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81-834 PDF 2002

S. HRG. 107-686

ARE GOVERNMENT PURCHASING POLICIES

FAILING SMALL BUSINESS?

ROUNDTABLE

BEFORE THE

COMMITTEE ON SMALL BUSINESS AND

ENTREPRENEURSHIP

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

JUNE 19, 2002

Printed for the Committee on Small Business and Entrepreneurship

(

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

(II)

COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

ONE HUNDRED SEVENTH CONGRESS

JOHN F. KERRY, Massachusetts, Chairman

CARL LEVIN, Michigan

TOM HARKIN, Iowa

JOSEPH I. LIEBERMAN, Connecticut

PAUL D. WELLSTONE, Minnesota

MAX CLELAND, Georgia

MARY LANDRIEU, Louisiana

JOHN EDWARDS, North Carolina

MARIA CANTWELL, Washington

JEAN CARNAHAN, Missouri

CHRISTOPHER S. BOND, Missouri

CONRAD BURNS, Montana

ROBERT F. BENNETT, Utah

OLYMPIA J. SNOWE, Maine

MICHAEL ENZI, Wyoming

PETER G. FITZGERALD, Illinois

MIKE CRAPO, Idaho

GEORGE ALLEN, Virginia

JOHN ENSIGN, Nevada

PATRICIA R. FORBES, Democratic Staff Director and Chief Counsel

EMILIA DISANTO, Republican Staff Director

PAUL H. COOKSEY, Republican Chief Counsel

(III)

CONTENTS

OPENING STATEMENTS

Page

Kerry, The Honorable John F., Chairman, Committee on Small Business

and Entrepreneurship, and a United Sates Senator from Massachusetts ...... 1

Carnahan, The Honorable Jean, a United States Senator from Missouri .......... 21

Bond, The Honorable Christopher S., Ranking Member, Committee on Small

Business and Entrepreneurship, and a United States Senator from Missouri ....................................................................................................................... 09

WITNESS TESTIMONY

App, Steven, deputy chief financial officer, Department of the Treasury,

Washington, D.C. ................................................................................................. *

Armendariz, Fred, associate deputy administrator, Office of Government Contracting and Business Development, U.S. Small Business Administration,

Washington, D.C. ................................................................................................. *

Allen, Susan, president and CEO, US Pan Asian American Chamber of Commerce, Washington, D.C. ..................................................................................... *

Clark, Major, assistant advocate for procurement, U.S. Small Business Administration, Office of Advocacy, Washington, D.C. ......................................... *

Denlinger, Stephen, president and CEO, Latin American Management Association, Washington, D.C. .................................................................................... *

Henry, Major General Charles, U.S.A. (Ret.), president and CEO, National

Veterans Business Development Corporation, Alexandria, VA ....................... *

Hudson, Morris, program director, Missouri Procurement Technical Assistance Centers, Columbia, MO .............................................................................. *

Kasoff, Barbara, vice president, Women Impacting Public Policy, Oklahoma

City, OK ................................................................................................................ *

Mazza, Pamela, senior partner, Piliero, Mazza & Pargament, Washington,

D.C. ........................................................................................................................ *

Newlan, Ron, chairman, HubZone Contractors National Council, Alexandria,

VA .......................................................................................................................... *

Parker, Patricia, president and CEO, Native American Management Services,

Inc., McLean, VA .................................................................................................. *

Payne, Joann, president, Women First National Legislative Committee,

Washington, D.C. ................................................................................................. *

Robinson, Michael, program manager, Massachusetts Small Business Development Centers, University of Massachusetts, Amherst, MA ......................... *

Rodriguez, Ramon, chief operating officer, U.S. Hispanic Chamber of Commerce, Washington, D.C. ..................................................................................... *

Styles, The Honorable Angela B., administrator for Federal procurement policy, Office of Management and Budget, Washington, D.C. ............................... *

Thomas, Ralph III, associate administrator for OSDBU, National Aeronautics

and Space Administration, Washington, D.C. ................................................... *

Turner, John, Minority Business Enterprise Legal Defense and Education

Fund, Washington, D.C. ...................................................................................... *

Turpin, James, director, Government and Industry Relations, American Subcontractors Association, Inc., Alexandria, VA .................................................... *

Wilfong, Henry, president, National Association of Small Disadvantaged Businesses, Silver Spring, MD ................................................................................... *

Page

IV

PREPARED TESTIMONY AND APPENDIX MATERIAL SUBMITTED

Kerry, The Honorable John F.

Opening statement ........................................................................................... 1

Prepared statement .......................................................................................... 44

Letters for the Record ...................................................................................... 87

S. 1994 analysis and text ................................................................................. 62

S. 2466 analysis and text ................................................................................. 68

Analysis and Discussion draft of the ‘‘Small and Disadvantaged Business

Ombudsman Act’’ .......................................................................................... 77

Armendariz, Fred

Prepared Testimony ......................................................................................... 96

Report of Annual Procurement Preference Goaling Achievements .............. 98

Black, Ed, president and CEO, Computer & Communications Industry Association, Washington, D.C., letter and comments for the record ....................... 99

Bollinger, John, deputy executive director, Paralyzed Veterans of America,

Washington, D.C., comments for the record ...................................................... 104

Denlinger, Stephen

Prepared Testimony ......................................................................................... 111

Henry, Major General Charles

Prepared Testimony ......................................................................................... 112

Hudson, Morris

Prepared Testimony ......................................................................................... 116

Kasoff, Barbara

Prepared Testimony ......................................................................................... 123

Newlan, Ronald

Prepared Testimony ......................................................................................... 128

Payne, Joann

Prepared Testimony ......................................................................................... 131

Turpin, James

Prepared Testimony ......................................................................................... 141

Wilfong, Henry

Prepared Testimony ......................................................................................... 155

Wilson, Don, president, Association of Small Business Development Centers,

Birke, VA, letter ................................................................................................... 159

* Comments, if any, are located between pages 6 and 41.

(1)

ROUNDTABLE: ‘‘ARE GOVERNMENT PURCHASING POLICIES FAILING SMALL BUSINESS?’’

WEDNESDAY, JUNE 19, 2002

UNITED STATES SENATE,

COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP,

Washington, D.C.

The Committee met, pursuant to notice, at 9:11 a.m., in room

428–A, Russell Senate Office Building, The Honorable John F.

Kerry, (Chairman of the Committee) presiding.

Present: Senators Kerry, Carnahan, and Bond.

OPENING STATEMENT OF THE HONORABLE JOHN F. KERRY,

CHAIRMAN, SENATE COMMITTEE ON SMALL BUSINESS AND

ENTREPRENEURSHIP, AND A UNITED STATES SENATOR

FROM MASSACHUSETTS

Chairman KERRY. This is the most orderly group I have ever had

to gavel to order.

[Laughter.]

Chairman KERRY. Thank you all. Good morning, everybody.

[Chorus of good mornings.]

Chairman KERRY. Great. We are awake. I love it.

Thank you very much. I really appreciate everybody taking time

to come in, and thank you so much for participating in another

roundtable and what we consider to be a very important one, and

I thank you for taking part in this.

We are, as you all know, here today to examine, in our roundtable format, which we have found extraordinarily effective, the

question of whether or not Government purchasing policies are

hurting small businesses. I wish the title were different. I wish we

were here to examine how well we are doing and how much

progress we have made, but sadly there is just a disconnect. We

are talking a lot these days about the culture of the FBI and the

CIA. Regrettably, there is a poor culture in Government surrounding procurement. There is a culture problem, to a large degree, an awareness problem, a caring problem, and I think, to some

measure, my own personal opinion is it is an expediency problem.

I think people sort of have this sense, well, I do not want to spend

time dealing with a lot of small businesses or I do not think they

will do it as well for us. Let us just get one big package, and get

this off our plate. I mean, there is a mentality about it.

We need to think through how we are going to deal with this.

We cannot have the Federal Government spending billions, hunVerDate 11-MAY-2000 10:41 Nov 21, 2002 Jkt 081834 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\SBA\81834.TXT SSC3 PsN: SSC3
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dreds of billions of dollars, and not try to proactively reach out and

share the pie. I mean, you just cannot do that, and there are so

many goals contained in what we are trying to do, as we do this,

in terms of growing small businesses, diversifying, allowing people

to enter the business world who might not otherwise have easy access, particularly women-owned businesses.

So I think this is imperative, and I think we have to acknowledge here today, I think, that one of the foundation premises of

this discussion is that the procurement reform, as it was so-called

of the early 1990s, simply has not adequately protected small business. There are actions such as contract bundling, increased use of

GSA supply schedule cutbacks in the procurement personnel, as

well as limitations on certain procurement programs in response to

the Adarand decision, all of which have had a devastating impact,

and I underscore that, a devastating impact on small business and

their ability to do business with the Federal Government. I am

sorry about that.

We have some folks here particularly to sort of try to explain

some of this from the administrative point of view, but we really

need a major change in how we are thinking about this, and we

have got to figure out how we are going to do that. Until the Federal Government, at all levels, realizes the importance of doing

business with small business, I am afraid that these negative

trends are going to continue, and we will not have the access that

we seek on a national basis for a wide range of small business suppliers across the country, and they will continue to lose billions of

dollars in opportunities year after year.

In your packets that have been handed out by our staff, there are

a series of charts which detail the Federal Government achievement on small business or lack of achievement on small business

prime contracting goals, and you will see that the news is not encouraging. Most striking is the failure, for the second year in a row,

to meet the main small business prime contracting goal of 23 percent. It should not be that hard.

[The chart follows:]

3

4

Chairman KERRY. Equally troubling, I mean, if you have the intent to do it, if you are determined to do it, you can meet the goal,

and if you have some kind of enforcement mechanism, and if you

care about it. If you do not care about it and you just kind of let

it slide into the backwaters of your efforts, then you are where we

are. It is a lack of leadership, a lack of effort and a lack of caring,

and we have got to underscore this.

You also see in the charts the near failure of the HUBZone and

Disabled Veteran-Owned Small Business Procurement programs,

with respect to goal attainment, as well as the lack of any real increase in women-owned small business participation in Government procurement.

We were bragging a few years ago about the incredible increase

of women in small business, and here we are seeing just sort of a

casual disregard for the capacity to continue that, and I think it

is shameful. I would also point out that the Administration’s delay

in implementing the provisions of the fiscal year 2000 Small Business Reauthorization Act, creating the Women’s Procurement Program, has also played a key role in keeping women-owned small

businesses out of the Federal marketplace last year. I hope some

of you will talk about that today.

So we have a diverse group of people here with extensive knowledge of Government Small Business Procurement programs. I am

grateful Angela Styles is going to be joining us from the Office of

Federal Procurement Policy, and we have SBA Associate Deputy

Administrator for Government Contracting, Fred Armendariz, and

from the program side we have a number of representatives of

Small Business’s procurement offices at several Federal agencies,

including the Procurement Technical Assistance Center representatives. We also have a number of advocates and business owners

who work with participants in these procurement programs.

Now it is my hope that today’s discussion will be both thorough

and constructive. We are not here to, I mean, you have got to state

the problem, and I am trying to be honest in stating the problem,

but I take no pleasure out of sort of a berating session. I mean, it

just does not get us anywhere, and that is not what this is about.

This is an effort to sort of figure out how do we turn this corner,

how do we set where we ought to be.

It is my hope that this discussion is going to accomplish that,

and we look forward to receiving your input on some of the legislation that is in front of the Committee at this point in time, especially the draft of the Small and Disadvantaged Business Ombudsman Act.

[The legislation and analyses are located in the appendix on p.

77].

Chairman KERRY. I understand that no one piece of legislation

is going to cure all of small business’s problems. It never could. But

on the other hand, it gives you the tools to be able to advance the

process, and I think that the creation of the SDB ombudsman at

the SBA will put us on a better track, in terms of isolating and focusing on the procurement issues and providing a mechanism for

people to be able to come to somebody without fear of retribution.

One of the reasons that we have not really had an ability for

companies to sort of fight for themselves is that the minute they

5

do, they are blackballed. So you raise your voice and say, ‘‘Hey,

wait a minute, what is happening here?’’ And you think that next

contract down the road is gone forever because you were the skunk

at the garden party. We all know how it works, and we have got

to provide some kind of capacity for people to be able to advocate

here.

This ombudsman I think has the ability to do that, to track complaints, to do it on a confidential basis and to try to help make the

process work. Of critical importance in this is the first statutory

consequence of an agency failing to meet its goals. We have to have

some consequence. You cannot just slide by and have nothing happen. So our hope is that any agency that fails to meet their goal

will be required to submit a report, and there will be a visible sort

of airing of their having missed the goal and of what they are going

to do to remedy it. They have to specifically submit that plan to

remedy and detail why they failed to meet their business goal so

that we can address those concerns.

The ombudsman will also be responsible for tracking compliance

with Section K of the Small Business Act, which stipulates that the

Director of the Office of Small and Disadvantaged Business Utilization at each Federal agency will report to the head or deputy head

of that agency.

Late last year, with the support of Senator Bond, the Ranking

Member, I sent a letter to 21 Federal agencies to gauge compliance

with this provision, and using a very lenient standard of compliance, we have concluded that at least nine of the Federal agencies

we surveyed are in violation of Section K of the Small Business

Act. That is simply unacceptable. So later this week, I will be forwarding those survey results to the GAO so that it can perform a

more detailed investigation.

[The letter can be found on page 87.]

Chairman KERRY. One final note on the legislation is the conclusion of a provision to increase the Governmental Small Business

Prime Contracting Procurement Goal from 23 percent to 30 percent. When I first made the suggestion that the Small Business

Procurement Goal should be increased 7 percentage points, my office received a number of calls, both in support and in opposition,

but, by and large, those in opposition pointed to the fact that the

Federal Government has never achieved such a level of business

procurement participation, and while that is true, no one said it

was impossible. So it is simply a question of what is our goal?

Ninety-nine percent of the businesses in America are small business. Fifty-two percent of American workers work in what is defined as a small business. Are we to believe that when the Federal

Government is spending money, we do not have the ability to

achieve the goal of 30-percent businesses having access to that

kind of procurement? What that does is provide enormous strength

to the small business community, and I think it is a mark of the

Federal Government’s confidence and belief in the ability of these

businesses to meet the standards and do the job.

Obviously, we all know here, if they cannot do it, if there is a

lack of availability, there is all the capacity in the procurement

process to take note of that. Nobody is required to buy something

from somebody who does not have it. Nobody is required to buy

6

something that does not meet the standards. Nobody is required to

buy something that does not do the job or that puts people at risk

or that does anything contrary to good procurement policy. That is

not the purpose of this.

There is no diminution of standards or quality in what we are

seeking to do. It is simply saying that all things being equal, we

want the small business community to be able to share, and we

ought to be able to do that.

I think that that is probably the outline, as much as I would like

to go into it at this point in time. We will discuss two other important pieces of legislation: S. 1994, the Combined 8(a) and HUBZone

Priority Preference Act, and S. 2466, the Small Business Federal

Contractor Safeguard Act. I think everybody understands what

those bills do and what we are trying to do with them.

Chairman KERRY. So, without further ado, Senator Bond is 5

minutes away.

Let me just run through sort of how we are going to work this.

How many of you have taken part in one of the roundtables before?

Several of you—OK, so you are pretty experienced and versed in

this.

For those of you who have not—let me just ask you, when you

intervene, as we invite you to do, in my absence or Senator Bond’s

absence, our staffs will run the show, and they have done so with

great ability in the past events, and we have a full record which

is then made part of the record of the Committee.

But, please, just state your name clearly. This is an official proceeding. There is a court reporter who is taking down everybody’s

statements, et cetera, to be part of that record. If you want to

speak, just flip your card up on its side, and then they will take

note of you as we go along here.

Again, if we can try to contain the comments so there is a good

dialogue and not long speeches, I think that is very helpful in

terms of making this more rewarding and more of a dialogue, rather than sort of a long series of soliloquies.

