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28–555 PDF 2006

SBA’S PROCUREMENT ASSISTANCE PROGRAMS

HEARING

BEFORE THE

SUBCOMMITTEE ON REGULATORY REFORM AND 

OVERSIGHT

OF THE

COMMITTEE ON SMALL BUSINESS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

WASHINGTON, DC, MARCH 30, 2006

Serial No. 109–45

Printed for the use of the Committee on Small Business

(

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

COMMITTEE ON SMALL BUSINESS 

DONALD A. MANZULLO, Illinois, Chairman 

ROSCOE BARTLETT, Maryland, Vice 

Chairman 

SUE KELLY, New York 

STEVE CHABOT, Ohio 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

JEB BRADLEY, New Hampshire 

STEVE KING, Iowa 

THADDEUS MCCOTTER, Michigan 

RIC KELLER, Florida 

TED POE, Texas 

MICHAEL SODREL, Indiana 

JEFF FORTENBERRY, Nebraska 

MICHAEL FITZPATRICK, Pennsylvania 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

NYDIA VELA ́ ZQUEZ, New York 

JUANITA MILLENDER-MCDONALD, 

California 

TOM UDALL, New Mexico 

DANIEL LIPINSKI, Illinois 

ENI FALEOMAVAEGA, American Samoa 

DONNA CHRISTENSEN, Virgin Islands 

DANNY DAVIS, Illinois 

ED CASE, Hawaii 

MADELEINE BORDALLO, Guam 

RAU ́ L GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

LINDA SA ́ NCHEZ, California 

JOHN BARROW, Georgia 

MELISSA BEAN, Illinois 

GWEN MOORE, Wisconsin 

J. MATTHEW SZYMANSKI, Chief of Staff 

PHIL ESKELAND, Deputy Chief of Staff/Policy Director 

MICHAEL DAY, Minority Staff Director

SUBCOMMITTEE ON REGULATORY REFORM AND OVERSIGHT 

W. TODD AKIN, Missouri Chairman 

MICHAEL SODREL, Indiana 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

SUE KELLY, New York 

STEVE KING, Iowa 

TED POE, Texas 

MADELEINE BORDALLO, Guam 

ENI F. H. FALEOMAVAEGA, American 

Samoa 

DONNA CHRISTENSEN, Virgin Islands 

ED CASE, Hawaii 

LINDA SA ́ NCHEZ, California 

GWEN MOORE, Wisconsin

CHRISTOPHER SZYMANSKI, Professional Staff

(II) 

C O N T E N T S 

WITNESSES

Page 

Martoccia, Mr. Anthony, Associate Deputy Administrator, Office of Government Contracting and Business Development, U.S. Small Business Administration ................................................................................................................. 5

Collado, Mr. Rafael, CEO & Chairman, Phacil, Inc. ............................................ 6

Heckman, Mr. Kurt, President, Sycamore US, Inc. .............................................. 9

Lopez, Mr. John, Chairman, Association for Service Disabled Veterans ............ 11

Giordano, Ms. Catherine, President, Knowledge Information Solutions, Inc. .... 13

Schneider, Ms. Christina, Chief Financial Officer, Purcell Contracting Corporation ................................................................................................................. 15

APPENDIX

Opening statements: 

Akin, Hon. W. Todd .......................................................................................... 24

Velazquez, Hon. Nydia (Ex Officio) ................................................................. 25

Kelly, Hon. Sue ................................................................................................. 28

Prepared statements: 

Martoccia, Mr. Anthony, Associate Deputy Administrator, Office of Government Contracting and Business Development, U.S. Small Business 

Administration .............................................................................................. 30

Collado, Mr. Rafael, CEO & Chairman, Phacil, Inc. ..................................... 34

Heckman, Mr. Kurt, President, Sycamore US, Inc. ....................................... 45

Lopez, Mr. John, Chairman, Association for Service Disabled Veterans ..... 47

Giordano, Ms. Catherine, President, Knowledge Information Solutions, 

Inc. ................................................................................................................. 53

Schneider, Ms. Christina, Chief Financial Officer, Purcell Contracting 

Corporation .................................................................................................... 62

Additional material: 

Espinosa, Mr. Raul, President & CEO, Fitnet Purchasing Alliance ............ 73

(III) 

(1)

SBA’S PROCUREMENT ASSISTANCE 

PROGRAMS 

THURSDAY, MARCH 30, 2006

HOUSE OF REPRESENTATIVES

SUBCOMMITTEE ON REGULATORY REFORMAND OVERSIGHT

COMMITTEE ON SMALL BUSINESS

Washington, DC 

The Subcommittee met, pursuant to call, at 2:00 p.m., in Room 

2360 Rayburn House Office Building, Hon. W. Todd Akin [Chairman of the Subcommittee] presiding. 

Present: Representatives Akin, Bartlett, Bordallo, Moore and 

Velazquez (Ex Officio). 

Chairman. AKIN. The Committee will come to order. Good afternoon, everybody. I’m sorry that we had some votes and it has made 

us run a little bit late. We’re going to try and redeem the time 

some here and so I’m going to proceed with an opening statement 

and then we’ll take an opening statement by my counterpart here, 

the Ranking Member, and then if you’d like to make a statement 

you may. 

What we’re going to do is run five minutes right across for everybody. I’m going to hold everybody pretty close on time. It is the 

equivalent of Friday afternoon in a school environment and so 

we’re going to do five minutes for everybody and then have a time 

of questions. I would expect we’ll be probably done pretty close to 

an hour or somewhere in that vicinity, okay? 

Good afternoon. Welcome to the hearing which will consider the 

Small Business Administration’s procurement assistance programs. 

I want to especially thank those who have come some distance to 

participate in the hearing. 

Most of you know that small businesses are the backbone of our 

economy. Most, if not all, large businesses started as small businesses. Small businesses are often times the driver of innovation 

in both products and services. The Federal Government plays an 

enormous role in promoting the growth of this sector as the consumer of goods and services that small businesses provide. 

In fact, it is the stated policy of Congress that the Federal Government should purchase 23 percent of their goods and services 

from small businesses. Furthermore, the Small Business Administration oversees procurement assistance programs for small businesses that owned by the disadvantaged, women, veterans, or located in Historically Underutilized Business Zones. 

In the past, small businesses have expressed concern that SBA 

and other federal agencies were not providing sufficient or effective 

2

procurement assistance. In addition, there have been concerns that 

large businesses have received the benefit of small business contracting goals and policies. With a new associate deputy administrator for the Office of Government Contracting and Business Development at the SBA, this is the time for a new review of the Government’s small business procurement policies. 

This hearing will examine whether or not federal procurement 

assistance programs are, in fact, helping small businesses compete 

in the fiercely competitive and complex contracting environment. 

Are the SBA’s and other federal agencies’ programs and efforts sufficient to assist small businesses in finding real procurement opportunities? Also, the Subcommittee will explore innovative ideas and 

recommendations to improve and enhance assistance to small firms 

that want to do business with the Federal Government. 

I now yield for an opening statement by my good friend and colleague, the Ranking Member of this Subcommittee, Ms. Bordallo of 

Guam. 

[Chairman Akin’s opening statement may be found in the appendix.] 

Ms. BORDALLO. Thank you very much, Mr. Chairman, and good 

afternoon, everyone. 

It has been some time since this Committee has been able to review the Small Business Administration’s procurement assistance 

programs. These preferential contracting programs provide small 

businesses with some of the best avenues into the federal marketplace. And it is important that this Committee and Congress, as a 

whole, ensure that the SBA is administering these programs to 

their full potential. 

The Federal Government is the largest buyer of goods and services in the world. During Fiscal Year 2004, the Federal Government’s purchases exceeded $330 billion. Amazingly, the value of 

the federal marketplace roes by more than $100 billion in the past 

five years. 

Small businesses, however, may not be benefitting from this 

growth in the federal marketplace to the extent that they should. 

