U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

77–298 2002

PROCUREMENT PRACTICES OF NEW MEXICO

DEPARTMENT OF ENERGY FACILITIES

FIELD HEARING

BEFORE THE

COMMITTEE ON SMALL BUSINESS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

SANTA FE, NEW MEXICO

AUGUST 27, 2001

Serial No. 107–25

Printed for the use of the Committee on Small Business

(

(II)

COMMITTEE ON SMALL BUSINESS

DONALD MANZULLO, Illinois, Chairman

LARRY COMBEST, Texas

JOEL HEFLEY, Colorado

ROSCOE G. BARTLETT, Maryland

FRANK A. LOBIONDO, New Jersey

SUE W. KELLY, New York

STEVE CHABOT, Ohio

PATRICK J. TOOMEY, Pennsylvania

JIM DEMINT, South Carolina

JOHN R. THUNE, South Dakota

MICHAEL PENCE, Indiana

MIKE FERGUSON, New Jersey

DARRELL E. ISSA, California

SAM GRAVES, Missouri

EDWARD L. SCHROCK, Virginia

FELIX J. GRUCCI, JR., New York

TODD W. AKIN, Missouri

SHELLEY MOORE CAPITO, West Virginia

BILL SHUSTER, Pennsylvania

NYDIA M. VELA ́ ZQUEZ, New York

JUANITA MILLENDER-MCDONALD,

California

DANNY K. DAVIS, Illinois

BILL PASCRELL, JR., New Jersey

DONNA M. CHRISTENSEN, Virgin Islands

ROBERT A. BRADY, Pennsylvania

TOM UDALL, New Mexico

STEPHANIE TUBBS JONES, Ohio

CHARLES A. GONZALEZ, Texas

DAVID D. PHELPS, Illinois

GRACE F. NAPOLITANO, California

BRIAN BAIRD, Washington

MARK UDALL, Colorado

JAMES R. LANGEVIN, Rhode Island

MIKE ROSS, Arkansas

BRAD CARSON, Oklahoma

ANI ́BAL ACEVEDO-VILA ́ , Puerto Rico

DOUG THOMAS, Staff Director

PHIL ESKELAND, Deputy Staff Director

MICHAEL DAY, Minority Staff Director

(III)

C O N T E N T S

Page

Hearing held on August 27, 2001 ........................................................................... 1

WITNESSES

Morales-Gurule, Michelle, CEO/Owner, CJ Enterprises, Inc. .............................. 5

Cordova, David, Director of Planning & Economic Development, Eight Northern Indian Pueblos Council ................................................................................. 7

Martinez, Marlo, President/CEO, New Mexico Office Products ........................... 10

Montoya, Antonio, Chairman/CEO, L&M Technologies, Inc. ............................... 11

Salazar, Abe, CEO, Computer Assets, Inc. ............................................................ 13

Salgado, Joseph, Principal Deputy Laboratory Director, Los Alamos National

Laboratory ............................................................................................................ 15

Wagner, Patty, Assistant Manager, Office of Management & Administration,

U.S. Department of Energy ................................................................................. 19

Woodard, Joan, Executive Vice President & Deputy Director, Sandia National

Laboratories .......................................................................................................... 22

Nelson, Ronald, Director for Contracts Management, University of California . 24

APPENDIX

Opening statements:

Manzullo, Hon. Donald .................................................................................... 46

Prepared statements:

Morales-Gurule, Michelle ................................................................................. 48

Cordova, David ................................................................................................. 51

Martinez, Marlo ................................................................................................ 54

Montoya, Antonio ............................................................................................. 55

Salazar, Abe ...................................................................................................... 63

Salgado, Joseph ................................................................................................ 67

Wagner, Patty ................................................................................................... 74

Woodard, Joan .................................................................................................. 81

Nelson, Ronald .................................................................................................. 100

(1)

PROCUREMENT PRACTICES OF NEW MEXICO

DEPARTMENT OF ENERGY FACILITIES

MONDAY, AUGUST 27, 2001

HOUSE OF REPRESENTATIVES,

COMMITTEE ON SMALL BUSINESS,

Washington, DC.

The Committee met, pursuant to call, at 9:00 a.m., in room 311,

New Mexico State Capitol, Santa Fe, New Mexico, Hon. Donald A.

Manzullo [chair of the Committee] presiding.

Chairman MANZULLO. Okay. Well, we’re going to call this field

hearing of the United States House of Representatives Small Business Committee to order, and I want to tell you it is so great to

be in a town that knows the true meaning of a billion dollars here

and there.

Tom, I understand you’re going to introduce a resolution that’s

going to move the federal capital from Washington to Santa Fe, but

I don’t think that you would want all that busyness coming here

and disturbing this tremendous little city. What a joy it is.

We flew in last night and looked around, and, you know, no giant

freeways, people legally driving at 75 miles an hour. It’s just a real

joy to be here. It’s a double joy—actually, it’s a triple joy, not only

a personal one, but to come out on behalf of my good friend and

colleague, Tom Udall.

I know, so often, you take a hometown boy for granted. Tom has

done just a tremendous job in Congress. You don’t see his name

flashed all over the place. You don’t see mine, you don’t even see

Congressman Bartlett’s. We’re the workhorses of Congress, and we

go there, we get our job done, and we come back every weekend,

or every other weekend, in order to meet with the people that sent

us to Washington.

Tom is one of the people that shows up very frequently on the

Small Business Committee, and when I decided to do a field hearing in New Mexico, I said, ‘‘Golly, let’s do one for Tom Udall.’’ This

afternoon, we are going to meet with Congresswoman Heather Wilson, just south of us. So I said, ‘‘Tom, whatever you want to have

a hearing on, it’s totally up to you. This is your area, these are

your people,’’ and he decided to do it on government procurement.