John DaSilva, of my staff, and Cordell Smith, of Senator Bond’s

staff, will act as the facilitators. So why do we not just run around

very quickly. Everybody just introduce themselves, say who you

are, and then we will sort of open up.

Mr. SMITH. Hi, I am Cordell Smith. I am with Senator Bond’s

staff.

Mr. APP. Steve App, Deputy Chief Financial Officer at Treasury.

Mr. ARMENDARIZ. Fred Armendariz, Associate Deputy Administrator from the U.S. Small Business Administration.

Ms. ALLEN. Susan Allen, president and CEO of the U.S. Pan

Asian American Chamber of Commerce, hoping to represent the

one million Asian-owned businesses in the country.

Mr. CLARK. Good morning. Major Clark, Office of Advocacy, U.S.

Small Business Administration.

Mr. DENLINGER. Steve Denlinger, president of LAMA, Latin

American Management Association.

General HENRY. Chuck Henry, president and CEO of the National Veterans Business Development Corporation, representing,

hopefully, 2.4 million veteran owners.

7

Mr. HUDSON. Morris Hudson, program director, Missouri Procurement Technical Assistance Center, also president-elect of the

Association of Government Marketing Assistance Specialists.

Ms. KASOFF. Barbara Kasoff, co-founder and vice president of

Women Impacting Public Policy.

Ms. MAZZA. I am Pam Mazza, with the law firm of Piliero, Mazza

& Pargament. I am a Government contracts attorney, and our firm

represents small businesses in the 8(a) program, the HUBZone program, women-owned businesses, graduates, and other small businesses.

Mr. NEWLAN. Ron Newlan, chairman of the HUBZone Contractors National Council, representing all HUBZone firms nationwide.

Ms. PARKER. Patricia Parker. I am president and CEO of Native

American Management Services, and I am also here representing

the National Indian Business Association and a founding partner

of Women Impacting Public Policy.

Ms. PAYNE. I am Joann Payne. I am president of Women First

National Legislative Committee, and I represent those women certified in the Disadvantaged Business Enterprise program, administered by the Department of Transportation, and I might add the

most successful program we have.

Mr. ROBINSON. Hi. I am Michael Robinson, program manager at

the Massachusetts Procurement Technical Assistance Center.

Mr. RODRIGUEZ. Good morning, Senator. Ramon Rodriguez. I am

the chief operating officer of the U.S. Hispanic Chamber of Commerce, representing approximately 1.8 million Hispanic-owned

businesses in the country.

Mr. THOMAS. I am Ralph Thomas. I am assistant administrator

for Small and Disadvantaged Business Utilization at NASA, and I

am also the chairman of the Federal Small Business Directors

Interagency Council.

Mr. TURNER. Good morning, Senator. My name is John Turner,

Jr. I am director of Special Projects for the Minority Business Enterprise Legal Defense and Education Fund, an organization founded in 1980 by former Maryland Congressman Parren Mitchell. I am

representing Anthony Robinson, our president, who had pressing

family business today.

Both Anthony Robinson and former Congressman Parren Mitchell asked me, as a preliminary matter, to commend your interest,

concern and support for the minority business community. We have

seen firsthand the work you have done in Massachusetts, and especially in Boston.

Mr. TURPIN. Good morning, Senator. My name is James Turpin,

and I represent the American Subcontractors Association, a trade

association representing subcontractors and specialty trade contractors in the construction industry.

Mr. WILFONG. Good morning, Senator. My name is Hank

Wilfong, president of the National Association of Small Disadvantaged Businesses. We are about 300-strong around the country,

dealing primarily with the aerospace defense industry. One of the

things I wanted to do was to compliment you on the Ombudsman

bill. I think it is awesome. I have reviewed it and re-reviewed it,

and I think it is awesome and will help do a lot of the things that

need to be done.

8

Also, I want to personally thank you for your putting that letter,

the SDB set-aside letter that you wrote to SBA. I am sorry it did

not come out exactly like we would have liked to have done, but

I appreciate your having done it, and I wish we could send it again.

Ms. FORBES. I am Patty Forbes. I am the Chairman’s staff director on this Committee.

Mr. DASILVA. I am John DaSilva. I work for Senator Kerry on

the Committee, handling procurement issues.

Chairman KERRY. Well, thank you all very, very much.

Those of you who commended me will be placed high on a special

list here.

[Laughter.]

Chairman KERRY. Thank you very much. Thanks for the comments.

So why do we not start off. I know Senator Bond is on his way.

We are going to interrupt when he comes, and I have a 9:30 that

I am supposed to be at, but I will stay until he gets here.

Who would like to lead off? Do you have a specific——

Ms. ALLEN. I would.

Chairman KERRY. Before you do, let me try to—and we will come

back to you, Susan, in 1 second.

Is there something inherent—let me just sort of put this question

on the table, if I can, as a beginning point—is there something inherent in the procurement process itself that is a stumbling block

to the ability to be able to do better or, I mean, what would each

of you say is the principal reason, if there is one principal reason

that leaps out at you, for why we are not meeting this goal or not

able to. Can we start there?

Ms. ALLEN. I think it is lack of transparency, the complication

of the process. Nowadays, when the small businesses, particularly

our constituents, and we hear a lot from them, they were told, if

you want to participate in the Federal contracting process, go to

our website, and they hire a full-time staff, they hire another fulltime staff, they just do not have enough money to hire the staff to

go search on the website, and that is one major obstacle.

Small businesses, and this is the point I wanted to make when

I volunteered to start to lead this off, have been extolled for nearly

20 years as the backbone of the American economy. We created

more jobs than all Fortune 500 companies combined. We are the

risk-takers, we are the innovators, and yet now with the contract

bundling practice, it is hurting them. It is bundling them out of the

table, and I just want to bring a new perspective because I am sure

later I will be hearing, Senator Kerry, a lot about the other issues

that have affected why small businesses are having less and less

portion of the contracting businesses.

Remember, in the 1980s, how we used to hear Japan is the country who could say, ‘‘no’’? One very arrogant Japanese politician in

Japan wrote a book and said, ‘‘Japan is the country that could say

no.’’

Well, Japan has been run by a handful of major corporations,

mega corporations, and that is what we call Japan, Inc. Look at

Japan today, these keiretsus, which is analogous to our bundled

corporations, have brought Japan’s economy to its knees, and we

do not want to be the keiretsu of Japan. I think the lack of transVerDate 11-MAY-2000 10:41 Nov 21, 2002 Jkt 081834 PO 00000 Frm 00012 Fmt 6633 Sfmt 6601 C:\SBA\81834.TXT SSC3 PsN: SSC3
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parency, the lack of accountability, the lack of innovation in major

corporations who no longer do as much R&D as they used to, they

wait for their small businesses to take the risk, and invent the

processes and products, and then the major corporations come in

like Pac-Man, they eat them up, and with the Federal procurement

process it is so complicated, it is like a maze. If we can simplify

the process, do not just go to the small business and tell them go

surf our website, that will be a major step.

Chairman KERRY. So three things. You need a contact person

that helps make it happen; you need transparency——

Ms. ALLEN. Accountability.

Chairman KERRY. And accountability.

Ms. ALLEN. It is not just the major contractors, but make the

subcontractors come up with the report, and some have even suggested—OMB held a public hearing last Friday and suggested that

their future contracts be tied to their performance. Of course, as

you said, we should award contracts according to merit and not for

the sake of goals.

Chairman KERRY. Good comments.

Before we go further, and, General, we will come back to you, I

said we would interrupt when Senator Bond got here. He is now

here, and I would like to turn the floor over to Senator Bond for

his opening comments.

OPENING STATEMENT OF THE HONORABLE CHRISTOPHER S.

BOND, A UNITED STATES SENATOR FROM MISSOURI

Senator BOND. Mr. Chairman, thank you. I apologize. This is one

of those days. This is the ‘‘Perfect Storm,’’ when I had a couple of

items this morning and a hearing in the Health, Education, Labor

and Pensions Committee going on all at once, but I commend you

for taking the lead in this, Mr. Chairman, and I welcome our procurement roundtable. Because, as I think everybody knows now,

this Committee has had a long-standing interest in ensuring that

small business has the ‘‘maximum practicable opportunity to participate,’’ in the words of the Small Business Act, in government

contracting, and certainly Susan has just given a very good reason

why this small business participation is so important.

First, I want to recognize my Missouri constituent, Morris Hudson, who has joined us today. He heads the Procurement Technical

Assistance Center at the University of Missouri and is the president-elect of the national professional association for PTAC staff,

the Association of Government Marketing Assistance Specialists.

I want to say a special word of greeting, also, to Angela Styles,

the Administrator of the Office of Federal Procurement Policy for

President Bush. In March, the President personally stated his commitment to tackle the problem contract bundling, and Angela has

been the point person in trying to convert that commitment into

specific policy steps. Unfortunately, around here, when you are the

point person, you are also the point target.

[Laughter.]

Senator BOND. There have been some anonymous sources making anonymous comments about her actions in the area, and one

anonymous critic was dismayed that Angela bought into the ‘‘myth’’

that bundling has hurt small business, suggesting Angela was purVerDate 11-MAY-2000 10:41 Nov 21, 2002 Jkt 081834 PO 00000 Frm 00013 Fmt 6633 Sfmt 6601 C:\SBA\81834.TXT SSC3 PsN: SSC3
10

suing this issue out of personal motives, rather than as an Administration initiative.

Well, I have heard the President, in his own words, say from his

own heart, that this is a problem. So, Angela, you must be doing

something right. I have the analogy we used to use back home. If

you throw a rock into a pack of dogs, you know the one that has

been hit because that is the one that barks, and if they howl, you

know that you must be doing something right.

But we are looking forward to a good discussion today about bundling. We need to know the state of play on the Administration’s

initiative, as well as the reaction to the bill that Chairman Kerry

and I have introduced. We came close in last year’s defense authorization on agreement to tighten the current law, but our bill is

going to build on that language.

I also want to welcome Ron Newlan of the HUBZone Contractors

National Council. Ron has some concerns about the bill that Chairman Kerry and I introduced to provide a super-preference for firms

that are both HUBZone and 8(a) program participants. I share the

view that a 20-percent price evaluation preference, 10 percent for

each program added together, is probably too high.

Ron also has some concerns about some of the bill language from

set-asides. For example, the bill says when bills are being sought

just from HUBZone firms, a HUBZone set-aside, and a HUBZone

firm that is also 8(a) is bidding, that firm should get the preference

when it submits a bid comparable to one from a non-8(a) HUBZone

firm, but ‘‘comparable’’ is the rub.

So we need to hear these kinds of criticisms and suggestions.

That is what we are here to do in this roundtable, to learn how we

can make legislation better, how we can deal with the problems we

find.

We have draft bill language in front of us. The Chairman’s idea

is to create a Small and Disadvantaged Business Ombudsman at

SBA. I want to hear your views on this. I want to know your

thoughts to see which way I go. But a strong piece of the bill is

the requirement that agencies negotiate plans to achieve the small

business participation goals. Instead of just failing to meet the

goals every year, let us find some way that we can get them done.

Whether that requires a new position in SBA or whether the task

can be handled by the Associate Deputy Administrator, that is one

of the questions.

The bill would also increase the small business goal from 23 percent to 30 percent. Thirty percent sounds better than 23 percent,

but when you are not getting 23 percent done, what do you need

to do? My view is that let us get to the first goal first before we

worry about trying to raise the goal when we are not getting the

performance we need.

So these are some of the things that I hope that you will get out

on the table, and I apologize that I am not going to be able to be

with you today because we have got—we are going to be talking

about ergonomics in the HELP Committee, and some of you in

small business have spoken to us about ergonomics in the past. So

I am going to go see if we can make sure that that comes out well.

But, again, Mr. Chairman, thanks for your leadership. Thanks to

all of you for joining us today.

11

Chairman KERRY. Thank you, Senator Bond. Let me just acknowledge that I appreciate particularly Michael Robinson coming

down from Massachusetts from the Procurement Technical Assistance Center there. I understand the skepticism, and I mentioned

it, Senator, before you got here, about sort of moving the goal when

we acknowledge we are not where we are, but it is a little bit like,

if you change your culture and you actually put in place the kinds

of tools necessary to get somewhere, sort of like changing a team,

you know, you get a new coach who comes in and says, ‘‘I do not

care about your less-than-winning-ways last year.’’ We are going to

set a new goal, and this is how we are going to achieve it, and that

is how you create a Super Bowl team. That is how you turn people

around is by raising the standards and moving further.

Senator BOND. OK. OK.

[Laughter.]

Senator BOND. All right, the Patriots beat the Rams, now, damn

it, we have been getting along good.

[Laughter.]

Senator BOND. I mean, we have got this Democrat-Republican

thing, we can overcome that. But if you want to rub the Patriots

in my face, just because you got lucky——

Chairman KERRY. I did not know——

Senator BOND. I mean, Brady did a hell of a job, but, damn, do

not go rubbing it in, OK?

Chairman KERRY. Sensitive, sensitive, sensitive.

[Laughter.]

Senator BOND. You got a raw nerve. I will tell you what.

Chairman KERRY. I never mentioned the name. I was thinking

about Vince Lombardi, not Bill Belichek.

Senator BOND. We do not speak of rope to the family of a man

who has just been hanged.

[Laughter.]

Senator BOND. And you do not go giving me Super Bowl analogies, but outside of that we are good friends.

Chairman KERRY. Gees, you do take it personally.

Senator BOND. Yeah.

Chairman KERRY. Senator, let us just try to do better.

General you were next, and thanks for being patient.

General HENRY. Thank you.

Chairman KERRY. We look forward to your ongoing comments.

General HENRY. Mr. Chairman, Senator Bond.

First, Mr. Chairman, let me thank you and Senator Cleland for

your help with our corporation on the no-year funding for 2002. We

certainly appreciate your effort in making that happen so that we

could deal as business people, rather than being a little bureaucratic on it.

I think that the answer that I would like to bring to you, in response to the question concerning whether or not the legislation

and whether or not the programs that we have, what I see, from

a standpoint of having been the Army’s competition advocate general, and having been the senior procurement executive at the Defense Logistics Agency, is that the goals that we have can be met,

but the problem is in the execution. I would suggest that this body

look at putting some teeth into why you are not meeting the goals.

12

I look at this both from the Federal Executive Branch and from the

prime contractors.

We all know that bundling is not working for the small business

community, and we can sit and do a lot of jawboning on that particular issue. I think that what you need is that you hold the Executive Branch responsible. I would even advocate so far, if they did

not meet their objectives on it, that you withdraw contracting authority. Angela, you may not like that. But nothing will get a senior executive officer’s attention faster than realizing that he can no

longer award the contract.

So you have got a lot of contracting agencies around the Federal

Government, and there is not a problem with finding somebody

that can award a contract. So you have a goal, you have a target.

If they are not meeting the goals, the answer is not ‘‘why not?’’ It

is ‘‘we withdraw your authority until we find out that you can do

it.’’

Having said that, that leads me to the Ombudsman issue. Back

in 1984, this body enacted the Competition in Contracting Act, and

I was fortunate enough to become the Army’s first competition advocate. I was an ombudsman for increasing procurement in Army

procurement. I worked for two great gentlemen—the Secretary of

the Army, John Marsh, and General Wickham, who was the chief

of staff, and both of them granted to me the authority to stop a procurement if, in my opinion, it did not meet the Competitive Acquisition Exec.

What we did is, in 3 years we went from 34 to 64 percent, and

I found out that while this was a new position, four stars in the

Army took notice when they realized that I had the ear of the Secretary of the Army and the chief of staff of the Army.

So I would say to you that the Ombudsman should never be

below the senior level, reporting directly to the senior person in the

organization, and you give the ombudsman the teeth to stop a procurement if, in his opinion, it does not meet the goals and objectives going forward. I believe that if you do that, you will see some

very, very substantial advantages.

I have spoken too long.

Mr. DASILVA [presiding]. Thank you.

Hank, you were up next.

Mr. WILFONG. To me, John, it is simple, and to the Senator.