And this of great concern to me. Small businesses are driving 

forces behind our economy. They are the largest creator of jobs. 

They are innovators that spur new technology and efficiencies in 

our economy. And they are also essential parts of the communities 

in which we live. 

I represent Guam. And small businesses constitute nearly 90 

percent of the businesses in my district. Supporting them is a top 

priority for me. 

The HUBZone program on Guam, in particular, is growing in importance to the island’s small business community. Fifty-four 

Guam firms have been certified as HUBZone businesses, since August of 2005 when all of Guam was designated as a HUBZone. And 

I have the Small Business Committee to thank for that. That was 

a piece of legislation that we put through. This is encouraging considering that only six Guam firms were certified for the program 

prior to this legislation. 

Barriers to small businesses participating in the federal marketplace have traditionally been high. And this is one of the reasons 

why Congress authorized programs such as the Historically UnderVerDate 0ct 09 2002 19:39 Oct 17, 2006 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 G:\HEARINGS\28555.TXT MIKE
3

utilized Business Zone program, the 8(a) program; the Service-Disabled Veteran Business program, the Small Disadvantaged Business program; and, Women-Owned Business program. Congress 

has also set in place mandatory minimums for the percent of contracts that federal departments and agencies must award to small 

businesses each year. 

These preferential contracting programs and the mandatory minimum contracting percentages allow for a more level playing field 

for small businesses to be created in the federal marketplace. And 

it is because of these initiatives that our nation’s small businesses 

can more successfully compete for and be awarded Federal Government contracts. 

Among other things, the SBA is responsible for ensuring that the 

playing field within the federal marketplace remains as advantageous as possible for small businesses. So it is the responsibility 

of this Committee today to review SBA’s performance in achieving 

that goal, and to solicit ideas on how this Committee and Congress 

can enhance these initiatives to ensure that the barriers remaining 

between America’s small businesses and the federal marketplace 

can be successfully overcome by our country’s small entrepreneurs. 

I look forward to your testimonies today. Thank you, Mr. Chairman. 

Chairman. AKIN. Thank you and a brief statement will be made 

by Ranking Member of the Full Committee, Ms. Velazquez, at this 

time. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman, and I also to thank 

the Congresslady Bordallo for allowing me to sit in on this hearing 

and I want to express my appreciation for all the work, the hard 

work that you do on this issue. 

Over the last several years, the federal marketplace has continued to rapidly increase and is $100 billion more than it was at the 

beginning of the President’s term. This growth is attributed to 

spending related to the war and our involvement in Iraq. The Department of Defense procurement volume in 2004 was bigger than 

the entire federal marketplace in 1999. 

Based on this, you would think that small businesses are thriving, but let me tell you nothing could be further from the truth. 

From 2003 to 2005 alone, small companies lost nearly $1.7 billion 

on contracting opportunities and contract actions to small businesses’ decline by 31 percent. While this Administration claims 

small businesses are important, they obviously don’t think they are 

important enough to do business with. 

We constantly hear that SBA is doing more with less, but it is 

clear entrepreneurs are not benefitting. By 2007, the agency staff 

will be reduced by one third and their budget has already been cut 

in half. The lack of personnel and resources causes programs to be 

abused, fraud-ridden, and in some cases not executed at all. 

One of the most important roles SBA serves is to ensure agencies 

comply with current contracting laws. This job falls on the Procurement Center Representative, the front line defense against items 

such as contract bundling. There were 73 PCRs when the federal 

marketplace was almost half of its current size and now there are 

only 58. 

4

This leaves small firms without an advocate and results in a 

drop in contracting opportunities. At a time when many small businesses are struggling to recover from Hurricane Katrina and Rita, 

local entrepreneurs are receiving less than 20 percent of FEMA’s 

contracting dollars. To make matters worse, nothing has been done 

to expand business opportunity in the Gulf region for recovery 

work. 

While the SBA does not think this is alarming, our nation’s small 

businesses are being neglected. These shortcomings are most glaring with respect to women and minorities. The 8(a) program, the 

primary program through which minority-owned businesses enter 

the federal marketplace has dropped by 20 percent. What is most 

disappointing is that this program has not been updated in nearly 

20 years and as a result has moved away from its core mission of 

minority business development. 

This Administration has also done nothing to implement the 

Women’s Procurement Program that passed into law and signed by 

the President in 2000, an initiative that allows for women-owned 

businesses to access the federal marketplace. By failing to execute 

this program, women business owners have lost out on $25 billion 

in contracting opportunity. Small business participation in the federal marketplace is important and should not be viewed as an 

undue burden.Entrepreneurs are the innovators, drivers of our 

economy. They make this economy tick. This is not just good for 

small businesses, but it creates competition in the federal marketplace, gives federal agencies quality products and most importantly, it provides the best value for taxpayers’ dollars. 

If corporate America turns to small businesses and provides contracts for them, why can’t the Federal Government do the same? 

Rather than recognizing this, the Administration’s sole focus is providing big contracts to companies like Haliburton who then turn 

around and overcharge the Government millions of dollars. This is 

the wrong set of priorities for this nation and it needs to change. 

Thank you, Mr. Chairman. 

[Full Committee Ranking Member Velazquez’s opening statement may be found in the appendix.] 

Chairman. AKIN. Thank you, all of our speakers so far who have 

been able to stay within the five minutes here. So let’s see if we 

can keep it within the five minutes and that will give us a little 

time for questioning as well. 

Our first witness is Anthony Martoccia. Anthony is the Associate 

Deputy Administrator in the Office of Government Contracting and 

Business Development, U.S. Small Business Administration, Washington, D.C., but Anthony, my understanding is that this is your 

second month in the job, is that correct? 

Mr. MARTOCCIA. That’s correct. 

Chairman. AKIN. What we’re going to do is allow Mr. Barlett, because he’s on a tight time schedule, to introduce Mr. Heckman. But 

I’m still going to go ahead and go straight across to Mr. Heckman 

even though he isn’t first. Mr. Barlett, if you would introduce your 

witness, Mr. Heckman, and then we will proceed. 

Mr. BARTLETT. When you come to him in the line, I’ll introduce 

him. Are you starting down the line? Go ahead. 

Chairman. AKIN. I was going to go down the line, but— 

5

Mr. BARTLETT. When you come to him, yield to me, and I’ll introduce him. 

Chairman. AKIN. Okay, that was what I was thinking about. 

Then I’m going to continue with the introduction then of Anthony, 

and your introduction is done, basically. Now your honeymoon is 

over, and you’ve been here a month, so we look forward to your testimony. Thank you. 

STATEMENT OF ANTHONY MARTOCCIA, OFFICE OF GOVERNMENT CONTRACTING AND BUSINESS DEVELOPMENT, U.S. 

SMALL BUSINESS ADMINISTRATION 

Mr. MARTOCCIA. Chairman Akin, Ranking Member Bordallo, Distinguish Members of the Subcommittee, I am here today to discuss 

the President’s FY Budget request for the Small Business Administration and related legislative issues, specifically those related to 

government contracting and business development. 

I am Anthony Martoccia, Associate Deputy Administrator for 

Government Contracting and Business Development. Thank you 

for allowing me to represent the SBA on behalf of Administrator 

Barreto. 

Since 2001, the SBA has been on a mission to deliver more services to the nation’s small businesses. We are proud of the SBA’s 

success in that quest, and the FY 2007 budget reflects a continuation of this goal. 

Improved methods to assist small businesses gain access to government contracting opportunities have been implemented. By restructuring key agency operations and re-engineering the Agency’s 

largest loan programs, the SBA has achieved record program 

growth while operating more efficiently and reducing its total budget by more than 37 percent since 2001. Government contracting 

dollars going to small businesses have grown significantly since 

Fiscal year 2000. There were $20 billion more in small purchases, 

prime contracts, small businesses in FY 2004 than in FY 2000, 

supporting an estimated 156,000 jobs. 