So I’ve got an opening statement. I’m going to take a minute to

read it, then I’ll yield to you, Tom.

The small business should be considered big business. The small

business people are the very core of our economy. It’s been established, by statistical facts concerning the nation’s small business

community, that 99.7 percent of all employers in the US are small

2

businesses. More than 50 percent of the private gross domestic

product is attributable to small businesses.

Your area here is particularly small business. I think the only

large business you have would be the labs. The area that I represent, the northern—16th District of Illinois, which is right across

the top of the state, has a lot of agriculture, a tremendous amount

of industry, Chrysler plant, Motorola facility, and et cetera, so it

has a lot more of a mixture of business sizes. Here in Tom’s district, you’re really dependent upon the small businesses in order to

create the core of the community. I presume that’s one of the reasons, Tom, that you’re devoted to spending a lot of time working

on the Small Business Committee.

A recent bill sponsored by Congressman Udall, which is the Native American Small Business Development Act, HR 2538, is designed to assist Native Americans who are starting or expanding

small businesses on tribal lands. It’s Tom’s bill. It was unanimously approved by the committee. That means that Republicans

and Democrats agreed on it. Not much occurs in Washington that’s

unanimous. Tom’s bill obviously has so much merit, the members

have said this is a good bill. I anticipate the bill will be passed by

the full House of Representatives the first or second week that we

are back in session in September.

Before I yield to Tom, I’ll just give you the ground rules for testifying. We try to limit it to a five-minute presentation. I’m not going

to throw a chair at you if you go over five minutes, but we want

to be able to let you give your testimony. It’s just an informal atmosphere. Nobody is under oath. If you make a mistake, you don’t

have to worry about saying, ‘‘Gee, it should have been this figure,

as opposed to that figure’’ here.

You’ve all provided written testimony, but it’s not necessary to

stick to it. Speak from your heart. Tell us what’s in your heart, the

things that—you know the reason that we’re here.

And so if I do like this (demonstrating), that means that the fiveminute mark is approaching soon, and if you could just wind up

within a minute or so after that.

Okay, Mr. Udall.

Mr. UDALL. Great. Thank you very much, Chairman Manzullo.

It’s a real pleasure to have you out here and to have the Small

Business Committee out in the Third Congressional District. I

should just tell all of you that we introduced Chairman Manzullo,

my wife and I did, last night, to green and red chili, let him sample

a little of both, and he was very interested in all of the local food,

and we had a good evening on Santa Fe, and on the town, last

night.

You should also know that as the chairman of the Small Business Committee, he has been a real champion in Washington of

small business enterprises, of seeing that when we make governmental decisions, we do everything we can to make sure that small

businesses are included. And as he noted earlier in my—earlier in

his statement, my district is really one of small businesses, and we

generate our job growth out of the small business community. So

that’s very, very important for us.

Here, we’re today talking about the positive impact of the Department of Energy and the management and operations contracVerDate 11-MAY-2000 03:18 Apr 04, 2002 Jkt 077298 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 E:\HR\OC\A298.XXX pfrm13 PsN: A298
3

tors and the impact that has had on New Mexico. Combined, these

are the largest employers in the state. Los Alamos National Laboratory is in my district, and it is the largest creator of jobs.

Well, we’re here today because DOE and its M&Os have made

strides in helping small businesses; there’s no doubt about that,

but we believe there’s more room for improvement and more to be

done to assist enterprises here in New Mexico.

During World War II, the Manhattan Project was one part of the

huge industrial effort that depended on a broad and diverse small

business sector with the flexibility and innovation needed for war

time production.

For example, small businesses designed the town at Oak Ridge

and the first casings for the Fat Man bomb. Similarly, during the

cold war, our military and industry integrated many small firms to

provide the adaptability needed for technological innovation and

better production. American entrepreneurs and small business

firms account for 40 percent of all federal tax revenue, 47 percent

of retail sales, 51 percent of our gross domestic product, and 58

percent of all private employment.

Small businesses provide the flexibility and innovation sold by

them to support vibrant communities and strong families. DOE institutions and the labs have been an economic anchor in our communities for over 50 years. Still, even with this longevity, pockets

of poverty remain which have not benefited from the availability of

jobs and business opportunities. Given that nearly 97 percent of all

enterprise in New Mexico is small business, the opportunity for the

federal government to find small business contractors is there.

We are here today to look for ways to tap this potential for economic growth. One of the most troubling trends is the drain of federal contracts out of New Mexico. Many federal agencies are taking

work projects that were once done by local small business and combining them into contracts so large that our small businesses can

no longer compete for them. These contracts are then given to corporations outside New Mexico.

Contracting officers inside the beltway call this streamlining, but

the result here in New Mexico is that these practices are streamlining small businesses right out of business. This is simply unacceptable.

Although the Department of Energy is the government’s second

largest buyer of goods and services, to be very frank, the agency’s

commitment to small, minority and women-owned businesses has

been suspect.

Last year, in the first ever comprehensive review of government

contracting, released by myself and the Democratic members of the

Small Business Committee, DOE was the only agency to receive an

F for contracting equity. While I’m sure that the grade is not representative of local DOE offices or the labs, it clearly demonstrates

that, within the department, a cultural problem exists in terms of

willingness to provide opportunities for small businesses.

The way to turn this around is by all of us working together to

make sure the opportunities exist for all our commerce.

And with that, Mr. Chairman, I want to also get quickly to the

witnesses, so we’ll look forward to hear their testimony; and once

4

again, thank you for coming out and for bringing the Small Business Committee to Santa Fe, New Mexico.

Chairman MANZULLO. Thank you. Let me introduce some other

people. Nelson Crowther, to my right, is an attorney. He’s—on the

Small Business Committee, works on procurement issues. Michael

Day is the staff director for the minority side of the Small Business

Committee, and Tony Martinez is also with Mr. Udall’s staff.

