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S. HRG. 108–447

SBA REAUTHORIZATION: NON-CREDIT PROGRAMS

ROUNDTABLE

BEFORE THE

COMMITTEE ON SMALL BUSINESS AND

ENTREPRENEURSHIP

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

APRIL 9, 2003

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 EIGHTH CONGRESS

OLYMPIA J. SNOWE, Maine, Chair

CHRISTOPHER S. BOND, Missouri

CONRAD BURNS, Montana

ROBERT F. BENNETT, Utah

MICHAEL ENZI, Wyoming

PETER G. FITZGERALD, Illinois

MIKE CRAPO, Idaho

GEORGE ALLEN, Virginia

JOHN ENSIGN, Nevada

NORMAN COLEMAN, Minnesota

JOHN F. KERRY, Massachusetts

CARL LEVIN, Michigan

TOM HARKIN, Iowa

JOSEPH I. LIEBERMAN, Connecticut

MARY LANDRIEU, Louisiana

JOHN EDWARDS, North Carolina

MARIA CANTWELL, Washington

EVAN BAYH, Indiana

MARK PRYOR, Arkansas

MARK E. WARREN, Staff Director and Chief Counsel,

PATRICIA R. FORBES, Democratic Staff Director and Chief Counsel

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C O N T E N T S

OPENING STATEMENTS

Snowe, The Honorable Olympia J., Chair, Committee on Small Business

and Entrepreneurship and a United States Senator from Maine .................... 1

Kerry, The Honorable John F., Ranking Member, Committee on Small Business and Entrepreneurship and a United States Senator from Massachusetts ....................................................................................................................... 40

Enzi, The Honorable Michael B., a United States Senator from Wyoming ........ 63

COMMITTEE STAFF

Forbes, Patty, Staff Director and Chief Counsel, Minority Staff ......................... *

Warren, Mark, Staff Director and Chief Counsel, Majority Staff ....................... *

PARTICIPANTS

Alford, Harry President and CEO, National Black Chamber of Commerce,

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

Armendariz, Fred C., Associate Deputy Administrator, Office of Government

Contracting and Business Development, U.S. Small. Business Administration, Washington, D.C. ......................................................................................... *

Au Allen, Susan, President and CEO, U.S. Pan Asian American Chamber

of Commerce, Washington, D.C. ......................................................................... *

Brogan, Molly, Manager of Government Affairs, National Small Business

United (NSBU), Washington, D.C. ..................................................................... *

Coratolo, Giovanni, Director of Small Business Policy, U.S. Chamber of Commerce, Washington, D.C. ..................................................................................... *

Denlinger, Stephen, President, Latin American Management Association,

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

Elmore, The Honorable William D., Associate Administrator, Office of Veterans Business Development, U.S. Small Business Administration, Washington, D.C. ........................................................................................................... *

Gast, Zach, Policy Research Manager, Association for Enterprise Opportunity,

Arlington, VA ........................................................................................................ *

Glover, The Honorable Jere, Former Chief Counsel to the SBA Office of

Advocacy, Brand & Frulla, Washington, D.C. ................................................... *

Golden, Ellen, Senior Program Officer, Coastal Enterprises, Inc. and President, The Association of Women’s Business Centers, Wiscasset, Maine ......... *

Henry, Major General Charles, U.S. Army (Retired), President and CEO,

The National Veterans Business Development Corporation, Alexandria, Virginia ....................................................................................................................... *

Homer, Pete, President and CEO, National Indian Business Association,

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

Ibarra, Mickey, Government Relations, U.S. Hispanic Chamber of Commerce,

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

Langer, Andrew, Manager of Regulatory Affairs, National Federation of Independent Businesses, Washington, D.C. .............................................................. *

Massaua, John R., State Director, Maine Small Business Development Centers, Portland, Maine ........................................................................................... *

Neece, Allen, Chairman, Small Business Legislative Council, Washington,

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

Nelson, Marilyn Carlson, Chair, National Women’s Business Council, Washington, D.C. ........................................................................................................... *

Newlan, Ronald, Chairman, HUBZone Contractors National Council, Washington, D.C. ........................................................................................................... *

Page

IV

Street, Kaaren J., Associate Deputy Administrator, Office of Entrepreneurial

Development, U.S. Small Business Administration, Washington, D.C. .......... *

Sullivan, Ann, Federal Legislative Consultant, Women Impacting Public Policy, Inc, Oklahoma City, Oklahoma .................................................................... *

Sullivan, The Honorable Thomas, Chief Council for Advocacy, U.S. Small

Business Administration, Washington, D.C. ..................................................... *

Swain, The Honorable Frank, Former Chief Council to the SBA Office of

Advocacy, Baker & Daniels, Washington, D.C. ................................................. *

Turpin, James, Director of Government Relations, American Subcontractors

Association, Alexandria, Virginia ....................................................................... *

Wilson, Donald, President, Association of Small Business Development Centers, Burke, Virginia ............................................................................................ *

Yancey, Kenneth, CEO, Service Corps of Retired Executives Association,

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

PREPARED TESTIMONY AND APPENDIX MATERIAL SUBMITTED

Kerry, The Honorable John F.

Prepared statement .......................................................................................... 43

Landrieu, The Honorable Mary

Prepared statement .......................................................................................... 68

Alford, Harry

Answers to Committee questions .................................................................... 136

Armendariz, Fred C.

Prepared statement .......................................................................................... 70

Answers to Committee questions .................................................................... 139

Brogan, Molly

Prepared statement .......................................................................................... 77

Golden, Ellen

Prepared statement .......................................................................................... 84

Ibarra, Mickey

U.S. Hispanic Chamber of Commerce Legislative Priorities for 108th

Congress ........................................................................................................ 94

Massaua, John R.

Prepared statement .......................................................................................... 99

Neece, Allen

Answers to Committee questions .................................................................... 154

Nelson, Marilyn Carlson

Prepared statement .......................................................................................... 107

Answers to Committee questions .................................................................... 156

Newlan, Ronald

Prepared statement .......................................................................................... 117

Answers to Committee questions .................................................................... 157

Street, Kaaren J.

Prepared statement .......................................................................................... 120

Sullivan, Ann

Prepared statement .......................................................................................... 5

Answers to Committee questions .................................................................... 168

Sullivan, The Honorable Thomas

Prepared statement .......................................................................................... 5

Answers to Committee questions .................................................................... 174

Turpin, James

Answers to Committee questions .................................................................... 175

Wilson, Donald

Prepared statement .......................................................................................... 128

Answers to Committee questions .................................................................... 178

* Comments, if any, are located between pages 3 and 63.

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SBA REAUTHORIZATION ROUNDTABLE:

NON-CREDIT PROGRAMS

WEDNESDAY, APRIL 9, 2003

UNITED STATES SENATE, COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP, Washington, D.C.

The Committee met, pursuant to notice, at 9:08 a.m., in room

428–A, Russell Senate Office Building, the Honorable Olympia J.

Snowe (Chair of the Ccommittee) presiding.

Present: Senators Snowe, Enzi, and Kerry.

OPENING STATEMENT OF THE HONORABLE OLYMPIA J.

SNOWE, CHAIRMAN, SENATE COMMITTEE ON SMALL BUSINESS, AND A UNITED STATES SENATOR FROM MAINE

Chair SNOWE. Good morning. Thank you all for being here this

morning half an hour earlier. There are so many hearings going on

I may not be able to stay for the entire duration of this roundtable,

but I wanted to have the opportunity to hear many of your comments before I have to depart. I have several other hearings this

morning. But I really do appreciate you taking the time to be here

to share your thoughts and perspectives as we begin the process of

reauthorization of the SBA and the programs that come within its

jurisdiction.

I understand from the staff and my predecessor, Senator Bond,

that these roundtables are invaluable in terms of shaping the direction of policy, so I really appreciate your input. It will help me

to prepare for the reauthorization and to assemble, I think, the

best approach in conjunction obviously with the Administration’s

proposal and the reauthorization, as well.

Of course, this reauthorization coincides with the 50-year anniversary of the SBA. Of course, none of us can remember 50 years

ago, can we?

[Laughter.]

Chair SNOWE. I think that really does underscore the value of

these programs. The original goal and mission are no different than

the goal and the mission today, and that is to level the playing

field for small business and to make sure that they have opportunities, in the Federal marketplace.

I certainly am going to consider how we can strengthen the resources within the SBA to help support small businesses throughout this country, and so your input is vital to this process.

Today, we are going to be considering the reauthorization of the

non-credit programs, such as, the SBA’s Office of Advocacy, which

has indicated that through their efforts, have been able to save

2

more than $21 billion in regulatory costs for small businesses in

fiscal year 2002, this is an astonishing number, but it also tells you

about the role that the office plays in helping to represent small

business and defending those interests within the agencies when it

comes to a regulatory burden.

I happen to believe, as well, that we ought to strengthen the

independence of that office, and to that end, I have introduced legislation to support that effort, because I think it is critical that we

do all that we can to ensure that the office remains free of any kind

of political interference, because its role is critical to the vitality of

SBA.

As far as the SBA entrepreneurial development programs, I

think, obviously, all of those programs are essential to delivering

the resources to those who need them and want to start and operate small businesses in their communities, whether it is through

the Small Business Development Centers or the Women’s Business

Centers or SCORE. Together, we can ensure that these investments and these programs, create a strong return to our economy

through successful business ownership and job creation.

On our agenda this morning as well will be SBA government contracting and business development programs. Since its creation,

the SBA has been persuading Federal buyers and others of the

value of contracting with small businesses. Not only is that good

for small businesses, but it is also good for purchasing agents as

well as for the taxpayers who foot the bills. When small businesses

compete for contracts, we know it lowers the prices and also elevates the quality of these purchases, whether it is for goods or

services.

On March 18, as many of you know, I held a hearing on the issue

of contract bundling and acquisition streamlining, both of which

threaten, I think, the opportunities for small business to participate in the Federal contracting process. I plan to introduce legislation on that issue and I look forward to hearing your thoughts, because I do think that that is a critical issue and an important one

to the small business community. Certainly, we need to do more to

make sure that small business has the opportunities, and I am concerned when I see that small businesses are not being able to participate in the Federal contracting process and, in fact, we have

seen a significant reduction in small business participation over the

last few years and certainly over this last decade. That is not the

trend we want, so we want to do everything we can to reverse that

trend and move it in the right direction. So, again, it is removing

those barriers and impediments, and so we are going to do all that

we can on that issue.

There are more than 25 million small businesses in America.

Three-quarters of the new jobs created in this country are produced

by small businesses and we also know, according to the Bureau of

Labor Statistics, that small businesses provide a refuge for displaced workers. I have certainly heard that in my State. When people lose their jobs, and many have in my State over the last few

years, they do decide to start their own business, their own small

business over a job in another industry, so they have more personal

job security.

3

There are 3 to 4 million new business start-ups and 1 in 25 adult

Americans are taking steps to start a small business. One-quarter

of existing small business owners are thinking of opening up another business. So small business is vital to the future of America

and there is no question the future of America is tied to the future

of small business, certainly when you consider that 32 percent of

the wealth in America is produced and generated by small businesses.

There is no doubt about the paramount role small business plays

in America’s economy. We understand that. We have to make sure

that everybody else appreciates and acknowledges that fact, too.

This gives us an opportunity to do all that we can to reinforce

the programs that work well and to address those that don’t. You

know, if we have to transfer resources from ineffective programs to

effective programs, we must do that. If we can improve programs,

then we must do that, as well. I think it is important that we use

this process as an opportunity to build upon those programs that

work well and to make sure they work well for small businesses,

because if they work well for small business, these programs are

going to work well for America.

So with that, I just appreciate the fact that you are here. We

want you to take this opportunity to participate. I think obviously

we want to make sure that everybody has a chance to give their

perspectives, and so that when you want to speak, please put your

nameplate up. I think that is a familiar process for all of you, but

we will keep a list of speakers in the order that you put up your

nameplate and we hope you will keep your comments brief so we

can have a discussion. But I do want to make sure that you feel

you have a chance to express yourselves on these issues because it

is important that we hear your individual perspectives here today.

We will move from one issue to another. We thought we would

start with the SBA Office of Advocacy, move to the entrepreneurial

programs and government contracting so we have some order. But

in any event, please feel free to state your positions.

I am going to begin by asking the Chief Counsel, Tom Sullivan,

to describe the office’s current staffing level and operations, so we

will begin with that process. Then we will just participate and fill

in, and please feel free to indicate your positions on these various

issues as we proceed. Thank you.

OFFICE OF ADVOCACY AND ITS PROGRAMS

Mr. SULLIVAN. Thank you, Madam Chair. I have a formal statement that is lengthy and would prefer to summarize just what our

staffing levels and operations are for the benefit of this roundtable

and just submit the statement, if you would allow that.

Chair SNOWE. Absolutely. Without objection, it will be included

in the record in its entirety, and the same would be true for all participants. If you have lengthier statements, we will include all of

your comments in the record.

Mr. SULLIVAN. Thanks, and Madam Chair, I would beg your forgiveness for being late. Although we are blessed with New England

weather, we are not blessed with New England drivers, and so it

took a little bit longer.

Chair SNOWE. I would agree with that.

4

[Laughter.]

Mr. SULLIVAN. Basically, the Office of Advocacy independently

pursues a small business agenda, really, the agenda of all the participants here this morning, in three ways. First, through our regional advocates: we have regional advocates, 8 on board in 10 of

the regions right now. Our New England advocate is Barbara Manning, and she is joined by seven other colleagues around the country, and they are our Main Street reality check. They basically tell

us what is going on in small business around the country to help

us prioritize.

That same prioritization method is done by reaching out to the

participants here that are gathered this morning and hearing from

them what issues we should be working on in the Office of Advocacy. That is how we take our direction, Madam Chair.

We also have a research team of economists and researchers who

research vital small business issues and then get that information

to the Committee and to small businesses so that more and more

folks know the value of small business to the U.S. economy, and

quite frankly, to the global economy.

The third way we pursue a small business agenda is through our

legal team. Our legal team is able to bring common sense solutions

and perspectives from small business into the rulemaking process

and it is working. Our regulatory intervention efforts under the authority of the Regulatory Flexibility Act and the Small Business

Regulatory Enforcement Fairness Act resulted in a cost savings of

$21 billion in fiscal year 2002 alone.

My predecessor, Jere Glover, who joins us today, used to try to

compare the Office of Advocacy’s budget with the amount of money

small businesses save, and we have done the same thing. Twentyone billion dollars in foregone regulatory costs when compared to

Advocacy’s budget for last year means that for every dollar spent,

we saw a return of over $2,700.

Getting to one matter that is a legislative priority for our office,

and I am very pleased to see the introduction of the Snowe-Kerry

bill, S. 818, having to do with the independence and nonpartisan

workings of our office, really does get at our budget process, and

when you examine the statutory mandate of Advocacy and the authority that the office has to defend small entities, it becomes obvious why the Office of Advocacy is independent. The Office of Advocacy is supposed to be critical of government that treats small business unfairly.

The current budget process is a dangerous one because the Office

of Advocacy’s budget is too easily pillaged when administration priorities change. A budget line item for Advocacy is the best and

most efficient way to ensure that government continues to be accountable to small business through compliance with the Regulatory Flexibility Act and the Small Business Regulatory Enforcement Fairness Act.

I am going to finish my statement there, Madam Chair, and really just listen. It is meetings like this and meetings like this all over

the country where our office takes direction. Thank you.

Chair SNOWE. Thank you.

[The prepared statement of Mr. Sullivan follows:]

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6

7

8

9

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Chair SNOWE. Mr. Swain.

Mr. SWAIN. Senator, it is a real pleasure to be here. Thank you

for inviting me. I am sure with your robust record in Congress, you

don’t remember exactly, but in September of 1981, I was reflecting

coming up here this morning, I appeared after being confirmed as

the Chief Counsel for Advocacy for my very first congressional

hearing. It was in front of the House Small Business Committee,

of which you were a Member, and the subject was the authorization of the Small Business Innovation Research Program.

At the time, that was quite a radical idea and the Administration, the Reagan administration, was not in favor of that idea. Our

office was in favor of it, but I must say that you and Mr. LaFalce

and several other Members of the Committee took that opportunity

to remind me in no uncertain terms that my role was to be an independent advocate for small business——

[Laughter.]

Mr. SWAIN [continuing]. So I am pleased to say that you have

been absolutely consistent on that over the past 20 years.

Chair SNOWE. Amazing how things come around.

Mr. SWAIN. That is right. It got to the point in subsequent hearings with some Members of that Committee, I remember Congressman Bedell got on me at the time about whether I had cleared my

statement with OMB. It is one of the little known facts from anyone that hasn’t served in the Administration, the extraordinary

power that OMB has over anybody that has got any job in the Administration at all.

[Laughter.]