Monitoring, compliance and enforcement. I hold the Ombudsman

Act very highly, and a number of that 95–507, 99–661, 101–560,

101–510, all of them are great acts and great laws, but if they are

not monitored and enforced, what good is it to pass another law?

So my thing here today, the one note that I came here today is

to monitor compliance and enforcement.

Mr. DASILVA. Ron, you had yours up next?

Mr. NEWLAN. Thank you, John. It is too bad the Chairman left,

because I come from a background similar to his, active duty Navy

and then came to the private sector. The general, and others

around the table, I am sure have a—I know the general does—and

others have a military background.

Basic training in the military is you do not give responsibility for

a function unless you also give them the authority to carry out that

function. We see too few people in the Federal procurement busiVerDate 11-MAY-2000 10:41 Nov 21, 2002 Jkt 081834 PO 00000 Frm 00016 Fmt 6633 Sfmt 6601 C:\SBA\81834.TXT SSC3 PsN: SSC3
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ness that have both the responsibility and the authority to change

a procurement, make it a small business set-aside and to assist towards the 23-percent minimum floor, which I prefer to call it, other

than the goal.

So I would look around and see who in the departments and

agencies has the authority and has the responsibility. I think the

Secretary, Secretary of Transportation, Secretary of HUD, Secretary of Defense, clearly, has the authority and the responsibility,

but as you go down the organization, I do not see many people, and

none of them are held accountable.

The OSDBUs might have a responsibility, but they do not have

the authority, in most agencies, to change something. They recommend; they do not dictate. I think we have got to focus on giving

somebody, in all of these departments, who is close enough to the

action both the total authority and total responsibility to hit the

23- or 30-percent minimum.

Thank you.

Mr. DASILVA. Steve.

Mr. DENLINGER. Thanks, John.

The Senator asked the question: Why is it so difficult to participate in the Federal market? Just as one example, I have a meeting

at 1:30 p.m. with a Member of ours, a high-end security services

firm in the computer side of security services, who is working on

the upgraded security at the Pentagon after the September 11th

situation. We have got a situation where the impact of bundling is

being felt beyond the initial bundled contract. There is a very, very

large contractor there that is performing work all across the entity,

and our company is performing an 8(a) contract, and what is happening is the pieces of work that our company is doing are now

being carved out and being lateralled over to this giant, huge contractor. There are some provisions, as you know, that provide safeguards for 8(a). You cannot take away work from an 8(a) company

if that work was formerly 8(a).

I think those same kinds of safeguards need to be put in place

with respect to whether it is HUBZone or veteran- or womanowned and so forth. So it is not only the bundling of the contract

to begin with, but it is the tendency of the agencies to funnel work

into that bundled contract work that is being performed by other

small businesses.

I want to commend you for the other pieces of legislation that

you have put together. They are really terrific. The Ombudsman

Act, I have got a couple of pieces that I want to suggest to improve

that.

The combined HUBZone parity, 8(a) parity situation, brings to

my mind something that I think we are all going to have to face,

and that is that it is getting to the point where we need to reconcile how all of these programs work together or do not work together. We have some programs like 8(a) that has a procurement

mechanism and no goal.

We have the women’s procurement program that has a goal and

no procurement mechanism and SBA is finding it difficult to implement that procurement mechanism legislation which was put in

place a couple of years ago.

14

HUBZone has a goal and a procurement mechanism. Veterans

has a goal, but no procurement mechanism. Some of these programs have price preferences, some of them do not. I sat down a

couple of months ago, and I read guidance in one of the agencies

to contracting officers as to how to deal with these preferences. I

have been involved in this work for 30 years, and I have never

been so confused in my life. We are going to have to reconcile all

of these programs so they are all treated equally, so they are uniform, so contracting officers can understand exactly how to proceed

and give them the responsibility to meet the goal.

I commend you for the 30-percent goal. That is a big, important

step forward. If you give agencies a minimum goal, they will

achieve it, and they will stay right there. So it is time to move forward to a more aggressive role.

Thank you.

Mr. DASILVA. Thank you. I will pass it on to the Chairman.

If I could just make a couple more housekeeping remarks. When

you are recognized to speak, if you could take the microphone nearest to you and put it by you so that we are sure that everybody

can hear. The acoustics in here are fairly good, but this will help

a bit. If I fail to state your full name, which is a little habit of

mine, if you could state that so the court reporter can take that

down.

James Turpin.

Mr. TURPIN. Yes, just a quick point. Getting the contract on the

front end is only part of the problem. I think we need to look at

the other end of the process and getting paid in a timely way and

the payment protections under the Prompt Payment Act, you can

get paid on Federal work, but if it is a Federal grant, then it falls

under the State payment protections, and in a State like Massachusetts, you could very easily be working in six or eight different

States in a very small radius, each of whom have a different payment law, and you do not know when or how you are going to get

paid.

Also, back in 1988, we experimented with direct disbursement,

and that was very quickly abandoned. But I think with technology

being what it is today, we should be able to do direct disbursement

because if you do not get the cash flow on your contract, then you

may not be in business to finish the contract. So getting the contract is only the first step. You need to get paid in a timely way

so you can be there to do the next contract.

Mr. SMITH. John, may I jump in with a question?

Mr. DASILVA. Certainly.

Mr. SMITH. James, what do you observe in terms of prompt payment and a difference between prime contractors and subcontractors in dealing with the Federal Government? Our impression is

you at least have a Federal law that provides some protection for

the primes, but what sort of flow-down is there to make sure that

subcontractors get paid promptly?

Mr. TURPIN. Well, there are certain protections in the Prompt

Payment Act for construction, but it depends a lot on the general

contractor and how they pass that on through to their subs. That

is one of the reasons we are advocating for direct disbursement,

where it will not have to go through the general to get to the sub.

15

If you have completed your work in a timely way, the general signs

off on it, then you would get your payment, instead of it going

through the general and you having to get it through the general.

You can shorten the process if it just goes directly to the person

who has completed their work and is entitled to be paid.

Mr. SMITH. Does the law currently provide for a time frame that

says once the sub has submitted the invoice, the clock is ticking,

and you have this many days, that is comparable to what the Federal relationship with the primes is? Is there any kind of time line

for subs or is it when they get around to it?

Mr. TURPIN. There is, but it is not always enforced.

Mr. SMITH. Not as robust?

Mr. TURPIN. Or consistent. It is not consistent.

Mr. SMITH. Thank you.

Mr. DASILVA. John Turner next.

Mr. TURNER. Yes. We do support the Ombudsman bill, and we

are encouraged by the comments that have been made around the

table concerning the importance of monitoring, and compliance, enforcement, and the ability to stop procurement. We also are encouraged by the acknowledgement that bundling can have an adverse

effect on procurement.

We strongly urge, on behalf of the Minority Business Enterprise

Legal Defense and Education Fund, that we not go all the way

down the road in analyzing the Ombudsman Act without taking

into account the report of the Commercial Activities Panel, which

has endorsed the use of best value.

Our organization has taken the approach that the best-value approach to contracting is a Trojan horse designed to kill that small

and minority business person.

We had a case in point, when we were retained by the Department of Energy to do a ‘‘lessons learned’’ piece of the Superconducting Super Collider Project from many years ago. One of the

things we learned was—and I was project director of that, so I am

speaking firsthand—the people there said we have got a project to

build. We do not have time to pay attention to goals for minority,

women and small businesses.

Our fear is that best value will become, in 2002, what bundling

was about to become before the turn of the century.

Mr. DASILVA. Thank you. I want to point out that this is an issue

that has been raised to the Chairman. We were actually trying to

help a firm that should have been awarded a contract, but when

it became apparent that it was going to go to that small business,

they changed the best value makeup so that they wound up losing

that contract.

Mr. TURNER. If I may, one of the fears that we have is that the

rampant use of best value will take away the effective ability of the

agency to monitor and to stop a procurement because there will be

no staff on the Government agency that would be in regular contact with the people, with the big companies that are designing,

and building, and carrying out that procurement. So—well, point

made.

Mr. DASILVA. Ralph Thomas, next.

Mr. THOMAS. Thank you.

16

One thing I want to say is that, and I think I am the only Government agency here, other than, of course, Angela——

Mr. DASILVA. SBA is here.

Mr. THOMAS. Oh, I am sorry, Fred, not on purpose, believe me,

and, Steve, just ignore it.

[Laughter.]

Mr. DASILVA. We have two PTACs, as well.

[Laughter.]

Mr. THOMAS. I want to say that if a Government agency wants

to meet a goal, I mean, furiously wants to meet a goal, it is definitely possible. Congress required NASA in a bill in 1990 to award

at least 8 percent of its prime and subcontract dollars to small disadvantaged businesses, and we embarked on a plan, on an aggressive plan utilizing the law very aggressively, and we went up, and

up, and up and now we are at 19.3 percent.

We have gotten awards from virtually every trade association in

here, including the National Association of Small Disadvantaged

Businesses, the U.S. Pan Asian American Chamber of Commerce.

We recently got the award for women, and others, if I missed you,

I am sorry. So, if you can please that many entities at the same

time, you must be doing something right.

Having said that, I think that we understate the progress of

small businesses and procurement dollars when we do not count at

all for subcontracting. Subcontracts are very important to NASA.

Recently, when an astronaut was putting the robotic arm on the

space station, what kept that astronaut alive were batteries manufactured by a small minority business. The device that they used

to communicate with the inside of the shuttle and Houston is a device manufactured by a woman-owned business on a subcontract,

both of those things on subcontracts. So I think, with NASA, with

the emphasis that we have on subcontracting and not to count it

all, recognize it all, I think understates progress.

Having said that, in terms of prime contracts and 30 percent, I

think some recognition has to be done about the budget makeup of

all of the agencies. NASA does not have 30 percent of prime contracts left over, after large contracts are—the space station, the

space shuttle, the Jet Propulsion Laboratory. So I think we have

to talk in terms of what the budget makeup of the agencies are.

I mean, all agencies are not the same.

We have consistently met all of the goals we negotiate with the

SBA, but in terms of across-the-board goals, certainly, what applies

to the Department of Interior does not apply to NASA.

Mr. DASILVA. I am going to turn it over to Cordell in a second.

I am just anxious to speak to this.

Just a couple of points. One, the Ombudsman Act does not require every agency to meet a 30-percent goal. It requires a governmentwide goal, and I know Cordell really wants to speak on the

topic of the prime and subcontracting, so I am going to let him do

so.

Mr. THOMAS. I know that is not what you require, but sometimes

that is the way it is implemented across the board. I think that

that does not set all agencies on a level playing field.

Mr. SMITH. Ralph, you mentioned you had an 8-percent goal that

was set in, what, 1992?

17

Mr. THOMAS. No, it was set in 1990.

Mr. SMITH. That is a unique goal for the SDB program for

NASA?

Mr. THOMAS. Right.

Mr. SMITH. That does combine prime and sub; is that right?

Mr. THOMAS. Right, yes, it does.

Mr. SMITH. But the governmentwide 23-percent, possibly 30-percent, goal currently is prime contract dollars.

Mr. THOMAS. Right. What I am saying is other people never meet

a 23- or 30-percent goal as an Agency because of the way our structure is.

Mr. SMITH. It is just also the nature of what you buy, and I know

the Department of Energy is similarly situated.

Mr. THOMAS. Right.

Mr. SMITH. I know the OSDBU Council has been trying to kick

this around back and forth trying to figure out a way to handle

this. Have you come up with something other than, I hope, adding

the numbers together? Because I think my main concern about the

approach of taking prime dollars and subcontract dollars and adding them together and saying, X plus Y equals the number of dollars we gave to small business, is, for example, we had the discussion with Mr. Turpin a moment ago about there being a substantive difference between subs and prime contracts and their

value to small business. I am afraid you add apples and oranges

together when you do that.

Mr. THOMAS. Well, they may or may not be. A prime contract

may or may not be more important than a sub. On the space station, where you have—what is more important? A million-dollar

subcontract or having the $2.2 billion prime contract? Certainly, in

that situation, the subcontract——

Mr. SMITH. Have you all—I am sorry—have you all come to any

kind of discussion or any kind of conclusion on what you are recommending on this front?

Mr. THOMAS. Not yet, but prime contracts should count as prime

contracts and subcontracts as subcontracts. Yes, sometimes we add

them, but always distinguishing it. We may say we are doing 32-

percent total dollars with a certain amount prime and a certain

amount sub. I think that being done, I do not see any problem with

that.

Mr. SMITH. Another way to tackle this that I find quite interesting is Pete Aldridge’s memo, the Under Secretary of the DoD,

he did the attempt to create a report card for the executive

branch—he had a grade for prime, and a grade for sub, and a grade

for this goal and that goal, and then came up with an overall assessment.

Mr. THOMAS. Right.

Mr. SMITH. I think that that is a good approach to come up with

an overall grade, but without taking the prime and sub and adding

them together, which I think is potentially misleading.

Have you all any thoughts on that approach?

Mr. THOMAS. Well, I have seen Mr. Aldridge’s formula and like

it very much. The OSDBU Council has been working on setting

standards, coming to a consensus on setting standards for grading

18

Federal small business programs. Whatever the formula is, it has

to recognize what my problem is.

Today, subcontracting is not recognized whatsoever at all. The

scorecard does not recognize it at all, when putting goals, overall

goals into place, whether it be 23 percent or 30 percent. There is

no recognition of subcontracting at all, when it is very important,

extremely important to the future of small businesses.

Mr. SMITH. When you report your data to FPDS, just to—I think

you are saying this, but just to be clear—when you report your

data to FPDS, the Federal Procurement Data System, and you say

we had X prime contract dollars, it is prime contract dollars.

Mr. THOMAS. Right, absolutely.

Mr. SMITH. There is no mixing of the two.

Mr. THOMAS. Absolutely. Whenever we talk about it, we distinguish what is what, but it does not matter because we have gone

way up in prime contract dollars too. In fact, we have the fastest

rate of increase of any other agency in the last 7 years. Just because we are strong in subcontracting, we do not stop prime contracting. That is extremely important, but we can only do what we

have left. We cannot create something that is not there.

Mr. SMITH. Thank you.

Mr. DASILVA. Ms. Styles, I believe you are next.

Administrator STYLES. Thank you very much. I just want to let

you know how much I appreciate the opportunity to be here today

and how much this Administration appreciates the support of this

Committee as we move forward assessing some very difficult problems that we have.

I categorize them into four categories as we look at the task that

we have ahead of us, where we are looking at addressing the issues

of access of small businesses, we are looking at contract bundling,

we are looking at the transparency of our contracting system, and

we are looking at accountability. If there is one thing I can focus

on, it is: governmentwide we are really looking at accountability.

I consider my job to be one to ensure that our procurement system allows small businesses to flourish, and I can tell you that has

not been the commitment of my office over the past 8 to 10 years.

We are really taking a very hard look, I think, at what has been

created through the past 8 years of acquisition reform and the situation of small businesses as a result.

I think it is really antithetical and something of an anathema to

the President to have small businesses come in and say we have

to hire a lobbyist in Washington in order to get a contract, we have

to go and knock on the door of every agency. We have to be a

prequalified contractor and then go knock on doors. We have created, I think, a system that you have to get the inside track on procurements at different departments and agencies. We have created,

I think, a system that is favoring the access of a few, to the detriment of many, including small businesses.

In March, the President made a real commitment to move forward on many small business issues, but in particular he focused

on several of the government contracting issues related to small

businesses and has asked my office to make recommendations to

him. I think our working groups have been working very hard moving forward.

19

I think we will have recommendations ready this fall on two of

the key issues: one is contract bundling and the other one is the

state of our system in terms of access, the openness of the system

and the transparency of the system. But the group we have put together is a good group. I think they are really people at the departments and agencies that are committed to small business, and I

think the recommendations that come out will be good recommendations.

Thank you.