I would like to just take a second to—Roscoe, would you introduce yourself; give a little bit of your background, because it’s really important with regard to this hearing, besides being vice-chairman of the Small Business Committee.

Mr. BARTLETT. Thank you very much. I’m very pleased to be here

in Tom Udall’s district. He and I share some of what we think are

very important issues relative to energy and energy future in our

country, and I’m very pleased to work with him in the Congress.

I’m one of maybe 35 people in the Congress who came from the

small business world. I was a member of NFIB, and among other

things in my background, I have a PhD in science, I worked 18

years for the military, I taught for 24 years, but I was also a small

business person for a number of years and belonged to NFIB.

There are probably about 35 of us who came from a small business

background to the Congress, so I was very pleased when I had an

opportunity, nearly eight years ago now, to join the Small Business

Committee.

I’ve been very much concerned about recent procurement trends

in the government, for very valid reasons. Many of our government

agencies are now moving to streamlining, as Tom mentioned, or

bundling is another way of expressing these new moves.

One of the first examples of this was the Marine Corps and the

Navy who decided that they were no longer going to purchase

equipment for handling data and moving it. Because the procurement cycle in government is so long, by the time you procure this

high tech equipment, it’s already obsolete. So all the equipment

that you can procure is obsolete if you were going through the government procurement cycle.

So they decided to buy function and performance rather than

equipment, and let the contractor who can buy the equipment overnight—where it takes us forever to buy it in the government—to

let them buy the equipment. But in letting that single contract, we

were very much concerned—the Small Business Committee was

very much concerned that the small business was going to be

pushed out, so we met—and Nelson worked with me on that—we

met with the Navy and the Marine Corps and they withdrew their

RFP and issued another one, guaranteeing 35 percent—that’s a big

percent of the money—35 percent of all the money would go to

small business and 10 percent of that would be direct pay to small

business.

The next opportunity we had to work with the government was

when NSA, National Security Agency, it was going to do the same

thing for the same very valid reasons. They could no longer have

the latest equipment, because it took them so long to buy it; by the

time they bought it, it was already obsolete. So they were going to

buy performance rather than buying the equipment, so we met

with them and they changed their procurement practice, also, to

5

assure 35 percent would go to small business and 10 percent of the

money would be direct pay to small business, so they wouldn’t have

to wait that long for payment.

I’d just like to mention a very significant thing in small business,

I think most people don’t know, and that is the most rapidly increasing part of the small business community is women-owned

small businesses. They are growing at twice the rate of male-owned

small businesses. They are better employers. That doesn’t surprise

me. Men and women are different. Our military is having some

trouble figuring that out, but they are different. Women are more

empathetic, more compassionate. It doesn’t surprise me, at all, that

they are better employers. By the way, their companies are also

better corporate citizens, and I think, for exactly the same reasons.

They are more concerned about their community and their involvement than the average male-owned small business.

So I’m really pleased to be here today to hear the testimony of

these witnesses. We want to make sure that small business has

every opportunity to participate, for a very selfish reason, by the

way. Most of the innovations out there are not in big business. Not

everything that’s big is valuable, which is one of reasons that you

should be thankful you don’t get all the government you pay for.

I don’t know if you’ve thought about that. But the bigger an organization gets, the less effective it becomes. And it’s stifling for creativity, and most real entrepreneurs—most creativity is in small

business. And so we are going to get a better return for our dollars

spent in small business, in general. Now, some things, big business

has to do it, but by and large, we are going to get a better return

for our dollar when it goes to small business than when it goes to

big business.

So I’m very pleased to be here and look forward to your presentations.

Chairman MANZULLO. Thank you very much, Roscoe. Let’s lead

off with Michelle Morales, CJ Enterprises, Incorporated, in Los Alamos.

Michelle.

STATEMENT OF MICHELLE MORALES-GURULE

Ms. MORALES-GURULE. My name is Michelle Morales-Gurule and

I am the CEO/owner of CJ Enterprises. I would like to take this

moment to thank you, Mr. Chairman, Congressman Udall, and the

members of the committee for allowing me, a small, woman-owned

business, the opportunity to testify based on our experience and position with Los Alamos National Laboratory, a division of the Department of Energy.

CJE was founded——

Chairman MANZULLO. Michelle, excuse me a second. Did you provide copies of your testimony to us?

Ms. MORALES-GURULE. Yes.

Chairman MANZULLO. Do you want to get those for us?

Okay, go ahead.

Ms. MORALES-GURULE. CJE was founded in April of 1986 with

the sole purpose of providing computer software, peripherals and

services to Los Alamos National Laboratory. During our 15-year

partnership with LANL, CJE has been awarded over $135 million

6

in computer-related contracts. CJE was the last vendor to receive

the award for Vendor of the Year and Customer Service Vendor of

the Year presented by the LANL Business Operation Division at

the just-in-time procurement ceremony. These awards were especially special to CJE, since they were voted on by the LANL endusers based on their experiences with each JIT vendor. CJE currently administers four computer-related just-in-time contracts,

which were awarded between the years of 1992 and 1998. In 1998,

CJE was granted a blanket order agreement for computer systems

repair and services utilized by LANL end-users.

Our success, we feel, is CJE continually strives to make each

procurement most advantageous for LANL. This is done by aggressively keeping in contact with our manufacturers, while informing

LANL of any changes in the technology industry which might affect

their direction, adjusting with the current changes in the technology industry, a thorough comprehension of LANL procurement

processes as a whole, being innovative within the scope of our justin-time contracts, being involved on a day-to-day basis with LANL

end-users and procurement personnel, developing a small business

relationship within the Los Alamos community, being consistently

accessible to our customers, and knowing that CJE has options

available to us through the LANL small business office.