Mr. SWAIN. So one of the first things that I discovered after I got

into the job and thought that I would just willy-nilly come up and

testify about whatever I, my staff and the small business groups

thought would be sensible, that that wasn’t exactly the case. At

least from Mr. Stockman’s perspective, I had to take my statement

and get it cleared with OMB to say what I wanted to say, and, of

course, SBIR was a classic example, the first one out of the box.

They weren’t going to clear that.

At that time, I said, ‘‘Well, you have got my statement and this

is what I am going to say, so I will simply be clear on the fact that

you didn’t clear it’’, and so that happened more often than not. We

always sent them the statement out of courtesy, and if they cleared

it, it was wonderful because that meant that they had strong small

business advocates at OMB. But in many cases, that wasn’t the

case.

Some 20 years later, 25 years or so after the creation of the office, I think it has been a resounding success. I wasn’t economically

as sophisticated as Mr. Glover and Mr. Sullivan to actually figure

out how much money we might have saved the small business community, but at any rate, I think it has been a good thing, The Congress is in an interesting position now because it is a largely successful office. But what can and should be done to make it even

more so? Of course, there are a continuum of things.

It has been suggested that the office be made entirely independent, and there are also other things, including a separate line

item for the budget, and that is where I would certainly endorse

a separate line item for the budget. I candidly do not endorse the

11

absolute independence of the office. I think that the position within

the Administration is a unique position. You sort of have one foot

outside the Administration, one foot in the Administration, but it

is a unique opportunity to try to make policy arguments to senior

Administration and White House officials and absolute independence would probably negate that. But I do think that a separate

budget item is a modest and not a dramatic step to improve the

current situation.

Chair SNOWE. Thank you. Thank you for reminiscing about the

old days.

[Laughter.]

Chair SNOWE. The more things change, the more they stay the

same.

Mr. Turpin.

Mr. TURPIN. I am James Turpin, American Subcontractors Association. First of all, I knew I was getting old when I knew Tom Sullivan as a law student.

[Laughter.]

Mr. TURPIN. But I just wanted to give our perspective. We are

the trade association representing commercial subcontractors and

our experience with the SBA Office of Advocacy has been extremely

positive as a conduit of information and also as an arbiter between

our organization and others to get the small business community

on the same page when they need to be and the dollars that are

spent, although they are relatively small, are leveraged more than

just the savings. It is also a service to organizations like mine so

we can then service our members.

So there is a multiplier effect in the information going out there,

and we would very much favor a line item for the office and commend the office for the work it does in making the most out of the

resources it has available.

Chair SNOWE. Thank you. Others?

Yes, Jere.

Mr. GLOVER. Again, thank you for introducing your new Independent Office of Advocacy bill and your consistent support of the

office over the years.

We have been fortunate—the Congressional Committees and the

small business community have been fortunate to have a number

of Chief Counsel for Advocacies who have been very strong and

done a wonderful job. There are a lot of advantages to that office.

No. 1, it is the independence that we have received, the special hiring authority that the office has, tremendous support and cooperation from the Congressional Committees.

But I have to be candid. Every year, the budget comes up and

you do have to change roles from doing your job, which is what is

best for small business and working for small business exclusively,

to going to the Administrator and, in effect, begging for research

money and other funds. Every time there is a freeze in SBA, the

Office of Advocacy loses slots. We are down from 70, when Frank

was Chief Counsel, to, what, low 50s, low 40s, high 40s? High 40s.

It has dropped down over the years and it happens every time

there is a freeze on personnel, because Advocacy has a turnover because we have to hire people in whatever area is hot, and we have

that special authority to do that, but that means we have a turnVerDate 03-FEB-2003 15:09 May 18, 2004 Jkt 091189 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 D:\SBA\91189.TXT SSC2 PsN: SSC2
12

over, and quite frankly, the office is unique and we have been able

to hire the best and the brightest and they don’t stay long. They

move on to other jobs. So you continuously have this problem.

My greatest fear is that the small business community and the

Congressional Committees will get what they pay for in the Office

of Advocacy. They have always gotten a lot more than they pay for.

When we started quantifying the successes, and it was a real

challenge—the first year, we didn’t publish those—but on average,

$3 billion of regulatory savings, that is not the data that you just

quoted about how important small business is. That comes out of

Advocacy’s research budget. It is not all the other things that we

do.

So it is a wise expenditure of money and the need for a line item

to focus on small business, the Office of Advocacy, is critical and

I think that is important and I think some other things you can

do to strengthen the Office of Advocacy, also, Office of Advocacy’s

independence makes a lot of sense. But I agree with Frank. It

should not be totally independent of SBA. It should not be totally

independent of the Administration. The idea that it is in both accounts is an important role.

I think there are some things that might be needed to be put into

that Office of Advocacy that are elsewhere within SBA, the Office

of Technology, even the Ombudsman’s Office. Clearly, these are

more aligned with the advocacy function than other places. But I

think the critical thing is to get a line item and make sure that

the office gets the funding that it deserves.

Chair SNOWE. I gather from what Frank has said, and you feel

that way, too, that the complete independence of the office might

compromise its ability to be flexible in moving?

Mr. SWAIN. I think the most effective place would be SBA. I

think it would get lost out there by itself without some connection,

at least administratively.

Mr. GLOVER. When it works it works well, not having to worry

about personnel, government contracting, a whole variety of things

you would have to worry about if you were independent, totally

independent. I think there is synergy at SBA. I think that SBA as

a total does a lot for small business. A number of times, we actually did research and provided to SBA, for example, job creations

through SBA lending programs. There were things we could do

when SBA was challenged. Occasionally, SBA is challenged and I

think we are able to provide the economic data and justification for

some of SBA and its programs.

You also have advocacy functions within SBA like the women’s

program, like the veterans’ program, like the minority programs.

All of those are also charged with advocacy and we do the research

that supports and justifies those programs and some of their existence.

So there is a synergy that does occur, and taking it completely

out of SBA, and certainly taking it completely out of the Administration, I think creates an adversarial situation. I mean, I kept

count of how many times I took independent positions from the Administration, and I think Frank did, as well, and I am sure Tom

is keeping that list, as well. That is not the important issue. It is

how many times do we get the Administration to later change its

13

mind, and if you are part of the Administration, you have got more

clout in getting them to change their mind.

Let us face it. You can fight and lose, but if you can be as a partner and always working to improve the decision making process—

what I view the Office of Advocacy, our success is when we change

the decision making process. When we made whoever was the decisionmaker at the next level from whoever made the original decision aware of facts and information they didn’t know, that changed

the outcome and it changed the culture of that agency. The frustrating thing is there seems to be a never-ending source of problems popping up and you are continuously educating people. But

once you do, it’s easier the next time.

Chair SNOWE. I see. Yes, and your name is—I can’t see.

Mr. CORATOLO. Giovanni Coratolo with the U.S. Chamber of

Commerce.

Chair SNOWE. Thank you. I couldn’t see your name tag.

Mr. CORATOLO. Senator, we really applaud you in introducing an

Independent Office of Advocacy bill that establishes a line item,

and certainly as well as my colleagues here, I agree with them. It

is well needed. I can’t add much to what they have said, but I

wanted to point out one thing. Several years back, myself as well

as a number of the organizations, small business organizations,

NSBU, NFIB, SBLC, got together and recognized the value of advocacy and we set upon a quest to increase the funding. The only

handle we had was a line item that exists now for economic research. This is just a subset of the whole budget for advocacy.

When the story is told to Congress, it is a good story and they

respond. We were able to increase that budget about 35 percent

based on the fact that we told the story and they recognized how

good the story was. Without a line item, groups like myself cannot

tell that story because the appropriators have no control over that

budget. We are not afraid of different organizations incurring in

that budget when we can have transparency with it.

We feel very confident that when the story is told, people will respond. Members of Congress do respond. That is something that we

would very much encourage, is the line item. Thank you.

Chair SNOWE. So you think it will make a difference?

Mr. CORATOLO. It will make a very big difference. It allows us

as small business groups to defend that particular organization and

encourage proper funding for that organization.

Chair SNOWE. Well, my bill isn’t creating—we were just talking

about it—my bill isn’t creating a separate office.

Mr. CORATOLO. No.

Chair SNOWE. It is obviously strengthening internally the independence of that office. But Tom, can you explain and respond on

some of the issues, and I know Allen wants to speak on this, as

well. Maybe we will have your comments and then we will go to

Tom.

Mr. NEECE. I represent the Small Business Legislative Council

as its elected Chairman. I have known Jere Glover for, I guess

back in the period way back into the 1970s. I actually worked for

this Committee as a staff person at the time of the passage of the

enabling legislation for advocacy and staffed the hearing for the

first confirmation of Milt Stuart, or his only confirmation, but for

14

the first advocate. So I have watched this program very carefully

over the years.

Chair SNOWE. What year would that have been?

Mr. NEECE. Pardon?

Chair SNOWE. What year would that have been?

[Laughter.]

Chair SNOWE. No, I am——

Mr. NEECE. We don’t want to talk about the years, because——

Chair SNOWE. Seventy-eight?

[Laughter.]

Mr. NEECE. I will be quick to——

Chair SNOWE. In the late 1970s, I came to Congress. So it was

1978?

Mr. NEECE. Actually, back in 1975.

Chair SNOWE. Nineteen-seventy-five. That was just before.

Mr. NEECE. I was going to say, I will be quick to add that I have

known Frank almost as long, so that dates him, as well.

[Laughter.]

Mr. NEECE. They were both terrific advocates——

Chair SNOWE. We weren’t here when President Eisenhower

signed into law——

[Laughter.]

Mr. NEECE. No, but if you want to push the envelope, when I

first went to work in this town, I worked for the first staff director

of this Committee who staffed the passage of the 1953 Act, so——

Chair SNOWE. Okay.

Mr. NEECE. We keep pushing back——

Chair SNOWE. We are getting closer. We are getting warmer.

[Laughter.]

Mr. NEECE. I am a dinosaur, and the first advocate worked for

Harry Truman down at—so we could really go back.

Chair SNOWE. Right.

Mr. NEECE. But to get to the point, first of all, we are very excited about the introduction of your bill and we would hope that

you would act on that as quickly as possible. There was great debate in the last Congress about what to do with advocacy and it

lingered and at the end of the day, nothing happened.

No. 2, I would like to reinforce what Jere just said and maybe

be more blunt about it. He is always very tactful. That is, we would

not support complete independence of advocacy. We think it should

have a line item.

But at the end of the day, I have heard all of these advocates

say over the years that some time during the course of an administration, and maybe more than once, you need to go to the well and

you need to go to the White House and you need to go to the President when you have really got your back to the wall and you are

trying to prevail on an issue. If you are an independent commission, you can never go to the White House. In fact, I think you

would be shunned by lots of agencies. You are still technically part

of that Administration, and you have got to be very careful about

how often you go to the well and how often you take on OMB or

they are still going to ask you to clean out your desk by the end

of the day. But the advocates——

Chair SNOWE. Did that happen, Frank?

15

[Laughter.]

Mr. SWAIN. I got a few calls.

Mr. NEECE. He never returned the call.

[Laughter.]

Mr. NEECE. So we think you have struck the right balance with

your bill, and I don’t mean to prolong this any longer, but just to

commend you for your leadership on this.

Chair SNOWE. I appreciate that. I think your comments are very

helpful.

Yes, Tom.

Mr. SULLIVAN. Madam Chair, I do want to point out one dynamic

that is important for this roundtable to understand, and that is

that I believe that the utility of a line item really is for the future

successes of chief counsels. I have the luxury of having an Administrator who is tremendously supportive and obviously a President

who is tremendously supportive and that is reflected in the budget.

What I think we are doing and the emphasis that exists around the

table really gets at preserving that through a budget method into

the future.

I do want to point out two examples, recent examples, of how it

works with the Office of Advocacy being within the government, because it does work best this way and these recent examples, I

think, point that out in real time.

The first is our formal working relationship with John Graham,

who is the President’s regulatory advisor, the head of the Office of

Information and Regulatory Affairs at OMB. Very early on in my

tenure, we sat down and worked through how our offices are going

to communicate and we formalized that in an MOU which really

piggybacks on the successes of folks whose counsel I seek frequently, Frank and Jere.

In March last year when we formalized this memorandum of understanding, basically what it said, Madam Chair, was that when

there are issues of such critical importance to small business and

we raise them with John Graham, then the small business component gets addressed first, and I say that because when a rule goes

through John Graham’s office, there is a checklist, I don’t know if

it is a formal checklist, but in all practical senses, it is a long

checklist of things to look at—cost-benefit analysis, duplicative nature of the rule on existing law, and so on and so forth.

When we raise an issue to John Graham that has to do with

small business, then his office literally drops everything and looks

at the small business component of a rule package before it goes

to the Federal Register, and we see results.

Just last year when EPA was considering putting on a whole

new Federal permit system for new home construction, we exercised our working relationship with John Graham, convinced OMB

to take another look and work with EPA, and as a result, EPA is

looking at how to protect new home construction and how it affects

water runoff by existing permits that will produce real environmental protection instead of just throwing a whole new Federal

permit system, and by trying to fill out new paperwork and costing,

we estimated a cost of $3,500 for every new home. Because small

business concerns were brought into the picture early, we were

16

able to achieve real results, and that was very much at the center

of our office being within the government.

Lastly, Executive Order 13272. Last August, the President

signed an Executive Order that calls on our office from within the

government to train regulatory agencies in how to do a better job

considering their impact on small business. So those two examples

really do bring to light why our office should be within the government, but then its independence bolstered through a line item

budget.

Chair SNOWE. What impact has that had on your staffing levels

and workload requirements, that Executive Order?

Mr. SULLIVAN. Well, the Executive Order really has recognized

that it is not enough just to criticize government. The President

wants us to do more, and that is to train government agencies on

how to do a better job. So we have had to look at our staffing and

shuffle them around so that we can go into a training mode, not

necessarily a legal critique mode. We have promoted one of our top

attorneys, Claudia Rayford Rogers, into the head coordinator of our

agency training.

We right now have a request for quotation out on the street, so

if anyone knows contractors who would be able to put together a

training module, please have them respond to this RFQ immediately because it is a quick one. That training module will be put

in place so that our legal team and our economics team—Madam

Chair, we actually are borrowing from Department of Transportation a regulatory economist who will be the economist role in

training agencies on how to do a better job measuring their impact

on small business.

We expect to train over the following year and a half just over

33 Federal agencies on how to do a better job measuring their impact on small business. This is a huge load which will cause us to

reprioritize where we are directing our resources, but we think that

with the cooperation of the Federal agencies, because basically, it

is their boss, the President, who is telling them to do this, that we

will achieve success under current staffing levels.

Chair SNOWE. That is terrific. I am sure that is going to make

a major difference for the small business community. Can you just

tell me, if you are at high 40s in terms of staffing, I gather the

high-water mark was 70-plus staffers, is that right?

Mr. SULLIVAN. That is right.

Chair SNOWE. I mean, can you do the job effectively with all that

you have to do with the current staffing?

Mr. SULLIVAN. Right now, we have 47 slots. We could do with another attorney and another economist, and then we think that we

can do the job.

Chair SNOWE. Okay. Andrew.

Mr. LANGER. Yes, Madam Chairwoman. I am Andrew Langer

with the National Federation of Independent Business and I want

to thank you for allowing us to participate in this roundtable today.

I manage regulatory policy for NFIB’s 600,000 members and I

want to underscore something that Chief Counsel Sullivan has

said, that this really isn’t about his office, necessarily, his office

today under his counselship. It really is about the future.

17

I mean, for us, I am always talking about the fact that no matter

who is in charge, either in the White House or up here on the Hill,

new regulations are always being proposed and they are always

having an impact on our members, and the fact is that there is but

one office whose sole job is to stand inside government as a barrier

between those regulations and their impact on our members and

those small businesses who aren’t our members, and that is the Office of Advocacy.

The fact is, we support this line item because we believe that it

will allow for a great deal of transparency in the future in terms

of how budgets are created for the office, but also protect it from

predation from other entities within the SBA itself, and that is a

key issue. When times get tight, it is no surprise that they are

going to be looked at as one of the ways for a great agency like the

SBA to save money, and we believe that, frankly, with the dollar

return that the Office of Advocacy provides, there is no reason for

that to happen.

So we support the budgetline item wholeheartedly. There are

other issues we support, as well, but I will save those for a later

time.

Chair SNOWE. Thank you.

Ron Newlan.

Mr. NEWLAN. Madam Chair, I am Ron Newlan with the HUB

Zone Contractors National Council and I would like to go on the

record as saying I don’t know anybody that has testified today that

remembers when these hearings were lit by candles.

[Laughter.]

Mr. NEWLAN. I am not part of that group. You and I don’t remember those days, but I do know, as the only national trade association for an organization or program that has a line item in the

SBA budget that continues to get zeroed out by the appropriators

year in, year out, which we would think, and very few at the table,

I hope, would disagree with me, that the HUB Zone program is as

near to America as apple pie and motherhood. So is the Office of

Advocacy, and the battle will still be ahead if they do get the line

item, and we fully support that and we support your bill. But the

battle will still be ahead to get the appropriators to put up the

money. Thank you.