In addition, subcontracting to small business has grown by $10 

billion. With improved efficiencies in Fiscal Year 2007, SBA will be 

able to serve record numbers of small businesses with a total budget request of $624 million of which $74 million will be used for government contracting and business development. 

SBA has increased the number of Procurement Center Representatives to 58, assisting small businesses with federal procurement. In FY 2004, small businesses received contract awards a little over $69 billion of the approximate $300 billion in total federal 

prime contract awards. Additionally, there were an estimated $45 

billion in government-related subcontracts awarded to small businesses. 

SBA’s Office of Government Contracting and Business Development also instituted enhanced practices and technological improvements. GCBD is working with agencies to help them meet their 

missions, as well as helping small businesses to identify contracting opportunities through these technological improvements. 

Technology, such as the electronic Procurement Center Representative system create increased efficiencies concerning governing contracting opportunities. 

6

Strides have been made to maximize staff resources and monitor 

contracting activities, as well as to improve communication and 

interaction with the small business community through the automation of many basic systems. These systems include the Electronic Subcontracting Reporting System, 8(a) application, HUBZone 

Procurement Query and Reporting System, Central Contractor 

Registration, Federal Procurement Data System Next Generation 

and Tech Net, among others. As technology is ever changing and 

improving, so are the efficiencies enhanced by using these E-gov 

systems. 

The added benefit of these technological advances is apparent in 

the business matchmaking efforts following the Gulf Coast hurricane disasters. More than 500 small businesses were registered 

and assisted by our Procurement Center Representatives across the 

country to get over $30 million in contract support. In other 

Katrina-related contracting, approximately $1.24 billion Katrina-related contracts listed in FPDS were awarded to small businesses. 

Also approximately $1.5 billion in FEMA small business awards 

are pending. 

In addition to GCBD’s traditional functions, the Office will leverage opportunities outside of our division. Opportunities provided by 

SBA’s Office of Capital Access, Entrepreneurial Development and 

SBA district offices outreach to assist small businesses to be ready 

and able to do business with the Federal Government. 

The SBA operates like the businesses it helps to succeed by continually meeting challenges and evaluating cost effectiveness. The 

SBA has succeeded in achieving record growth in its programs 

while at the same time reducing the overall budget request through 

focused, practical implementation of the President’s Management 

Agenda and related initiatives. 

Creating a better environment for small business to thrive and 

compete is a priority. It is well documented that when small businesses are thriving, the overall economy is thriving. 

Thank you. I will be happy to answer any questions you might 

have. 

[Mr. Martoccia’s testimony may be found in the appendix.] 

Chairman. AKIN. Thank you. I really appreciate your testimony, 

Deputy. And you brought it in 30 seconds under time. You’re doing 

pretty good. 

Mr. MARTOCCIA. Thank you. 

Chairman. AKIN. Get a little extra star for that. Thank you. 

And Rafael—is that Collado? 

Mr. COLLADO. Yes sir. 

Chairman. AKIN. And you’re the CEO and Chairman of Phacil, 

Incorporated from Camden, New Jersey. 

Mr. COLLADO. Actually, it’s Phacil, Incorporated in Camden, New 

Jersey. 

Chairman. AKIN. Phacil? 

Mr. COLLADO. Yes sir. 

Chairman. AKIN. I got half of it. Thank you, please proceed. 

STATEMENT OF RAFAEL COLLADO, PHACIL, INC. 

Good Afternoon Chairman Akin, Congresswoman Bordallo, Members of this Subcommittee, fellow panelists and guests. My name 

7

is Rafael Collado and I am the Chairman of the Board and CEO 

of Phacil, Inc. Phacil, Inc. is certified by the Small Business Administration as a Small Disadvantaged, 8(a) and HUBZone Business. 

The company provides Information Assurance/Security, Information 

Technology, Logistics Support and Engineering Services to the Federal Government and commercial customers. Phacil is unique 

among 8(a) companies in that it holds a Top Secret Facility clearance and is headquartered at the Applied Communication and Information Networking Center in Camden, New Jersey which is a 

HUBZone. 

I am pleased to join this panel of industry and government leaders to participate in a dialogue about contracting opportunities 

made available as a result of the Small Business Administration’s 

HUBZone program. And more specifically, the legislation reauthorizing the SBA itself. For me and my Company Phacil, participating 

in procurement opportunities within the context of the SBA have 

been extremely disappointing. After four years of participating in 

SBA programs, Phacil’s appropriate expectations have not been realized. 

Based on our experiences there is no doubt there is a bias 

against small business and that the SBA has done very little to 

mitigate it. I hope that forums such as this one will provide the 

guidance, and more importantly, sanctions that will transform the 

SBA from the bureaucratic speed bump for small disadvantaged 

companies into the facilitator of newly, reinvigorated, badly needed 

economic engines in urban communities. 

By way of personal background, I was born in the South Bronx. 

With the support of my parents working as an electrical engineer 

in the aerospace industry and my mother, a home-maker, I did well 

in school. I graduated high school as both a Regents and National 

Merit scholar attended Polytechnic Institute of Brooklyn where I 

majored in Electrical Engineering and after Polytech worked for 

several of the largest technology firms in the United States. 

Very early in my working career I knew that I wanted to start 

my own business. I did not want my life to potentially be in the 

hands of people who might not be fair to me. I decided that the 

only way I could help myself and my community was to build something which would directly contribute to the local economic infrastructure. In 1983 with the assistance of some friends I had grown 

up with, I founded Protocom Devices, Inc. and at its peak we employed over 200 people. The majority of these folks came from the 

local neighborhood and had been trained by the company to a high 

level of technological competence. 

I since went on to found several other companies, including 

Inabox Communications which was acquired by Register.com in 

2000. It was at Register.com that I met my current partner at 

Phacil, Sascha Mornell, who also shares the value of hard work, 

education, integrity, commitment and compassion for equality. 

Phacil was formed by Sascha and me, fulfilling a life long dream 

of creating, nurturing and running our own business. In 2000, we 

formed Phacil and experienced all of the barriers that confront 

most Small Disadvantaged Businesses. Primarily, we experienced 

and continue to experience now what I call the institutional corruption of convenience, people not performing their congressionally-apVerDate 0ct 09 2002 19:39 Oct 17, 2006 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 G:\HEARINGS\28555.TXT MIKE
8

pointed duties because it requires them to work a little harder and 

they don’t pay a price if they are not diligent. 

For the sake of brevity I will limit my comments today to the 

major obstacles the company historically faced so as to illustrate 

the SBA’s failure to effectively implement the HUBZone program 

and the pervasiveness of its institutional apathy which is most corrosive to equal opportunity. Therefore, I begin as any small disadvantaged business wanting to develop in the Government contracting marketplace with the SBA. 

As I mentioned earlier, Phacil wanted to be a HUBZone company 

because Sascha and I wanted our Company to provide jobs to folks 

in economically disadvantaged neighborhoods. We had been successful previously; we wanted to continue and extend this success 

to folks in under utilized or under employed urban settings. 

The HUBZone Program was most co-incident to this purpose, or 

so we thought. The program was and is, first and foremost, a jobscreation program. It was open to all businesses regardless of race, 

ethnicity or sex—not a quota system—which appealed to my particular idealism best expressed by Dr. Martin Luther King when he 

said that he hoped one day his children would live in a world 

where they were judged ‘‘not by the color of their skin. but by the 

content of their character.’’ 

For me the decision to seek entry into the HUBZone program 

was a way of making part of that dream real. My first disappointment came, when after we had speedily filled out the forms, hired 

the requisite number of people from our limited capital resources 

and set up operations in Newark.the SBA said they were ‘‘too busy’’ 

to process our paperwork and worse yet had no idea as to when 

they could review it so that we could be certified. Despite numerous calls, emails and personal visits, we could not get any movement or support whatsoever from the SBA. Upset and frustrated, 

we decided to reach out to our local Congressman, the Honorable 

Donald M. Payne. 