The positives that we’ve experienced is the LANL business operations personnel are extremely accessible and cooperative. The

LANL small business office was responsible for enabling CJE to become board members of the Northern New Mexico Procurement Advisory Board and the Northern New Mexico Supplier Alliance

Board.

LANL seems to be very open to new ideas, and they do share

new opportunities with us when they arrive; and if we’re ever in

a difficult position, LANL has always provided assistance towards

CJ on that.

Our biggest concern with the procurement of Los Alamos is the

government purchase cards. JIT competition is typically with Fortune 1,000 companies. Lack of LANL property labeling on merchandise could make products unaccountable, unlike that of the

JIT policies and procedures; lack of accountability for purchased

products, such as leather goods. Some of the purchase cards have

home delivery shipments. CJE feels that there’s a shortage of

LANL personnel to oversee the purchase card procurements by

end-users.

Lack of scrutiny of companies providing products, unlike that of

the JIT procedures, and add-on costs, such as shipping and handling, are paid for by LANL, unlike that of the JIT, with the exception of overnight freight, and also some rebates are not taken advantage of by LANL.

So overall, on the purchase cards, what we’ve experienced is, as

a JIT vendor, we have certain requirements that we must fulfill.

If a product comes in and it’s a certain dollar amount, we have to

warranty tag those; therefore, if the product—once it goes up to

LANL, it’s traced, it has a serial number.

When it’s purchased out of state, which most of our experience

with the procurement cards are mail order, this procedure is not

done. Therefore, if you take a Palm Pilot, the hand-held devices, we

7

would have to warranty tag it; it’s traceable, it’s accountable. If it

comes in through a mail order catalog, there’s no traceability at

this point, and it could very easily get lost.

There are certain rules for a JIT vendor, unlike that, again, of

mail order. Because leather goods are not supposed to be purchased

on the JIT, because it’s considered a luxury item, we can’t offer

those to our end-users; however, they can purchase those products

on their government purchase cards.

As a JIT vendor, and I think with most small businesses, as you

mentioned earlier, we take a lot of pride, we take a lot of concern

over what we do, and I think we have to go through a lot of scrutiny, as a vendor, a JIT vendor, for the laboratory, and I just feel

that these mail order companies don’t have to go through that

same scrutiny that we have to go through.

My biggest competitors are companies like PC Warehouse, Max

Warehouse, even Office Max. I saw a statistic last year that there

was $35 million in purchase card procurements for Los Alamos National Laboratory. I have four just-in-time contracts. I did $8 million. So as a small business, I’m losing a lot of that business to outof-state, back east mail order companies.

The only other thing I’m concerned with is the performance ratings are not always in the control of the vendors, such as myself,

such as back-ordered or discontinued items. I don’t feel a vendor

should be penalized under these circumstances.

Also—this is just in general—I’d like to see the difference between a small business and a small business. There is a difference

in resources and accessibility for a small business with less than

50 people and that of a small business with 150 people. And I

think, in northern New Mexico, based on my experience, that

you’re going to see a lot more small companies with less than 25

people, versus companies with 150 people.

So in closing, the experience that CJE has gained from the federal government procurement has, overall, been positive and has

allowed CJE growth within our corporation. CJE always looks forward to the challenges set forth due to the changes in technology

and federal government industries. CJE looks forward to maintaining exceptional customer service, while continuing our long-term

partnership with the federal government customers.

[Ms. Morales-Gurule’s statement may be found in appendix.]

Chairman MANZULLO. Thank you very much, Michelle.

David Cordova is with the Eight Northern Indian Pueblos Council, Incorporated.

Good morning, David, welcome here.

Mr. CORDOVA. Thank you.

Chairman MANZULLO. The tap of the pencil means the five minutes is about up, and you’re to sort of wrap up within a minute

after that.

We look forward to your testimony.

Mr. CORDOVA. Okay.

STATEMENT OF DAVID CORDOVA

Mr. CORDOVA. My name is David Cordova, and I’m the director

of planning and economic development for the Eight Northern Indian Pueblos Council, Incorporated. We are a noncorporate consorVerDate 11-MAY-2000 03:18 Apr 04, 2002 Jkt 077298 PO 00000 Frm 00011 Fmt 6633 Sfmt 6602 E:\HR\OC\A298.XXX pfrm13 PsN: A298
8

tium of the eight northern pueblos of New Mexico. The consortium

was established in 1967. The board of directors for the ENIPC,

which it’s known as, is the current governors of the Eight Northern

Indian Pueblos Council, Eight Northern Pueblos.

The pueblos have formed the consortium in order to deal with

common issues that affect all the eight northern pueblos. Our organization is unique in that we are the only Native American community reuse organization in the United States.

ENIPC was designated a community reuse organization on April

2000 by the US Department of Energy Community Transition Office. Our mission as a CRO is to develop strategies and goals that

will increase economic development to the eight northern pueblos.

We intend to continue to provide community-based services in the

areas for which ENIPC has been chartered: Economic development,

community services, social services, employment and training, and

to assist tribal members to implement and manage their programs.

Regretfully, the relationship between the eight northern pueblos

and the federal government, in regards to procurement, has been

minimal or almost nonexistent. Our most recent research shows

that less than $5,000 in procurements from tribal businesses of the

eight northern pueblos have happened in the past year.

LANL has not worked directly with any pueblo government on

any initiative, to date, in 2001. The laboratory employment of Native Americans is, as well, marginal, totaling only 139 people, or

1.8 percent of the 7,626 full-time positions reported by the laboratory in 2001. The northern pueblos accounted for only 59 of the 139

total positions held by Native Americans in 2001. Of this figure,

only one tribal member of the northern pueblos held a supervisory

position, and none held managerial positions.

The employment and procurement figures show that there is a

huge disparity between the federal government procurements to

the eight northern pueblos. Improvements need to be made, and a

well-orchestrated effort needs to be put in place that will allow the

eight northern pueblos to successfully bid for opportunities with

the federal government.