Chair SNOWE. Thank you for those comforting thoughts.

[Laughter.]

Chair SNOWE. Anybody else who cares to comment on the Office

of Advocacy? The Ombudsman program, anything in that department?

[No response.]

Chair SNOWE. Okay. Then I guess we will move on to the entrepreneurial development programs. Obviously, they had a range of

issues there and obviously there are various methods of delivering.

You folks deliver in the field all these important resources and assistance to the small business community. So I would hope that

you can share with me some of the lessons that have been learned

from your experiences and what we can do better as we approach

this reauthorization.

Who cares to begin, anybody? Small Business Development Centers, Women’s Business Centers? Okay.

18

Ms. AU ALLEN. Thank you very much. I did not get the message

until this morning that the hearing had changed——

Chair SNOWE. Oh——

Ms. AU ALLEN [continuing]. I have been on travel, so I am sorry

I missed earlier, but I do want to add my 5 cents in.

I think that the Office of Advocacy has done a terrific job. I enjoy

reading the e-mail that you send to me as to what is going on and

what other news comes out of your office.

On the issue of entrepreneurship, one other thing that we have

to pay attention to is how to bring the small businesses at a level

where they could actually sustain. Oftentimes, corporations and

government would say that, ‘‘Well, we have X-number of small and

minority businesses in our fold and we are doing business with

them’’. When you really cut through the chase and will go in and

see, well, how many are you actually doing business with, there are

very few.

I know that with government and corporations, one of the problems is if they were to be introduced to a new business, they say

that, ‘‘Well, I have to replace the incumbent. My buyer has been

doing business with Mr. X for 5 years and we are quite happy with

Mr. X. Now you bring Ms. Y in. Well, to give Ms. Y the business,

Mr. X will have to be replaced. You have got to come up with some

creative way to deal with the replacement of incumbency’’.

One way, and I was at the U.S. Postal Service 2 days ago and

talked to the chief procurement officer and he was looking for

ideas, and I said, ‘‘You know what? What we would want to do

is’’—it is a difficult decision to ask a buyer or an agency to replace

a competent incumbent, but at the same time, while you see others

waiting in line outside of the door looking for the opportunity, it

is to see that if there is an increase in expense in purchasing dollars, then it behooves the agency and the buyers to think, well, the

increase in span should go to somebody else other than Mr. X. That

is one.

The other is, sometimes corporations especially, they throw the

dollars at a small business and say, ‘‘Well, I am giving you so much

money, so much business. Now go.’’ But they do not look at how

they operate. They do not help mentor them about the management, about the financial processes, and also their strategic alliances with other companies, and as a result, they cannot sustain

the operation. After a few years, they go out of business.

In the telecommunications industry in the last 10 years, we had

a study that out of the seven companies that were the largest company in the TI industry, three had gone bankrupt and they were

touted, lauded, put on a pedestal as the most successful ones.

So if there is something you can talk about in particular in these

dialogues as to how do we, first, increase the number of small and

minority-owned businesses who could benefit from the Small Business Administration program. Second, is to also continue to look at

them and see whether the businesses can actually sustain the test

of time.

Chair SNOWE. They are not getting the right guidance and assistance?

Ms. AU ALLEN. Sometimes, businesses are given a big contract

but they do not—management-wise, they do not have the skills. So

19

they will go out and try to produce, but in the end, they are not

operating in the company right and they go bankrupt. I will be

happy to give you more information on this.

Chair SNOWE. Absolutely, yes. No, I would be interested in that

because I think that would be useful.

Ann Sullivan.

Ms. SULLIVAN. I would like to start by just saying what we, as

Women Impacting Public Policy, how we view the programs in

SBA. In the Small Business Act, it says that with regard to

women-owned businesses, the SBA programs should, (A) vigorously

promote the legitimate interests of small business concerns owned

and controlled by women; (B) remove insofar as possible the discriminatory barriers that are encountered by women in accessing

capital; and (C) require that the government engage in a systematic and sustained effort to identify, define, and analyze those discriminatory barriers facing women and that such effort directly involve the participation of women business owners and the publicprivate sector partnership, and so that is how we evaluate the programs that you are talking about.

Our members tell us that the SBA does a terrific job of working

with people that want to just start their business. They have many

resources for them. The centers provide that. What our members

are telling us is that there is not much beyond that at the second

stage of your business, when you are growing it from 10 to 50 or

50 to 100. At that point, the resources really drop off and our members would like to see a refocus or a larger emphasis on the SBA’s,

their resources to help businesses in those stages of development.

Most women businesses are in first generation, so they don’t have

a lot of experience with that next level. That is where they could

really use the help.

Chair SNOWE. What is the response, I mean, in terms of if somebody does, you know, a woman business owner wants to go to the

next level? There isn’t that kind of assistance?

Ms. SULLIVAN. There just isn’t much.

Chair SNOWE. They don’t have enough staffing and funding to

provide people——

Ms. SULLIVAN. Right, and there is not a lot of expertise——

Chair SNOWE [continuing]. Guidance on expansion?

Ms. SULLIVAN. Yes, and there is not a lot of expertise to help

them beyond that level. There are—I see SCORE is here. Those are

retired executives that can help. But the whole focus has really

been toward——

Chair SNOWE. Start-ups.

Ms. SULLIVAN. Right. So we would like to see that shift, if possible.

Chair SNOWE. Do you have much demand on the expansion level?

Ms. SULLIVAN. Yes.

Chair SNOWE. You do?

Ms. SULLIVAN. Yes.

Chair SNOWE. It would be interesting to know the difference for

those who don’t receive that type of assistance in terms of expanding but move ahead and do so, whether or not they are successful

or do they fail.

20

Ms. SULLIVAN. We would be happy to poll our members on that,

because that is an interesting question that we would love to find

the answer to.

Chair SNOWE. Yes.

Ms. SULLIVAN. I would also like to, if it is appropriate, just talk

a little bit about Women’s Business Centers, another issue that is

real important to us. As I understand it, Women’s Business Centers, for the first couple of years, are funded 50 cents to the dollar.

They have to come up with in-kind and cash. The third year, it

goes to dollar-for-dollar match. But after 5 years, you are on your

own.

We would like to see resources at the Women’s Business Centers

directed toward the people that they serve rather than chasing corporate money and we feel that the centers are providing services

that help the economy because they are helping businesses grow.

We think it is a good investment on the part of the government to

do so.

Chair SNOWE. So you support extending it beyond the 5 years?

Ms. SULLIVAN. Yes. We think it is critical.

Chair SNOWE. Sustainability grants.

Ms. SULLIVAN. Absolutely.

Chair SNOWE. That certainly will be under consideration, because I know a number of centers would be closing.

Ms. SULLIVAN. Right. That is what we feel.

Ms. STREET. Good morning and thank you, Madam Chair, for

providing this roundtable this morning and giving us an opportunity to discuss the entrepreneurial development programs. I am

Kaaren Street and I head up the Office of Entrepreneurial Development for SBA.

I would first like to talk about all of our programs. We believe

that the entrepreneurial programs are the backbone for entrepreneurs to survive and grow in America. We also believe that we

have made tremendous strides. I am proud to say that we served

over 1.5 million clients in the year 2002. That is up by 250,000 clients over the previous year, with basically a flat-line budget. Our

resource providers are some of the best in the country and we are

really proud of them. We have SCORE, the SBDCs, the Women’s

Business Centers, our Business Information Centers, and our new

program that is coming on board, our Native American Economic

Impact program. So we are moving forward and progressing.

Our Women’s Business Centers are one of our prizes in terms of

providing services to women-owned businesses. That program has

been in existence for quite a while. It started out primarily serving,

as Ann mentioned, entry-level, pre-start-up, and pre-business clients. We have been requiring new centers that come on board to

provide a balance to that and provide services for first-stage and

second-stage women-owned businesses, as well.

Most of our programs, at first blush, appear as if there is some

duplication, and we are accused of that quite a bit. But if you look

closer at them, they all have their own particular niches. The

Women’s Business Centers, to a large extent, have been focusing

a lot of their energy and resources on the start-ups, which there

are many of, and the fastest-growing segment is women-owned

businesses in terms of start-ups. It is a huge number of women.

21

They are growing at a faster rate than any other segment of the

business. So there needs to be some mechanism in place, a process

in place to provide that service and the Women’s Business Centers

clearly are doing a great job at that.

The second is our Small Business Development Centers, which to

a large extent deal with businesses who are already existing from

the first year on into their fast-growth period, so that they tend to

focus, to a large extent, on those existing owned businesses.

SCORE, another one of our gems, to a large extent focuses on the

counseling, and they do across-the-board counseling, but primarily

on the pre-business or early-stage business development.

So each one of them have their own particular area. All of our

programs are serving women in large numbers. Our SCORE program serves—almost 41 percent of their client base are women,

and our SBDCs, almost at the same rate. So we are serving women

in all of our programs throughout. The Women’s Business Centers

are exclusively serving women, and to a large extent, the small

start-up, self-employed women.

So we are trying to address Ann’s commentary about having

more programs for women in the advanced stages, but there are

other programs within SBA that these women can avail themselves

to, and there clearly are the SBDCs, SCORE, and other parts of

our system.

Chair SNOWE. Do you think there are sufficient resources to do

that?

Ms. STREET. Yes, I do. I think so. I think that, more or less, we

have a marketing program to let people know more about our programs and that is going to be extremely helpful to us, and in terms

of letting people know that they don’t have to be exclusively in the

Women’s Business Center to get technical assistance, business information, and entrepreneurial programs. They can get those services throughout a wide network. The SBDCs are there for them.

They are on many college campuses in the United States. Also,

SCORE is there for them, and it is proven that women are utilizing

those programs.

Chair SNOWE. Can you just address or offer comments on the

sustainability grants? I know that is something the Administration

doesn’t support, but if we want to have centers in every State and

so many will close—I guess approximately 26, is my understanding, will close in 2004 without any type of sustainability

grants, and so I wonder what the objection is.

I mean, doesn’t it make sense to continue those that are already

operating successfully as opposed to just continuing with the creation of new ones? Shouldn’t there be sort of a mix here? These

centers obviously serve a vital purpose, so doesn’t it make sense to

continue to fund with those that are working well and at the same

time add into the mix the creation of new ones?

Ms. STREET. I would be happy to respond to that. First, I would

like to talk about the intent of the legislation that created the

Women’s Business Centers. It was created with a 5-year program

and it was only in 1999 that the pilot, and it is clearly a pilot for

a 4-year period, would add the sustainability component to the program. It was a pilot to see how it would work out and it would

22

have to be reauthorized in order for that pilot to become part of a

major program.

Part of the application for Women’s Business Centers requires

the applicant to have a plan in place for graduation out of the program. It was not a program that was designed to be for perpetuity.

In fact, the centers that came into being from the beginning did not

have any sustainability. Only since 1999 has the sustainability

process been in place.

We have no record or no evidence to say that, provided if those

sustainability funds are not available, for those who will be graduating out of the program after their fifth year, they will not survive. Many of those programs do have other sources and have been

encouraged along the way to begin to start looking at funding elsewhere other than SBA.

Some of our Women’s Business Centers have been receiving

funds for 8 years, 7 years, 6 years, and well beyond—through the

sustainability process. We are planning to look at the Women’s

Business Centers who may have difficulty in sustaining themselves

beyond the 5 years and provide capacity building workshops, training, et cetera for them.

Also, another thought that we were working with is that some

of our Women’s Business Centers who have graduated have moved

on to become Women’s Small Business Development Centers and

we would like to see a lot more of that happen, because there, we

can have the sharing of the funding, working with the SBDCs, and

that is an important feature, as well.

So really, our objective in not reauthorizing the sustainability is

to try to get some diversity in geography, which we do not have,

and that is a clearly important feature. Some of our centers are

concentrated in certain parts of the country, and they are really an

important feature with this.

I brought a map along with this just to kind of give you a sense

of where we stand in terms of our—these red stars, if you can see

them from there, represent sustainability, those Women’s Business

Centers who are in sustainability. They are receiving sustainability

funding beyond their 5 years.

Chair SNOWE. The ones that are lit up?

Ms. STREET. Yes, the ones that are lit up.

Chair SNOWE. How many are there of those?

Ms. STREET. Twenty—that are in sustainability now, there are

approximately 29.

Chair SNOWE. Twenty-nine?

Ms. STREET. Twenty-nine that are in sustainability. But there

are some pockets of the country where there are fast-growing business areas for small businesses, especially women-owned businesses, where we have very little, minimal penetration. We have no

Women’s Business Centers in southern California, none in Los Angeles, none in San Diego. We have also needs in Texas. We have—

if you can see, most of them are concentrated in the Northeast and

in New England and——

Chair SNOWE. Why is that, out of curiosity?

[Laughter.]

Chair SNOWE. We are not complaining about that, but is it because the entrepreneurial spirit is thriving there or what?

23

[Laughter.]

Ms. STREET. We have no centers in Las Vegas or Reno. We have

no centers in Portland, Oregon. We would like another center—we

would love to have another center in Minnesota. We have none in

Portland, Maine, Bangor, Maine. We have none in Miami, none in

Orlando, none in Tampa. The one center that we do have in Florida

is located way on the border of Alabama here, which kind of serves

the Alabama side of it.

In an ideal world, we would love to have them all and we would

love to have the sustainability and bring on new centers. But we

are pretty much a victim of our funding. We have $12 million.

Thirty percent of that $12 million is dedicated to sustainability

through the pilot program. Without the pilot program, or without

the pilot program continuing, we would have that opportunity to

reallocate to the geographical areas that are in desperate need for

centers and want them.

We haven’t agreed that there should be a center in every State.

There are some States that are large enough and have the fastestgrowing businesses that should have two or three or maybe more

Women’s Business Centers. So we are not trying to make sure that

every State has one. There has to be a demonstrated need for them

there.

Clearly, we go on. In New York, I mean, we could go on with

more, Buffalo. In Syracuse, New York, I mean, those are fast-growing areas. Cleveland, Ohio, has no centers. Pittsburgh has none.

Richmond has none. Charleston, South Carolina, none of those—

there are places that we really can use these centers and we just

don’t have the resources to do them.

By continuing to fund these sustainabilities, it limits the growth

of these centers. Now, I am not certain and we don’t know the answer as to whether or not by not having sustainability, whether or

not these centers are going to go out of business. I mean, that is

what we have been hearing, but we have been working with them

and we would like to continue that process so that that doesn’t

occur. A good number of them have already been receiving funding

for 8 years, 7 years, and 6 years into the program.

So that is our position. We would like to try to see—to make sure

that we have the geographical diversity. In some cases, some of the

most very closely concentrated, they are in this particular area. We

have some within a 30-mile, 40-mile area. So we are looking at the

geographical dispersion of these centers. It is critically important,

and we know OMB is going to look at that, as well, in terms of also

the economic impact of these Women’s Business Centers.

Chair SNOWE. So what do you think would happen to those Women’s Business Centers if they don’t have sustainability grants? I

mean, do you think it would be appropriate to have them compete

for SBDC grants?

Ms. STREET. We certainly would work with them to transition

them to the SBDC program, to have Women’s SBDC centers. We

have five of those already in the system that are working very,

very well.

Chair SNOWE. What is the longest time period that a Women’s

Business Center has been reseiving a sustainability grant?

Ms. STREET. Eight years.

24

Chair SNOWE. Eight years?

Ms. STREET. Yes.

Chair SNOWE. What do you expect to happen to those centers if

they don’t receive continuing funding?

Ms. STREET. I think the ones who are strong will continue on and

they will get—they have had 8 years to grapple with this situation.

Some of them—the ones who have been in the program 8 years

didn’t have sustainability even earlier. Sustainability came in 1999,

so it has only been in existence for 4 years. So they were sustaining

themselves even up to that point.

Ms. FORBES. They were funded. The program started with a 3-

year grant and it was extended to a 5-year grant and then there

was sustainability. So there is no period of time that they haven’t

received the Federal portion to attract the match. So, I mean, it is

just not——

Ms. STREET. Yes, it is five plus the——

Ms. FORBES. Right, but there is no—I mean, you were making it

sound like——

Ms. STREET. I am not saying there was a gap there.

Ms. FORBES. Okay.

Ms. STREET. I didn’t mean to imply there was a gap.

Chair SNOWE. Okay.

Ms. STREET. I don’t know of any evidence that a good number of

these centers will close. Maybe some will. I am not certain of that.

I can’t say that that is not going to happen to some of them.

Chair SNOWE. They are working so well——

Ms. STREET. That is true.

Chair SNOWE [continuing]. It is unfortunate not to be able to find

some way to continue their operations, but at the same time, addressing some of the other issues, and I realize it is all a question

of funding. We will have to, obviously, look at that. How do you

know what the demand is for creating Women’s Business Centers?