Mr. Robert Cottingham from Congressman Payne’s office came to 

visit us within a day of our call. He took the time to listen to us, 

asked a few questions and then very frankly told us that there 

might not be very much he could do. Thanks to the Congressman’s 

assistance, within three days of that meeting, the SBA reviewed, 

asked a few questions and clarifications and certified us as a 

HUBZone company. That was the first time, but certainly not the 

last time, that aggressive and principled congressional involvement 

helped balance the scales of opportunity on our behalf and on that 

of the communities whose citizens we employ. 

Our experience with the HUBZone program caused us to become 

very concerned that other potential beneficiaries in Newark were 

being underserved by the SBA. Sascha and I, with assistance 

from— 

Chairman. AKIN. Mr. Collado, we’re already out of time. We have 

actually quite a lengthy record that is part of our record for the 

Committee that you’ve submitted. Do you want to just sort of summarize in one sentence? 

Mr. COLLADO. Surely. In closing, I would like to remind the 

Members of this Committee that Phacil has depended on the active, aggressive support of our elected representatives in leveling 

9

the playing field in dealing with Federal Government acquisition 

and contracting. Borrowing in a bipartisan manner from the words 

of two great American Presidents I say as President Kennedy did, 

‘‘always remember that sincerity is always subject to proof.’’ In that 

same vein, another great American President, Ronald Reagan 

warned us ‘‘to trust and verify.’’ 

I would again want to thank the Members of the Committee for 

this opportunity to share my perspective and I’d like my comments 

entered into the record. Thank you. 

[Mr. Collado’s testimony may be found in the appendix.] 

Chairman. AKIN. Without objection, and thank you for sharing 

and obviously an exciting personal journey and all. I think people 

have some questions for you. 

I would call on Mr. Bartlett to introduce our next witness. I’m 

sorry they didn’t arrange the name tags on the table in the same 

order they did in our notes, so we’re going to jump over to Mr. 

Heckman, but I’d like to recognize Roscoe Bartlett, my esteemed 

colleague. 

Mr. BARTLETT. My honor. Kurt Heckman is a resident of Hagerstown, Maryland. He is the President of Sycamore US which is 

based in Frederick and McHenry, Maryland. He has a mathematics 

degree from Eastern Nazarene College and has 22 years’ experience in the U.S. intelligence community. He has primarily served 

as a systems engineer and has designed mission planning software 

for large, aerospace applications. However, he is most proud, as he 

well should be, of his beautiful wife of 23 years and his 5 children. 

In 1996, Mr. Heckman founded a small business to support the 

intelligence and aerospace communities with engineering services. 

Kurt and his business partner, Jim Lockwood, named the company 

and I really like this, named the company Sycamore Associates because Zaccheus, from the Bible, climbed up a Sycamore tree as a 

dishonest businessman and came down from the tree an honest 

businessman. 

Since 1996, Mr. Heckman and his team have led the company 

from a single contract with a few engineers, to numerous contracts 

with the US intelligence community, HUD, Fannie Mae, Freddie 

Mac, Ginnie Mae, Lockheed Martin and Orbital Systems employing 

a staff of over 100 people. 

I am honored to know him. He is both a friend and a constituent. 

He has brought really high-paying jobs to a HUBZone in a really 

depressed part of our district, a city that—a county that until a few 

years ago had 14 percent unemployment. And I think his employees there get what, four times the average income? HUBZones are 

really, really working in his district and thanks to Kurt Heckman, 

we had a lot of employees now in HUBZones. 

Thank you for coming as a witness, and I’m honored to be here. 

Chairman. AKIN. Roscoe, thank you for that great introduction, 

and Kurt, you can proceed. Thank you. 

STATEMENT OF KURT HECKMAN, SYCAMORE US, INC. 

Mr. HECKMAN. Congressman, thank you for your kind introduction. It’s an honor to be here in front of this subcommittee today. 

On behalf of the 100 employees at Sycamore, please accept my 

10

thanks for creating the HUBZone program and maintaining it 

through these years. 

In my ten years at Sycamore, I’ve discovered that there is really 

only one inherent virtue to being a small business, and that virtue 

is that the stockholders know the employees on a first name basis. 

It’s impossible to work side by side with your employees for any 

length of time and coldly refer to them as ‘‘labor.’’ In a small business, employees are your partners. In a small business like Sycamore, they become owners where 20 of my 100 employees own part 

of my company. Small business is where humanity truly intersects 

with economics and frankly, a lot of America’s business problems 

today can be traced to dehumanization of our workers. 

Sycamore has been a delight to me for the last 10 years, but with 

the delight comes a burden regarding the care of a growing number 

of individuals and families. We’ve worked to create the employeecentric company that I always wanted to work for, and the net result is that we have top-performing men and women and virtually 

no attrition. People come to Sycamore and stay, and in the Intelligence Community, that is virtually almost unheard of. For moral 

and ethical reasons, we keep the respect for our employees at the 

top of our priorities, but it is also good business. A stable and motivated workforce is a powerful thing. If your employees know that 

you will do everything in your power to take care of them, they 

won’t bolt at the first sign of bad news; couple that with honesty 

and transparency, and you will overcome great hurdles. 

You should know that Sycamore was a successful business prior 

to the HUBZone program. We were five years old, had 30 people, 

were doing about $3 million in annual revenue, but with the exception of some small contracts with Fannie Mae, Freddie Mac and 

Ginnie Mae, the vast majority of our business was as a subcontractor. That was fine, but as a sub you typically don’t get credit 

for your success, you rarely get project management experience and 

in general, leadership opportunities are scarce. Often you can’t 

even cite the good work you’ve done as a sub on proposals. Furthermore, as a sub, the prime’s add-on cost creates a lower ceiling for 

what you can pay your employees and what benefits you can provide. The funny part is that even though the primes skim their 

G&A and profit off of the top of our bill rates, my employees are 

typically higher paid than their prime contractor peers, and certainly have better benefits, and that’s because as a small business 

we’ve had to be efficient. 

In our five years as a HUBZone certified company, we’ve gone 

from a good little company, to a leader in the small business arena. 

We’ve more than tripled in size, and have five significant prime 

contracts because of the HUBZone program. The HUBZone requirements on the agencies have given us a chance to perform and I am 

happy to say that we have executed. Our performance grades are 

excellent across the board, and on our largest prime contract, 

which is a multimillion dollar HUBZone IT contract in the Intelligence Community, we have received our fourth straight 100 percent award fee for outstanding performance. Instead of viewing 

HUBZone regulations as a burden and a mandate to do work with 

inferior businesses, our customers see it as an efficient and simplified way to do business with an excellent company. 

11

I must confess that I love how the HUBZone program isn’t 

geared to make rich men and women richer, but sends dollars to 

communities with statistically proven needs. It was very easy for 

Sycamore to extend its practices of excellence to our customers and 

employees to include our community. All three of our offices are in 

HUBZones. Sycamore is required to have 35 percent of our staff be 

residents of a HUBZone. We have over 50 percent. Our investment 

in the HUBZone community in 2005 was over $2.5 million. 

In closing, one our first HUBZone employees is a smart young 

man that was literally working in a coal mine in the Appalachian 

region of Western Maryland. Today, through his own efforts and 

with the help of tuition assistance, part-time work, benefits and 

technical training from Sycamore, that young man has a bachelor’s 

degree in mathematics, has some of the highest security clearances 

in the land, and has a full-time job making over $45K straight out 

of college and is on his way to a terrific career and a bright future, 

all because of the HUBZone program. On his behalf and the others 

in Sycamore, thank you for creating the HUBZone program. 

[Mr. Heckman’s testimony may be found in the appendix.] 

Chairman. AKIN. Thank you so much for your testimony and the 

story as well. 

Our next witness is John Lopez. He’s Chairman of the Association for Service Disabled Veterans from Washington, D.C. 

John? 