This year, though, the small business office of the Los Alamos

National Laboratory is attempting to improve the eight northern

pueblos’ small business presence at the labs. Several of the representatives of the small business office have assisted the ENIPC

in learning how get our businesses certified, 8(a) certified, et

cetera.

Most recently, ENIPC was asked by the small business office to

name a representative to the Procurement Advisory Panel, of which

I was named as the eight northern pueblos’ representative. A few

procurement opportunities have been presented to the pueblos.

Currently, one of our tribally-owned businesses, TSAY Corporation,

has been working with the small business office to secure a contract for the decommissioning of buildings. This is a step in the

right direction, and TSAY is excited about the opportunity.

Our perception of the small business office is that they are finally stepping in the right direction, but there are several issues

to work on, such as, one, securing more contracts for the Eight

Northern Pueblos businesses; two, teach and advise the pueblos on

how to access the opportunities that are available to them; three,

9

opportunities need to be presented with adequate time, and in writing, as to allow the pueblos time to respond; four, if government

contracts are awarded to more qualified businesses, then direct

that business to employ Native Americans from the eight northern

pueblos so they can learn the tools of the trade and bring it back

to the pueblos; five, procurement red tape does not allow the small

disadvantaged businesses of the pueblos to successfully compete for

contracts.

Changes need to be made that will allow the pueblos to successfully bid on government contracts. Modification of requirements

may be needed to assist tribal businesses in procurement opportunities. Perhaps a probationary period, with less stringent requirements may be needed to allow the tribal businesses to fulfill the

government requirements to secure a procurement contract. These

federal regulations have—these federal regulations that are in

place have created companies as monopolies that are already established and exclude competition from any newly-forming companies.

As of date, our research shows that there have been no loan programs administered by the SBA to any northern tribe, tribal business, or entity. Many of the local federal SBA offices have not made

an effort to assist the pueblos or introduce us to what assistance

they have to offer. The Espanola SBA office, for example, has not

contacted my department to offer any of its services. Many tribal

businesses and small business owners do not have access to capital,

and this hinders their economic development and growth.

More needs to be done to secure procurement opportunities for

the eight northern pueblos and tribally-owned businesses. It needs

to be done immediately. Perhaps the possibility of creating a tribal

small business office that would assist not only the eight northern

pueblos, but also all the New Mexico tribes needs to be created.

This will effectively deal with the lack of tribal procurement opportunities.

Thank you very much.

[Mr. Cordova’s statement may be found in appendix.]

Chairman MANZULLO. David, I really appreciate your testimony.

You know, you never realize how big our nation is until you look

at the backgrounds. Roscoe is from Maryland, I’m from northern Illinois, and here we are in New Mexico. Each area of this country

has the most incredible opportunities, and I really appreciate your

testimony.

The next witness is Marlo Martinez. Marlo is with the New Mexico Office Products Company. Is that your company, Marlo?

Mr. MARTINEZ. Yes, sir.

Chairman MANZULLO. We look forward to your testimony.

Mr. MARTINEZ. Good morning to you.

Chairman MANZULLO. Notice that there’s Martinez, Morales,

Cordova, Montoya, and you’re probably wondering what this name

is. Okay, I’ll just let you keep on guessing, but my family does have

an Italian restaurant. That could be it. Sometimes they put a tilde

over the ‘‘N,’’ you know.

Marlo, please.

10

STATEMENT OF MARLO MARTINEZ

Mr. MARTINEZ. Mr. Chairman, Honorable Congressman Udall,

members of the committee, thank you for the opportunity for being

here; it is an honor, and I’m here, and I’ll read off of my script, and

I have my other copies here—pass those along, please.

Because many small minority businesses are short on resources,

are undercapitalized and face cultural biases, one has to be very organized, proficient, work hard, have self-discipline, perseverance in

all aspects of business. We have to control costs to such an extent

that while offering a competitive, but a fair price, a reasonable

profit is constantly attained.

New Mexico Office Products has been in business for over 40

years. My father started this business in 1959, I assumed control

in 79, and I’ve been in business for 25 years. In 1985, our company

was selected as Minority Subcontractor of the Year for Los Alamos

National Laboratory, and subsequently, in 1986, Small Business of

the Year for Los Alamos National Laboratory, and then, in 87, we

received an award from—the SBA Administrator’s Award of Excellence.

Those were good years for myself as a young businessman, but

in the ensuing years after that, LANL changed their system to JIT,

which is just-in-time contracting. This basically is when competitive bidding stopped in exchange more for the principle of awarding

all of the contracts to a handful of vendors, usually those in Albuquerque with a large market area. This change in policy has really

hurt all of the micro businesses of rural New Mexico for the last

decade-and-a-half, and doing business with Sandia National Laboratory is virtually nonexistent in northern New Mexico.

If DOE would continue to prioritize funding to companies such

as SLS, Strategic Learning Services, or others, to serve as a conduit or clearinghouse to the small business community, like they

had done before—I think it worked really well, because you had an

outside source really channeling information and opportunities to

small businesses and really serving as an outreach program, which

I don’t believe is as strong as it was then. So I would say to maybe

take some of that funding that they have and prioritize it, I think

that disadvantaged businesses would have better access to bids and

the specific needs of the government, at least those niches within

the government that we fail to get.

I think the time has come to reevaluate the process used by DOE

and the national laboratories by which they buy their goods and

services. I believe that breaking up the JIT contracts would surely

spread the wealth. As it is now, most of those people continue to

get those same orders over and over and year after year. I think

it’s only fair that everybody gets a piece of the action. This would

mean an extra effort on behalf of LANL and Sandia National Laboratory for the sake of really truly supporting many of the small

businesses, especially those in rural America.