Ms. STREET. Well, we have had quite a few applicants. Every

time we have—we have not been able to open more than two to

three a year.

Chair SNOWE. What is your demand?

Ms. STREET. Our demand, we have an application out now for

three centers and with that we have over 100 applications in for

that, for those three centers.

Chair SNOWE. In some of the areas that you say——

Ms. STREET. Yes. In fact, we are giving extra points to those

areas that are underserved.

Chair SNOWE. That aren’t represented?

Ms. STREET. Yes, that aren’t represented.

Chair SNOWE. You don’t have any, in Los Angeles——

Ms. STREET. None.

Chair SNOWE [continuing]. Or in southern California?

Ms. STREET. No.

Chair SNOWE. Do you have applications from that area?

Ms. STREET. Yes, we do, from San Diego, yes, and from Florida,

both places.

Chair SNOWE. Mr. Homer.

Mr. HOMER. Thank you very much. Madam Chair, thank you for

the opportunity for the National Indian Business Association to be

25

here today to participate in this roundtable. I think that is very important, that we all share some of our issues.

I want to get into and I want to report on the Native American

entrepreneurial development, specifically a bill that is coming down

the line, in fact, the House bill, 1166, passed the House and will

be submitted and transferred to the Senate Committee on Small

Business and Entrepreneurship.

The House bill passed and is going to amend the Small Business

Act to include specific funding for Native American businesses,

and, of course, that is a legitimate one. This amendment has been

a long time coming, and for the past 20 years, there have been critical needs for SBA business development assistance in Indian country.

NIBA has two amendment concerns that, if implemented, would

hamper or may not expand or improve business assistance to Native American businesses. First would be the SBA delivery service

provider, and the second is the SBA central administrative office

for the program.

H.R. 1166 recommends the funding of State non-Indian-funded

business development center programs to deliver business development services to Indian reservations and communities. We have

nothing against the Small Business Development Centers. They do

great in Phoenix and Tucson and Albuquerque and Las Cruces. But

on Indian reservations over the past years, they haven’t done such

a very good job.

In the past 10 years of existence in NIBA, I have not seen an

improvement, an expansion of services to Indian country by the

Small Business Development Center program who have been receiving funding for many, many years for all minority programs.

Statistical reports of the 13 Western States with substantial Native

American populations have not received substantial SBA training

and 8(a) certification, HUB Zone certification, 7(j) assistance, veterans’, women’s assistance, loan programs. Bonding is nonexistent.

If Congress wants to expand and improve business assistance to

Indian country, NIBA recommends the following changes in the bill

that the Senate will get. Instead of funding State non-Indian small

business development programs, legitimately, funding should be established for the SBA Tribal Business Programs who have been established for the SBA programs, who have been providing services

to Native Americans in the 13 Western States for the past 6 years.

Tribal colleges, 31 total exist out there to receive training and

technical assistance money. Intertribal organizations and organizations such as the National Indian Business Association and some

of the National Indian Chambers could receive and be training providers. NIBA recommends that the SBA’s office in Washington,

D.C., the Office of Native American Affairs, which was implemented in 1992, be the administrator of the program instead of the

Small Business Development Center Program.

We feel very strongly that these changes are important for expanded and improved programs. So I am looking at that as one of

the really enhanced recommendations from Indian country, to go

ahead and provide the funding to those Indian colleges, Indian universities, 31 Indian colleges, 33 universities, instead of some of the

other colleges in Phoenix or Las Cruces, Albuquerque, New Mexico.

26

Chair SNOWE. Ms. Street, can you respond to some of the issues

that Mr. Homer raised? I would be interested in getting your perspective on this, and also about the Tribal Business Information

Centers. Does that provide any support for what Mr. Homer is referring to?

Ms. STREET. Yes, it does——

Chair SNOWE. But obviously deficient in terms of the issues that

he is raising.

Ms. STREET. The Tribal Business Information Centers were discontinued in the last fiscal year. We are replacing that with a new

program. It is a Native American economic development program

that has just been funded for this year to provide economic development services through tribal organizations as working closely with

the tribal colleges as well as the tribal universities.

I agree with my colleague in terms of the SBDCs having the role

already established in their charter to provide services to the Native American community. We have been working very closely with

them to expand that proposition. At the same time, we are very

pleased to say that we are implementing a very comprehensive Native American program that is in—we just hired a Director of our

Office of Native American Affairs who is going to begin work next

week, who is going to lead this effort, and we certainly have been

working on it up to this point in time.

That kind of leads into my response that our response that we

had in terms of the SBDC, opening it up for competition, because

we don’t believe that the SBDCs, as good as it is, can be all things

for every business, and in this particular case, I think the services

for Native Americans are better served with Native Americans provided that service at the tribal college and tribal university level

as my colleague stated.

Chair SNOWE. Mr. Homer, do you——

Mr. HOMER. That is very good. Thank you. That is a very good

response. We will work with you on that. Thank you, Kaaren.

Chair SNOWE. First, Ellen Golden, and then Marilyn.

Ms. GOLDEN. Thank you. Thank you, Senator Snowe, for inviting

me here today for this roundtable. I am Ellen Golden and I am

here wearing two hats. I am the President of the Association of

Women’s Business Centers and I am also Senior Program Officer

for Coastal Enterprise and manage a Women’s Business Center in

Maine.

I would like to set the record straight. Ms. Street said that there

is no Women’s Business Center in Portland. In reality, Coastal Enterprises provides extensive services to women business owners

across the State, and certainly Cumberland County, which is one

of our most densely populated counties, gets their fair share of

services. So we needn’t worry about that.

I want to make a number of points here, and I will be submitting

more extensive written testimony for the record.

First of all, going back to the history of the program, I appreciate

Patty Forbes making clear that there has been an evolution over

time, and that is, of course, the evolution in the Women’s Business

Centers program has been accomplished through extensive and remarkable bipartisan support of Congress, and we really appreciate

your help in terms of growing and strengthening the program.

27

In response to the comment that there is no evidence that the

programs will survive, I think that that is true. On the other hand,

we have some extensive experience in terms of what goes on currently within the program and I can say that there is evidence that

certainly some programs will not survive. Just this past year, we

were saddened to lose a very old and well-established program in

Long Beach, California. They were unable to come up with their

match, so they decided to close their doors.

So even with sustainability, there are certainly challenges for the

Women’s Business Centers program, particularly in this funding

environment. I am sure you are all aware of the fact that it is extremely difficult. Foundations don’t necessarily have the capacity to

fund what they did. Even banks are no longer providing the kinds

of dollars that they did a few years ago, and I know in a rural

State like Maine, where there has been a restructuring of the

banking industry. In many cases, the larger banks are now owned

by out-of-State corporations and we are no longer competing on a

local basis but we are competing nationally for shrinking funds.

I would say that the importance of the availability of the SBA

grant cannot be underestimated. I think it is so much easier to

have that as a foundation and use that as a catalyst for leveraging

the non-Federal match. I think without that, I think a lot of the

centers would, in fact, disappear or really be compelled to significantly reduce their capacity at a time when we know that this is

a growing and increasingly vital sector of the economy.

I think the other piece that can’t be underestimated is the existence of the SBA funding that serves to give programs significant

credibility. It helps the centers position themselves so that they

are, in fact, better able to secure additional funds. I know it has

been a huge factor for us and I know that is true for other organizations across the country.

In terms of the sustainability program, clearly, the association

would strongly recommend that we make the sustainability pilot a

permanent part of the Women’s Business Centers program. We

think it is incredibly important to invest in those organizations

that have demonstrated that they have the capacity to successfully

meet the program goals of the Women’s Business Center program.

I am sure that everybody here knows that it was a competitive

process and that each Women’s Business Center goes through an

annual programmatic and financial review. So we are certified as

being able to deliver the program effectively.

I think it is also important to understand that it takes time to

build a successful program. It takes time to attract and build staff

capacity. It takes time to really understand the market, to understand what services need to be delivered, to build that kind of

trust, visibility, and credibility in a marketplace. It takes time to

build successful partnerships that increase the efficiency and effectiveness of program delivery. It takes time, again, to establish the

funding relationships that allow us to generate the non-Federal

match.

According to my calculations, if we eliminate the sustainability

program, we not only eliminate the 26 centers that would be eligible to apply next year for sustainability, but we eliminate those

that are currently benefitting from the sustainability pilot. In efVerDate 03-FEB-2003 15:09 May 18, 2004 Jkt 091189 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 D:\SBA\91189.TXT SSC2 PsN: SSC2
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fect, we end up eliminating two-thirds of the current centers. In

other words, we eviscerate the current infrastructure that is providing services.

I think it is just unconscionable to do that. I think that is an incredible waste of Federal dollars, when we have been investing in

carefully building an infrastructure over the past X-number of

years.

The other thing I think is important to understand is not only

do we lose that existing capacity, but the existing centers, particularly through the Association of Women Business Centers, serve as

mentors for those new centers that are coming on board. I know

that I have personally, and I can think of many other existing centers who have nurtured centers right from the ‘‘thinking about applying’’ stage, through the earliest stages of starting up their center, to trying to understand what the best practices in the field are.

If you get rid of the sustainability centers and those who become

eligible next year, you also lose that capacity to provide mentoring

and ongoing support to new centers.

So what we would like to see, and I hope that we will have your

support in this, we would like all the Women’s Business Centers

who have demonstrated their capacity to deliver the program effectively to be eligible for 5-year funding on an ongoing basis, obviously subject to the annual programmatic and financial review.

We would like to see that the sustainability and existing centers

have priority over new centers, although we would certainly like to

see adequate funding to have new centers in those areas that are

currently underserved.

We would request that Congress would authorize funding levels for the next 3 years at $14.5 million, $16 million, and $17.5 million,

which we think will be adequate to support the current infrastructure and still allow for new centers to come into existence.

One or two other points. I can appreciate what my colleague said

earlier about services for existing businesses. I do think that that

is something that is variable, depending on the specific market that

Women’s Business Centers serve. There are a number of centers

that are providing services for existing businesses. I think each

center tries to develop services that fit into the context of their

market area.

Lastly, in response to what Ms. Street said about transitioning

the Women’s Business Centers to the SBDC funding, quite honestly, I just don’t think that that is realistic. I know that my colleague from Maine, the Director of the SBDC in Maine, who is here

with me, is happy to work with me. I am not sure that he is happy

to share his funding with me.

[Laughter.]

Ms. GOLDEN. Thank you.

Chair SNOWE. Thank you, Ellen.

Okay, and then we will go back to some of the issues.

Marilyn Carlson.

Ms. NELSON. Thank you, Madam Chair. Thank you for inviting

the National Women’s Business Council to be a part of this roundtable discussion. We welcome this opportunity to share our views

of our mission, of our current activities and future plans very briefly and we will submit our written testimony, as well.

29

Since my appointment in May of last year, we have been moving

ahead on a number of fronts. The council is now fully staffed. Joining me here today is our Executive Director, Julie Weeks, who was

formerly of the Center for Women’s Business Research and the

SBA’s Office of Advocacy. So she comes, I think, with a great deal

of skill to help us accomplish our mission.

My vision for the council is to be regarded as a trusted source

of fact-based information for public policy change, to be a connective force for the women’s business community with one another

and with the public policymakers, and to be a leading and respected advocate for women’s business community.

The National Women’s Business Council is the government’s, at

this time, the government’s only independent voice for women business owners. This responsibility is critically important to policymakers in both parties who are committed to understanding and

supporting women business owners.

The only entity in the Federal Government which can be counted

on to represent the most informed, diverse, and bipartisan views of

women business owners and what we need to succeed is the National Women’s Business Council. If I may borrow some wise words

I read this morning in the Washington Post, it is possible that we

could say that the council tries to bridge the differences on issues

that are important to women business owners.

To that end, the council is committed to supporting women business owners at all stages of their growth, from start-up to success,

and certainly with an eye to what Ann Sullivan has mentioned, to

significance.

In our 2002 annual report, you are going to find greater detail

about our activities, but let me briefly share one project to illustrate how we are encouraging more and more women business owners to participate in the public policy arena. We have just launched

a monthly conference call that we are calling the ‘‘Women’s Business Connection.’’ These toll-free calls feature speakers discussing

important business issues. They offer an opportunity for people to

ask questions, to learn from each other, and to get more involved

in public policy.

Joining us last month, as an example, was Administrator of the

Office of Federal Procurement Policy Angela Stiles. She spoke

about the new contract bundling regulations that were out for public comment and urged those on the call to be informed and to express an opinion.

This month, we will discuss the issue of military reservists who

are being called to active duty and what assistance is available to

small business owners who are temporarily without very valuable

employees.

We would be delighted to invite any of the Committee Members

to be a guest speaker on an upcoming call, or indeed if you have

topics, and I imagine that you do, to suggest topics to us that we

might discuss on those calls.

Now on the matter of the council’s reauthorization. Let me first

say that, in general, the NWBC statutory authority is sufficiently

broad and addresses the key issues facing women business owners.

So we don’t have a need for a major change in the language. There

30

are some minor changes that we have submitted in our written testimony.

But there is a point of confusion as to how the council’s organizational members are to be treated. Women Impacting Public Policy,

right away, is a member of our council. Six of the fifteen council

members are to represent women’s business organizations. We believe that the intent of the structure is to have organizations, as

well as women business owners, comprise the council. However, in

the past, when an organizational member has left their position in

the organization, the SBA has interpreted our organizational membership in such a way that it has been difficult to replace the individual in that seat with another member of that organization to

serve out the term and we would be very appreciative of some clarification on this issue.

Then there is also reference in our statutory authority to the

Interagency Committee on Women’s Enterprise. As written, we are

charged with advising, consulting, and meeting with this Committee on an ongoing basis. This Committee is currently not active.

I don’t know if it is not active or nonexistent, but in any case, we

haven’t been able to fulfill that piece of our responsibility.

[Laughter.]

Ms. NELSON. Our suggestion would be that rather than waiting

for an interagency committee to be reconstituted, we might offer

that the council could, on an annual basis, conduct a meeting with

the relevant Federal agency representatives to inform them on the

activities and to solicit views on issues related to women enterprise

development.

Finally, I would like to address the issue of support for women

business owner-focused programs. I don’t believe I need to tell most

of you here of the economic importance of women-owned businesses

in this country, certainly at a time that we are all looking to reignite this economy. For the record, we represent over nine million

businesses and growing. We need one of those, like McDonald’s,

one of those signs that keeps telling you how many we have at the

moment——

[Laughter.]

Ms. NELSON [continuing]. Because we are growing so fast. We employ 27.5 million workers and contribute over $3.6 trillion in annual revenue, and we are growing at a number twice the rate of

all firms.

Sustainability becomes an important issue for these start-up

firms, and sustainability beyond the very nascent period. I think of

it as seedlings and saplings and then the large mature trees.

Despite the growth, there are still inequities, such as the fact

that we receive slightly more than two percent of Federal procurement dollars and a similarly low share of venture capital investment. The playing field is not yet level. Women need environments

which acknowledge their unique style of learning and address specific circumstances.

One example of a program that addresses these needs is the

Women’s Business Centers program, and certainly over the last 5

years alone, the budget for these programs has increased from $4

million to $12.5 million. The number of supported centers has

grown actually from 27 to 81, and the number of clients has inVerDate 03-FEB-2003 15:09 May 18, 2004 Jkt 091189 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 D:\SBA\91189.TXT SSC2 PsN: SSC2
31

creased from 8,000 to 86,000. In my business, that would demonstrate a need and the ability to fulfill a need. Thus, we can notice that the budget has actually tripled in the past 5 years, but

the number of clients has increased more than ten-fold.

We are also keenly aware of the debate on sustainability and we

think that the debate is probably justified. Evidently, the performance and the effectiveness of these centers is uneven. Many of us

who have businesses with operations across the country or across

the world recognize that, inevitably, there is unevenness. There is

no question about that.

The Women’s Business Council needs some time to understand

the real issues surrounding this, to look more closely at the research, to really understand best practices. We appreciate the

value of the centers. We appreciate the importance of making sure

that we are leveraging every Federal dollar, and we are going to

definitely monitor this extremely important issue and work with

our friends, both in the women’s business community and at SBA,

to try to come up subsequent to these deliberations with a better

understanding and to actually weigh in on the issue after we understand better what the research is available and perhaps even

what research needs to be done.

Finally, there is a growing body of knowledge about women’s

business ownership, but that knowledge is truly scattered. I think

the lack of real clarity on the Women’s Business Centers is an example, and it is not presented in a usable form for public policy

arena.

The National Women’s Business Council, I believe, could actually

serve a role in gathering and synthesizing on an annual basis the

best and most relevant research on women’s entrepreneurship.

This ‘‘state of women’s entrepreneurship compendium,’’ if you will,

could actually, I think, make an important contribution to women’s

business and policy communities and it would be highly anticipated. Congress might wish to actually formalize this kind of added

responsibility to our statutory authority to preserve it beyond my

tenure.

