUETKEMEYER. What percentage of the contracts do you believe that are small business contracts are given to companies that 

are foreign-based or foreign owned, or whatever? 

Mr. SPROLE. I would not be able to venture a guess on that. But 

we could try to get— 

Mr. LUETKEMEYER. Significant or just a few here or there? 

Mr. SPROLE. I think it is significant if you look at the entire 

amount that would be eligible for small companies to bid on this. 

Mr. LUETKEMEYER. Do you buy parts from any foreign entities? 

Mr. SPROLE. No. 

Mr. LUETKEMEYER. Ms. Gentile? 

Ms. GENTILE. We do not want to cross in our contract bundling 

because of DoD, we do not want to cross a lot of foreign companies. 

Some of the NATO we do buy parts periodically from some of the 

NATO countries. 

Mr. LUETKEMEYER. Yes. 

Ms. GENTILE. I am sure that the bulk of what we do and what 

we run across and what we see bundled are basically American 

made product. 

Mr. LUETKEMEYER. Ms. Hillmer? No. Do not have any experience 

with that? 

Ms. HILLMER. No, I do not. 

Mr. LUETKEMEYER. Okay. Mr. Brown? 

Mr. BROWN. Congressman, all of our veterans are American 

made, so— 

Mr. LUETKEMEYER. I am talking about competing, when you bid 

for something that whatever the item is that you are bidding for 

or the contractor bidding for, how much competition do you see 

from foreign entities? 

Mr. BROWN. Between our veteran-owned small businesses I 

would not be able to venture a guess into their competition. 

Mr. LUETKEMEYER. Well, thank you for your service, sir. Appreciate your efforts and all your sacrifices for our country. 

Okay. I am just kind of curious as well with enforcement. I sit 

on another Committee, Oversight and Government Reform, and the 

other day we were talking in that Committee about the problem 

with a lot of the contractors who, for one reason or another, have 

violations of one kind or another and the lack of enforcement by 

the government on these people when we find them to be in violation of whatever. It could be they themselves have felony records, 

it could be the contract itself were not performed up to standards, 

and yet, they are given another contract. 

Have you seen that in your businesses? How much activity do 

you see along that line, a competition of people who have those 

kinds of problems, where there is not enforcement action taken to 

take them out of the picture? And again, you have to compete 

against that type of company over and over again. Have you seen 

any of that? At all, any of you? 

Ms. GENTILE. I think we see in the contract bundling arena that 

some of the large contractors continue to get fined by the Federal 

20 

Government, they continue to be in violation of what some of the 

regulations are, they continue to intimidate the small businesses in 

numerous cases, but they continue to win the bundles. And nothing 

seems to be enforced by it. 

Mr. LUETKEMEYER. Who is the enforcer in your situation? Who 

should be the enforcement in that? 

Ms. GENTILE. I believe it should be the Defense Logistics Agency 

because they are the ones that are mandating the bundles that are 

coming out of Defense Supply Center in Columbus, Ohio. 

Mr. LUETKEMEYER. Have any of you lost a contract as a result 

of bundling by a larger contractor who sort of squeezed you out of 

the process? 

Ms. GENTILE. Absolutely. 

Mr. LUETKEMEYER. Anybody else? All of you have? What was the 

result of that? Did you go back and complain? Did you file a complaint with the proper authorities or did you go back to the contractor and say, hey, you are not doing things as per the rules and, 

therefore, make sure you contact me next time? Or what kind of 

action did you take? Any at all? 

Ms. Hillmer? 

Ms. HILLMER. Well, I would like to tell you about an experience 

I had with the United States Army. And they bundled some contracts together and a large prime contacted us and said ‘‘Oh, we 

need you on our team, HUBZone, check that box.’’ And so we joined 

their team. And they won the contract along with several other 

large primes. And we have not seen a single task order come out 

because the prime collects the task orders and the prime decides 

who on the team gets them. So I do not even get to see any of the 

work that comes out. And I used to have a significant amount of 

business in the Army, and now that has gone way down because 

all of the work that I was doing is coming out on these task orders 

and the prime is taking them. 

Mr. LUETKEMEYER. Did you get paid anything at all? In other 

words, just to lend your support to this, your name to this? 

Ms. HILLMER. No. 