STATEMENT OF JOHN LOPEZ, ASSOCIATION FOR SERVICE 

DISABLED VETERANS 

Mr. LOPEZ. Good morning Mr. Chairman, Ranking Member and 

Members of the Committee. 

Thank you for your attention and without objection, I shall submit a written statement for the record and summarize my testimony for the Committee. 

Since the beginnings of our nation, the people of the United 

States of America have placed great confidence in that interpretation of the United States Constitution that permits our Government to conscript or seduce our citizens to be killed, disabled and 

tortured in military service, for the security and prosperity of the 

total population. 

Complicit in that application, has been presumption that our nation, through its Government, would provide rehabilitation for our 

service disabled veteran survivors of the resulting horror. 

This has not been the case when service disabled veterans have 

attempted to maintain their rehabilitation as owners and operators 

of smaller businesses. 

It has been nearly six years since the U.S. Congress first provided support for the service disabled and prisoner of war veteran 

enterprise initiative, by enacting Public Law 106-50 and Public 

Law 108-183. 

The Administration followed that direction by invoking Presidential Executive Order 13360, directing aggressive and immediate 

implementation of those laws and specifying actions to be taken. 

Those activities took place in October 2004 and since that time 

frustration has continued and subsequently the legislated intent of 

the United States Congress has been variously interpreted by reguVerDate 0ct 09 2002 19:39 Oct 17, 2006 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 G:\HEARINGS\28555.TXT MIKE
12

lators, due to the necessity for inserting and parsing of the required language, statements and references to existing regulations 

and laws. 

This bureaucratic abuse has had the effect of confusing and impeding the effort to increase the participation of the service disabled veteran in government procurement and contracting opportunities. 

The policy of the nation and the intent of the Government has 

been ignored and the congressional compact for our nation’s security has been violated. 

Consequently, it is imperative that the Congress enact H.R. 3082 

‘‘The Veterans Owned Small Business Promotion Act’’ which clarifies and reemphasizes the intent of the U.S. Congress. The intent 

is a splendid example of the concern and focus of the congressional 

response to the veteran’s need for rehabilitation and transition assistance. 

H.R. 3082 gives specific authority to the Department of Veterans 

Affairs to confirm the eligibility of service disabled veteran businesses and to accept direct responsibility for the provision of benefit to the veteran, especially, the service disabled veteran. It puts 

the task to that agency specifically established for the purpose of 

serving ‘‘those who have borne the battle.’’ 

H.R. 3082 also clarifies the misconception that Veterans Entrepreneurship, and the proposed act, are a socioeconomic development initiative or a cultural inequity panacea. 

H.R. 3082 is a specified contribution to that continuing obligation 

of our nation to rehabilitate those veterans that sacrifice for our 

nation’s security and prosperity. 

The service disabled veterans government service incurred misery, is unique. There is no justification for requiring that service 

disabled veteran indemnification and rehabilitation be adjusted to 

the conduct of any other socio-economic program. H.R. 3082 only 

addresses the symptoms of the Government’s neglect of responsibility for our nation’s disabled veteran. 

To finally and accurately respond to that responsibility, the U.S. 

Congress is urged to amend the Small Business Act by adding a 

new section, the service disabled veteran comprehensive eligibility 

amendment as follows:‘‘The U.S. Congress hereby authorizes businesses owned and operated by veterans with service connected disabilities, adjudicated by the United States Department of Veterans 

Affairs, to enter into contracts with the United States Government 

and any department, agency, officer or government contractor, 

thereof having procurement powers obligating the entity to furnish 

articles, equipment, supplies, services, or materials to the Government or to perform construction work for the Government. In any 

case in which the procurement officers certify to any officer of the 

Government having procurement powers, that the service disabled 

veteran business is competent and responsible to perform any specific government procurement contract to be let by any such officer, 

such officer shall be authorized and directed to let such procurement contract to the service disabled veteran owned business upon 

such terms and conditions as may be agreed upon between the 

service disabled veteran owned business and the procurement officer. Whenever the procurement officers and service disabled vetVerDate 0ct 09 2002 19:39 Oct 17, 2006 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 G:\HEARINGS\28555.TXT MIKE
13

eran owned business fail to agree, the matter shall be submitted 

for determination to the Secretary or the head of the appropriate 

department or agency by the procurement officers.’’ 

Chairman. AKIN. Mr. Lopez, your out of time here. Did you want 

to have one concluding sentence? 

Mr. LOPEZ. I have one concluding sentence already. It would be 

appropriate to recall the words of the first President of the United 

States of America, George Washington, who stated that ‘‘the willingness with which our young people are likely to serve in any war, 

no matter how justified, is directly proportional to how they perceive the veterans of early warn, were treated and appreciated.’’ 

I would be pleased to answer any questions of the Committee. 

[Mr. Lopez’s testimony may be found in the appendix.] 

Chairman. AKIN. Thank you very much for your statement and 

for your concern about the service people that are overseas, particularly, and who have served our country. 

Our next witness is Catherine Giordano. And you’re the President of Knowledge Information Solutions from Virginia Beach. 

Thank you. Please, and Ms. Giordano, please proceed. 

STATEMENT OF CATHERINE GIORDANO, KNOWLEDGE 

INFORMATION SOLUTIONS, INC. 

Ms. GIORDANO. 

Mr. Chairman and Members of the Subcommittee, my name is 

Catherine Giordano. I am CEO of Knowledge Information Solutions, located in Virginia Beach, an 8(a) certified firm. I am testifying today on behalf of Women Impacting Public Policy, a bipartisan organization representing 39 small business groups with a 

combined membership of over 535,000 women in business nationwide. 

Procurement programs are near and dear to my heart. Our company has several contracts with Department of Defense and a number of other government agencies and holds six Government Wide 

Acquisitions Contracts. Due to our success in the federal marketplace, our company has grown from $9 million in annual revenues 

to $27.5 million in the last five years. So, it is possible for a small 

company to penetrate the federal marketplace. 

I ask that the written testimony be made part of the record. 

Chairman. AKIN. Without objection. 

Ms. GIORDANO. Rather than read the testimony, I will try to 

come to seven points of interest to the Subcommittee. 

Number one, adequate funding for SBA staff that can provide 

procurement assistance. The number one issue for small businesses 

who want to enter the federal market is an understanding of how 

the federal buying system works and the ability to respond to a 

federal sales opportunity. The SBA regional offices should be prepared to provide this assistance, but the reality is that there is inadequate staff to provide procurement expertise to small businesses. Members report that the assistance from SBA regions is inconsistent. We believe this to be largely due to whether or not the 

Procurement Center Representatives are located at that facility 

and whether or not the SBA staffer is properly trained to under the 

government procurement. 

14

WIPP urges the Committee to work with the Appropriations 

Committee to ensure adequate funding for additional PCRs beyond 

the six requested in the FY07 President’s Budget. 

Number two, implement the law. Restricted competition for 

women-owned businesses is key to meeting the congressional goal 

of five percent. Putting aside any philosophical discussion on 

whether competition should be restricted to minority, womenowned, HUBZone certified or veteran, the practical reality is that 

unless federal agencies are required to do so, it will not happen. 

The most recent statistics show that only 3 percent of all federal 

business is awarded to women-owned businesses. As long as there 

is no penalty to the agencies, nor the federal employees, that the 

agency fails to meet the women-owned goal, it’s just nice to have. 

Number three, why is the 8(a) certification so difficult to obtain? 

In the absence of restricted competition for women-owned businesses, the tool most often cited by the federal agencies is go get 

your certification for 8(a). And yet, it is abundantly clear to WIPP 

that SBA presumes that women business owners are not really socially and economically disadvantaged. One only needs to go 

through the tedious process of assembling reams of financial documents, personal stories dating back decades to be awarded an 8(a). 

In the past, clear and convincing evidence was the standard which 

made it almost impossible for women-owned businesses to get into 

the 8(a) program. In the late 90s, that standard changed to the preponderance of evidence in order to facilitate the entrance of 

women-owned businesses into the program. 