The council is also uniquely positioned to serve as a central

clearinghouse for all major research on women’s business issues.

However, this possibly could require maybe modest additional

funding. We believe it could require one more staff to do the job

appropriately. This has not been in what we have applied in our

application, but it is really a consideration, because once again, we

have—we are deeply committed to the kind of research that informs these decisions for all of us involved because we all, I believe,

are looking towards the same ends.

In closing, I just want to say how delighted I have been to have

been appointed the chair of the National Women’s Business Council. There are extraordinary women in this country who are building businesses, who are looking to participate in the American

economy and contribute to the vitality over time, and I say thank

you to all those who have gone before and made this possible and

to look forward to collaborating with those of you at this table to

make an even more important difference.

Chair SNOWE. Thank you very much, Marilyn, and I think you

made an excellent suggestion about a compendium to determine

32

the successes. I think that would be very helpful in shaping public

policy. I think that is an excellent idea.

Ms. Street, I would also ask that in response to the issue Marilyn

raised about the interagency committee, whether or not it will be

active again, can you report back to the Committee on its

status——

Ms. STREET. I sure will.

Chair SNOWE. and what are the future intentions with respect to

that Committee?

Ms. STREET. I will, yes.

Chair SNOWE. Thank you.

Mr. Yancey.

Mr. YANCEY. Thank you, Madam Chairwoman. Thank you for allowing me to participate in this roundtable discussion of the Small

Business Administration’s entrepreneurial development programs.

I am Ken Yancey and I am CEO of SCORE and I am representing

SCORE’s 10,500 volunteers, men and women who provide their

time and talent in support of America’s entrepreneurs. The 10,500

volunteers we have represent over 300,000 years of business experience and know-how. They volunteered 1.3 million hours of service

last year.

[Laughter.]

Mr. YANCEY. It is an impressive number, is it not, and certainly

sufficient to work with existing businesses. They volunteered over

1.3 million hours of service to America’s entrepreneurs last year at

a cost to the taxpayer of just over $5 million, on an hourly basis,

less than the Federal minimum wage for very high-quality service.

Over the last 2 years, SCORE has been working diligently to do

business more on the client’s terms, and to do that, what we have

been trying to do is improve the quality of our organization as well

as expand our reach. Since October 1, 2001, we have opened 96

new branches across the country and 15 new chapters in an effort

to be more accessible to America’s entrepreneurs in the markets

that we now serve.

We are also working diligently to become more diverse, not only

as an organization of volunteers, but also from a client-based

standpoint. We have new and emerging relationships with organizations that represent the minority community and underserved

communities, including the NAACP, the U.S. Hispanic Chamber of

Commerce. Mr. George Herrera has recently joined our organization on the Board of Directors to help us do a better job in that

market, and we have targets with other organizations that we will

be working with in the future.

In terms of our outreach, we have also been very successful with

our e-mail counseling service. Most of you know that we do counsel

online. We were one of the very early offerers of advice online,

starting in 1997. Today, we have over 1,100 volunteers that are

available to answer questions online 24 hours a day, 7 days a week.

Our online services grew by 51 percent last year. We are in the

process of actually, for lack of a better term, franchising that opportunity to other sites around the Internet so that, like we have

done in our face-to-face business, we can expand that reach from

an electronic standpoint.

33

In addition to these things, we have been working diligently to

improve our quality, and that work has included recruiting more

people with more current skills. Our turnover is roughly 20 percent

per year. Mother Nature certainly takes its toll on our organization, as you can imagine, and so recruiting is clearly our life’s

blood.

We find that in our recruiting, we are attracting younger individuals. We are also attracting individuals much sooner after retirement than we have in the past. The good news is that we are not

only an organization of retired men and women. Ten percent of our

organization today is still employed, and of our new volunteers,

over 25 percent remain active in the workforce. So we are getting

a current cadre of individuals that are willing to volunteer their

time on behalf of America’s volunteers.

We are working diligently with our chapters to develop new core

competencies against which we can measure performance and continue to improve our quality.

Our organization has been funded for the last 2 years at the $5

million level. That is level funded. We were increased roughly 35

percent a little more than 2 years ago. We have put that money

to very good use in terms of our expansion both geographically, demographically, and online. Our request for 2004 was $7 million and

we are in the Administration’s budget at $5 million. We are hopeful

that that will be supported and that we would be funded at that

$5 million level.

In the wonderful event that this Committee and the appropriators would consider additional funding for SCORE, we would use

that money for additional outreach. We have a great infrastructure

of volunteers and skills. What we need to do is create broader

awareness and drive more traffic to those volunteers in an effort

to serve. So it is not necessarily about building more infrastructure.

It is about creating broader awareness, and we are attempting to

do that both online as well as face-to-face and through the types

of relationships and partnerships that I just mentioned.

Again, thank you very much for your support, the support of the

Committee. We will be 40 years old in 2004 and we appreciate all

that you have done as well as our partner, the Small Business Administration. Thank you.

Chair SNOWE. I wish I could say the same.

[Laughter.]

Mr. YANCEY. Me, as well.

Chair SNOWE. Just one other comment on serving. You have

more than 10,000 volunteers?

Mr. YANCEY. That is correct.

Chair SNOWE. That is obviously insufficient for the demand for

the services that your volunteers provide?

Mr. YANCEY. I think today, Madam Chair, we have capacity. We

recruit today to maintain a corps at this level. I don’t anticipate

significant growth in our volunteer corps. Again, the resources that

we have, we are going to focus more on creating new resources and

expanding our reach. We often find that we are cooped up in a

downtown office building on the 15th floor and you have to go

through security to access our services.

34

We don’t necessarily, or haven’t been in the past located where

growth is really occurring in the communities where we operate. A

perfect example, here, with not sufficient resources in Loudoun

County, the fastest growing county east of the Mississippi. The

downtown location is wonderful, but those that live there are unlikely to travel into downtown for the service. So that would be an

example of how we are trying to reach out into markets that we

don’t presently serve and make ourselves more available within the

communities where we operate. That, I think, is more important

than adding—becoming 13,000 volunteers as opposed to 10,000.

Chair SNOWE. Thank you. John, welcome to the meeting.

Mr. MASSAUA. Madam Chair, thank you for inviting me to participate today. I would like to report that the weather in Maine is

a lot nicer than it is in Washington, D.C.

[Laughter.]

Chair SNOWE. See.

Mr. MASSAUA. Senator, I would like to address some of the issues

that have been discussed this morning, especially the area of duplication, and I think we would all be foolish to think that there isn’t

some sense of duplication between the Women’s Business Centers

and SCORE and the SBDCs. But the reality of it is that there is

plenty of work for all of us to do, whether it be at existing businesses or it be start-up businesses.

I think we would be well-served if we worked together on, as we

have been doing very much in Maine, on collaborative models to

focus the various programs, whether it be SCORE, Women’s Business Centers, or the SBDC, in a collaborative model, and I know

that we are trying to do that nationally, as well. Therefore, we

could focus the right resources to the existing businesses, as you

started the conversation on entrepreneurship this morning.

In terms of the Women’s Business Centers becoming part of the

SBDC program, whereas that could be a reality, what would essentially happen, since there aren’t any increasing resources, we would

shrink the SBDC and increase the Women’s Business Centers. It

would be a net decrease in resources that we so vitally need across

the nation.

Some of the other issues I would like to address that I understand are in some of the proposals from the SBA, and that has to

do with the issue of sustainability and whether or not we should

be rebid every 5 years, whether or not the other organizations

other than universities should be able to participate in the program.

On the position of the universities, there is a tradition of 25

years. Maine was one of them. The University of southern Maine

has been a participant in the program. We have built the program

over the years to include not only the money that is received from

the Federal Government, to a significant State match, to being able

to leverage other resources around the State, so that the $500,000

that is given to us nearly gets to be almost $2 million that we are

able to bring to bear on helping small businesses.

My suspicion would be that once you put that in place, that if

you out rebid it or for some reason, whatever the motivation might

be, those resources would have to all of a sudden be rebuilt again.

35

Ellen spoke nicely about the fact that programs need to get up

and running, and we have a tradition of people who work in our

SBDC, some of which have been with us for 10, 12, 13, 15 years,

and to jeopardize that every 5 years would probably detract from

the ability to keep good people, which is very important in what

we do.

We do certify all of our counselors. It takes—to get to a master

certified counselor—it takes 6 years to get there if you are really

good at it. So I would be remiss—I think we would be remiss if we

were able to allow that to happen.

One of the issues about start-ups versus existing businesses, we

believe, certainly in Maine and have worked very closely with our

District Director there, is the quality versus quantity. Unfortunately, in the funding that we continue to receive through the SBA,

the numbers just go up every year and the dollars don’t, and that,

therefore, forces you to go out and maybe not spend as much quality time with an existing business that you would want because

you are trying to serve two masters, the client and the SBA accounting.

We, of course, in Maine and most of my partner States, look at

the impact in terms of loans that we are able to provide, the jobs

that we are able to create, and the return on investment that is

made through the efforts that we have. That is more important

than necessarily the number of clients we see. You know, how

many clients do we really have success with? That is indicative of

our program and that is the measurements that we hope to be put

in place in the future.

The final one is on match dollars. I think there is some discussion about whether the States should be—what requirement the

State might have on match dollars. Having just come through our

own budget battle in the State, I think match dollars are very important. I think that we need to encourage that, but perhaps encourage those States to actually overmatch in some shape or form

to allow for rewarding those States that actually put more dollars

in.

Chair SNOWE. Did you face a reduction, John?

Mr. MASSAUA. We faced it, but fortunately, with a lot of help, we

were able to reverse it and we stayed the same.

Chair SNOWE. You maintained the status quo.

Mr. MASSAUA. We are status quo. Thank you, Senator.

Chair SNOWE. Because some of these States have reduced or

eliminated their support, loss of matching funds has certainly hurt

a lot of the centers.

Mr. MASSAUA. Fortunately, I think most of the States are battling back, and I think perhaps when Don Wilson talks, he can address specifically what is happening there. Thank you.

Chair SNOWE. Thank you.

Mr. GAST. Thank you, Madam Chair. I appreciate the opportunity to come here and participate in this discussion today. I represent the Association for Enterprise Opportunity. We have over

450 micro-enterprise development programs across the country that

are working with the smallest businesses, four employees or less,

and initial capital needs of $35,000 or less.

36

We are actually speaking up in support of two programs here

today that are top priorities for our members. First is the Women’s

Business Centers. Fortunately, the women who have preceded me

have certainly made the case far more eloquently than I could, so

I will just let it go that AEO strongly supports Women’s Business

Centers and all the recommendations that have been made here

today.

Then I would like to say a few words about the Program for Investment in Micro-Entrepreneurs. This is an entrepreneurial development program that hasn’t been discussed yet. This is a program

that was passed 4 years ago, in 1999, and it has been operational

now for about 18 months. We are eagerly awaiting statistics on the

first year of performance in the program, but anecdotally, we know

that it has been incredibly strong. The demand is tremendous, particularly in these economic times, for low-income entrepreneurs

who are seeking to create their own employment through self-employment.

PRIME was created 4 years ago to reach a target market that

wasn’t being met. Two major focuses. One is very low-income clients. The legislation stipulates that more than 50 percent of the

entrepreneurs served have to be below 150 percent of the Federal

poverty line. So we are reaching a market that wasn’t being met.

The second is an investment focus. We heard a little bit from

the Small Business Development Centers. These programs, microenterprise, define a client as someone they spend 10 or more hours

with. So we really are making a human capital investment in these

entrepreneurs to build businesses, and research, longitudinal research that we have seen has shown that it works. It is effective.

Our request today is that PRIME be included in reauthorization,

preferably with increasing funding levels. Currently, PRIME was

not passed as part of the Small Business Act, so it required being

folded into that. It was originally stand-alone legislation. I guess I

will stop there.

Chair SNOWE. Thank you, Zach. We will look at that in the reauthorization.

Ms. Brogan.

Ms. BROGAN. Thank you, Madam Chair. We appreciate you holding this roundtable. I am Molly Brogan. I represent National Small

Business United and we represent 65,000 small businesses across

the country.

First of all, I would like to reiterate what my colleagues here

have said in support of the Small Business Office of Advocacy. We

have been a longtime supporter and we appreciate you introducing

legislation and look forward to working with you and your Committee in that capacity.

Secondly, I would like to do a little cheerleading. As a former

SBDC employee, I would like to tell you some of the great things

that they are doing. The Denver Small Business Development Center in 2002 alone helped small businesses secure over $3 million in

loans. They counseled over 600 small businesses. They helped 132

small businesses gain government contracts, something we will be

talking about later, which is a very significant number. We held—

we, I don’t work there anymore—they offered training programs for

1,200 people.

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I think those are significant numbers and I think, like the Office

of Advocacy, the SBDCs have a broad client base. They help bridge

the gap, as Mr. Swain said the Office of Advocacy does. They work

with the Women’s Business Centers. They work Chambers. They

work with small businesses, and I think it is a really important office and our members support SBDCs as well as the Office of Advocacy. Thank you.

Chair SNOWE. Charles Henry.

General HENRY. Thank you, Madam Chair. I am Major General

Chuck Henry and I have the honor to be the President and CEO

of the Veterans Corporation. I come in support of the SBA’s reauthorization and your efforts on this behalf.

I have had the opportunity to meet with the Administrator. We

have agreed to meet every 60 days to promote the veteran entrepreneurial issues. We feel that that is a major advantage going forward, and the Administrator and I have agreed in principle on a

memorandum of agreement, in effect, to promote the entrepreneurship of veterans and what you and Senator Kerry have been putting forth in Public Law 106–50.

We have been working very closely with Bill Elmore in his efforts

to assist in the definition of the Guard, in the Reserves, in the

service members, and we certainly support that. As an old Army

guy, I can tell you that 60 percent of America’s citizen soldiers go

to war in the very beginning and a lot of these people have businesses and these businesses are being impacted. They call it optempo in our line of work, but it is being impacted on a 120-day

basis.

We tried to help with that by establishing America’s Veterans

Network. It is a listing of those individuals who have businesses

in the veterans’ business so that people—it is Internet-driven—will

know those individuals who are serving our country right now and

they can buy from those and that is the concept. It is totally a

grassroots effort. It has started, but it is underway and we are very

proud of that.

I also support the amendment to extend the advisory committee

to October 1, 2009. There was a late start, as you well know,

Madam Chair, on that committee and we feel that keeping it until

2009 and then transferring it to the Veterans Corporation, as the

law prescribes, would be the thing to do.

In the next few moments, if I may, I would like to just brief a

couple of the advantages and some of the accomplishments of the

Veterans Corporation. The Kauffman Foundation was able to help

us meet our matching grant with $2 million, and that was with a

program called Fast Track. We have taken that Fast Track and we

are working very closely with SCORE and SBDCs. They have the

counselors. We have built a business plan around that and we will

graduate 617 veterans throughout the country between now and 30

September of this year. Our program shows that we will graduate

1,500 next year and 3,000 the year following. This is a very robust

program.

We pioneered a Fast Track program in Maine with the help of

John Massaua. I was glad to be up there at the graduation and the

reports on this is dynamite from the graduates coming out of this

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very, very sophisticated Kauffman-driven program. We declared

victory on that. It looks good.

Additionally, this week, I will sign a contract with a nationwide company that will create on the private sector a $100 million line

of credit for the use of veterans in veteran entrepreneurship. This

is a major, major victory for us because we are in 50-State coverage

with this $100 million line of credit and we are just very happy to

declare victory there.

I mentioned the American Business Network, thoroughly supportive of the Guard and Reserve, but all veteran businesses.

The other two points that I would make is the veteran marketplace. It is Internet-driven. We are in a partnership with a very

large company that provides veterans the opportunity to buy and

sell across the marketplace. It takes them from where they are

today, it makes them global. If you can provide a quality product

at a competitive price, we have an opportunity to give you the tools

to be able to market their commodities wherever it may be, globally, if you will.

The last point is that working with Bill Elmore again on the

community-based organizations, we have now established three

community-based organizations that would drive bringing in the

private sector, the San Francisco Giants, the Sword and

Ploughshares out of San Francisco, large law firms there, along

with Lenore Corporation, coming together and building an opportunity that would teach veterans the trades, carpentership, things

of that nature, so that they could then go and expand those. That

is in its very infant stage, but we have agreements and principles

with all of the partners on that. We are using that on a test basis.

I will go back to Mr. Elmore and ask him to start finding us some

money to explore the concept of this.

These are not infrastructure points that I am asking the money for in the future, but it is that, for example, for every $2,100 we

get, we can graduate a veteran that has got a 77 percent better

chance of being in business 5 years later.

Madam Chair, you have been very kind with your time.

Chair SNOWE. No, thank you. It sounds like you have gotten off

to a great start. Those are outstanding results.

Donald Wilson.

Mr. WILSON. Chair Snowe, Senator Kerry, we thank you very

much for having the ASBDC to the roundtable and for holding the

roundtable and inviting all points of view with regard to the agency’s non-credit programs.