Mr. DASILVA. If I could just ask one quick follow-up question on

the President’s proposal. One of the things, though we are thrilled

to see the level of attention this is receiving, one of the things that

has come to the Committee’s attention, the concerns that have been

raised to us, are the consequences of going to complete, full and

open competition and what that means for small business—setasides, for reserving contracts for 8(a), for HUBZones and for the

individual small business programs.

Can you sort of elaborate a little on what is envisioned by full

and open competition?

Administrator STYLES. It is not a move back to CICA, in terms

of full and open competition for everything in any respect. The

problem I think we are seeing is that you can have a thousand people on a schedule, and a department or agency only has to go to

three. So small businesses simply never find out about the opportunities, and we have to make sure that those task and delivery orders are transparent, that they are open, that people know what

the needs of the departments and agencies are.

That does not mean that we are getting rid of the many good

things that were created during acquisition reform and the many

different contracting vehicles. It is not to remove a focus from other

statutory requirements, it is just a recognition that there is a real

problem here with the procurement system, in terms of us telling

people what our needs are, and us continuing to contract with large

contractors, and departments and agencies continually going back

to the same contractors and never telling the public what their

needs are.

Mr. DASILVA. Joann Payne.

Ms. PAYNE. Thank you.

I wanted to basically discuss, first of all, the proposed bill by the

Senator, where I think it would necessarily advocate for small, disadvantaged businesses. Women are left out of there, so it would be

nice to sort of take that Executive Order and legislate that, as well,

as part of this—

Mr. DASILVA. Just a clarification, it is small and disadvantaged

business ombudsman, and the legislation itself within the text does

cite gender issues.

Ms. PAYNE. Yes, but women are not considered disadvantaged in

these programs, so the bottom line is I think you really have to

take the Executive Order that was signed by the President and sort

of legislate that and make that a law and include them in here.

You talk about gender issues. What does that mean, in all honesty?

There are a couple of other issues I wanted to address, and since

I do women’s, I would like to do that, if I may. I believe it is imporVerDate 11-MAY-2000 10:41 Nov 21, 2002 Jkt 081834 PO 00000 Frm 00023 Fmt 6633 Sfmt 6601 C:\SBA\81834.TXT SSC3 PsN: SSC3
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tant that SBA develops MOUs with all of the Federal agencies.

SBA has one with the Department of Transportation and has

streamlined the certification process, even though women have to

jump an additional hoop to do so, and that is another completely

different issue.

I think it is also important to strengthen, and I think Ralph

Thomas is right on the nose here, to strengthen the Federal subcontracting program by eliminating sub—I, personally, would like

to see the elimination of most, as we know it today, subcontracting

plans. I think it is so much easier to just have direct goals on our

contracts and for subcontracts and just get it done. I mean, that

is just the bottom line. If you want to make it work, that is the

way you make it work.

Develop a program, which I just said, sort of a women’s contract

program, which I think is on hold right now because they cannot

figure out how to make it work.

Strengthen all of the certification programs and streamline or

consolidate the certification process amongst all of the agencies; adjust the accounting and tracking procedures for contracting goal

achievements. Minority women get counted four times, sometimes

five, as far as the goals are concerned, counting the goals. Minority

men can get counted three or four times. Women can be counted

twice. So, when you see a goal of 23 percent or being reached at

22, whatever it is, fiscal year 2001, the chances are it is probably

closer to 18 and 20 than it is the 22 or 23, just simply the way they

count and track the goal.

Legislate enforcement procedures for prime and subcontracting

goals. I think that is extremely important. The other thing I want

to stress, something that John said, is best value. It seems to me,

from my experience, best value procurement can create a good ol’

boy system within the Federal contracting community. I mean, it

just makes sense to me that if you are going to go with best value

and you are not going to take into consideration the contributions

that women, and minorities, and small businesses make to this

country, to this Government, what is going to happen is that it is

going to be a lot easier for contracting officers to just sort of give

it to the Microsofts of the world. I mean, for goodness sake, that

makes common sense.

The other thing that John said, also, that I thought was important is that our talking about taking the goal of 8 percent for

NASA, combining the subcontracts and the prime contracts, my

women that I represent in the Disadvantaged Business Enterprise

Program, basically, they do some prime work, but basically they

are subcontracting. They do about $2 billion a year or something

like that. Together, women and minorities do about $3 billion a

year. I do not think it matters if it is flowing from a prime contract—or if money flows from a prime contract or a subcontract. It

is money, and it is going into the hands of small businesses. I think

that is extremely important.

I mean, I do not get the argument. I am sorry, Mr. Smith, I do

not get the argument of separating—counting them, but adding

them together and reaching that goal. You could reach a goal of 30

percent by combining both.

21

I just wanted to say that, as far as the proposed legislation, it

just seems to me that with powers to report, review, analyze and

coordinate, without the agencies’ authority to enforce, will simply

establish another person or entity that celebrates the problem, but

we do not solve it. I think that is really, really important.

Mr. SMITH. I guess the question that I would have for you, and

perhaps you have heard from your Members on this or perhaps

they have not run into this problem, but we have heard it from

other associations, that once a firm gets relegated to a subcontract

level, they tend not to come back, basically, because their chances

for exposure to the contracting officer are reduced, their interaction

directly with the agency, their opportunity to hear about upcoming

opportunities. So once we say there is no distinction between the

two, then basically they get permanently at that status for subcontracting opportunities and not to get their foot in the door to hear

about the prime contracting opportunities.

The reason that I think that that is important is for establishing

past performance history—dealing directly with the Government

agencies, managing the contract themselves and getting that experience—and I think there is a value-added there. That is what we

have heard. Perhaps, you are hearing differently from some of your

members or have you heard that concern?

Ms. PAYNE. I think we are talking about, at the end of the day—

Mr. SMITH. The money, yeah.

Ms. PAYNE. The money. Ralph Thomas, at his desk, putting the

two together. I think that is totally different than out in the field

and contracting as prime or subcontract.

However, I will tell you, in the construction industry, and the

subcontracting association can speak to this, a lot of subcontractors

do prime work, and a lot of prime subcontractors do subcontracting

work. I mean, a lot of that gets done. So I really——

Mr. SMITH. I certainly can see your point, and I agree that a dollar is a dollar, however it comes to you. The question is whether

it gets to you and whether you get the contract opportunity in the

first place. I think that is the concern that we have.

Ms. PAYNE. I think that is where you start with getting rid of

these subcontracting plans, No. 1, and not moving towards the best

value procurement kind of thing. Of course, the bundling. Thank

you so much for addressing that issue. That is extremely important

because it devastated small businesses, and I appreciate that.

But the bottom line is that, without enforcement and without direct subcontracting procurement, with goals on actual contracts

that have got to be met, if not, the prime contractor just does not

get the job. That is absolutely the way to go if you really want to

make this work.

Mr. DASILVA. Thank you. I am going to turn it over to Senator

Carnahan so that she can make some remarks.

OPENING STATEMENT OF THE HONORABLE JEAN CARNAHAN,

A UNITED STATES SENATOR FROM MISSOURI

Senator CARNAHAN [presiding]. Thank you very much, John. I

want to thank all of you for being here this morning and participating in this roundtable. I particularly want to thank Morris Hudson for being here. I have worked with him. He has worked with

22

our office, and we have been helpful in getting some funds for Procurement Technical Assistance Centers. So it is good to have had

that opportunity.

I hope that today’s discussion will lead to some substantial improvements in our understanding of the shortcomings of Government procurement policies. Certainly, having all of you here is a

very impressive collection of experts, and we look forward to learning from your comments.

I believe this Committee will benefit from hearing about all of

your ideas on how we can expand procurement opportunities for

small businesses, especially among minority- and women-owned

businesses. I have met with many small business owners throughout Missouri, and I have always been impressed with their dedication to their dreams. They are people who actually put some fire

to their dreams and work for the things that are so meaningful in

their lives and in their communities.

Small businesses have become really the engines of our economy,

and the Federal Government should be able to play an important

role in promoting their growth and their success. Last year, the

Federal Government spent more than $600 million purchasing

products and services from small businesses in my home State of

Missouri. This is an impressive figure, and it is certainly a testimony to the many hardworking business owners in our State. But

it is less than 10 percent of the total Federal procurement dollars

spent in Missouri, and that, indeed, is disappointing.

I look forward to working with my colleagues to improve Federal

purchasing policies to provide even greater opportunities to small

businesses. One of the first steps we can take in this process is to

address the problem of the so-called bundled contracts. I am very

pleased to be an original co-sponsor of the Small Business Federal

Contractor Safeguard Act. This legislation will ensure that Federal

agencies do not consolidate different procurement requirements

into such large contracts that small businesses can no longer effectively compete.

Congress tried, at one point, to remedy this problem, but, unfortunately, agencies have abused this and found loopholes in the current law. So I hope that we will act this year to close some of those

loopholes and increase the opportunities that are available to small

businesses.

I am also looking forward to hosting a procurement conference

later this summer in Missouri. As Morris knows, the Science and

Technology Conference will be held at Fort Leonard Wood, and it

will provide small businesses an opportunity to meet with some of

the top officials from the Defense Department. They will be able to

demonstrate their products and learn about the procurement needs

of the military.

I hope that business owners and procurement officials will take

the opportunity to establish relationships that can lead, ultimately,

to greater contracting opportunities for small businesses.

So I look forward to hearing from you. Certainly, I will be reading your testimony and reviewing the transcripts that you leave

today.

Again, I thank you for being here and for the opportunity that

you give us to hear and to learn from you.

23

Thank you.

I would like, at this time, to turn the microphone over to Pat

Parker and to hear from her.

Pat.

Ms. PARKER. Thank you. Good morning, Senator, John, Cordell.

My name is Patricia Parker.

First of all, I want to take a little different perspective and view

on contract bundling, and I want to come from a point where—because I used to be a Federal employee, and I have worked in program, and I have worked in contracting. Now I am a Native American woman-owned small business contractor here in the area and

also with the National Indian Business Association and Women Impacting Public Policy.

I understand that sometimes enforcement and accountability,

and I agree with that, and I think there is not anyone at the table

that would not agree that we need to do that when it comes to procurement, especially with contract bundling, but sometimes when

people are forced to do something, they are a little less enthusiastic

about carrying out the process. I find that when people are more

willing and want to do something, the process speeds up, and more

is accomplished, and a lot more gets done.

So I just throw out this concept to look at it from a little different

perspective, and one might say from more of a nurturing side, but

I think that is a good thing about who we are as women, that we

are able to look at something from a little different perspective

sometimes.

We know the bottom line, when it comes to contract bundling

and the large businesses out there, is pricing and their ability to

have a competitive edge, and as small businesses we all know that

is what we are out there marketing for, competitive edge.

If we could, perhaps somehow, when a large prime contractor

meets their subcontracting plan and gets out there and let them

demonstrate it, so we do not put that on the responsibility always

of the Federal program person out there, a contract person there

because we all know that part of the reason for the contract bundling is the lack of contracting staff. They are already overworked,

and when you start asking them to do more paperwork and more

requirements, sometimes that can slow the process down, rather

than actually expedite it, which is what we are all trying to do,

make it easier and faster to do things.

So, if we are looking at that, and we are asking the prime contractor to take a responsibility that the Federal Government cannot

do right now because of the lack of staff, which is to encourage

small business, make sure that small business is there at the table

to be able to play and be part of these large procurements, then

perhaps incentives to the prime contractors can help facilitate that,

and it is not necessarily more money.

Maybe if they come in and meet their subcontracting goals, and

they demonstrate to the contracting folks and to the Federal agency that they are meeting that, they get some kind of price evaluation to give them a competitive edge when they are out there also

trying to compete for contracts. That brings everybody wanting to

make this happen, rather than, in some cases, begrudgingly, if it

is going to mean more paperwork or I am going to have to, as large

24

primes will say, I have got a bottom line, I have got stakeholders,

we have to go with the best price and the best quality.

So maybe some incentives, from that standpoint, if we could look

at that, might be able to help facilitate a faster progress than always just coming in and thumping people on the head if they do

not do what they need to do. However, sometimes a thump on the

head is necessary, and so I do not want to discount that.

On Friday, I was very honored to be able to speak before OMB

on the competition and contracting review, on behalf of Women Impacting Public Policy. We had made a suggestion that I thought

was, as far as the enforcement—when you want to get somebody’s

attention, obviously, the pocketbook is always the way to get somebody’s attention. So we recommended that perhaps, for every percentage that an agency fails to meet their goals, their budget be reduced by that amount. Perhaps that would give them incentive to

go out there and make sure that those goals are met.

Thank you very much.

Mr. SMITH. May I—I am sorry, please.

Senator CARNAHAN. Go ahead, please.

Mr. SMITH. No, Senator, you get to—

[Laughter.]

Senator CARNAHAN. In that case, I will ask Cordell if he would

like to ask a question.

[Laughter.]

Mr. SMITH. Very well. Just to clarify. Your view is that the subcontracting plans are an appropriate approach, that if you did

away with them and had it all direct Federal mandates, you would

then have the problem of getting staff to police that; is that what

you are saying? So your view is slightly different.

Ms. PARKER. It is slightly different, looking at it a different way.

I mean, I am not saying that—subcontracting plans are what we

have now. I guess I am looking at what have we got now, what

have we got to work with? Yes, if we want to work with legislation

to try to improve it, but that is a process that is going to take a

while.

Small businesses, we have got payrolls to meet next week.

Mr. SMITH. Right.

Ms. PARKER. We want to make sure that we try to get to the

table and get some of that pie right now. While we are doing what

we have to do to push legislation and make sure everybody can

participate, that is great, but I also want to look at what we can

do immediately. If the subcontracting plans are what we are having to live with right now, how can we encourage and facilitate

primes to help us, not try to cause a little bit more of a tougher

hand? I would like to want them to participate because, as I say,

I find it’s a little quicker, you get things done quicker that way.

Mr. SMITH. Thank you, Senator.

Senator CARNAHAN. Thank you. Before I leave, I will take advantage of another senatorial prerogative and call on the gentleman

from my State, a constituent, Morris Hudson, to speak next.

Mr. HUDSON. Thank you, Senator. I appreciate that very much.

I know we are getting short on time, so I would like to make my

comments concise and address each proposed bill.

25

First of all, on Senate bill 1994, I think it is time that priorities

are established. I think this is badly needed. I do have a question

about whether the preferences would be optional or whether they

would be mandated. So that is one issue I have with that bill.

On Senate bill 2466, Small Business Federal Contractor Safeguard Act, on bundling: I think defining the problem better will

help. I think bundling is a major problem, but there is no need to

discuss that further. It has been discussed and seems to be unanimous.

On the Ombudsman Act, I have concern with that. I am not opposed to it, but I do have concern about it, that it might just become another Federal bureaucratic activity. There does not seem to

be any direct contact with the small business people, and that is

one thing that concerns me with that act.

In the Procurement Technical Assistance Centers, we work with

businesses in the trenches on an hourly or minute basis, and there

is a lot of frustration out there. I think this Committee may have,

within their prerogative, to eliminate some of that duplication, and

I will mention one example: If a company is going to do business

with the Department of Defense, such as Fort Leonard Wood or

Whiteman Air Force Base or the Army Corps of Engineers in Missouri, and of course this extends throughout the Nation, it is mandatory that they be registered in the Central Contractor Registry.

We help companies with that.

It is also recommended that they be registered in Pro-Net. Many

of those data elements are the very same, but they have to enter

this information into two different systems. We have heard rumors

that the systems would be combined at some point in time, but

right now it seems to be only rumors. We would certainly encourage the Committee to look at that and see if that could be done because that would help companies at the working level in eliminating this type of duplication.

Also, and someone alluded to this earlier, we would like to see

better publicizing of the requirements, and I am going to quantify

this, from the $2,500 level, credit card level, up to $25,000. Now,

agencies do maybe a good job of advertising this, publicizing this

within their own agency or at a lower level, at the base or installation level. But when you are a small business person, you do not

have time to go to all of the different websites where you have to

track this down.

I would like to see a system similar to FedBizOps that captures

these type of requirements and makes them available for the small

business community.