I believe that the procurement buyers and managers at LANL

have good intentions, and I personally know these folks that run

these programs at LANL, but maybe the problem isn’t at that level;

I think it’s probably higher up. And as I mentioned here in my report, that people such as the technical people would prefer, as Mrs.

Morales alluded to, to go directly to these larger firms, with the beVerDate 11-MAY-2000 03:18 Apr 04, 2002 Jkt 077298 PO 00000 Frm 00014 Fmt 6633 Sfmt 6602 E:\HR\OC\A298.XXX pfrm13 PsN: A298
11

lief that these national companies will give them a better deal or

whatever—however they think. These are technical people that

make these requests that actually get this merchandise elsewhere,

which these buyers, I don’t know if they have that much control

over that, but higher-ups probably would, I think.

I think we have to break this barrier, and I think the time is

now, and for too long the small business has paid its dues. And

what I mean by that is, you know, we pay our taxes, we hire the

people. Back in the 80s, I had twice as many employees. I don’t

have that many employees anymore, because when the JITs did

occur, I had to find other sources of revenue and expand my business in other ways to offset the losses at Los Alamos. In those

years, we were doing about 250,000. To me, it’s not a lot of money,

but it was manageable, and at least it was something—better than

nothing that we were getting after all those years.

We do have one contract now, which is a paper contract, which

is really good, and it’s real helpful, and that’s nice.

And also, I say that our fathers and our mothers, brothers and

sisters in northern New Mexico have gotten sick and died building

infrastructure at Los Alamos and Sandia, and have had to endure

hazardous working environment, chemicals that were being

dumped at the time, where we have DOE facilities at nine sites

throughout the nation, compensating people that have gotten sick

over having worked at these sites that were not protected back 30,

40, 50 years ago.

And I think with that, I don’t know that we’re deserving, especially, to get special treatment or anything, all I do know is that

in my testimony today, here, the micro businesses constitute most

of New Mexico businesses, and I think right now the way it’s

gauged is 500 employees and under, or for instance, a construction

company would be $15 million and under, to be considered a small

business. Well, if we paid more attention to helping these businesses that are 20 employees and under, or ten employees and

under, I think, as far as set-asides or having particular goals and

fulfilling those goals, would be appropriate.

And again, I would just emphasize that we’re at the mercy of

these laboratories, and I would place some of the blame probably

on ourselves. We have to have strong, persistent presence in those

locations, as well; but even at that, we need a better clearinghouse

to find out the advantages of what is available to us.

[Mr. Martinez’s statement may be found in appendix.]

Chairman MANZULLO. Marlo, thank you for your testimony. I appreciate it very much.

The next witness is Antonio Montoya. Antonio is chairman and

CEO of L&M Technologies. We look forward to your testimony, Antonio.

STATEMENT OF ANTONIO R. MONTOYA

Mr. MONTOYA. Thank you, Chairman Manzullo, Congressman

Udall, and members of the Small Business Committee.

Indeed, I consider myself fortunate to be able to express some of

my thoughts, and I’ll attempt to read part of it and just verbally

summarize some of the rest of it. So if it appears like maybe I’m

a little bit unorganized, I might be.

12

L&M is a company that’s been around since 1972, giving us

about 28 years of doing business with the laboratories, including

Los Alamos and Sandia, since 1972. However, the work with Los

Alamos has come to the point where there is none. However, I’ve

worked on, and sat on committees with Los Alamos procurement,

the Northern New Mexico Los Alamos Procurement Committee,

and those actions are efforts to improve small business, particularly in the northern part of New Mexico. There were a lot of good

efforts.

However, I think it was the lack of those action items to have

taken place, and therefore, having a successful effort from that

committee.

Also, I’ve sat on committees with Sandia National Laboratories,

and—almost exactly the same type of committees, to include the

task force that Sandia had to bring in folks from the community

to testify. The difference there, I believe, is just the fact that there

was follow-through with the actions stated, the actions desired; and

so I think, therefore, causing them, Sandia, to be a little more successful in those efforts in improving small business.

I think also the fact that legislation probably is one of the biggest

things that can change those things that can help small business,

the agencies’ policies and procedures, particularly with DOE, and

the Small Business Administration, also.

You know, when an agency can’t take credit for small minority

businesses or business that the prime contractors have given and

allowed them to compete for, and they’ve received, when the agency

can’t get credit for that, then I think that’s defeating the overall

purpose of promoting small business.

Also, the legislation of such bills as providing exclusive and overriding advantages to the Alaskan Native tribal contracting organizations, such as the Alaskan Native Tribal Company that makes

over a billion dollars a year and yet can compete and take over 8(a)

and small business contracts, particularly the one they just picked

up at Kirtland, and I’m sure the Congressmen——

Chairman MANZULLO. Excuse me. An Alaskan Native American

tribe just picked up a contract here in New Mexico?

Mr. MONTOYA. At Kirtland, yes.

Chairman MANZULLO. Are there any members of the Alaskan

Native American tribe here, that are residents in this state?

Mr. MONTOYA. No, there are no Native American tribes in New

Mexico that have that advantage over the Alaskan Native American tribe. They buy up small and minority 8(a), American Nativeowned companies, therefore they retain the advantages and benefits of those organizations.

Not only do they have the economic force and just ready cash

force to keep their advantages going, that’s the legislation that I

think needs to be changed.

Mr. SILVA. Let me clarify that for you, please.

I’m Orlando Silva with the SBA——

Chairman MANZULLO. All right. Just a second. Let me take the

testimony of the people here—— Mr. SILVA. Sure.

Chairman MANZULLO [continuing]. And then we can go outside

the group here, once that’s done. All right?

13

Were you done with your testimony, Antonio?

Mr. MONTOYA. No, sir.

Chairman MANZULLO. You’ve got a couple of minutes there, and

I know I interrupted you.

Mr. MONTOYA. That’s quite all right.