ASBDC, as you know, represents all of the 58 grantees of the

SBDC program. The SBDC program is in every State, the District

of Columbia, Virgin Islands, American Samoa, Guam, Puerto Rico.

In 2002, we served probably 1.5 small business clients, 650,000 of

those with face-to-face, one-hour training or 1-hour counseling or 2-

hour training.

The latest data we have indicates that simply our long-term clients, those that received 5 hours or more of counseling in the year

2000, produced 66,000 new jobs as a result of their counseling by

their own estimates, saved 34,000 new jobs, experienced sales increases at four times the rate of the average business and job creation at 10 times the rate of the average business.

39

That is why, Madam Chair, we somewhat were taken aback

when we saw the proposals of the agency to radically restructure

a program that has indeed been the most successful management

and training program in the history of this country. We are concerned that the people who crafted those proposals had very little

experience on the ground with SBDCs out beyond the beltway and

how they interact with their partners and their host.

SBA and the SBDC program are closely linked in a partnership,

but there are other partners—State governments, educational institutions, Chambers of Commerce, foundations, et cetera. The fact of

the matter is that under the matching requirements—as you know,

it is a one-to-one match—the SBA, the Federal Government, puts

in less than the other partners. There is probably only 5 to 10 percent of our programs in which the SBA is at least a 50-50 partner.

They are a minority partner in all other instances.

So that is why we are concerned that they would take these

hosts who for 20 years—25 years, like the University of Southern

Maine—who have invested millions in this infrastructure under

that partnership arrangement, and that partnership arrangement

was you will retain this grant as long as you perform adequately,

and they have performed admirably, as the data I just told you.

Now the Federal Government under this proposal would come back

and say, ‘‘Thank you for all your investment. Thank you for your

partnership. We will take our models and go elsewhere.’’

Now, where else are they going to go? Who are they leaving?

They are leaving the great educational institutions of this country,

the University of Wisconsin, the University of Pennsylvania, the

University of Missouri, the University of Massachusetts, the list

goes on and on, and in some instances, the key economic development agencies in the States. These people have come to the table

in good faith, made these investments, and now the rug will be

pulled out from under them.

But what will we have in return? Let us assume that it goes

through. In the last year before they start recompeting, the host

will realize they will no longer be the host. They will begin to drastically cut back their money. SBDC counselors will leave the program, realizing that their jobs will be up in a matter of months.

So then you grant the dollars to a new host.

At a minimum, it will take a host 2 years to create even the most

minimal productivity in a Statewide network. So now you have lost

3 years of productivity. So then you probably have 2 years of okay

productivity. Then you are recompeting again. So out of a 6-year

cycle, you have kissed off 4 years. That, to us, makes no sense,

none whatsoever.

The other thing, we absolutely depend on the States and other

partners like the universities to provide the match. As the Federal

Government pulls the rug out from under them, breaks the partnership arrangement of 25 years standing, nobody will come and

deal with the Federal Government in good faith because they won’t

feel that you have dealt in good faith. The match will not be there.

Right now, we are overmatched, but who is going to invest in a program that is going to be taken away from them in just a matter

of years?

40

The third thing is that they have proposed that State plans proposed by State governments, under the current law, no grants

should be made unless they complied with the State plan. Those

plans are generally written by the government, the State government. What they are saying in their third proposal is, we would

like for you to be a partner, but a very silent partner. You really

just give us the money, but don’t have any role. Now, that would

be rather insulting, I think, to most governments and most State

legislatures who are putting in oftentimes a 2 to 1 match.

So we are extremely disturbed that, basically, what they have

proposed is a radical restructuring of a program that has proven

itself over and over and over again for a quarter of a century, modeled after the Agriculture Extension program that harnessed the

knowledge, the resources of our land grant colleges, and we have

done the same with our great universities, their great business

schools, their great business faculty, their entrepreneurial faculty.

Once it is taken away from those hosts, those resources will no

longer be available to us. Thank you very much.

Chair SNOWE. I appreciate your thoughts, and I am sure we will

get a response from Ms. Street.

I would like to welcome the Ranking Member who you all know,

Senator Kerry, who has been a great champion and advocate for

small business in his own leadership of this Committee, so I welcome you, Senator Kerry. Thank you, as well, for introducing the

Independent Office of Advocacy and all the other efforts that you

have made on behalf of the small business community in America.

OPENING STATEMENT OF THE HONORABLE JOHN KERRY,

A UNITED STATES SENATOR FROM MASSACHUSETTS

Senator KERRY. Thank you, Madam Chairwoman. Thank you

very much. Thank you for your bipartisan efforts over the last

weeks which have helped us do a number of good things for small

business, from confirming Harold Damelin to passing the drought

assistance and the supplemental appropriations bill and so forth.

I appreciate the opportunity to share a few comments. I apologize

for coming in late, and I have an 11 o’clock meeting which I am

now late for and have to go to in a minute.

But let me begin, if I can. I want to make a few comments, if

I can, Madam Chairwoman, and so the record contains them, since

we are building a record here and it is important. Also, thank you

yesterday for introducing with us a bill on the independence of the

Office of Advocacy.

This is an important component of the business of the Committee, and I am grateful to you for having this roundtable on the

non-credit component of the reauthorization. I do want to associate

myself—I listened with interest to Mr. Wilson’s comments. I think

he has made very, very important points, and I, in fact, had some

questions I wanted to ask Ms. Street with respect to the rationale,

and we might come back to that in a moment.

But let me just begin at the beginning, if I can. We have had a

3-year reauthorization process here, and we and our House counterparts regularly ensure that programs are properly structured

and appropriately authorized. I think it has been a really healthy

process, frankly. This Committee has an incredibly good record of

41

bipartisan effort. Almost nothing happens without a bipartisan effort because of the time on the floor and the scheduling issues, and

just because of the nature of the beast, we tend to need to have

that consensus when we do something. So I am really disturbed by

the notion that we are going to consider moving to a 6-year period,

and I will say a few more words about that.

Everybody understands the economy is deeply troubled. There is

nobody who has any difficulty figuring that out. Anybody who analyzes the economy also knows there is an absence of confidence,

that increasingly capital requirements for people are very dicey in

this atmosphere. You can’t call small business the engine of the

economy and then, I think, disrespect it to a certain degree when

you don’t empower it to be able to create the jobs that we want and

weather this downturn, to weather the storm.

I really regret, and I don’t come here for the purpose of being

critical except to the degree that I feel forced to say that some of

what is being offered here in this legislative proposal just falls

short of the needs of small business in the country, and I think it

is problematic on a number of different levels, including the recommendation to reauthorize for 6 years at level funding. I mean,

6 years at level funding, folks. Are we nuts? You have got to be—

I mean, that is a fundamental cut on an annual basis for the next

6 years in the volatility of an economy that we are sitting around

saying, how can we help small business?

Now, capping funding with no adjustment for inflation would be

a cut in virtually every one of SBA’s programs and that will place

the effectiveness of some programs and possibly the viability of others in complete jeopardy, and businesses and citizens are going to

be the ones that lose.

I think a 6-year reauthorization compromises the oversight authority of the U.S. Congress, of our Committee, of our counterparts

in the House, and I think it is irresponsible given the way in which

we have very effectively, in a bipartisan way, tinkered, tuned, finetuned, sometimes changed, often revitalized various programs in

the course of a 3-year period. I don’t think this Committee should

be denied the opportunity to do that. There is just no showing

whatsoever that there has been any irresponsibility in our approach to these kinds of issues.

In the entrepreneurial development arena, I am really concerned

about several proposals that will hamstring two very popular and

extremely successful SBA programs, and they are the Small Business Development Center program and the Women’s Business Center program. Now, I gather that the potential effects of that are already being discussed this morning, and I am glad and I hope we

build a strong record in response to that.

But I hope this Committee will proceed very, very carefully with

respect to mandating changes to these programs. You know, the old

saying, ‘‘If it ain’t broke, don’t fix it,’’ really ought to be taken to

heart with respect to these.

I also, Madam Chair, have the additional concerns regarding the

SBA’s ability to effectively advocate on behalf of small businesses

without all the tools necessary to do so. There are shortages in the

staff of the Office of Advocacy and a shortage in the number of procurement center representatives compared with the growing deVerDate 03-FEB-2003 15:09 May 18, 2004 Jkt 091189 PO 00000 Frm 00045 Fmt 6633 Sfmt 6633 D:\SBA\91189.TXT SSC2 PsN: SSC2
42

mand that is being placed on both offices. I regret to say that the

Administration has failed to meet its statutory goal for Federal

contracting to veterans, to women-owned businesses, and HUB

Zone firms for fiscal year 2000, fiscal year 2001, and it is doubtful

that they are going to reach the goal for 2002. That means literally, in real terms, that $14.3 billion is being de- nied to small businesses—$14.3 billion denied because we don’t

work to meet those goals, and with Federal contracting growing but

the portion going to small business firms continuing to shrink, it

is evident that the SBA ought to have that additional staff or it

ought to better use the staff it has got to make sure we are meeting those goals.

So I am very grateful to all of you for taking part in this effort

today and I thank you, Madam Chairwoman, for holding this

roundtable which allows this sort of input to take place from all

sides.

But it just doesn’t make sense to me. I mean, we have struggled

here for years. I have been here 18 years now, most of them on this

Committee. I have watched while we have gone through ups and

downs. We all remember the cycles of 1985, the cycle of 1989–1990,

1992, and we know through the 1990s what we were able to do in

terms of small business growth. It just doesn’t make sense to cut

these programs. It is sort of robbing Peter to pay Paul, and I am

not sure what Paul is going to accomplish for us in the process.

So I really hope that we are going to keep our eye on the prize

here, and that is how we enhance small business, and I just don’t

see a strong enough rationale for this shift in the SBDC program.

I mean, how we are going to have funding—why we are going to

ask people to recompete every 5 years when SBA already has the

authority to revoke any non-performer today? You are going to

make everybody recompete even though you could revoke a nonperformer now? It seems to me SBA has all the tools it needs to

guide this.

So again, I worry about the rationale for that. I can find several

rationales and I don’t like them. It just doesn’t make sense.

The other thing is, I don’t understand why a State government

would want to provide matching funds to an SBDC when the governor is opposed. I mean, how that is going to happen is beyond

me, particularly at a time when every State budget in the country

is under fire for cutting, and any excuse in the world not to perform is going to be seized on.

So I hope we are going to be smart here and not undo things that

we have worked very hard as a Committee to try to create. Madam

Chair, I really appreciate your indulgence and thank you for letting

me intervene, and I thank all of you for allowing me to do that.

I would ask if staff can, in my absence, take part.

Chair SNOWE. Without question.

Senator KERRY. I thank you very much.

Chair SNOWE. I appreciate your comments and look forward to

working with you, and you have offered some very thoughtful, provocative comments and those are some of the issues that we will

be exploring in the months ahead. Thank you.

Senator KERRY. I appreciate it. Thank you, Madam Chair.

Chair SNOWE. Thank you. Thank you, Senator Kerry.

43

[The prepared statement of Senator Kerry follows:]

44

45

46

47

48

49

Chair SNOWE. Ms. Street.

Ms. STREET. Yes. There is no question that the Small Business

Development Centers are a key component of our entrepreneurial

development programs and that they are performing. That is not

a question that we will debate at all.

However, for the past—for 10 years, the SBDCs have operated

somewhat as a quasi-monopoly that has prohibited new centers

and new ideas from coming forward. We need an environment that

is going to reward innovation and encourage competition and performance. Only three lead centers have changed over the past 10

years. This program has grown from $300,000 in 1980 to almost

near $90 million in this current fiscal year.

As good as the SBDCs are, they are not everything to every

small business out there, and each particular need that a business

comes up in terms of the business marketplace requires doesn’t

necessarily mean that we throw more funding in there without

competition and allowing other organizations to at least compete

and also the SBDCs to recompete, and I don’t think that is a bad

idea or an upsetting of the apple cart in any form or fashion. It is

American tradition to have competition to avoid monopolies.

I think that this is—if the SBDCs, and we know they are good,

if they are good as they are, competition should not be anything

that they fear. They should be able to compete with anyone and

win. They have the leading edge on it. But to open it up—to keep

it closed as it is, is not doing good for our innovation and our competitive way. I think competition adds to increasing and producing

results.

So I think that that is our key and main rationale for this. There

has been no change in lead centers. As Don mentions, 20 years, 25

years, I mean, these people have been entrenched and in place, and

that could be a good thing. I am not saying that is a bad thing at

all. All I am saying is that we at SBA feel that competition will

lead to greater productivity and that is what we are trying to get

at.

Chair SNOWE. Well, obviously, this is a dramatic departure—

Ms. STREET. Sure.

Chair SNOWE [continuing]. It is something we are going to have

to look at very carefully——

Ms. STREET. Right.

Chair SNOWE [continuing]. Because we don’t really want to undermine something that is working very well, if, in fact——

Ms. STREET. Exactly.

Chair SNOWE. I understand the thought behind it. I just wonder

if it doesn’t leave a lot of anxiety and uncertainty and produces unintended consequences as a result. So I think we will have to look

at it very carefully——

Ms. STREET. Right.

Chair SNOWE [continuing]. Since it is a major departure from the

traditional approach.

Ms. STREET. Sure. This is a dialogue, and I think that we don’t

want in any way, form, or fashion the process or the programs to

be harmed in any form or fashion, and if we thought this was going

to be the case, we probably would not have put forth this proposal.

50

But I agree with you that we could have more dialogue on the process.

Chair SNOWE. I appreciate it.

I regret to say that I have to depart. I have to meet with several

of my colleagues right now on something that is coming up today.

I just got a message. So I am sorry that I can’t complete the last

round on government contracting, but I really do welcome all of the

thoughtful comments here today and presentations. This is just the

beginning of this dialogue for the reauthorization process. But it

certainly helps me. As the new Chair of this Committee, I want to

have a full breadth of understanding of the issues and dimensions

of these programs as well as your perspectives. You represent, obviously, a broad constituency across this country, and obviously represent the Administration and SBA. We certainly appreciate your

input.

Mark Warren, who is my Staff Director, and Patty Forbes who

is here on behalf of Senator Kerry, will continue with this discussion. I thank you very much for your participation here today and

I am sorry that I have to leave.

GOVERNMENT CONTRACTING AND BUSINESS

DEVELOPMENT PROGRAMS

Mr. WARREN. I know there were a number of people who still

wanted to speak on this area, but we need to move on, if we can,

to our third segment on government contracting and business development. If we have more time left over, obviously, we will come

back. As Senator Snowe mentioned at the beginning, we will leave

the record open for formal written statements for 2 weeks and we

expect that there will be questions from Members, and the Chair

and Ranking Member.

So let us turn to the government contracting and business development programs. Certainly, the Committee has heard over the

last month, including at the hearing we had on contracting bundling, how critically important it is for small businesses to have an

opportunity to compete for Federal contracts. The Committee has

also heard how the government is not living up to its obligations

and falling short on that task.

So this is one of the things that we would like to hear about from

you all this morning, and in particular, because we have a number

of participants with very strong views and good strong backgrounds

in this area. We would like to get ideas from you on the various

programs that SBA currently has, the lessons that we can learn

from the past, and the improvements that can be made. Any comments that you have on the fiscal year 2004 budget submission

would also be most welcome.

So who would like to open?

Steven.

Mr. DENLINGER. Thank you very much. I certainly appreciate the

opportunity to be here today. For those of you who are not familiar

with LAMA, LAMA is the oldest national Hispanic business organization. We are a strategic partner of the U.S. Hispanic Chamber

of Commerce and my colleague, Mickey Ibarra, sits across the way.

You could think of us as a national association of Hispanic Federal contractors. That is probably the simplest way to think about

51

it. Needless to say, we focus on programs like the 8(a) program and

so forth and I would like to make a couple of comments in relation

to that very important program.

The 8(a) program is the single most important instrument in the

Federal procurement arena for minority businesses to participate

in the Federal marketplace. That is a program that we have monitored and supported and nursed for the past 30 years.

I would like to focus on the issue of the 8(a) net worth. The entry criteria for the 8(a) program is $250,000 net worth, and that is designed to be responsive to the need for showing of economic disadvantage. Our sense is not only has that net worth issue or criteria or floor not changed in the past 10 or 15 years, but it is artificially low to begin with in a number of respects. It does not take

into consideration the differing capital needs in all of the different

markets or industries that are represented across the spectrum of

the 8(a) program, and I will come back to that in a second.

But what it is doing is unwittingly admitting the companies that

are the weakest financially, and then we wonder why they are not

bankable and why there are failures down the road. If the entry

criteria is so unforgiving that we hamstring our companies coming

into the program from a good capital base to begin with, then we

are certainly going to pay the price later on through failures and

lack of bankability and lack of access to capital for growth.