Then, finally, I would like to add that a lot of companies have

made a lot of progress with electronic commerce, moving into the

computer age and so on, but there are still a number of companies

out there that could use some assistance in this area. So I would

like to see at least some of the funding and responsibilities restored

that existed in the Electronic Commerce Resource Centers and see

that made available for the small business community.

Thank you.

Mr. DASILVA [presiding]. Thank you, Senator. Thank you, Morris.

26

I am going to be a little heavy-handed here. I am going to call

on Michael Robinson in just a second, and then we are going to

have to move on to the next topic because we are running very far

behind on time—so I am going to ask everybody to put their cards

down until I throw out the next topic for discussion after Michael

is done, and I apologize to folks who did not get a chance to speak

on this, but as it is 10:30, we are going to need to move on.

Michael.

Mr. ROBINSON. Thank you, John.

Also, from a PTAC in Massachusetts, again, from the trenches,

and I would just like to share one anecdote from the field that is

a bundling-related anecdote, and it takes it out of the rather esoteric money and contracts and puts kind of a human face on the

situation.

We have an 8(a) company that is owned by a service-disabled

veteran in a wheelchair. He had been performing on a contract for

several years for the Veterans Administration’s facilities in Rhode

Island. The contract came up for renewal again, and the contract

requirements were consolidated into a regional contract, which ultimately was awarded, after a lot of protests, and screaming, and

gnashing of teeth, to a Fortune 100 company.

There have been several further protests by the service-disabled

vet. He is one of our clients. This service-disabled vet has since

been forced to declare personal bankruptcy. This is the human face

of a constituent contracting with the very agency who should be

protecting his interests, and it is the effect of what we who are involved in Government might call operational streamlining and better stewardship of our dollars. It is kind of a tragic story.

Thank you very much, John.

Mr. DASILVA. Thank you.

We are going to turn to the next topic on the agenda, ‘‘Improving

the SBA’s Small Business Contracting Programs.’’ I would like to

throw out two questions for the group: No. 1, Chairman Kerry

touched on when he was here, wanted to put out why is the SDB

set-aside program a thing of the past and does the Executive

Branch have the authority to override the statute?

I want to throw out a second question, as well, one that Senator

Kerry has been working on, and I believe the SBA is addressing,

is that: Why is certification so difficult for some SBA programs,

and should all SBA programs have procedures and applications

similar to the HUBZone program?

So, at this time, if you wanted to address these topics, you can

put up your cards.

Hank, go ahead.

Mr. WILFONG. SDB set-asides. Why would you figure I wanted to

talk about that?

[Laughter.]

Mr. DASILVA. Just a hunch.

Mr. WILFONG. Ironically, I see a lot of answers to a lot of the

problems that has been raised. I see SDB set-asides as the answer.

The General pointed out some things, and Ralph Thomas pointed

out some things. I believe goals can be met if the agencies really

want to do it and if they are caused to want to do it.

27

SDB set-asides, we do not have to worry about subcontracting a

whole lot if we have some pieces of action set-aside for competition

between small and economically disadvantaged firms. That is one

of the positives of SDB set-asides.

I have heard a complaint that, yeah, but, Hank, there is the Roth

case and there are other cases about race-based methods. First,

small and economically disadvantaged, I have not mentioned race

yet. But if we are talking about racial discrimination and remedying racial discrimination, how are you going to deal with racial

discrimination if you do not deal with race? Now that may be a

rhetorical question. I cannot figure the answer of how can we deal

with race discrimination and cause efforts without some consideration of race.

So I think, John, the SDB set-aside is the one thing that I would

like to see this Administration address. We had it before. There

was a moratorium, and as I recall, the moratorium was so that we

could find—and I am generalizing—a better way of doing it. Hell,

what we had was working well. Why do you have to find a better

way than something that is working excellently?

So I would like to have that moratorium, which was a 2-year

moratorium established 7 years ago, removed.

Mr. DASILVA. Fred, would you like to address any of those comments?

Mr. ARMENDARIZ. Currently, the SDB numbers for fiscal year

2001 were 7.12 percent, which is 140 percent of the goal, and is

why at this time we believe that the program is working without

the set-aside.

Mr. DASILVA. Is that if you combine 8(a) and non-8(a) together

for the SDB goal?

Mr. ARMENDARIZ. All 8(a) firms are SDB firms.

Mr. DASILVA. I understand. I know. But this is the first year—

for 2001, it is the first year they are actually reporting the goal together instead of breaking it out separately——

Mr. ARMENDARIZ. 8(a)s have always been SDBs.

Mr. DASILVA. I understand, Fred. It is just the first year that it

has been reported together, but it is true that all SBA firms are

SDB firms, I understand.

Mr. ARMENDARIZ. Correct.

Mr. DASILVA. So that’s the position at the time because of the

percentage?

Mr. ARMENDARIZ. Right.

Mr. DASILVA. John.

Mr. TURNER. Thank you. The Minority Business Legal Defense

Fund also takes a position as the Senator has and as Hank has,

that SBA should seriously reconsider the set-aside program, and

we believe that is the appropriate way to go.

In the interest of time I will bullet to other comments that relate

to that. You raised an issue relating to the SDB certification process, and in our view, to date the SDB certification process has been

a disaster, and we stand prepared to work with, as we have in the

past, to work with the Hill and the agency to make this process

work better.

There are many different suggestions which we will not go into

today, but I think it is very important for us not to ignore the fact

28

that work is required here. The last point is that of course our

founder, Parren Mitchell, the author of Public Law 95–507 and the

father of the 8(a) program, we have a overriding concern about

the—that everything that we do, we must always keep in mind

that the pie for 8(a) is getting smaller and smaller and smaller and

smaller, much due to the Federal Acquisition and Streamlining

Act, much due to other factors such as thresholds of purchasing.

We have gone on record on our position concerning the parity or

the HUBZone and 8(a). HUBZone is a laudable program, but we

must find a way to take the 8(a) program and to provide a greater

pool, a greater reservoir for our 8(a) contractors.

Mr. ARMENDARIZ. John, could I make a comment?

Mr. DASILVA. Certainly.

Mr. ARMENDARIZ. I wholeheartedly agree with you in regards to

the application process. I think I am probably one of the few people

here that has actually tried to go through that process. I drew on

my own experience when I came to the agency. The first task force

that I assembled, the very first one, was to address the application

process. I put a very capable person in charge, Mike McHale, who

put together our HUBZone application.

Mr. TURNER. Good man.

Mr. ARMENDARIZ. He is a good man. He has been working diligently in putting together what we believe is a state-of-the-art

e-capable application that should be ready for launch in the next

12 months. So we are very excited about simplifying the process

and getting more people involved in the program. We have been

working furiously as well in regards to keeping the 8(a) numbers

up. Last year we increased the 8(a) program $500 million over the

previous year. There was a little bit of a setback in the year 2000,

but we came back in 2001 and we want to make 2002 even a better

year. So you have our commitment at the SBA that not only is the

8(a) program important, but it is extremely visible to us. We have

a lot of new initiatives that are focused directly on that program,

and we think are going to revamp the entire mission of the statute.

Mr. DASILVA. I think Ron was next, and then Joann was up.

Mr. NEWLAN. Thank you, John.

A couple of thoughts. The topic we are on is improving the SBA’s

small business contracting programs. I think it starts with the

funding of the SBA’s contracting program within the Appropriations bill and the budget. I am not an expert in that area. We have

got experts at the table. I do attend the hearings and I hear the

SBA Administrator talking about, ‘‘Well, we got more money last

year, and we got more money the year before that, and we got more

money before that, but we are going to do the best we can with

what we have.’’ The world was more complex. The Small Business

programs are more complex.

The SBA Government contracting program, across the board

needs more money. I led a fight for the HUBZone funding which

got overlooked by the House, and was restored. But they need more

money, and to the extent OFPP might be able to fit that into a recommendation if they happen to agree with me, the Administration

and certainly the Senate represented here might be able to help

out.

29

1 Information is located on page 98 in the appendix of this document.

One of the things, if I were there and got more money, I would

buy some PCRs, Procurement Center Representatives, and I would

go back to a system that worked well in the 1980s, where the PCRs

really rode herd over the other agencies, and they did not do an

unrestricted procurement without the PCR’s personal involvement,

the personal understanding and thorough examination. PCRs are

spread so thin now, they cannot do that. There is perhaps one third

the number of PCRs today to cover the Federal Government than

there was 15 years ago.

Mr. DASILVA. I am going to go to Joann, and then Barbara. I

would also ask that if anybody else wanted to make comments on

SBA programs, put your cards up so I can take note of you. After

this we are going to move on to the next topic.

Joann.

Ms. PAYNE. Thank you so much. I just wanted to address something that the SBA advocate over there said. We have talked about

the small disadvantaged business and the set-aside issue, and the

program is working well at 7.12. The only comment I have is that

it does include 8(a) so it means they were counted twice, sometimes

three or four times. So my guess is, is that the counting figure is

very high. I think that is simply the bottom line. If you are also

certified as a HUBZone, counted you 4 or 5 times in that number.

So just let me just stress to you it is so important that we reevaluate how SBA counts and tracks the goals because you do not know

really what is going on unless you have that. In addition to that,

as some of you know, SBA has a MOU with the Department of

Transportation in the certification process, which means that

women and minorities who are certified in the Disadvantaged

Incentivized program should be able to get certified easier as a

small disadvantaged or an 8(a). That is the point of it I think.

The reality is that minorities can in fact get certified a lot easier.

Women have got to jump an additional hurdle. On the one hand

women are presumed to be socially and economically disadvantaged

in a nontraditional area like transportation construction, but not so

at SBA. So what happens is that women have to jump an additional hoop, and by doing so, there are not very many certified

woman-owned businesses in the 8(a) program and on the Small

Disadvantaged Business program.

Mr. ARMENDARIZ. First of all, the 8(a) numbers are not counted

double for the SDB number, and I will get some information to you

immediately after the hearing that demonstrate that to you.1

I do not know if Angela has any comment in regards to how the

numbers are accumulated, but in that particular case that is not

a correct statement.

However, I cannot agree with you more in regards to needing to

simplify the fact that companies, when they start working with our

Federal Government, need to have a smooth transition into starting to participate in our programs. I do not believe it is in anyone’s

best interest that we ask small businesses to spend this disproportionate amount of time going through certification programs. One

of the other task forces that I would like to launch in the near future is a reciprocity task force so that we can have small busiVerDate 11-MAY-2000 10:41 Nov 21, 2002 Jkt 081834 PO 00000 Frm 00033 Fmt 6633 Sfmt 6601 C:\SBA\81834.TXT SSC3 PsN: SSC3
30

nesses apply once and be accepted not only within the Federal Government, but across state lines as well. We find that people have

to go through and apply in Michigan and if they are doing business

in Ohio, they have to reapply in Ohio, et cetera, et cetera, and I

think that is just a complete waste of time. We think we can take

the lead on that.

Ms. PAYNE. What is interesting, if I may just follow up with that,

is that women, with the certification process—and I will be interested to see how you count the 8(a), because I know they are counted as small business and they are counted as others as well, but

we will get into that; I would love to talk to you about that. But

with the certification—and with the Department of Transportation

you have on-site reviews. You have DOT people who actually come

on site of a business to make sure that you own 51 percent, you

know, all of the requirements. It is an in-depth, thorough certification. My women get denied at SBA by paperwork. I just find it

just absolutely appalling, absolutely appalling.

Mr. ARMENDARIZ. I agree that we need to simplify the process.

Joann, I would like to have a conversation with you again. I would

like to talk about that a little bit further.

Mr. DASILVA. I also remind everybody that the record is going to

be open, that you can have 14 days to submit your comments at

the end if you did not have a chance to speak to a particular topic.

We are going to go Barbara, Susan, Pam, Steve, and then we are

going to move on to the next topic.

Go ahead, Barbara.

Ms. KASOFF. Good morning. My name is Barbara Kasoff, and I

represent Women Impacting Public Policy. We are well over

250,000 women-owned businesses right now across the country. I

can tell you that 80 percent of our constituency is not only just passionate and angry about this, but they are in a state of despair,

and most of them do not even want to try to go through the process

as it is right now. It is obvious that we have a very onerous and

complex system that is riddled with barriers rather than with opportunities.

I can tell you, I can bring it down even to a more basic level

when I can say to you that almost half of our constituency is on

dial-up rather than on high-speed access, and they cannot even

download a procurement contract to bid on because high-speed access is not available to them.

The President said real clearly that we need accountability. Everybody here in this room has said that we need accountability. I

can tell you also that in the corporate world, when the sales department is having trouble getting sales because they are getting

constant complaints, when a customer cannot fill out an order form

so that they can get the product, and when a warehouse cannot

ship a product and get the product out the door, two things better

happen in that corporation. No. 1, they had better listen to their

customer so they have a real clear understanding of what the problem is, and No. 2, they need to revamp their procedure. We are the

customers here in this situation. We need to be part of the solution,

not just experience the problem. If legislation was written two

years ago and passes, and is not out the door, there has to be a

real clear understanding of what is wrong with it so that we can

31

fix it. The clock is ticking. We are not doing the business that we

should be doing—we, the entrepreneurs—and if we are not doing

the business that we need to be doing because of these barriers,

then the economy is suffering.

I want to state for the record that Women Impacting Public Policy is ready to have a seat at the table. We accept the challenge

and we want to be part of the solution.

Mr. DASILVA. Thank you.

Susan.

Ms. ALLEN. Susan Allen, U.S. Pan-Asian-American Chamber of

Commerce.

I just wanted to revisit the issue of certification. Fred, you talk

about wanting to take the lead in getting reciprocity, which is a

good thing, but right now there are more than scores of certification processes around the country, and we have got to live with

that. That initiative that you are going to take the lead on is going

to take some time. There will be turf battles to be fought all

around.

My question is that some years ago, during the last Administration, there was a process for self certification or privatized certification. I think the dialog is still there, and there are still some organizations doing private certification like WBNC, the Women’s

Business National Council, and NMSDC, but for the Asian-American community, we have 57 ethnic groups within our community,

spread across 1 million businesses. Many of them are new Americans. They are not very familiar with the Federal process, and as

we know, the biggest procurer of products and services is the Federal Government and all the moneys and opportunities trickle

down to the community.

So what I would like to do is to make sure that the Asian-Americans get into the certification program. What we want to do is to

educate and tell them that we would help you out, because when

we tell them to go to the SBA, they say, ‘‘Oh, no, no, no. It takes

too long.’’ One told me, ‘‘Moving the Federal Government, trying to

get something done in the Government is trying to move a destroyer in the middle of an ocean. It takes what seems to be ages

to turn a 10-degree corner.’’ So we would like to be able to be considered, our organization, as a certifying agency accepted by the

SBA, not that we will replace your program or any other program,

but in so doing we can get these Asian-Americans into this process

so that they say, ‘‘All right, get one certification done, I can move

on to the other.’’

We tried, during the last Administration, to get noticed. They

never sent us the notice when the opportunities were sent out for

this private process, and I would like to know whether it is still

in place, and if so, can we get to the table?

Mr. ARMENDARIZ. The Administrator constantly states that the

focus of the SBA programs is to include more of the 25 million

small businesses of America. I think it would behoove the SBA to

include all different parties at the table and start focusing and

drilling down in the different program areas that we need to address, and this is one of them. We encourage your participation, so

thank you.

Mr. DASILVA. Pam.

32

Ms. MAZZA. Thanks.

I thought that Senator Kerry’s opening remarks were exactly on

point. I mean these are very, very complicated issues that we are

dealing with here. You know, fixing the SBA’s procurement problems does not involve just SBA. It is a mentality with the agencies

that relates to question No. 1: How do you increase commitment to

meet goals? What do the procurement people think? What do the

contracting officers think? Are they being evaluated on whether or

not they have done the best that they can to meet their goals, or

are they concerned because of the myth that we still live with, that

bigger is better and smaller is more expensive? That is simply not

true. So there is a lack of information still out there, or at least

there is a myth that just keeps getting generated. I think that the

more that we can do to continue to talk to eliminate those concerns, I think the better off we will be.