I think, probably, one of the largest things that can contribute

to what I believe are honest attempts and desires of not only the

Small Business Committee, but large companies—because I’ve seen

them doing it commercially, also—and that’s attitudes. That’s the

attitude of the folks that not only are with the prime contractors

or the government agencies or the Small Business Committee, but

the attitudes that go all the way down, and when you have outreach programs, that’s great, but it doesn’t do a damn bit of good

unless you have in-reach programs where you talk to your users

within the laboratory or any of the government agencies.

I’m reaching the end of my five minutes, but I think that probably one of the good examples one can relate to is—particularly, in

the recent three or four years—are the efforts of Sandia National

Laboratories. NASA has good policies. Often, though, some of their

areas, such as NASA headquarters, they have attitudes and go

along with their users that just do not contribute to their ultimate

desires, helping small business.

[Mr. Montoya’s statement may be found in appendix.]

Chairman MANZULLO. Antonio, thank you for your testimony.

Let’s go, then, to the folks at the lab. Oh, I’m sorry, Abe. Good

morning. I didn’t see you come in over there.

Mr. SALAZAR. I apologize. It’s the first day of school over here in

the valley, so I had to come in with my son. I had to meet that

commitment today, so that’s a priority for me right now.

Chairman MANZULLO. Well, you’ve got your priorities set

straight.

Abe, you’re the owner of Computer Assets, Incorporated. We look

forward to your testimony. If I go like this, that means your five

minutes are coming to an end.

STATEMENT OF ABE SALAZAR

Mr. SALAZAR. Okay. I will try to summarize this as best I can,

but I want to give you some historical information about this area,

and I’m going to read this portion from my testimony.

First of all, Computer Assets is located in the beautiful Espanola

Valley. The Espanola Valley is where the first European capital

was established in what is now the continental United States, and

as a result, it was a trade center for a very, very long time. This

has been somewhat changed in the last hundred years. In fact, development of industry in this valley has basically stagnated, in

some form, in the last hundred years. There hasn’t been a lot of

development or growth for the area.

The lab was established more than 60 years ago, and not one,

not one entity has developed, businesswise, in the valley, and that’s

amazing to me. They spend billions and billions of dollars, and you

see one large corporation set forth in 15 miles away from that—

from the organization. That’s actually shocking.

So what I want to cover today is really three points. First of all,

I’ll give you some background about my company. Secondly, I want

14

to talk a little bit about the federal programs’ contributions to our

company, and the third piece is the procurement program and the

policies that the DOE facilities have in relation to our area.

Now, I cannot speak about other areas. I can only speak about

this northern section, that is what I know, and as a result, I will

try to clarify some key points.

First of all, Computer Assets was established in 1993. It was based on a $600 loan from my father, believe it or not, and I established the company and went forward and established slowly, over

local and state contracts.

At one point, I decided to go ahead and change that and develop

an actual real company and we started looking at procurement opportunities with other organizations. As of today, the company has revenues of over $10 million. Of the $10 million, less than 5 percent is related to any type of federal

programs. We are primarily focused on state and local business opportunities.

The federal programs and the contributions that are there,

there’s a couple of organizations that we utilize as our federal base.

Of course, the SBA is one of those. They have both lending opportunities in terms of SBA-type loans, and of course, they have some

opportunities, in terms of procurement.

Does anybody know that, if you’re a small business and you need

to do business with some type of either federal agency, you have

to have some type of contract vehicle, and the contract vehicles

that have been set forth have been the 8(a) certified and HUB zone

certifications.

Our company currently has met those two criteria. We’re both

8(a) and HUB zone certified. And briefly, HUB zone certification is,

basically, if you live or if your company is based in an area that

has very low types of business opportunities, and a high percentage

of unemployment, that area may classify as a HUB zone, where in

Espanola Valley we do classify that as a HUB zone, and we did file

for that, with the help of the SBA, and we did get certification on

that.

What that basically does for us, it gives you also the opportunity

to go out there and contract with the federal agencies directly. But

unfortunately, there’s been some hesitation in having the local federal agencies contract with our company.

In the lab’s sense, there was—about three, four years ago, there

was a large RIF that happened at LANL. I don’t know if anybody

remembers that or not, but it was written up in all the papers.

Well, if you look at the percentages of those RIFs, a high percentage of those RIFs landed up impacting the valley in some form.

They had—the highest percentage of those people RIFed were from

the valley. As a result, LANL took an aggressive move to somewhat

put some programs in place to help initiate some type of economic

development. And so what they had is, they had two programs that

were initiated.

First of all, they had something called the Northern New Mexico

Procurement Initiative. That particular initiative was targeted for

the northern New Mexico region, and what the mechanism basically allowed them to do was to go out there and procure either

services or equipment from northern New Mexico vendors.

15

Originally, the scope landed up only being certain counties, while

in the second phase of that scope, it changed. They started adding

additional counties, which actually went all the way down to Rio

Rancho, which was a real surprise, and basically what that allowed

the lab to do was to do business as usual. They could still meet the

procurement obligations that they had under the program, but they

didn’t necessarily have to procure items or services from those

northern regions, by adding of the additional counties. That was

definitely a weakness in their strategy, and the logic behind that,

I do not know, but it was definitely a weakness in terms of procuring the proper services and equipment from the north.

The second one, which is not really directly related to my business, but is something that we have a deep interest in is something

called the Los Alamos National Labs Foundation, which is basically

an organization there set up to help fund educational institutions,

primarily high schools, elementary, junior highs, with technology

plants.

Essentially, for the last—I don’t even know how long it’s been

going on, but it’s been going on for a long time—the Los Alamos

School District has been getting federal funds directly into the

school, itself, for technology. This was going on for a whole number

of years. So someone asked the question, a few years back, ‘‘Why

are the other schools, locally, not getting that same type of funding?’’ So the foundation was created, and the mechanism for the

funding in that particular organization is based on how many kids’ parents are working at the laboratory.