What we would like to suggest would be a system whereby for

major industry sectors, the SBA or some appropriate entity do a

study as to what the average net worth is in given industries and

then through some formula peg what a logical and reasonable net

worth criteria ought to be for each of those industries instead of

having a flat $250,000 entry criteria for each and every and all

folks participating in any program.

I would like to talk briefly about the 7(j) program. Basically, we

see the program in support of minority enterprises, providing access to contract opportunities, providing access to capital, and providing access to technical assistance. The most troubled element

with respect to that troika of support is the technical assistance.

The 7(j) program is, oh boy, just lacking in definition, lacking in

clear funding support historically, and it is—there are many special

programs that are kind of reaching into that very limited till.

I remember a couple of years ago there were 15 or 20 different

special programs that were authorized for particular institutions in

particular congressional districts, for particular institutions, many

of them institutions of higher learning, that basically glommed onto

a very significant portion of the 7(j) funding, 7(j) funding that was

designed for the SBA folks to be able to provide technical assistance across the board. So that third pillar of the support structure

for minority business is really weak, needs clarity, needs definition,

and needs funding.

I will weigh in on the SBDC issue very lightly in the following

respect. Historically, the SBDC system was structured in a manner

that wound up excluding minority and particularly Hispanic business organizations from providing services as far as that national

network is concerned. That has been an ongoing concern for many

years. We have had discussions on this issue. Hopefully, out of this

debate can come a mechanism to ensure that Hispanic organizaVerDate 03-FEB-2003 15:09 May 18, 2004 Jkt 091189 PO 00000 Frm 00055 Fmt 6633 Sfmt 6633 D:\SBA\91189.TXT SSC2 PsN: SSC2
52

tions that can provide services out across the country are eligible

to participate in this important program, as well.

I would like to talk about advance payments. I would like to suggest that the advance payment program be resurrected. It was one

of the most effective funding vehicles to support the growth and

nourishment of minority enterprises just getting into the Federal

contracting arena.

Basically, what it did was provided advance payments to minority businesses that had Federal contracts in the 8(a) program and

they were self-liquidating in the sense that when the contractor

performed under the contract, the 8(a) company submitted the bill,

the Federal Government agency paid the SBA. The SBA took out

a prorated portion of the advance payment and then the rest went

into the minority company’s bank account. So it was self-liquidating and it was managed by the SBA directly and so the potential for abuse on the part of the participating companies is absolutely minimum. That was a very, very effective vehicle and some

years ago it simply went away and we would like to recommend

that that be resurrected.

PCRs, let us get serious about the PCRs. We need more PCRs.

They are the first line of defense with respect to combatting the

issue of bundling and we just need more PCRs.

Size standards, I would like to focus a moment or two on an

issue that I think is really long overdue and needs to be addressed.

The size standards, particularly in certain industries, such as information technology, are totally inadequate with respect to the current marketplace. What do I mean by that?

In the information technology arena, you have large businesses

that have annual sales in the area of multi-billions of dollars a

year. You have middle-size businesses that have sales in the hundreds of millions of dollars a year. Yet you have an SBA criteria

that says once you have achieved $23 million a year in sales over

a 3-year average, you are now considered a large business. So these

very, very tiny minuscule companies in the IT arena that have

achieved $23 million in sales are now cast out into the open marketplace and it is just not even remotely close to a level playing

field. That really needs to be addressed.

We think that there perhaps ought to be a tiered approach where

companies of similar size are competing against one another in the

small business arena, maybe $1 to $10 million, $10 to $25 million,

$25 to $100 million. But the size standard is artificially low and

is really impacting a growing cross-section of our companies, particularly in the fast-growing IT arena, and we really respectfully

request that that be looked into and some adjustments be made.

Thank you very much. I appreciate the opportunity to be with

you.

Mr. WARREN. Thank you. Mr. Denlinger has made a number of

points, and I wanted to ask, Fred, if you want to take just a minute

and respond to some of those points.

Mr. ARMENDARIZ. Absolutely. Thank you for allowing me to make

mention of some of the points that Mr. Denlinger brought up today,

and thank you all for being here. I see a lot of friends around this

table, a lot of people I have worked with over the last almost 2

years now at SBA, and as a result of a lot of your counsel and

53

meetings with each and every one of you, we are moving on a lot

of targets that I think are important to you.

I would like to talk about the net worth issue, and I agree with

Mr. Denlinger over at LAMA that there are some issues related to

the net worth. One of the problems that we face is not only the

entry point, $250,000, but the fact that we don’t include the value

of your home and the value of your business as part of the equation, and being a former entrepreneur and a small business person

for almost 20 years, I know where my net worth is. It is in those

two areas. It is not in my cash reserve sitting in my personal bank

account. It is in the value of my home and the value of my business.

So I think we could make some type of adjustment to this and

we are studying this issue day in, day out, to find the proper balance to properly identify which companies are socially and economically disadvantaged. So I think there is definitely some work

to be done there.

In regards to 7(j), I agree that for far too long, the 7(j) program

has focused its revenue sources on very few organizations, and I

look around this room and I know four in this room, maybe five,

that received 7(j) grants this past year, and the reason that they

did is because we tripled the amount of awards this past year over

the previous year with the same amount of funding. The way we

did that was we looked at who was going to deliver the most value

and product, if you will, to the most small businesses dollar for dollar. So we are very excited and proud of the progress we have made

in regards to addressing the 7(j) issue.

In regards to technical assistance, one of the things that we have

done is we have looked for proposals that give guidance or assistance to the most small businesses per dollar, if you will. One of the

programs we are about to launch was a result of a 7(j) grant and

that is our procurement academy. This is going to be a virtual program, a multi-media program that people will be able to log onto

nationwide for pennies on the dollar of what that program would

cost if we were to do it face-to-face or in traditional educational forums.

PCRs, I agree. We have a need to address the PCR issue on a

whole host of fronts. One of the things that I think is the most important issue regarding PCRs is that we can’t do business the way

we have in the past. In the Integrated Acquisition Environment

Task Force, which is an intergovernmental, interagency working

group, they are addressing that issue, how to utilize technology in

order for the PCR to do the proper surveillance on the agencies to

ensure that small business is getting their fair share.

Last but not least, size standards. I am very happy to say, and

Steve probably doesn’t know this, but last week, we assembled an

interagency task force to work on size standards, and the reason

that we are working on size standards is it is just too cumbersome

for small business. It is too confusing for the procurement community. We have over 32 different size standards and we think we can

whittle that down dramatically over the next couple of months once

we start reviewing this process in depth.

I think I addressed most of your issues. Thank you.

Mr. WARREN. Thank you.

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Mr. Turpin.

Mr. TURPIN. Thank you very much. I just wanted to bring up a

number of procurement-related issues. Some come under SBA,

some don’t. Some are Office of Advocacy issues. But it is this common overview of the landscape of why an important part of the procurement system isn’t necessarily working that well.

The government is the largest procurer of construction services

in the country, and as a result, it sets the tone for the whole construction marketplace. We face an ongoing issue where if you are

a part of the team that bids a project and you think you have won

that project, that does not necessarily mean you get the work, because with a process called bid shopping, where the actual award

of the contract is simply another step in the process of negotiating

what you are actually going to do the work for, it means the cost

is actually—what the contractor is actually paid is whittled down

and the government does not benefit from that lower cost.

This has expanded to where the government is now looking at

doing reverse auctions, and the country’s infrastructure and its

buildings should not be run the same way e-Bay is. We should not

bid down to the lowest level on the Internet to determine how we

are going to build something like a Federal courthouse.

Our second issue has to do with payment protection. If you don’t

get paid, the next job isn’t going to mean anything because you are

not going to be there. Going back to 1983 and 1988, the Congress

passed the Prompt Payment Act and the amendments to that,

which has functioned very well. But that does not help you if you

are working on a Federal grant that you think is a Federal project

because the big sign out front says, ‘‘Paid for by Federal dollars,’’

but it is actually a Federal grant, and we would hope that the Federal payment protections would be expanded to work done under

Federal grants, because what has happened is as the States’ financial situations have deteriorated, how fast they pay has slowed noticeably and people think they have payment protections that they

don’t have.

I would like to commend the Committee for their work and the

hearing they had on bundling, but just point out a couple of things.

Bundling of construction alone has increased 150 percent in the

last decade, and the dollar thresholds that are in the regulation,

the proposed regulation that is out now, are troublesome because

they are anywhere from $2 million to $7 million, depending on the

agency. Well, our average member has—their revenue is $6 million.

So it is not going to help them much if the contracts that are being

unbundled are larger than their whole net revenue. So the bundling is becoming more of an issue in construction, and if you are

unbundling such a large number that it never gets down to the

people that can actually use it, it is not really helping the situation.

Then it is really unclear who enforces what is bundled and what

is unbundled. That is a real problem for us. If you have got somebody who is not necessarily that involved in the Federal procurement process, they would like to get a piece of something but they

can’t find out how to get it unbundled so they can get part of that,

who enforces the bundling and unbundling?

Related to the bid shopping, the GSA is working on placing construction on the schedule so you can buy construction services off

55

of the schedule like you were buying office supplies. Our contention

is that construction has its own part of the Federal Acquisition

Regulation for a reason and that this is a solution in search of a

problem. There is not this great hue and cry by contracting officers

that they want to buy construction services off the schedule. It is

a system that is working and doesn’t really need to be modified.

Then lastly, also a payment issue, we are at a time now that the

government should be paying contractors and subcontractors directly rather than this delayed process of the government paying

the contractor who then pays the subcontractor. The technology is

there that the government could pay both the contractor and the

subcontractor directly on the date it was due rather than delaying

the process by passing paper checks along. We are beyond that,

and it could expedite everybody’s cash flow. Thank you.

Mr. WARREN. Just a procedural note. We are running close on

time. We have been using the lights at about 3 minutes, so if everybody can try to keep your comments moving so we can get as

many people out there as possible.

General Henry.

General HENRY. I come back to you from my old procurement position, and I noticed Senator Kerry’s comments about competition.

Let me, if I may, just put my oar in the water as the Army’s Competition Advocate General a few years ago.

The one thing that I found about, competition for competition’s

sake doesn’t do anything. My experience is on major weapons systems, and the issue is always how do we give everybody a fair

chance to compete for something, what I came to find out is that

if you started out with the competition in the beginning and you

had clear metrics, call it a learning curve of where you want to be

at a point down, it could be 10, 5, 15 years into the future, and

as long as the contractor, once you initiated the contact, stayed on

your learning curve, then there was no reason and there was no

economies of scale to recompete. It was only when you failed to

manage the process through that that you felt that you could get

this perturbation into the point, whatever that may be to you.

My other point is on the 3-percent goals, the socio-economic goals

that we have today, I think that it presumes that contacting officers have discretionary authority, and if you look at the Federal

Acquisition Regulation, you realize that they don’t have that discretionary authority. So a goal without some teeth into it, like a setaside that would require something on the part of the contracting

officer, is going to end up meaningless, and I think that is why we

come around the table saying we have got the goal, but the Federal

Government is not meeting it.

So if we are really serious about wanting to mandate, whatever

it be, whether it is veterans’ preference, whether it be the 8(a) program, whether it be small business, women business owned, whatever it is, I think we need to sort of optimize that, determine what

progress that we want this Congress to mandate that into legislation, and that puts the Administration on the point to meet that

goal.

Mr. WARREN. Thank you. Do you have any suggestions as to

‘‘teeth’’ that can be added to the law?

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General HENRY. Well, if you don’t meet your budget, you don’t

get money. That always works.

Ms. FORBES. Can I just ask a follow-on question of you and Mr.

Elmore? We are interested in looking at these goals because it is

a reauthorization process, and right now, there is a goal for service

disabled veterans but there is nothing for regular veterans. We

wondered if you could comment on that and if you have any recommendations.

General HENRY. Obviously, yes, Patty, thank you, and obviously,

the legislation of Public Law 106–50 favored the service disabled

veteran in the beginning, and within the veteran community, you

will find that there are two areas on it. There is a feeling that

those service disabled veterans have given more to this country

and, therefore, they should be at the very beginning in order to receive something. I support that concept. I think that if you look at

it as a bifurcated type of process, if you want to go 5 percent for

service disabled veterans and 3 percent for other veterans, I think

somewhere along those lines would be my thinking about how you

should approach that.

Mr. ELMORE. From my perspective, I look at the entire veterans’

community as a market, and I agree with General Henry, that

service disabled veterans are at the forefront of that market. They

are at the very point.

But I also think that if we don’t engage the entirety of that veterans’ small business community, it has ultimately a negative effect on our ability to help all veterans in the small business community, including service disabled veterans. So as we talk about

goals and procurement, if we don’t engage the other 90 percent of

the veterans’ business community into this arena in significant

ways, we can’t mobilize them to assist service disabled veterans to

better success.

Ms. FORBES. Thank you very much.

Mr. WARREN. Mr. Newlan.

Mr. NEWLAN. Thank you. As the chair of the Hub Zone Contractors National Council, I will focus my comments today just on the

reauthorization of the HUB Zone program and my written comments will include all other government contract programs.

The program was enacted to bring good employment opportunities and economic development to the 8,000 geographical areas of

our nation designated as HUB Zones due to their high rates of unemployment or the low wages paid in these areas. As designed, the

program is very sound and, at best, only requires some very, very

fine tuning during reauthorization.

Just as the design of the program was and remains quite solid,

the implementation of the program has been quite flawed. The program is authorized $10 million annually. During its highest year

of funding, only $2 million was appropriated in the SBA budget for

the HUB Zone program management and oversight. In fiscal year

2002 and fiscal year 2003, during conference, the two congressional

appropriations subcommittees eliminated the program’s $2 million

line item. Only through the extraordinary efforts of Senator Bond

was the funding for fiscal year 2002 restored.

As of today, there has been no funding restored for 2003. This

eliminated funding would have paid for community outreach and

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new firm certification, program management, including keeping the

award-winning website current and functional, program examination audits of currently certified firms, and the adjudication of

HUB Zone award protests.

Recently, the program has come under some fire for not performing an adequate number of oversight reviews to ensure the eligibility of all HUB Zone certified firms. With no appropriations to

fund the program, it is impossible for the SBA to perform the necessary oversight and to protect the taxpayers from those willing to

commit fraud.

With this being the case, I must urge this Committee to closely

and aggressively work with the congressional appropriators and ensure that they do not eliminate our funding again for fiscal year

2004. The SBA cannot perform the task required by the statute

with the resources they have.

The second area of the program’s implementation that needs to

improve is at the agency department level. The statute is clear.

The regulations have been clear for some time. However, the executive agencies fail to follow them. The annual contracting goal started at 1 percent and has increased by .5 percent each year and is

now at 3 percent. The executive agencies have failed to even come

close to these statutory HUB Zone goals.

For fiscal year 2001, the government achieved 0.72 percent level

of actual HUB Zone awards with a 2 percent goal. In fiscal year

2002, the goal was 2.5 percent, but the fiscal year 2002 data has

not yet been released to the public, but I have no reason to believe

that any actual contract award progress was made in 2002 over

2001.

We, in the HUB Zone community, are frustrated. We have a

well-designed program, designed to reduce or eliminate poverty in

the United States. We have a program that focuses on economically

developing communities and their infrastructure by offering good

jobs where they are needed most. This is no handout program. Virtually all contracts are awarded competitively.

The biggest problem facing the program today is the government’s failure to overcome the inertia in implementing it. This inertia can and will be overcome when the program is adequately

resourced and each agency focus on statute compliance.

Meanwhile, the HUB Zone business community is frustrated.

Today, there are 7,800 HUB Zone certified firms. They range from

a small helicopter transportation firm in Hawaii, to a bulletproof

shelter manufacturer in Missouri, to a 150-person precision machine shop in Maine. Collectively, HUB Zone firms have annual

revenues approaching $14 billion. With this size, if ranked on the

Fortune 500 list, collectively, we are larger than Kodak or General

Dynamics and we would be ranked 135th.

Unfortunately, only a very small percentage of our business

today comes from HUB Zone contracts. We as a group are ready

to begin to fulfill the promise of the American dream to 32 million

Americans who today live in poverty. When the Federal agencies

begin to award HUB Zone contracts per the statute, we will be able

to deliver good jobs at fair wages with medical insurance and benefits. We will continue to move people off the welfare roles and give

them a chance they have never had before.

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To accomplish this, we simply need the current program reau- thorized at $10 million. We need a like amount of appropriations.

We need each agency to follow the law. It is within our grasp, and

with the continued strong focus, interest, and oversight of this

Committee, we know it will happen. Thank you very much.

Mr. WARREN. Thank you. You raise a good point in terms of the

availability of data. Fred, I wonder if you could report back to the

Committee on what steps are being taken and when we might be

able to see that fiscal year 2002 procurement data.

Mr. ARMENDARIZ. Yes. The SBA gets our data from the FPDS

system, Federal Procurement Data System, that generates a report

over at GSA through the Office of Federal Procurement Policy, and

we should probably be getting that information in the next 90 days,

I would suspect, for fiscal year 2002. That system obviously has

been something that is a little bit to be desired and the Integrated

Acquisition Environment Task Force is addressing that issue as we

speak.