It seems to our members that SBA has reverted back to the old 

standard for women-owned businesses. If the SBA believes that 

women who are not minorities should not qualify, then they should 

just say so. It would save our members hundreds of hours of paperwork and valuable dollars. 

Number three, increase in income thresholds for 8(a) certification. Income thresholds have not been updated since 1998. The 

present and real problem for the program thresholds are so low in 

2006 dollars that the program is really set up to fail. If the business owner does not have assets on which to draw the business is 

likely not to succeed. 

Four, reverse the trend toward contract bundling. Despite the 

President’s initiative in 2002 which clearly stated that unbundling 

of contracts was a priority of the Administration. 

I will try to come to the others quickly. 

OMB reported for every $100 awarded, only $33 go to small business. 

Number five, Congress should closely monitor strategic sourcing 

which in most cases means bundling. Strategic sourcing basically 

means that a very large contract will have only one source and that 

company can sell to the Government as opposed to any award or 

multiple vendors. Small businesses can be harmed in two ways: 

one, by structuring a procurement so that even a large team of 

small businesses can never win a contract. Basically, if the small 

business does not align itself with the winner, they are out of luck. 

Chairman. AKIN. Your time is expired. We may be able to get to 

some of your points with the questioning later on. 

Ms. GIORDANO. Thank you. 

15

Chairman. AKIN. We have taken your statement for the record, 

I believe. 

Ms. GIORDANO. Thank you. 

[Ms. Giordano’s testimony may be found in the appendix.] 

Chairman. AKIN. Our next witness is going to be Christina 

Schneider, Chief Financial Officer of Purcell Contracting Corporation from Watertown, New York. Is that right, Ms. Schneider? 

Ms. SCHNEIDER. Yes. 

Chairman. AKIN. Proceed, please. Thank you. 

STATEMENT OF CHRISTINA SCHNEIDER, PURCELL 

CONTRACTING CORPORATION 

Ms. SCHNEIDER. My name is Christina Schneider and I am testifying on behalf of the Associated General Contractors, the nation’s 

largest and oldest construction trade association. We represent 

more than 32,000 construction firms nationwide. Our firm derives 

much of its work from Department of Defense construction contracts. Our main office is in upstate New York near Fort Drum, the 

home of the 10th Mountain Division. We were a HUBZone contractor. We’ve since grown out of the program. We have graduated 

the HUBZone program. We have now sales slightly more than $31 

million average. We wouldn’t describe ourselves as large business. 

We’re more medium size, but we’re considered large business according to the SBA standards. 

AGC is pleased to share our thoughts for this year’s upcoming reauthorization of the Small Business Act. I am going to focus on the 

changes that we recommend for the HUBZone program, the impact 

of contract bundling and the growing concern over large construction contract awards to Alaska Native Corporations. 

Regarding the HUBZone program, we suggest that you limit the 

program to construction projects in or near HUBZones within 150-

mile radius of the HUBZone contractor’s principal place of business. Only those projects can offer employment to a significant 

number of HUBZone residents and only those projects can promise 

to make a lasting change on their economic circumstance. Extending the HUBZone program to distant projects only encourages 

brokering, merely acting as an agent to get someone else to perform the work. While the HUBZone concept may have merit encouraging economic development within HUBZones, the concept 

does not transfer appropriately to the construction industry. Since 

a HUBZone contractor can perform work outside the zone, this 

does not economically benefit the zone. 

The HUBZone concept is designed to encourage employment in 

the HUBZone and is suited for manufacturing and other industries 

where the majority of employees are working in the HUBZone. 

Our second point is that Congress should authorize and require 

a smaller price preference applied to the construction industry. 

While Congress may want to give HUBZone contractor’s an advantage, it should be an advantage that reflects the realities of the 

market. At most, Congress should give the construction contractors 

in the HUBZone a 5 percent bid preference. Such a bid preference 

would still exceed the profit margin in the vast majority of federal 

construction contracts. 

16

As a HUBZone contractor, our firm was once awarded a construction contract that was nearly $1 million over the lowest bidder 

when the 10 percent preference was applied. As a small business 

we were thrilled. As a taxpayer, we were embarrassed. 

While Congress may want to give HUBZone contractors an advantage, a 10 percent preference for the construction industry is a 

windfall, not an advantage. 

Regarding contract bundling, it’s been a concern in the construction industry for several years. It’s still going on. Small contracts 

are being bundled to result in large dollar volume solicitations and 

HUBZone preferences are being applied to large dollar volume solicitations. 

I’m going to skip through this. I’m running out of time. 

Regarding the Alaskan Native contracting issue. AGC has continued to hear complaints about the ANC. Speaking on behalf of my 

firm, we have been directly impacted by a $400 million sole source 

award to Alaskan Native corporations at Fort Drum, New York. 

We’ve met with SBA Headquarters and we determined that SBA 

believes in their statistics to you that ANCs are small businesses. 

And we don’t believe that. 

In other words, awarding large dollar volume contracts to ANCs, 

large and small, helps the SBA and contracting agencies meet their 

utilization goals. 

We understand the ANC matter is currently under investigation 

by the GAO. And we look forward to their findings. We hope we’ll 

be resource for information for the Committee as it reviews the 

findings of this report. 

Thank you for the opportunity to testify. 

[Ms. Schneider’s testimony may be found in the appendix.] 

Chairman. AKIN. Thank you very much, Ms. Schneider. You 

came in 30 seconds under, pretty good there. You get your star 

here too. 

What I’m going to do is I’m going to allow the Ranking Member, 

Ms. Bordallo, she has five minutes to ask questions. And I’ll let her 

proceed first. 

Ms. BORDALLO. Thank you very much, Mr. Chairman. I have 

three quick questions for Mr. Martoccia. 

First of all, I know you’re very new in your position, but what 

are your initial impressions about SBA’s procurement assistance 

programs and what new thinking do you feel you bring to the 

table? 

Mr. MARTOCCIA. I bring a perspective—I’ve been a contracting officer all my life in the Federal Government. So I bring that perspective. I know we need to communicate, train and provide outreach to the procuring community. And we have to use the resources that the procuring activities have. They have small business specialists. Each procuring activity typically has a small business specialist and I think with our PCRs and our new electronic 

system that we should be able to get involved in the procurement 

strategy before decisions are being made to give those small companies a fair opportunity. 

Ms. BORDALLO. So you do see inadequacies in things that you 

will be changing? 

17

Mr. MARTOCCIA. I see improvements that can be made. I don’t 

see any inadequacies. 

Ms. BORDALLO. Do you believe that the SBA has all the authority 

necessary to promote the development of small business and improve their access to the federal marketplace?Or should Congress 

be providing more, in your opinion? 

Mr. MARTOCCIA. I believe that we’re providing the opportunities 

needed. You know, as far as the dollars, our dollars have improved 

every year since President Bush took office and they’re going up. 

I know the total dollars have gone up, but the percentages, especially in the women-owned businesses and other areas have been 

moving up significantly in the last few years. 

Ms. BORDALLO. Weren’t there cuts made at SBA? 

Mr. MARTOCCIA. There have been cuts, but I think, you know, 

they’re operating smarter with better technology and I think we 

have the adequate resources necessary to perform our job. 

Ms. BORDALLO. But really then you can’t say funds have been, 

you know— 

Mr. MARTOCCIA. I know funds have been cut 37 percent over the 

last five years. 

Ms. BORDALLO. That’s correct, yes. By your comments, I understood that things were—funds were becoming larger and larger as 

each year goes by? 

Mr. MARTOCCIA. No, I say the results of the small business program have been pretty successful since President Bush took office. 

The dollars go into small businesses in prime as well as subcontracts. It’s gone up significantly since the Year 2000. 

Ms. BORDALLO. Now one last question I have for you. Can you 

describe the SBA’s efforts to combat contract bundling? 

How can SBA’s record on this be improved? 