Ron, your point that PCRs do not have any tools really to do

their jobs, nor do they have the technical expertise to be able to—

I do not think—to be able to say, ‘‘Yes, there is an environmental

firm out there that can do this as a small business set-aside or

not’’. So maybe we are limited with our resources, but can we be

doing things to put task forces together to help the PCRs to do

their jobs better and to make people more accountable for their decisions. I do not think there is any way they can be reviewing each

procurement action to determine whether or not it is an appropriate set-aside or whether small businesses are capable.

I have a couple of specific comments on the legislation, and I

commend Senator Kerry and Senator Bond for trying to move these

pieces forward. On contract bundling: as a lawyer I think that

changing the definition is going to go a long way to the wordsmithing that eliminated our ability to go in and say this is a bundled contract, because 3 or 4 years later we see that the definition

just really had a lot of loopholes in it and I think that this legislation will certainly help with that.

I have a thought that I throw out for you, and that is that if I

read the contract bundling bill correctly, we are going to require

agencies—if they procure a consolidated contract over $2 million

and $5 million—to step through a lot of additional paperwork. I

think that a $2 million contract and a $5 million contract is not

a very large contract. In the IT field that is a few bodies if it is

a 5-year contract. There is no reason why small businesses cannot

perform those contracts even if they are consolidated. I mean I feel

there are small businesses out there, certainly my clients, that

could do that contract even if it were consolidated. So perhaps a

consideration for the Committee would be to say, ‘‘You do not have

to step through those studies, over $2 million, over $5 million even

though you consolidated it, if you are still restricting the competition to small businesses, whether it is through small business setaside, 8(a) set-aside, or whether you are going out on a GSA schedule but only to small business holders.’’ So in other words, go ahead

and consolidate if you want to consolidate, but if small businesses

can still do it, then no need to step through your study as to why

you consolidated. I am not sure of any of the down-sides to that,

but I think it is something that maybe should be considered.

33

On your Ombudsman bill, I think that is terrific that you are

thinking of protecting the firms as they come in with their problems. I am on the SBA’s Regulatory Fairness Committee and with

the Ombudsman at SBA on reg. fairness issues. I was surprised,

when I got appointed to that Committee, that procurements and

contract bundling are not within the purview of the current Ombudsman or the current Regulatory Fairness Board. So there is a

void right now, and as we go across the country and we listen to

small businesses’ concerns, a lot of them want to talk about bundling, and we have to say, ‘‘No, we do not have jurisdiction over

that.’’ If this bill moves forward, I think it should be clear—I was

happy to hear you say that the Ombudsman will be responsible to,

it sounds like, all small businesses, including women-owned small

businesses, because as I said right now, there is no Ombudsman

for procurement, and I think that there is a void. On the other

hand, I think that our board and the Ombudsman does not have

the resources to do what we need to do, so creating another slot

without resources may just be creating another slot that is not

going to be effective, so I think that probably that needs to be reviewed too.

Mr. DASILVA. Thank you.

Steve.

Mr. DENLINGER. Thanks. Steve Denlinger, LAMA, Latin American Management Association.

I am going to make a gentle remark about the difference between

prime contracts and subcontracts, but let me assure you, I do not

hear it gently from my members around the country. There is an

enormous difference between prime contracts and subcontracts. It

is not just a matter of dollars. Prime contracts give you extremely

important experience with the Federal Government, direct experience with the Federal Government. Prime contracts are more profitable. They give you the opportunity to do the good quality work

as opposed to the dregs, which prime contractors tend to give you

when you are in the subcontract mode.

Also importantly, it gives you the opportunity to get paid on

time. I hear horror stories at every turn about members not getting

paid by prime contractors, and they are afraid to do anything about

it because they will be blackballed.

I am delighted to hear, Fred, that you guys are taking on the

issue of reciprocity with respect to certification. It is one of the

most onerous things that small businesses have to deal with across

the country. Would you please add to that the forms that prime

contractors require MBEs and SDBs to fill out every year? Every

prime contractor has a different form. Every prime contractor

sends that out to our members each year to be done all over again.

If you do not submit it, you do not have an opportunity to be considered for bids. If you do submit it, it is a mountain of paperwork.

There ought to be one single form, one single intake form that is

used by all prime contractors to get the basic data from SDBs, and

then if that prime contractor is seriously interested in doing business with that company, then it is certainly appropriate to go ask

for this new information.

But that paperwork load is just onerous, and it comes from the

very prime contractors, very companies that often complain about

34

the load of paperwork that the Federal Government places upon

them, but they have no problem placing that kind of onerous paperwork burden on our companies.

The extreme case was Lockheed Martin Missiles and Space,

which sent one of our companies a 23-page form to fill out to be

considered for business there. The owner of the company looked at

me and handed me this, and said, ‘‘I am never going to do business

there. This is ridiculous.’’

One item with respect to the Ombudsman’s monitoring, about a

year and a half ago I asked the SBA to what extent are the price

adjustment credits being used by the civilian agencies? We know

that they cannot be used by Defense right now. We were not able

to get a handle on that. If you could make sure that the Ombudsman also monitors the extent to which price adjustment credits are

actually used, I do not think anybody here knows the extent to

which they are being used at any of the agencies in addition to the

evaluation points that prime contractors get for the quality of their

subcontracting programs and the incentives at the tail end.

One final item, if at all possible, Ms. Styles, I am wondering if

you could comment on the OMB’s view of the SDB set-aside with

respect to the women’s procurement preference legislation. I understand that there is a general sense that the President and the Administration does not support set-asides. Then specifically with respect to the women’s procurement preference, that there were

issues related to how the study was conducted relating to which

areas of Federal procurement women were under-represented in.

Secondly, that SBA’s approach did not meet the Adarand test. So

could you possibly comment on that?

Administrator STYLES. Yes, I can briefly comment on it. It was

actually withdrawn by the SBA Administrator, so Fred may be

more appropriate to comment on some of the details. Certainly my

understanding was that there were some legal concerns with the

statistical data that were part of the study, and that we really

wanted to, SBA really wanted to firm it up, make sure that it was

done right and that it could be legally supported.

As far as our policy: there is not an Administration policy against

set-asides from a perspective certainly of my office. I am concerned

about the broad procurement policies and the access of small businesses as a whole that we have created a situation in our procurement system that we cannot live with, and that in many respects

I think is creating something of a stigma on businesses and small

businesses themselves within the procurement community. I hear

from a lot of contracting officers on a regular basis, and it concerns

me that we have created a system of statutes and regulations that

is very, very difficult to understand. Contracting officers do not

know when it is appropriate to award to a HUBZone or SDB or an

8(a) or a women-owned small business, and they have to have a

specialty in and of their own in order to understand it, and I certainly can sympathize. I did not come into this job as an expert in

small business, and it has taken me a great deal of time to get up

to speed on the different statutes and regulations and how they

work. But I think the overriding concern in my mind is that it is

almost as if the contracting officer wants to ignore them, or that

it reflects poorly on small businesses, that there is something

35

wrong, that this is a handout to them, that this is somehow something that they do not deserve.

From my office I have got to help the procurement community

get over those hurdles and ensure that we have a procurement system that is focusing on access for all of the small businesses, but

that is not—I do not think that is to the detriment or to the exclusion of any particular group.

Mr. DASILVA. I am going to let Steven App make some comments—he has been extraordinarily patient. He got bumped from

the last go-round, but then we are going to move on to the next

topic, and I apologize because we are running overtime slightly.

Surprise, surprise, a Small Business Committee function running

over time.

Mr. APP. Just very briefly, I think the legislation is important;

we are supportive of it. I think the complexity is a real issue. But

the key to it, and the key I think to Treasury’s success has been

that we had a very strong integrated acquisition planning process

that permeates all levels of the Department. We consistently beat

the 23 percent. We were over 30 percent last year for prime contracts. We set our goal higher at 28 percent this year. We are doing

26.

The point is that we have instilled a culture in the acquisition

planning process so that no procurement is really considered without looking at a small business aspect of it, and it is done through

metrics. We can demonstrate metrics to everybody who is thinking

about doing a contract, that the service quality and the cost advantage is very real, and that is how you do it. Legislation is important. Complexity you have to work through, but a strong, integrated planning process I think gets you over the hurdle of people

trying to move through the cycle times quickly because they have

not planned for it. Program people, procurement people, small business people, all together—integrated planning is how Treasury has

been successful.

Mr. DASILVA. Thanks, Steve.

We are going to move over to the last part of the agenda, which

is specifically on the legislation. We have heard a lot of comments

on the proposals before the Committee, but I did notice that a lot

of questions have been raised. Senator Bond raised some questions

as well. So I wanted to throw out a couple of general things to

start.

No. 1, I hope to hear some more feedback on increasing the goal

to 30 percent, whether that is achievable, whether we should take

the idea of looking more at agencies that can do more on an individual basis. I want to talk about the 8(a) HUBZone Priority Preference bill and the 20-percent evaluation preference within the legislation, what people felt about that.

Cordell, did you have any other specific issues?

Mr. SMITH. No, I think that covers it.

I do think that I would be interested in knowing what is currently done in terms of efforts to try to help agencies that fall short

of their goals, whether anyone currently does anything to negotiate

goal attainment plans. I think that a real strength of the Ombudsman bill is requiring that, but I do not know what is being done.

My sense is we hear about it by accident, when somebody decides

36

to do that, but we do not know that there is anything done systematically now, and maybe that does point to a need for legislation.

Mr. DASILVA. Hank, were you up first?

Mr. WILFONG. Thank you. Thirty percent. You know, John, I

think it ought to be 40 percent.

[Laughter.]

Mr. WILFONG. Thirty percent certainty. Forty percent it should

be. Twenty-three percent they did not make. I think this is just an

indictment against the fact that maximal practicable utilization.

Senator Bond talked about maximal practicable utilization. I think

that is excellent. So I think 23 percent is too low. Thirty percent

is getting there. So I strongly endorse that.

Part of it, John, too, to throw in my little bit, and this will be

my final comment, I am totally disturbed by a number of things

that are going on right now in the procurement area, and it gets

back to this race-neutral versus race-based methods. No way to

avoid it. Until and unless we address what was brought out in 95–

507, the extensive findings of 95–507, that there was racial discrimination in this country, and that a certain part of the community was being denied equal access to the laws through the procurement system, we’re not really getting to it. So my thing is that,

as I sit here, some things are becoming very clear to me. Reluctantly, I am accepting the fact that these people tend to want litigation-proof kinds of things as relates to us. They are constantly

bringing up the litigation that others are bringing. So I guess probably what I am reluctantly coming to, is that those of us like my

association, and the women-owned business association, and maybe

the HUBZone, we are going to have to start thinking about getting

to our members to start to litigate, because they keep talking about

the rights of others and afraid of the litigation of others. Nobody

ever seems to bother about whether we are going to litigate or not.

So that, John, if nothing else comes out of this—and reluctantly

I sat here and my spirits got lower and lower, and it is because I

do not like to sue, but I do not know what else to do if I am being

denied.

Mr. TURPIN. James Turpin. I had one comment on the bundling

bill. We talked about access and transparency in the procurement

process. There is also an integrity issue, an issue we are concerned

about is bid-shopping, where the prime contractor will win the bid

and then shop it. Where you think you are going to get the subcontract, you are not going to get it. So there is an integrity issue

here too because the same person that is bundled on Monday is

going to be shopped on Tuesday, and the end result on Wednesday

is that they have not gotten either job. So I think there is—if we

are going to have a procurement process, it needs to have those elements if it is going to work for everybody.

Mr. DASILVA. Thank you.

Ron.

Mr. NEWLAN. Ron Newlan.

We will take advantage of the 14-day submission time and put

our comments in writing with respect to S. 2466 and the Ombudsman bill, but just in summary say that we support both. We think

they are very good bills. We think we could make a couple of small

37

improvements, and we will document it to you. The 30 percent we

believe is good and should remain.

Senator Bond, I could not have asked for a better setup than he

gave me as it relates to S. 1994. We are primarily concerned with

the priority preference aspect, and that would be the aspect where

a dual certified HUBZone and 8(a) firm gets a preference in a

HUBZone competition or a 8(a) competition, and we are concerned

that the tie breaker is if your bids are comparable. I have worked

with both the Chairman’s staff and the Ranking Member’s staff,

and we will submit in this same document our detailed thoughts

on that. But I do not think, based on the conversations we have

had, that we are far apart at all.

Mr. DASILVA. Thank you.

John.

Mr. TURNER. John Turner, Minority Business Legal Defense

Fund.

On the topic of attainability of the 30-percent goal, it is my experience and the fund’s experience that if you have the commitment

of the agency, if you have substantive enforcement powers, and

above all, talented personnel, it can indeed be done. There is a good

friend, colleague of mine in the city of Dallas that oversaw the

building of the Dallas Area Mass Transit Subway, Barton Burrell,

he succeeded in getting—and I think my numbers may be a little

off—but last I checked, something like 29 point something percent,

women minority SDB participation in that massive project. With

the American Airlines Center—which he oversaw the building of—

he met and exceeded the goals which were substantive. So you had

a very talented man, you had the support of the employer, and he

had some enforcement powers, it can be done.

Mr. DASILVA. Thank you.

Ralph.

Mr. THOMAS. Yes. I want to reassert the importance, and I

wish—speaking for myself, I wish the bill could be amended to include some portion about subcontracting by just 30 percent—with

the Government, we are putting all of the responsibility on the

Government and none on the prime contractors. The more we keep

de-emphasizing subcontractors, we are de-emphasizing subcontracting, we are giving strength or energy to prime contractors not

wanting to do anything. We are saying to the Federal Government

that it is OK not to stress subcontracting, or not to follow up, or

not to monitor, or not to make it important. It is a whole approach,

it is not just the Government being responsible. Prime contractors

have a responsibility as well. They are the ones getting the bulk

of the money, and we cannot attack one without the other. We cannot measure one without the other.

Thank you.

Mr. DASILVA. Thank you. On that issue, first, I wanted to thank

Steve for some comments that he had made before about the importance of prime contracting versus subcontracting. I think you

are absolutely correct, subcontracting is important, but that relationship that a prime contractor builds with the Federal Government cannot be overemphasized. I think the Committee, throughout its history on procurement issues—and correct me if I am

wrong, Cordell—has always stressed the relationship of prime conVerDate 11-MAY-2000 10:41 Nov 21, 2002 Jkt 081834 PO 00000 Frm 00041 Fmt 6633 Sfmt 6601 C:\SBA\81834.TXT SSC3 PsN: SSC3
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tracting as being of paramount importance to the Committee and

paramount importance to small business. But on the subcontracting issue, I would like to point out that the Ombudsman legislation, in response to small businesses that have come to the Committee on subcontracting issues, saying that their prime contractor

is not meeting their subcontracting plans and that the oversight of

them is very very limited, specifically because the CMRs at SBA

are essentially disappearing or being merged with the PCRs. it

does call on the Ombudsman to monitor those subcontracting

agreements, to take reports back when small businesses are not receiving their share of prime contracts when they were told that

they would be getting those prime contracts, and the prime never

contacts them again after they win.

But if anybody would like to add anything on the subcontracting

and subcontracting agreements and oversight of that, I would be

more than happy.

Mr. THOMAS. I just want to say that it is not just the responsibility of the SBA or any Ombudsman. It is the responsibility of the

Federal agencies as well. A lot of prime contractors today, small

businesses start off as subcontractors. I mean subcontracts can

lead to prime contracts. As Joann said, they inter-relate a lot.

Primes can be subs. It depends on the situation if a prime contract

is better than a subcontract. But my point is, regardless of how we

feel about that, to consistently de-emphasize subcontracting and

say it is not important, we are falling—we cannot not talk about

it on the one hand and then expect somebody to monitor it on the

other. I know that we give a lot of attention to team agreements.