Mr. WARREN. Harry.

Mr. ALFORD. Thank you. Last night, former Secretary of the

Treasury Donald Regan and myself participated in a debate in Detroit. Benedictine High, which is an all-black school in inner-city

Detroit represented corporate America, specifically the auto industry, and Brother Rice High, a suburban school that is virtually all

white, represented minority business, and the debate was holding

prime contractors, major firms who get contracts with the Federal

Government, accountable for their subcontracting and their diversity. From this exercise last night, the two high schools are going

to have a joint project in tracking the auto industry in Michigan

and what they do with minority business. I think this is beautiful.

Another point I want to make—I am getting to something here—

our Peoria chapter gets technical assistance funding from the State

of Illinois for highway construction work, technical assistance.

There is a minority contractor in central Illinois who is not at 100

percent capacity working on the freeways of Illinois. The project is

so good that our East St. Louis chapter is going to get a similar

contract from the State of Illinois for southern Illinois.

Our chapter in Wisconsin gets $500,000 a year from the State of

Wisconsin to perform capacity building for small business in the

State of Wisconsin.

Our Harrisburg, Pennsylvania, chapter gets $650,000 every 3

years from the Harrisburg Airport Authority to provide technical

assistance and subcontracting competition for the contractors there

at the airport.

The Chattanooga, Tennessee, chapter, Shari Gilchrest, Executive Director, gets $200,000 a year from the city council of Chattanooga,

and she can document $90 million a year in new contracts based

on their efforts. She has never, never met the District Director of

the SBA in Nashville.

What I am saying is that too many of us, I think—woe to us who

put all the marbles in the Federal pie. There are other ways of

going about getting funding and improving the lot. The government

is not going to grow. Hopefully, it is going to shrink, and I think

the SBA is going about this right in trying to find the best bang

for the buck.

59

We must have competition to improve products and service. You

can’t get a contract for life. You must have competition there. I

think all of these things go together and I support whatever the

SBA, whatever resources they have. We want to work with them

and include them in the mix.

Other associations, like the National Black MBA Association,

they are starting to get into technical assistance for small businesses and providing some good professional support that would

rival SCORE. So I think the whole point is, there are other ways

of going about doing this.

Finally, my biggest complaint that I get from our members is the

size standards and net worth. It is ridiculous. It is unrealistic.

Mr. WARREN. Thank you. Where we are right now is pretty close

to wrapping up our time, so what I would like to do is say who we

have on the list and we will close it off with that. If everybody

could help me work with the lights, we can wrap up pretty close

to on time.

I have Ann Sullivan, Jere Glover, Allen Neece, Susan Au Allen,

Giovanni Coratolo, Mickey Ibarra, and Ellen Golden—but I can’t

tell if you still want to speak?

Ms. GOLDEN. Yes.

Mr. WARREN. Okay. So if anyone else has comments beyond that,

if we could work through the record and submit them in writing,

that would be great.

Ann.

Ms. SULLIVAN. Well, as we have told the Committee, contracting

with the Federal Government and the government contracting

business is one of our members’ hot buttons, and the hottest button

of all is implementation of Public Law 106–554. We understand the

SBA is going to devote $150,000 to study the study, 7 months. We

would like to see a much shorter time table. We think it can be

done much more expeditiously.

The other thing we would say to Mr. Armendariz is, thank you

for what you do. Thank you for your help. We think you could use

more and we would love for you to take on unbundling the paperwork. So we would love to see the 8(a) process streamlined. We

would love to see your help with spearheading and trying to get the

GSA scheduled paperwork under control. There is just a lot of—

that is a huge barrier for our women-owned businesses.

Mr. WARREN. Thank you, Ann.

Jere.

Mr. GLOVER. Yes. As Director of the Small Business Technology

Coalition, I wanted to point out a couple of areas of interest and

concern, one of which is the Office of Technology staffing. That program has more than doubled to $1.4 billion. The staffing and resources in that program have been cut by well over 50 percent.

That issue was raised with the Administrator during his confirmation hearing. It is not a new issue, but it hasn’t gotten any better.

In fact, it is getting worse.

The other issue is when we talk about bundling, there is one specific area, and I will talk with the staff more about it later, and

that is the Army’s new future combat systems, which is a huge program that is going to take care of the next generation of the soldier

in the field, and all of that R&D has been directed to one company,

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Boeing, who is making 30 awards. There is no small business subcontracting plan. There is no guarantee that small business will

participate in any of these plans. We are told that once these

awards are made, they will think about putting together a small

business plan. But those solicitations have already closed and they

are now being awarded and small business is going to be squeezed

out of those. It is the next 10 years of R&D being crammed into

a program that is not under the Federal Acquisition Regulations or

the statute.

When we talk about bundling, it is a horrific problem and this

is one of the worst examples, exactly opposite of what the President

said he wanted in the way of bundling.

Mr. WARREN. Allen.

Mr. NEECE. Three things on procurement We concur. SBA has

been underfunded in its PCR program and in its procurement office, we believe, for a number of years, so we would urge increased

funding for the procurement office. It continues to be underfunded

and graduated down over a period of time and we think that ought

to be reversed.

Secondly, many of Jim Turpin’s comments, they are one of

SBLC’s members.

Lastly, we also feel very strongly about SBA’s recommendations

addressing the SBDC program. I know you addressed that earlier.

We just want to be on record that we strongly oppose those recommendations from the Administration. This Committee and the

Congress has been a great champion of the SBDC program over the

years and protected that program. We think those recommendations are unwise and could have catastrophic consequences if they

are enacted and we presume that, based on what Senator Kerry

said, and I understand the Chairwoman has also been a longtime

champion in this program, that hopefully, this Committee will not

accept any of those recommendations. Thank you.

Mr. WARREN. Thank you.

Susan.

Ms. AU ALLEN. Susan Au Allen, U.S. Pan Asian American Chamber of Commerce. I am going to say that this is just some music

to my ears to hear the issue of bundling being talked about, debated so vigorously.

What I suggested 2 years ago at the Missouri Women’s Business

Summit, that in order to make sure that there are contracts left

over for the small business community, that there should be a policy that the agencies set aside a particular portion in dollar terms

of contracts that will be free of bundling, first.

Secondly, we need to direct the Office of Procurement to make

sure that these unbundled opportunities are in areas where small

business could perform. There is no point in unbundling contracts

in areas they could not perform, and I would give you more details,

but in the interest of time, I will move forward.

Thirdly, in order to enforce unbundling, there has got to be a

penalty clause. Fine. But you have got to put into the penalty

clause there is no transfer of the penalty from the prime contractor

all the way down. Otherwise, that cost is going to share by the subcontractors who had nothing to do with the failure to unbundle.

Three points. Thank you.

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Mr. WARREN. Good points.

Giovanni.

Mr. CORATOLO. Three quick points. No. 1, we certainly fully support SBIR and we hope the Committee will exercise oversight to

make sure that homeland security gets a viable SBIR program as

quick as possible.

The U.S. Chamber of Commerce has as its member base 3,000

State and local Chambers who utilize a lot of programs throughout

the United States that are offered by all the SBA. As the Ranking

Member had pointed out, the State resources are shrinking. State

budgets are pressed. We hear from a lot of our members that State

resources for small business are also taking an unproportional hit.

As you go through the reauthorization process and the funding

process for SBA programs, please recognize it is not a level playing

field. A lot of people are really depending on these services out in

the State and local governments because the State budgets are

really incurring very much so into resources they offer for small

business.

This gets me to a final point. SBDCs are used by our State and

local Chambers and a lot of our memberships and a lot of our underlying members and we certainly support the current system of

SBDCs and certainly the funding there. We would certainly like to

see at least level funding, if not more funding, because they are

truly underfunded. Thank you.

Mr. WARREN. Mickey.

Mr. IBARRA. Thank you, Mr. Warren, and also to Ms. Forbes. The

U.S. Hispanic Chamber of Commerce, I am proud to say, represents over 1.2 million Hispanic-owned businesses that earn nearly $200 billion annually. It is comprised of 130 local Chambers

from across the country. We are just here in Washington, D.C., to

conduct the 13th Annual Legislative Conference, where our Hispanic-owned businesses really attempted to make four major

points. Two of them, I would like to share with you today.

Before doing so, though, I would like to also mention and compliment the Small Business Administration. I think today, more

than ever before, the SBA is viewed by the U.S. Hispanic Chamber

of Commerce, as vital to the success of small business. We will

work very hard, very hard, hopefully most of the time with the

SBA’s support, for additional resources for the important programs

that they are responsible for delivering to Hispanic small business

and all small business throughout the country.

Two points I would like to make. First, access to capital. The

U.S. Hispanic Chamber of Commerce continues to support Federal

programs that provide access to credit and venture capital. We believe, again, this is vital sustenance in order to ensure the success

of small business. Also, we would ask that the 108th Congress, and

we will continue to work hard to ensure that the 108th Congress

meets the needs of small business, that, in fact, we provide the

adequate resources through the funding process, appropriations

process, to reverse what we believe are threats to the flagship programs of SBA, to include the 7(a), 504, the SBIC, as well as the

micro-loan programs.

Second point, procurement. The U.S. Hispanic Chamber of Commerce certainly supports the preservation and expansion of existing

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minority programs within SBA, as well as the enforcement of legislative mandates to ensure Federal departments meet their goals in

awarding contracts to minority and women-owned firms. Moreover,

the USHCC believes it is critical to support the elimination of contract bundling within the Federal Government.

I will just close. I mentioned our legislative conference. Clearly,

the issue that is of most concern currently is the issue of contract

bundling and we urge the Small Business Committee, the SBA to

vigorously address this issue which is of grave concern, I think, to

many small business owners around the country. Thank you.

Mr. WARREN. Absolutely. Thank you.

Ellen.

Ms. GOLDEN. Thank you. I will keep it very, very brief. I want

to go back just for a second to two issues around technical assistance. One is the issue of the competition for the SBDC, and I want

to say that while I can understand the desire for innovation and

increased performance, like others have said, I think that there are

more cost-effective and efficient ways to achieve that.

Similarly, in terms of the concerns expressed about the gaps in

services in the Women’s Business Center program, I think that

there are other ways to achieve those ends without taking funding

away from current centers. On behalf of the association, I would

like to extend an offer to work with the Small Business Administration so that we can look more closely at their concerns and see

if we can’t find alternative solutions. While I can’t really speak on

behalf of my colleague from the Association of SBDCs, I assume

that he, too, would extend a similar offer to the Administration.

Mr. WILSON. Absolutely.

Mr. WARREN. Thank you.

Fred.

Mr. ARMENDARIZ. Yes. I would just like to make one comment in

closing today. We can use all of your help in regards to getting

these small business goals accomplished. One of the things that we

have embarked on at the SBA is we have been going out agency

to agency, the Deputy Administrator and the Administrator and I,

and working with senior-level officials at each agency, educating

them as to the importance of small business.

When I was a young businessman, my dad gave me a little bit

of advice and he said, ‘‘You know, if you can get two of three things

in any business transaction, you have a solid deal, something that

is in your favor,’’ and that was price, quality, and speed. If you can

get two of those three, you have got a fair deal.

Well, I venture to say that small business offers all three to the

Federal Government. They offer the highest quality, the best prices

and we can deliver overnight. When we go out and educate the secretaries and deputy secretaries of each one of these agencies, they

understand, they listen, they see the leadership of the President,

and when they look at their bottom line, they are trying to leverage

every day to get the most out of every dollar. They seem to act. We

have gone to three agencies this year, and I can tell you that all

three agencies have made huge moves in regards to getting their

culture, if you will, within their agency to understand the value of

small business.

63

We started out at HUD and they self-imposed a 50 percent goal

on small business. In other words, 50 cents out of every procurement dollar is earmarked for small business, and that is self-imposed, once again, because of the leadership of Deputy Secretary

Alphonso Jackson.

We then went to Labor and talked to Labor, and Ken Finley put

in place an MOU with the SBA that puts us at the front end of

the design of procurement opportunities so we can make sure that

small business is within the design of the procurement, not on the

back end as an afterthought.

Most recently, we went to Energy, which, as we all know, has

been a struggle for all of us, and Energy’s deputy secretary put into

their performance measurement plan a small business provision.

Now, all of these three landmark moves came as a result of the

education of the senior-level management at each one of these

agencies, and I want to enroll each and every one of you to help

us with this cause because I do believe that leadership is the silver

bullet, if you will, for all of us to achieve the goals that we have

in mind for our constituents. Thank you.

Mr. WARREN. Thank you, Fred. We are pleased to be joined by

Senator Enzi.

OPENING STATEMENT OF THE HONORABLE MICHAEL B. ENZI,

A UNITED STATES SENATOR FROM WYOMING

Senator ENZI. Thank you. It is good to be here today and I appreciate all the efforts and comments of everybody that has contributed today. I have had a staff person here recording those things

so that I can get a briefing later this afternoon. I have been in Foreign Relations, where we are doing the reauthorization that involves some of the things dealing with the war right now, so I

apologize for not having been here.

The Small Business Committee is my favorite Committee. It has

a bigger effect on Wyoming than any other Committee that I serve

on, and I suspect that it has that kind of an effect in almost every

State. Small business is the backbone of this country. We have had

the mega-mergers where the big corporations have come together,

and shortly after they do, then they have what they call a rightsizing or a down-sizing. I call it laying off people.

[Laughter.]

Senator ENZI. But following that, until we had the downturn, all

of those people were being absorbed and they were being absorbed

by small business. Thank goodness small business has continued to

grow and improve throughout all the times of this country. That is

where the real innovation comes from, and, of course, the reason

we had big business is because some of those little businesses grew

up, and that is what we want to have with all of the businesses

in the United States.

My office has been in the process of moving this week and it

gives us a chance to clean out some of the nooks and crannies and

that is what this reauthorization of small business does. It gives

us a chance to clean out some of the nooks and crannies and places

that are less used and refocus those resources into areas that are

more used and to streamline some of the ones that are used on a

daily basis. So I do appreciate your efforts on that.

64

I am pleased that the reauthorization includes an extension of

the Technical Rural Outreach Program. I helped get that program

rolling in 1997 and it has provided valuable technical assistance to

Wyoming’s small businesses. Unfortunately, we have had some difficulty getting appropriators to fund the program at the level that

we authorized, but that is a topic for another day.

I am interested in the comments that you have made on suggested amendments to the Small Business Development Centers.

They have the potential to alter how SBDCs function. I want to assure that any alteration that we make is a good one. We do have

the University of Wyoming, it is our only 4-year institution, public

or private in Wyoming, and they had taken the lead on SBDCs.

They developed strong working ties with the local communities,

and so any changes that the Committee considers, I hope will

strengthen rather than weaken those ties.

The Small Business Development Centers and several other organizations, both with the Federal Government and in Wyoming,

have worked with me for each of the last 2 years to hold a procurement conference in Wyoming. It has been an opportunity for the

small businesses in our State to get together with representatives

from Federal agencies, particularly the SBA liaison with the agencies, to help come up with ways that they can get contracts with

the Federal Government. It has been an extremely valuable conference. We have had actual contracts come out of it. Each year,

we have always had at least twice as many people as we expected

show up for it, so it is something that is needed and something

that I hope will expand into other States.

Of course, we are interested in government contracting. We are

interested in business development. I want to place some special

emphasis on the Small Business Innovation Research and, again,

with the hope that that will be funded more fully. We have some

great success stories that have come out of Wyoming, of inventions

that have worked their way through that process and are now

being marketed independently worldwide. Small businesses give

people a lot more flexibility in where they can live and in what

they can earn. I think that is the future for our young people in

this country, to be able to start a small business and grow it into

one of the mega-businesses that I complained about earlier.

So I thank you for all of your efforts and look forward to working

on the reauthorization, and I thank you all.

Mr. WARREN. Thank you, Senator Enzi.

[Laughter.]

Mr. WARREN. On behalf of Senator Snowe, let me thank you all

for coming today. Your input has been absolutely invaluable. We

look forward, and she asked me to tell you how much she looks forward to working with you, with the SBA, with the Members of this

Committee, including Senator Kerry and the other side of the aisle,

in order to craft a good, balanced, 3-year reauthorization as we

move forward into the next cycle for SBA.

As Senator Snowe said at the beginning, the record will be open

for the next 2 weeks, so if you have additional comments or written

statements, if you have brought them and would give them to our

hearings clerk, Lindsey, we will insert them into the record.

65

The Senators may also have additional questions, which we will

send out, and we would ask you to try to have responses back as

quickly as you can. Given the mail around here, if you can e-mail

them in, we might actually get them faster and they won’t be

crispy.

[Laughter.]

Mr. WARREN. So with that, thank you, and we are adjourned.

[Whereupon, at 12:12 p.m., the Committee was adjourned.]

(67)

PREPARED TESTIMONY

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