Mr. MARTOCCIA. Well, we’re working with the agencies to make 

it a priority. We share your concern that bundling in large contracts do provide less opportunities for small business. So we’re 

working with the agencies to communicate, to train, to talk to the 

program managers and the contracting officers and the senior level 

officials to find best practices to improve opportunities for small 

businesses. 

Ms. BORDALLO. So you do consider this a priority? 

Mr. MARTOCCIA. Yes, I do. 

Ms. BORDALLO. Thank you. Thank you. Thank you, Mr. Chairman. 

Chairman. AKIN. Thank you for your questions and being right 

on point with some very good questions. 

I’m next going to recognize Ms. Velazquez who is not just a Member of the Committee, but also is the Ranking Member of the Full 

Committee. So if you would please proceed. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. Mr. Martoccia, look, 

I know you have been there, what, a month now, two months? 

Mr. MARTOCCIA. Five weeks. 

Ms. VELAZQUEZ. Well, welcome and I’m sorry. 

Mr. MARTOCCIA. I’m enjoying the job. 

Ms. VELAZQUEZ. I’m sorry. Sir, I know that you read the papers, 

don’t you? 

Mr. MARTOCCIA. Yes, I do. 

18

Ms. VELAZQUEZ. USA Today, Washington Post, New York Times. 

If you look at the SBA disaster loan response to Katrina, I don’t 

think that it has been good. And you know why? Eighty percent decline rate on disaster loan for Katrina victims because you don’t 

have the resources. In five years, the budget has been cut by 50 

percent, so and then later on we are going to discuss PCR. 

But let’s go to the question. In 2003, the SBA’s Inspector General 

conducted an audit of the HUBZone program. The result was that 

the program was vulnerable to contracting fraud. Then there were 

almost 7,500 companies in the program and SBA did nothing. Now 

there are nearly 13,700 companies and SBA has still done nothing. 

Why have you allowed this time bomb to continue ticking? 

Mr. MARTOCCIA. I’m not aware of any fraud involved in the program. I know that the marketplace polices itself pretty well and if 

a procurement is set aside for HUBZone companies, that any interested party can protest that to the contracting officer who would 

fully investigate with SBA whether a company falsified their status. 

Ms. VELAZQUEZ. Well, the thing is that you have 13,700 and you 

have not conducted the audits and even if SBA reviewed 500 companies per year, you will never keep up with the incoming businesses. 

My second question, the number one problem facing small businesses in their attempt to get Government contracts is contract 

bundling. A report for SBA’s Office of Advocacy has estimated that 

bundles represent nearly 10 percent of all government contracting 

dollars and have reduced small business contract opportunities by 

more than half, yet for the past two and a half years, SBA has filed 

four appears on bundled contracts. Why isn’t the SBA challenging 

agencies when they are taking opportunities away from small businesses? 

Mr. MARTOCCIA. We do challenge agencies when they’re taking 

business away from small businesses and we have PCRs in the 

field who are working with the agencies to assure that these contracts are not restricting small business participation. We are communicating to the senior levels of the agency. We’re talking to the 

small business specialists. We’re talking to the contracting officers. 

We’re trying to train contracting officers. We want them to justify 

when they have to have a large contractor or a bundled contractor, 

what the benefits are, what the efficiencies are. So we are proactive 

in trying to assure the contracts are not being bundled. 

Ms. VELAZQUEZ. I can see that proactive when you challenge on 

four contracts. Four appeals. 

Mr. MARTOCCIA. Well— 

Ms. VELAZQUEZ. The witnesses here are telling us that is a big 

issue for them. The President, in 2002, issued his small business 

agenda. And in that agenda he said my number one priority is 

going to be contract bundling. We need to tackle it. And in two and 

a half years, you’re going to tell me that only four appeals? 

Mr. MARTOCCIA. Those are four formal appeals. 

Ms. VELAZQUEZ. Let’s go to the next question. 

Mr. MARTOCCIA. But we have discussed and made many changes 

to the contracts that are to be bundled and made many changes to 

19

the procuring activities to break up these contracts into smaller 

parts that small business can participate in. 

Ms. VELAZQUEZ. Thank you. In your testimony, you spent a lot 

of time talking about the small business goal being achieved. In reality, the goal has been achieved because SBA counts large businesses’ awards as going to small companies. The Office of Advocacy 

has said that SBA is counting $2 billion in award to large businesses. This is the number one management challenge to the office, 

according to the Inspector General. The General Accounting Office 

has also confirmed this problem. 

So can you please explain to us why it is appropriate for the SBA 

to claim that the government-wide small business goal has been 

met, when you are counting large businesses to do that? 

Mr. MARTOCCIA. I don’t think— 

Chairman. AKIN. Time has expired. You can go ahead and answer her question. 

Mr. MARTOCCIA. I don’t think the problem is as widespread as 

some people think. I think what happens is that small companies, 

successful small companies are being purchased by large companies. If they have a five-year contract, the company is being purchased and we do have—we just instituted a rule on novations. 

And in addition to that we have rulemaking which will require 

small businesses to recertify if they’re being bought off. 

Ms. VELAZQUEZ. I’m sorry. You just can’t come here and inform to the small business people that are here to say to them that $2 

billion is nothing. $2 billion. You can do better than that. 

Chairman. AKIN. Thank you. The next questioner would be Congresswoman Moore. We’re trying to stick to five minutes. 

Ms. MOORE. Thank you, Mr. Chair. I would be offended, Mr. 

Martoccia, that you were new, except that I’m new too. 

But I am concerned about whether or not you’ve realized that we 

have an 8(a) program, an 8(a) procurement program which has not 

been redesigned since it was started. And it has really cost billions 

of dollars in contracting opportunities to those small and disadvantaged businesses. 

The Federal Government purchases—is the largest buyer of 

goods and services in the entire world. And during the ’90s, there 

were so-called reforms that allowed Government buyers to use a 

number of expedited contracting options with the exception of the 

8(a) program which meant that 8(a) programs and minority businesses have been left behind. 

And you know, one of the things, one of the SBA programs is the 

HUBZone program which operates in distressed areas, but you 

don’t have to be a minority business or a disadvantaged business 

to take advantage of that. Again, women-owned businesses, the 

Women’s Procurement Program never implemented. There is a bill 

that I am co-sponsoring, along with our Ranking Member, Representative Barrow, called the MOVE Act, which would really modernize the 8(a) program so that minority businesses won’t lose billions of dollars by what Congressman Barrow calls a repeal by neglect in terms of how this program operates. 

And I’m wondering if we could depend on your stewardship to 

move this initiative forward and bring it before the Administration’s attention? 

20

Mr. MARTOCCIA. Are you speaking of the women-owned program? 

Ms. MOORE. The 8(a) program modernization, the women’s initiative, yes. 

Mr. MARTOCCIA. We’ll be working on all the programs to— 

Ms. MOORE. To modernize them so that minority businesses can, 

in fact, take advantage of some of the contracting opportunities. We 

can’t, because these programs are stagnant. Would you stipulate to 

that being true? 

Mr. MARTOCCIA. No. What I would I would say is we’re complying with the law and I think the laws are flexible enough for 

us to deal with the agencies to improve the opportunities— 

Ms. MOORE. In 1990, the Government buyers used an expedited 

means to get contracts. The exception was that 8(a) programs 

couldn’t do it. 

Mr. MARTOCCIA. Well— 

Ms. MOORE. Would you stipulate—you said you’re following the 

law. 

Mr. MARTOCCIA. Right. 

Ms. MOORE. But the law is stagnant is what we’re saying. 

So we’re asking for a commitment from you that you will look at 

the need to initiate reforms of the 8(a) program. 

Mr. MARTOCCIA. We’ll try to reform the 8(a) program when it’s 

necessary. 

Ms. MOORE. It’s necessary now. We’ve lost tens of billions of dollars in contracting opportunities. 