We have a lot of classes on understanding team agreements and we

teach them all over the country, and we are working with the aerospace industry’s association to have general rules of fairness and

principles of fair dealing, but it has to come from all ends. It is not

a one-hand approach. It’s like—just stressing prime contracts is

just like having one arm with the other arm. They both inter-relate

and one leads to the other, so I would hope that we would pay

more attention to that in the future.

Mr. DASILVA. Thank you.

We are going to go to Joann, and then Hank, General Henry, and

then Ron, and I am going to ask that by the time we have gone

on to Hank, if you want to address any topic, to have your card up

by then, because I am going to close it out after that.

So, Joann.

Ms. PAYNE. Just very quickly, I agree with Steve and of course

with Ralph with the prime and the subcontracting, so do not get

me wrong. But the reality is, the majority of women- and minorityowned businesses are in fact subcontractors, and that is why the

subcontracting piece is so important to have money flow to woman

and minority contractors.

Mr. DASILVA. Hank.

Mr. WILFONG. Hank Wilfong, NASDB. Jumping in on the subcontracting part, the reality of the way we are now is that the majority

of the work from our association, the overwhelming majority of

quality work is coming through subcontracting. Now, we can wish

that we had the heyday in the 1970s and 1980s where small and

disadvantaged businesses were getting a significant amount of conVerDate 11-MAY-2000 10:41 Nov 21, 2002 Jkt 081834 PO 00000 Frm 00042 Fmt 6633 Sfmt 6601 C:\SBA\81834.TXT SSC3 PsN: SSC3
39

tracts from the Federal Government or we had PCRs, Ron, who

would go out and help break out requirements that we could prime

contract with. But the reality is that we have things like space stations, consolidated space operation contracts, Odin, et cetera, et

cetera, joint strike fighter, that these are major kinds of already

bundled, already consolidated contracts, and there will be more like

them no matter what kind of language you put into law because

economically it makes good sense. Falling back again to where I

started off, part of the reason I wear my NASA pin so proudly and

proud of my participation in the program over there, is because of

the subcontracting part. Of course we have got good prime contracts, but overwhelmingly, our members have made a good substantial profit and firm development through subcontracting. So I

join my friend Ralph by saying, why do we so de-emphasize subcontracting? Subcontracting is extremely important, and that is the

point I think, Ralph, I am glad that you made, that the subcontracting part—and I did not realize, John, this law did not include

subcontracts?

Mr. DASILVA. It does.

Mr. WILFONG. Oh, it does?

Mr. DASILVA. It does.

Mr. WILFONG. OK, thank you.

Mr. DASILVA. General Henry.

General HENRY. Thank you.

First, let me say how pleased I am to be here with you and thank

you very much, you and the Senator, for asking.

Just a couple of comments around. I certainly agree with the

comments of Mr. Thomas of NASA. I agree with him on the point

of the subcontracting. As you may know, I spent many years in

contract management. We had $780 billion at one point, so I spent

a lot of time studying the issue.

The first thing that I think that you should recognize is contracting officers really do not like mandatories. Any time that you

get into it, there is a rebellion that exists for that. Contracting officers like to preserve the contracting officer’s discretion. So when

you impose either the social or economic provisions on a contracting officer, there is a natural tendency for him not to like it,

so they are never going to like it.

That brings me to the point of the goal. I certainly support, as

my friend here, I would like to see 40 percent for it, but I do not

think that adding legislation a ratchet up on the goal is going to

get you where you want to. I think that you have got to focus on

the accountability. The issue to the prime contractors. Prime contractors are looking for the next job. If you embody into their

present contract a responsibility to act a certain way and to give

a certain performance, and failure to do that is a condition precedent on the next award, you have got the CEO’s attention. If you

embody it into that, you will have the contracting community.

I certainly agree with what I heard over here, debundle and

deconnect the fact of the small business plans. That is kind of a

feel-good approach that everybody does it, it goes on the shelf and

nobody ever looks at it. The comment that the lady said was that

let us take and find out what did you do. If you are a prime contractor and you are on the next major supersonic whatever it is,

40

what was your performance on this contract at the end of the day?

Did you or did you not make it? For the next award or the following award it is going to be a critical, essential element for the

award of that contract. You will get their attention.

Same thing holds true for the agency. When I was a senior acquisition executive I made a comment one time, what happens to me

if I do not meet this award? The answer was, nothing. If you can

turn that, to say to the guy that is in my position, that bad things

are going to happen to you, you will get their attention. The agency

has got to lead this issue because all those contracting officers are

stretched thin. They have a position where they need to have some

guidance. If the agency comes out and says that by September 30,

regardless of what happens, you will meet this goal and you will

produce that, then I think that you have a chance of being successful, and all that we have spoken to will come to pass. Thank you.

Mr. DASILVA. Ron.

Mr. NEWLAN. Ron Newlan.

There is an expression in sports, a tie is like kissing your sister.

Well, a subcontract, in my opinion, is even less exciting than that.

Many of you know that in the late 1970s I founded a small business and ran it for 20 years, and when I left that firm 4 years ago,

it was the 54th largest Federal Government contractor. At that

business, we spent 92 percent of our marketing dollars focused on

being a prime. Eight percent of our marketing dollars, in any one

year, we would chase subcontract opportunities. That is just one

business’s marketing strategy.

Administrator Styles, who represents what the President said,

has said many times that the President wants to create an environment in which small businesses can flourish. If our role is to help

small businesses flourish, it is to get them prime contract opportunities. If it is to keep them a small business and to put bread on

their table and feed their family, then perhaps subcontracting business is good enough and appropriate, but if we want to flourish as

a small business and ultimately become a big business, there is no

substitute for being the prime. Thank you.

Mr. DASILVA. Thanks, Ron.

Pat.

Ms. PARKER. Patricia Parker.

You know, we talk about accountability and holding—and reports, and even the certification process. Well, what we are talking

about is data, the ability to collect data, the ability to identify data,

process it, get it back, make decisions quickly so this can go

through. As we know with any good legislation, any good programs

that come of that, resources, financial resources are needed to

make that happen, and as we know, this is in scarce resources, we

need to focus those resources. I think a lot of attention needs to be

paid to putting resources towards technology to help us all work

better and smarter. Thank you.

Mr. DASILVA. That is quite ominous.

[Laughter.]

Ms. PARKER. I am glad somebody agrees.

[Laughter.]

Ms. PARKER. But I mean because it is. If we want to hold primes

accountable, we want to hold agencies accountable, then we do

41

need to report. They need to be able to have the data. There needs

to be software programs that are out there. Small businesses go get

a Small Business Innovative Research grant so that they can develop a technology that can help process all of this quickly so agencies can see those numbers and they can hold people accountable.

Without that it is just pointing fingers and saying you did not do

it, and coming up with numbers. So I think that using technology

to help this process is going to be a big push in making all of this

happen.

Mr. DASILVA. Thank you.

Michael.

Mr. ROBINSON. Michael Robinson.

Building on what General Henry said, I think that the way to

incentive primes and agencies is to get this buy-in at the top. Without that buy-in this is not going to work. We have programs right

now that are languishing, where we offer an awardee in the

amount of 5 percent if companies will use Native American-owned

firms in the Indian Incentive Act, and this program is not working.

So financial incentives do not work. Report-onlys, which is what we

have in DoD, is not working. We have an agency charged to find

and report on the progress of the primes. DCMA, they do a wonderful job, but DoD is not making its goals.

So I think that buy-in at the top and holding primes accountable

in past performance, and making those conditions for further

awards, is a good incentive to move these programs forward.

Mr. DASILVA. Thank you.

With that, I am going to be closing out the Roundtable. Before

I do, I would just like to again thank Senator Kerry’s constituent,

Michael Robinson from our PTAC, Morris Hudson, Senator Bond’s

constituent from their PTAC, Angela Styles, who just left a few

minutes ago, but gave a tremendous amount of her time, as did

Fred Armendariz.

With that I would like to thank all the participants for participating in this Roundtable discussion today. I remind you that the

record will be open for 14 days. Please feel free to submit any comments on anything anybody said, any of the agenda items, and particularly the legislation.

And with that, thank you very much for coming. We are adjourned.

[Whereupon, at 11:27 a.m., the Roundtable was adjourned.]

(43)

APPENDIX

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1 CCIA is an international, nonprofit association of computer and communications industry

firms, representing a broad cross-section of the industry. CCIA is dedicated to preserving full,

free and open competition throughout its industry. Our members employ over a half-million

workers and generate annual revenues in excess of $300 billion.

COMPUTER & COMMUNICATIONS INDUSTRY ASSOCIATION,

Washington, D.C., July 2, 2002

Senator JOHN F. KERRY, Chairman,

Senate Committee on Small Business,

428A Russell Senate Office Building,

Washington, D.C.

DEAR SENATOR KERRY: I am writing to express the Computer & Communications

Industry Association’s (CCIA) support for S. 2466, the ‘‘Small Business Federal Contractor Safeguard Act.’’

CCIA was founded on the belief that competition and vibrant markets are critical

factors in the success of our economy and in our ability to lead the world in innovation and technology. We are the leading industry advocate in promoting open, barrier-free competition in the offering of computer and communications products and

services worldwide, and our motto is ‘‘open markets, open systems, open networks,

and full, fair and open competition.’’

CCIA is an association of computer, communications, Internet and technology

companies that range from small entrepreneurial firms to some of the largest members of the industry. CCIA’s members include equipment manufacturers, software

developers, providers of electronic commerce, networking, telecommunicatioas and

online services, resellers, systems integrators, and third-party vendors. Our member

companies employ nearly one million people and generate annual revenues exceeding $300 billion.

We have found that, in general, contract bundling can harm many small businesses by locking them out of ‘‘mega contracts;’’ can harm taxpayers by promoting

procurement of goods and services that may not be cost-efficient; and can hurt vendors of all sizes who do not have the resources to fulfill bundled contracts. We believe that the requirements of S. 2466 in regards to bundled contracts of over $2 million and $5 million will go far in ensuring that bundling is used only in the rare

case and as the norm.

We appreciate your efforts to promote effective and fair procurement policies, and

congratulate you on this excellent proposal. Please let me know if there is anything

I can do to assist in passage of S. 2466. You can contact me at (202) 783-0070 ext.

110, or Gabe Rubin of my staff at (202) 783-4070 ext. 107.

Sincerely,

ED BLACK,

President & CEO.

NEWS RELEASE OF THE COMPUTER & COMMUNICATIONS INDUSTRY ASSOCIATION1, JULY 1, 2002

CCIA: CONTRACT BUNDLING IMPEDIMENT TO FULL AND OPEN COMPETITION

Washington, D.C.—The Computer & Communications Industry Association

(CCIA) today submitted comments to the Office of Management and Budget (OMB)

describing the potential competitive barriers created by contract bundling when

used for Federal procurement. CCIA submitted its views in response to President

Bush’s call for comments from affected industries and individuals describing how

contract bundling limits ‘‘fair and open’’ competition.

In the comments, CCIA makes several recommendations including: making bundled contracts easier to protest; providing longer times to respond to requests for

bundled contracts; giving OMB the authority to resolve disagreements on bundled

contracts; and requiring more stringent standards for an agency to request the use

of bundling. Additionally, CCIA recommends that the presumption of validity for the

use of bundling move away from the affected agency and to those challenging its

use. CCIA recognizes the hard work of several Senators and Members of Congress, and

heartily endorses Senator John Kerry’s bipartisan ‘‘Small Business Federal Contractor Safeguard Act’’ and Representative Nydia Vela ́zquez’ bipartisan ‘‘Small Business Opportunity Act.’’ Both pieces of legislation will go far in ensuring greater access to the government procurement system, and better, more cost-effective solutions to acquiring goods and services for the Federal Government. While not just

a small business issue, CCIA recognizes that small businesses are disproportionVerDate 11-MAY-2000 10:41 Nov 21, 2002 Jkt 081834 PO 00000 Frm 00103 Fmt 6601 Sfmt 6621 C:\SBA\81834.TXT SSC3 PsN: SSC3
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1President George W. Bush, Address at the Women’s Entrepreneurship Summit (March 19,

2002) (transcript available at http://www.whitehouse.gov/news/releases/2002/03/20020319–

2.html). 2 Competition in Contracting; Contract Bundling; Notice of Public Meeting and Request for

Comments, 67 Fed. Reg. 87, 30403 (May 6, 2002). 3Procurement Policies of the Pentagon with Respect to Small Businesses and the New Administration: Hearing Before the House Comm. on Small Bus., 107th Cong. 51 (2001) (Statement of

Susan M. Walthall, Acting Chief Counsel for Advocacy, Office of Advocacy, U.S. Small Bus.

Admin.).

ately affected by bundling, and locked out of contracts where they could otherwise

provide cost-effective solutions.

‘‘Too many times the Federal Government will decide that it wants to procure

from a particular vendor and create a bid process that is tilted against anyone but

the one vendor who can provide the ‘mega-contract,’ ’’ said Ed Black, President and

CEO of CCIA. ‘‘This does not achieve the goals of full, fair and open competition

that is required from our laws. Moreover, this causes the taxpayers to pay more for

what the government wants to do. This is not the way our resources should be

used.’’

The comments can be found at http://www.ccianet.org/papers/contract—bundling.pdf.

COMMENTS ON COMPETITION IN CONTRACTNG REVIEW: CONTRACT BUNDLING, OFFICE

OF MANAGEMENT AND BUDGET, EXECUTIVE OFFICE OF THE PRESIDENT

The Computer & Communications Industry Association (CCIA) was founded on

the belief that competition and vibrant markets are critical factors in the success

of our economy and in our ability to lead the world in innovation and technology.

We are the leading industry advocate in promoting open, barrier-free competition

in the offering of computer and communications products and services worldwide,

and our motto is ‘‘open markets, open systems, open networks, and full, fair and

open competition.’’

CCIA is an association of computer, communications, Internet and technology

companies that range from small entrepreneurial firms to some of the largest members of the industry. CCIA’s members include equipment manufacturers, software

developers, providers of electronic commerce, networking, telecommunications and

online services, resellers, systems integrators, and third-party vendors. Our member

companies employ nearly one million people and generate annual revenues exceeding $300 billion.

For nearly 30 years, CCIA has supported policies that ensure competition and a

level playing field in the computer and communications industries. CCIA has been

effective in advocating our mission in Congress, in the Executive Branch, and in the

courts. Notably, we have taken a keen interest in antitrust enforcement, participating in the cases against IBM, AT&T, and most recently Microsoft. Additionally,

CCIA has taken a lead role in advocating that the government should not compete

against private sector enterprises, such as current competitive activities undertaken

by the United States Postal Service, the Office of Personnel Management, and plans

by the Internal Revenue Service.

It is with this strong belief in full, fair and open competition that CCIA was extremely pleased by President Bush’s recent announcement:

government contracting must be more open and more fair to small businesses

. . . I know government contracting, if wisely done, can help us achieve a grand

national goal . . . But you know as well as I do that there are some large hurdles for small businesses . . . and the main one is . . . that agencies sometime,

many times, only let huge contracts with massive requirements . . . called bundling. It effectively excludes small businesses. And we need to do something

about that.1

CCIA wholeheartedly endorses President Bush’s vision, and is pleased to provide

our comments on how contract bundling often fails to achieve the rule of ‘‘full and

open’’ competition that ‘‘remains the general rule when agencies acquire goods and

services.’’2

In short, most contract bundling is a huge impediment to full and open competition in Federal procurement. Bundling is defined as ‘‘the consolidation of two or

more smaller contracts into one very large contract.’’3 Invariably, these are contracts

that could have been separately bid on by a variety of vendors, achieving the same

outcome but with a more cost-effective solution for the government and U.S. taxpayer. The practice of contact bundling deprives small vendors of the ability to comVerDate 11-MAY-2000 10:41 Nov 21, 2002 Jkt 081834 PO 00000 Frm 00104 Fmt 6601 Sfmt 6621 C:\SBA\81834.TXT SSC3 PsN: SSC3
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4The Impact of Contract Bundling on Small Business: FY 1992–FY 1999, Report by Eagle Eye

Publishers, Inc. to the U.S. Small Bus. Admin. Office of Advocacy, (September 2000). 5See generally 2002 Scorecard III: Small Bus.: Opportunity Denied, Report by the House

Small Bus. Comm. Democrats, (May 15, 2002). 6 Id. at 8. 7Senator Kerry Introduces Legislation to Limit ‘‘Contract Bundling,’’ 44 No. 19 Gov’t Contractor 189 (May 15, 2002). 8 Id.