Mr. LUETKEMEYER. No? You are just — 

Chairwoman VELA ́ ZQUEZ. Would the gentlemen yield? 

Mr. LUETKEMEYER. Sure. 

Chairwoman VELA ́ ZQUEZ. But you incurred a lot of expenses, 

didn’t you anytime that you want to participate in any of this subcontracting with prime? 

Ms. HILLMER. We did incur expenses, yes. 

Mr. LUETKEMEYER. I assume you had to go through the bid process— 

Chairwoman VELA ́ ZQUEZ. Thank you for yielding. 

Mr. LUETKEMEYER. —therefore you incurred quite a bit of time 

and expense just to put your bid together. 

Ms. HILLMER. That is correct. 

Mr. LUETKEMEYER. And you were not paid for that at all? So you 

are out all of this really? 

Ms. HILLMER. Plus the business that I used to have. 

Mr. LUETKEMEYER. I see I am over my time. 

Thank you, Madam Chair. 

21 

Chairwoman VELA ́ ZQUEZ. Mr. Denlinger, I have some other questions that I would like to ask now to the witnesses. SBA has proposed a rule for the 8(a) program that would adjust how assets, 

gross income and retirement segments are assessed when determining whether a company is economically disadvantaged. Are 

these changes enough or does Congress need to raise the net worth 

standard? 

Mr. DENLINGER. Thank you. 

We have been advocating for an increase in the net worth standards for many years, as you know. This is actually a step in the 

right direction. We salute that. 

We would have to take a look at the extent to which that provision would broadly affect all applicants. Not everyone coming into 

the 8(a) program has a nice retirement fund sitting there. Most 

come in from having scrapped in the small business arena and do 

not have a lot of capital along those lines. So it would be helpful, 

but we do not think it is the complete answer. 

Chairwoman VELA ́ ZQUEZ. And also you gave an example in your 

testimony where you talk about a small business that sold itself 

immediately after winning a long term contract. And you pointed 

out that the contract and others like it will distort agency goal 

achievements for years to come. In your mind, what is the appropriate response to that kind of situation? 

Mr. DENLINGER. Well, that is a real tough one. You start from 

the premise that we just cannot count a small business award that 

transforms into a large business award within the month from the 

small business award having been made, and count that as a small 

business award for the next ten years. There has to be a cut off 

at some point. 

I would not necessarily say cut it off immediately, but maybe because that puts the awarding agency at a great difficulty, we recognize that. So maybe a three year limit, or something like that, or 

a declining allocation toward small business. But to count that as 

a small business award for ten years is totally unacceptable. 

Chairwoman VELA ́ ZQUEZ. Mr. Brown, multiple agency awards 

such as government-wide acquisition contracts have grown significantly in the last decade. And while small firms have participated 

in some of these efforts, others have been closed out of lucrative 

contracts. 

In order to ensure that small firms are not overlooked, should 

Congress consider creating multiple agency award goals for small 

businesses? 

Mr. BROWN. Thank you for the question, Chairwoman. 

I believe it could be helpful in trying to reach the 3 percent goal 

for small disabled veteran owned small businesses. So I think if it 

marches us in that direction, if it opens up these contracts for 

small businesses, then I don’t see an issue with it. 

Chairwoman VELA ́ ZQUEZ. Do you think that we should go even 

further than a goal and establish a multiple agency award small 

business program? 

Mr. BROWN. I think that that would help with the oversight of 

trying to reach the goals that you would be trying to reach with 

that. So I think that that could be helpful as well. 

22 

Chairwoman VELA ́ ZQUEZ. Okay. Mr. Graves, any other questions? 

Okay. 

Well, again, I want to take the opportunity to thank all of you 

for being here today. And we are going to continue studying the different issues as they relate to the federal contracting practices in 

the federal marketplace. 

So I ask unanimous consent to enter stories and testimonies into 

the record regarding the disparities facing small and disadvantaged 

firms. Hearing no objection, so ordered. 

In addition, I ask unanimous consent that members will have 

five days to submit a statement and supporting materials for the 

record. Without objection, so ordered. 

This hearing is now adjourned. Thank you. 

[Whereupon, at 2:18 p.m. the Subcommittee was adjourned.] 

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Æ