Mr. MARTOCCIA. The 8(a) program provides the most expedited 

method of contracting of all the set aside programs. 

Ms. MOORE. Okay, Mr. Chair, I’d like to yield the balance of my 

time to the Ranking Member. 

Chairman. AKIN. Yes, you can do that and I believe Ms. Velazquez said she had a question also, so why don’t you proceed. 

Ms. BORDALLO. Go right ahead. 

Ms. VELAZQUEZ. Mr. Martoccia, since Mr. Giordano raised the 

issue of the women’s procurement program, it is appropriate for me 

to ask this final question. I understand that the Rand Corporation 

is conducting the study for the SBA to identify industries that are 

under represented by women and entrepreneurs in order to get this 

program up and running. Rand was subject to a class action lawsuit by several of its own female employees on a pay disparity 

issue. 

Can you explain to this Committee how SBA could contract with 

a company that was sued by its own female employees on a study 

designed to implement a program to halt women business owners? 

Mr. MARTOCCIA. I’m not familiar with that lawsuit. The way the 

Government works is that if a company— 

Ms. VELAZQUEZ. No, no, no. I’m not asking you— 

Mr. MARTOCCIA. I have to answer the question. 

Ms. VELAZQUEZ. Look, how could the Federal Government give 

out a contract, we love to lecture people here about you know, playing by the rules, and you have a company that has been sued by 

their female employees and they are the company that is going to 

do a study about women being under represented? That’s bizarre. 

Mr. MARTOCCIA. Well, the Government has a process called the 

debarred list and when a company is not responsible to perform 

21

Government contracting work, they’re not allowed to receive contracts. To that extent, if they’re not on the debarred list— 

Ms. VELAZQUEZ. My last question. In your testimony you state 

that the current number of SBA Procurement Center Representatives is 58. 

Mr. MARTOCCIA. Correct. 

Ms. VELAZQUEZ. When the federal marketplace was half this size 

that it is now— 

Chairman. AKIN. Congresswoman, this is your last question, 

right? 

Ms. VELAZQUEZ. Okay. My last. How do you expect 58 people to 

do twice the work that 73 did? 

Mr. MARTOCCIA. Since President Bush took office, he moved—we 

moved the number of PCRs from 35 to 58 and they cover approximately three quarters of the buying activities in the Federal Government. 

In addition to that, we’re instituting an electronic Procurement 

Center Representative system which will be very effective and efficient and productive in providing those requirements at a sooner 

date so the PCRs can get involved from their desk, on their computer to talk to the procuring agencies and officers about their procurement strategies with regard to small business participation. 

Chairman. AKIN. Thank you for responding. Now it is my turn. 

I only have five minutes as well. 

I’m going to ask you for short answers. I’m trying to give you a 

few short-answer questions. 

The first one is, because the only person who got into play here 

was Anthony and I want everybody else to have a chance too. 

And so what I’d like you to do first of all would be to state how 

would you rate the SBA’s performance on procurement assistance 

contracting? You’ve got a choice of good or medium or bad and I 

want to go straight across. Good, medium or bad. This is report 

card. Some of you are technical people and I’m one of the very few 

engineers that they allowed to get into politics which tells you I 

wasn’t much of an engineer. 

Rafael, I’m going to let you go first. 

Mr. COLLADO. Bad. 

Chairman. AKIN. Bad, okay. 

Mr. LOPEZ. Worse than bad. 

Chairman. AKIN. Worse than bad. That wasn’t an alternative, 

but I know what it means. 

Mr. LOPEZ. Bad. 

Chairman. AKIN. Kurt? 

Mr. HECKMAN. They’ve had some successes. I would say medium. 

Chairman. AKIN. Medium, okay. Catherine? 

Ms. GIORDANO. Other. 

Chairman. AKIN. Other. Do you have a little short other? 

Ms. GIORDANO. It would be below medium and just above bad. 

Chairman. AKIN. Okay. Christina. 

Ms. SCHNEIDER. Bad. 

Chairman. AKIN. Okay. That being the case, now I’m going to 

give you a chance for a little bit longer answer, okay? 

We’ve got a guy in here, Anthony, who is a brand new guy on 

the block. Now it used to be when Harvard Business School would 

22

do cases, they wouldn’t want to know your second or your third 

piece of advice. They want to know your very best shot. 

So what I’m going to ask for those of you who, if you have one 

piece of advice—let me ask one other question—well, I don’t have 

time for that. 

Here’s just one shot. You have a piece of advice to give to the 

SBA, you’ve got a brand new guy. He’s got an open mind for the 

moment anyway. What’s your best piece of advice to him on how 

we try to do a better job here, because we’re all on the same team. 

We really want to make this work. 

Rafael, you’re an innovative guy. What’s your best shot? 

Mr. COLLADO. Best piece of advice is force the unbundling of contracts and audit, audit, audit prime contractors at their meeting—

and agencies—at their meeting their goals. Make sure they’re not 

lying about their numbers. 

Chairman. AKIN. That was short and very much to the point. 

Thank you. 

John? 

Mr. LOPEZ. I’m Stanford Business School and we don’t do that. 

Chairman. AKIN. I already got in trouble politically, didn’t I? I 

applied there too, but they didn’t take me. 

Mr. LOPEZ. I would suggest to Mr. Martoccia that he demand accountability from his workforce and demand reports. Documentation. Documentation goes a long way to steering decisions and 

making certain those decisions are the correct ones. 

Chairman. AKIN. Thank you. 

Mr. HECKMAN. I would say in speaking from the HUBZone program side where I am, I would recommend that they would do an 

automatic audit of the HUBZone requirements and they can’t do 

them for all the HUBZone allocations, there’s just too many. But 

I would recommend they automatically do it for any HUBZone contract that is awarded above some reasonable threshold, $10, $12, 

$15 million something like that, so that at least the big ticket 

items that go out there, it’s just carte blanche. If you win a 

HUBZone contract above that threshold, you’re going to be audited. 

Chairman. AKIN. Okay, good. Thank you. 

Catherine? 

Ms. GIORDANO. I think first and foremost is implement the 

women-owned rule. I think if we were having children based on 

how long it takes to gestate, this would be a twin, quadruple—elephants, because it takes you that long to have elephants. 

I think it’s an over-abused process on our part to be last in line, 

waiting for something that was passed in 2000. 

Chairman. AKIN. Thank you. 

Ms. SCHNEIDER. My advice isn’t necessary to the SBA, it’s to 

Congress and my advice is to look hard at the utilization reports 

that you’re getting because I don’t believe they’re accurate. I believe they’re flawed. I believe the statistics we heard today are 

fraught with large dollar volume contracts awarded to Alaskan Native Corporations under the guise of small business. I believe that 

large volume HUBZone contract awards are being—HUBZones are 

fronting for large businesses in those large dollar volume awards. 

There’s no way a small business can bid $100 million HUBZone 

contract in the construction business. 

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There’s really nasty stuff going on out there and when the SBA 

sits at this table and tells you that they’ve doubled their utilization 

volume, I’m sitting here and— 

Chairman. AKIN. Christine, I’m down to 10 seconds. What I’d like 

to ask you to do, all of you that had recommendations, if you don’t 

mind writing them up and shooting them over to the SBA to Mr. 

Martoccia so that he can hear what you have to say. I think that 

would be helpful just for starting places. 

I will take, Christina, what you were saying, and see if we can 

factor that into what we’re doing. I was going to ask another question which I don’t have time to do. 

Ms. VELAZQUEZ. Mr. Chairman, we would like to receive a copy 

of those recommendations. 

Chairman. AKIN. If you could send those to the Committee, that 

would be good, too. 

I was going to also ask you, being a conservative Republican, my 

question would be can the Government really do this or not? I 

mean I have some skepticism about that, but I’m not going to ask 

that question. And with that, I’ll make this informal, let people 

chat as they have time to this afternoon. 

The hearing is adjourned. 

(Whereupon, at 3:54 p.m., the hearing was adjourned.)

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