9See Ishak Akyuz, Bundling into the New Millenium: Analyzing the Current State of Contract

Bundling, 30 Pub. Cont. L.J. 123, 124 (2000). 10President George W. Bush, Address at the Women’s Entrepreneurship Summit (March 19,

2002). 11See 15 U.S.C. § 644(e)(2)(B) (2000). 12See 15 U.S.C. § 644(e)(2)(A) (2000). 13See e.g. Analyzing the Analysts: Hearing Before the House Subcomm. on Capital Mrkts., Ins.

and Gov’t Sponsored Enterprises, 107th Cong. (2001). 14 Ishak Akyuz, Bundling into the New Millenium: Analyzing the Current State of Contract

Bundling, 30 Pub. Cont. L.J. 123, 125–6 (2000) (citing EAI Corp., Comp. Gen. B–283129, Oct.

7, 1999, 99–2 CPD ¶69).

pete for many Federal sales, as many compete in niche areas and are not able to

fulfill contracts that reach beyond their business specialty. The numbers make this

fact clear: for every additional 100 bundled contracts, there is a corresponding decrease of 106 contracts awarded to small firms.4

Contract bundling was also cited by the House Small Business Committee Democrats as a major impediment for Federal agency contracting with small businesses.

In a recently released report, Ranking Democrat Nydia Vela ́zquez (D-New York) emphasized the woeful performance of the Federal Government’s track record in accomplishing its statutorily defined small business goals.5 In grading 21 agencies,

only one received a grade of A; one received a grade of B; seven received a grade

of C; 10 received a grade of D; and two received failing grades.6 Senator Christopher

‘‘Kit’’ Bond (R-Missouri) has also faulted contract bundling as anticompetitive, resulting in contracts that small businesses are unable to perform ‘‘due to its complexity or its obligation to do work in widely disparate geographic location[s].’’7 Senator Bond further stated that contract bundling ‘‘eliminates small businesses from

competing for contracts to sell the government some of the $200 billion in goods and

services it buys every year.’’8

Clearly, contract bundling is a device that locks out many qualified venders and

strikes at the heart of fair and open competition. In addition to costing taxpayers

valuable resources, the restrictions in availability of these contracts will hurt these

vendors’ ability to survive, thus reducing future competition.9 CCIA certainly does

not believe that it is the Federal Government’s responsibility to subsidize small

business, or specifically use its purchasing power to buttress venders who otherwise

would not be in a position to provide goods or services on competitive terms. This

also parallels President Bush’s comments: ‘‘I do not believe the role of government

is to create wealth. . . . The role of government is to create an environment that

facilitates the flow of capital, and an environment in which people can realize their

dreams.’’10 However, there is a great difference between subsidizing small businesses that aren’t competitive and placing onerous restrictions that unnecessarily

foreclose viable businesses from bidding for Federal contracts. In CCIA’s view, contract bundling, in its current excessive use, has operated to do the latter.

CCIA recognizes that there may be circumstances that warrant the use of bundled

contracts but cautions that they should be used in only the most sparing cases. In

general, Federal law appears to discourage bundling but allows it when there would

be ‘‘measurably substantial benefits’’ including: cost savings; quality improvements;

reduction in acquisition cycle times; better terms and condition; or any other

benefts.11 While the agency is required to conduct market analsysis to determine if

bundling is ‘‘necessary and justified,’’12 the language of ‘‘any other benefit’’ is troubling due to its vagueness. Further, it should be noted that there is no guarantee

ensuring the independent quality of market research, and such research has recently come under attack for its less than objective reporting.13 Given the limitations of relying on questionable market research, CCIA believes that this data, used

to justify any other benefit, creates too much leeway for vendors and agencies to

game the system.

There are other particular circumstances when bundling is allowed, such as when

the agency reasonably believes that de-aggregating tasks to separate contracts

would be impracticable;14 when effective coordination of the tasks involved require

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15 Id. (citing Electro-Methods, Inc., 70 Comp. Gen. 53, 90–2 CPD ¶363, at 5; LeBarge Prods.,

Inc., Comp Gen. B–232201, Nov. 23, 1998, 98–2 CPD ¶510, at 3–4). 16 Id. 17 Id. 18 Id. (citing Tucson Mobile Phone, Inc., Comp. Gen. B–274684.2, Feb 1, 1994, 94–2 CPD ¶45) 19 Id. (citing S&K Elecs., Comp. Gen B–282167, June 10, 1999, 99–1 CPD ¶111, at 4). 20 Ishak Akyuz, Bundling into the New Millenium: Analyzing the Current State of Contract

Bundling, 30 Pub. Cont. L.J. 123, 125–6 (2000) (citing Better Serv., Comp. Gen B–265751.2, Jan

18, 1996, 96–1 CPD ¶90, at 3; Ralph C. Nash, Contract Bundling: An Update, 12 Nash & Cibinic

Rep. ¶9 at 24–5 (1998)). 21 H.R. REP. NO. 107–432, at 3 (2002).

a single contractor;15 when unbundling would create undue technical risks;16 when

interoperability and compatibility would be hampered;17 when the agency has integrated the purchasing and installation on systems;18 and when the procurement results in a novel approach that will provide substantial benefits to the agency.19

While protests have demonstrated that contract bundling will be rejected when the

agency’s rationale for doing so is insufficient or unreasonable,20 considering all the

circumstances in which bundling is allowed, as described above, it appears that

agencies have wide latitude and discretion in bundling contracts. In CCIA’s view,

this discretion often leads to unwise bundling, and as a result, the current structure

is an ineffective one for ensuring fair and open competition.

There are two notable legislative efforts to reform contract bundling and CCIA

wholeheartedly endorses both. In the House, the bipartisan Small Business Opportunity Enhancement Act (H.R. 2867) has passed the Small Business Committee and

is awaiting floor action. This bill would amend the Small Business Act to give the

Director of the Office of Management and Budget (OMB), or a subordinate who is

appointed by the President and approved by the Senate, the authority to resolve disagreements on bundled or ‘‘mega’’ contracts in addition to extending the time period

from 30 to 60 days for a small business to respond to a solicitation for a bundled

contract. By moving the appeal process from the affected agency to OMB, bundled

contracts will likely face more rigorous scrutiny and not be rubber-stamped, an

issue that the Small Business Committee identified as a major problem in bundled

contract appeals.21

Senator John Kerry (D-Massachusetts) has introduced the bipartisan Small Business Federal Contractor Safeguard Act (S. 2466). This bill provides more stringent

guidelines for allowing a bundled contract. It would require, for bundled contracts

over $2 million, a statement of benefits, a statement of alternative approaches, and

a specific determination that the bundling is necessary and the anticipated benefits

justifies bundling. The bill adds further requirements for contracts over $5 million,

including conducting market research, an assessment of impediments to small business participation, and specified actions to maximize small business participation.

Additionally, these contracts will not be accepted if the ‘‘necessary and justified’’ determination is based solely on administrative and personnel savings unless those

savings will be substantial.

Taken in tandem, these two approaches would go far in ensuring more access by

a wider array of vendors into the government procurement process. CCIA also recommends that protests be automatically available in the case of bundled contracts

and that Congress should direct the Government Accounting Office (GAO) to shift

the presumption away from the affected agency when determining if a bundled contract is necessary and justified. Anecdotally, CCIA has determined that in too many

instances, Federal agencies give far too much deference to their procurement offices

in determining the appropriate scope of bundling of contracts, and in turn GAO

gives these agencies overly broad latitude. This trend needs to be reversed. CCIA

believes that the aims of H.R. 2867, moving dispute resolution to OMB, would be

an effective way to begin to overcome this hurdle.

CCIA believes contract bundling serves as a significant impediment to not only

fair and open competition, but more importantly, fosters shortsighted decisionmaking resulting in limiting the value the government ultimately receives for their

investments in technology.

A recent example can be found with the implementation of agency Financial Management Systems required under GAO’s Joint Financial Management Information

Program (JFMIP) where contract bundling is prevalent, resulting in unfair (or lack

of) competition and the elimination of both ‘‘best of breed’’ and Small Business as

solution providers. Under the direction of the GAO, JFMIP documentation calls out

for a ‘‘single integrated system’’. The document further explains that this does NOT

mean one software solution yet this is exactly the path recently taken by such agencies as NASA, the Navy and programs such as the Army’s Wholesale Logistic Modernization Program (LOGMOD). In each case, a foreign-based provider was selected

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22Federal Agencies Receive Poor Grades for Small Business Contracting, 44 No. 20 Gov’t Contractor 195 (May 22, 2002).

to support the modernization of the agency financial system. Agencies have gone on

to further justify the use of this solution for all encompassing agency requirements

at what appears to be significant and elevated costs resulting in reduced value to

the government.

Further contract bundling is frequently the precise hidden objective of the ‘‘socalled independent’’ analysis from consultant firms who strive to benefit from their

very same decisions. In our opinion, the government needs to have a far more critical review of ‘‘independent’’ analysis perfonmed by consultants and organizations.

Certainly, the top Fortune 100 companies are NOT moving toward a single or one

software solution relying on an individual organization. They realize the risk is just

too high to depend on ‘‘one’’ software provider, but instead move toward a strategic

alliance with several software companies that meet a high degree of their critical

needs (i.e. financial, HR–Human Resources, physical assets, IT assets). Consultant

organizations will provide integration but allow the client company or agency to

have the benefit of superior products which fit the specific needs of their organization.

In summary, bundled contracts greatly harm the competitive process. As the Federal Government spends over $219 billion annually, making it the largest purchaser

in the world,22 procuring the best solutions for government agencies in a fair, competitive and thus cost-effective way should be of paramount importance. The Federal

Government has the ability to make winners and losers in the marketplace. As previously stated, CCIA does not advocate using this power to unduly help businesses

that can’t compete effectively in the marketplace; however, it should not use this

system to lock out venders who can compete, but for unnecessary, burdensome contracting requirements. While much discussion of bundling revolves around small

businesses, CCIA’s position is not that this is solely a small business issue. Rather

this is one that affects vendors of all sizes, and more importantly, it affects all citizens in how much they pay for goods and services through their taxes, and what

they will receive. CCIA appreciates the President’s dedication to this issue, and welcomes the quick action on the part of OMB in assembling these written comments,

and oral comments at the open meeting recently held. If you have any further questions, or if CCIA can be of more assistance, please do not hesitate to contact CCIA

President & CEO, Ed Black.

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ADDITIONAL WRITTEN COMMENTS BY WOMEN IMPACTING PUBLIC POLICY FOR THE

COMMITTEE ROUNDTABLE

ARE GOVERNMENT PURCHASING POLICIES FAILING SMALL BUSINESS?

Mr. Chairman: On behalf of Women Impacting Public Policy, (WIPP), we are responding to questions raised at the June 19 Roundtable Discussion, ‘‘Are Government Purchasing Policies Failing Small Business?’’ Specifically, Women Impacting

Public Policy (WIPP) wants to go on record as supporting the draft language submitted by Chairman Kerry at the hearing regarding the creation of a Small and Disadvantaged Business Ombudsman for Procurement in the Small Business Administration (SBA).

Women own more than 9 million businesses in this country, employ more than

27.5 million and contribute more than $3.6 trillion to the nation’s economy. Yet,

since the Federal Acquisition Streamlining Act, enacted 7 years ago, women-owned

firms have received, at most, 2.2 percent of all contracting dollars.

Given those statistics, our support for the creation of an Ombudsman for procurement at the SBA should come as no surprise. There is no question in our members’

minds that the SDB Ombudsman should serve as a facilitator between Federal

agency procurement officers, small businesses (especially women-owned firms) and

prime contractors.

The interagency coordination required through each Federal agency’s Office of

Small and Disadvantaged Business Utilization (OSDBUs) in the proposed language,

should go a long way toward ensuring procurement goals for women-owned and minority-owned businesses are met. Toward that end, the confidentiality provision of

the proposed legislation is absolutely essential to making that happen.

WIPP understands that Committee members may differ on where to place the

Ombudsman within the SBA. We believe the Committee must make a judgment as

to where the Ombudsman can be the most effective independent voice for small and

disadvantaged business. Certainly, no Ombudsman can be effective unless he/she is

perceived to have enough authority and access to compel compliance among Federal

agencies and prime contractors. We feel certain the Ombudsman cannot be an effective voice for our members if he/she is hampered by the perception of being subject

to political pressures rather than being a true advocate for small and disadvantaged

businesses.

Finally, we support increasing the governmentwide small business goal from 23

percent to 30 percent. As Senator Bond indicated in his opening remarks at the

Roundtable, the government is not currently meeting the 23 percent goal. WIPP believes, however, raising the goal to 30 percent provides leadership from the Congress that Federal agencies must continue to strive to work with small businesses.

At the same time, setting higher goals must be accompanied with a strong goal attainment plan. The proposed legislation requires a plan from each agency on how

to meet the targets if they fail to do so. WIPP believes that consequences for failing

to meet the goals should be stronger than requiring a plan. Our small business owners face much greater consequences when they fail to meet their business targets.

Failure to meet business goals results in lost revenue for small businesses. In the

private sector, failure of employees to meet company goals and objects results in lost

jobs. We suggest that Congress consider a similar model for the agencies. Those

agencies failing to meet their goals, should face a decrease in their budget by a corresponding amount. We urge the Committee to explore stronger enforcement measures for agencies failing to meet their small business goals.

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ASSOCIATION OF SMALL BUSINESS DEVELOPMENT CENTERS,

July 16, 2002.

Hon. JOHN F. KERRY, Chairman,

Committee on Small Business and Entrepreneurship,

U.S. Senate

DEAR MR. CHAIRMAN: I am writing in strong support of the National Small Business Regulatory Assistance Act, S. 2483. As you know, this legislation establishes a

pilot program to award competitive grants to 20 selected Small Business Development Centers (SBDCs) to provide regulatory compliance assistance to small businesses. With these grants, the SBDCs would form partnerships with Federal compliance programs, provide education and training, and offer free compliance counseling

to small businesses. The legislation also provides privacy protections to small business owners who seek assistance under the pilot program, and also extends privacy

guarantees to all small businesses that seek assistance from their local SBDCs.

SBDCs are in a unique position to provide regulatory assistance to small businesses. With more than 1,000 centers across the nation, the SBDC network assists

about 600,000 small business owners each year in face-to-face counseling and training, in addition to hundreds of thousands more small businesses that SBDCs assist

through the mail, telephone, fax-on-demand and e-mail.

Small business owners try to comply with government regulations. Many small

businesses are family-owned and operated. Small business employees are frequently

family or friends of the same employer. Small business owners do not want their

employees working in unsafe workplaces, and they want their children to grow up

in a clean and healthy environment. However, small business owners may not know

what is expected of them and how they can comply with regulations in a cost-effective manner.

Legislation similar to S. 2483 was passed by the House of Representatives by voice

vote on October 2 of last year, with strong, bi-partisan support from the House Committee on Small Business. S. 2483, which you are cosponsoring, includes changes to

the House-passed bill that are supported by the ASBDC. These changes include

technical corrections, an improved funding formula to distribute grants more evenly

among grant recipients, improved study provisions, and clarification of privacy protections. I sincerely appreciate your openess in working with the ASBDC on these

changes, and I want to commend John DaSilva of your staff for his work on this

bill.

S. 2483 recognizes the very real need of small- and medium-size employers for regulatory compliance assistance. Thank you for your leadership on this important

small business development legislation.

Sincerely,

DON WILSON,

President.

Æ