So, for an example, if we have 40 percent of the kids’ parents

land up being—having their kids go to the Espanola School District, well, they get essentially 40 percent of those funds. Well, unfortunately, there are strings attached to all this.

The schools are required to issue a proposal for that funding, and

there’s always some type of strings attached. And in my written

statement here, there’s an example, here, of one of the issues that

the Espanola schools were facing, and one of those issues was the

fact that they had a certain program in place to establish technology.

Well, as you know, with any school district, there’s a lot of turnover. Well, when you have turnover, progress of certain programs

is either stalemated or they stop going at an efficient rate—I’m

sorry, sir.

Chairman MANZULLO. That’s okay.

Mr. SALAZAR. So to summarize, the foundation has put some corrals over the school districts and required them to do business and,

therefore, not normally in the school district form.

Thank you.

Chairman MANZULLO. Thank you. We appreciate it.

Mr. SALAZAR. Sure.

[Mr. Salazar’s statement may be found in appendix.]

Chairman MANZULLO. The next witness is Joseph Salgado, who

is the principal deputy lab director at Los Alamos.

STATEMENT OF JOSEPH SALGADO

Mr. SALGADO. Thank you, Mr. Chairman and members. On behalf of John Browne, we welcome the opportunity to be here and

16

appreciate you taking your time and effort to come here to northern New Mexico.

I want to just briefly outline some of the testimony that has been

submitted to the committee. Essentially, I would like to say what

we’ve submitted, Mr. Chairman, is a strategy as to how to enhance

our small business activities in northern New Mexico.

I think it’s important to understand that Los Alamos is unique

in the DOE complex. We’re in rural northern New Mexico, rural

America. We have over 43 square miles that constitute the laboratory, we have over 2,000 buildings, and we have over 100 miles of

road, and it’s important to understand that geographical configuration and physical configuration to understand the strategies that

Dr. Browne has put into motion.

We have two prongs to address in northern New Mexico, both in

economic development and small business activity, which are important to Director Browne. Our strategy consists both to educate

and assist small business in the process and technical skills to

meet laboratory needs and requirements; to form an alliance with

small business development organizations; to target historically underserved areas of the supplier community; to establish internal

laboratory awareness of the importance of increasing small business participation in northern New Mexico; and to educate and assist small business firms in thinking and competing globally. The

importance there is not to totally rely on the laboratory, but also

to enhance their capability to compete internationally and nationally and globally.

Our goal this year is to place 35 percent of our base procurement

budget with small businesses, which is approximately a billion dollars, so that equates to $335 million, and we hope to attain that

goal.

The issue that has been addressed here and discussed briefly is

northern New Mexico, and there is a regional procurement effort

that we have put into place, Director Browne has put into place,

to try to enhance the economic development in northern New Mexico, both through economic development in our contracting and procurement, but also in the major subcontracts that we let at the laboratory, and make those parts of the contract.

Northern New Mexico consists of a seven-county region in northern New Mexico. Appendix J of the contract with DOE chartered

a concerted effort for economic development, particularly in our

large subcontracting activities. This sometimes runs contrary to

small business activities we are also engaged in.

This year, we anticipate that we will have $110 million with 454

firms in northern New Mexico. Ironically, if you look back over a

period of years from 1996 to this year, in 1996, we spent approximately $64 million in northern New Mexico. This year it will be

$110 million. The discrepancy that we do note at the laboratory,

and the deficiency we have to address, is that in 1996, there were

449 firms we dealt with for that amount of money. In the year

2001, there were 454 firms, which means that the supplier base in

New Mexico is probably not increasing at the rate that we would

anticipate.

There is a northern New Mexico preference program in existence.

We’re making every attempt to try to put preferences in northern

17

New Mexico. This year, one of the companies we have, Abba Technologies, was awarded a five-year, $4 million contract under this

special effort.

We’ve heard some of the concerns of the Native Americans. Dr.

Browne initiated, through Benny Gonzales, who heads our small

business operation, the Pueblo 2002 Program. Hopefully, by October 1st, we’ll put four contracts in place with four pueblos, under the Cerro Grande fire restoration program; a $1 million contract for

each pueblo, helping us address the Cerro Grande damages that

were impacted in northern New Mexico.

You’ve heard a reference to the HUB, historically underutilized

business, HUB zone program. Currently, I believe that we have approximately 50 firms that have been certified with the Small Business Administration in the seven-county area, and we’re looking to

increase that.

We have just recently let a contract for $1.6 million to the first firm, Anvil Welding Company, in Espanola Valley, a $1.6 million

contract pursuant to that HUB zone certification program.

One of the issues that has been addressed, and rightly addressed, is the issue of not only the external component, but the

internal component. Given the geographic configuration of 200

buildings, one of the major efforts that we have undertaken is to

internally have a series of workshops and understanding for our

buyers, both our technical and our procurement buyers, to understand the opportunities availed them in northern New Mexico and

in small businesses throughout the entire state of activity.

In the last year, year-and-a-half, we have had two major conferences with suppliers, both in the Espanola Valley area, and we

have had two technical presentations by which the suppliers come

to the laboratory and meet with our buyers and our technical staff

so our technical staff can understand the opportunities that they

have to purchase in the northern New Mexico area.

We have utilized the Northern New Mexico Supplier Alliance in

helping to try to coordinate and develop those type of activities.

We do understand that communication is one of the key components for basically not only success of small businesses, but our internal ability. We launched a web site that makes available all the

current information that we have for small business in northern

New Mexico, and throughout the entire world, for that matter. We

have had 7,500 hits on that web site, which brings particularly

small businesses up to speed on what areas of opportunity there

are within the laboratory.

During that course of time, Mr. Chairman, we also found out

that there were many small businesses that do not have computer

capability, particularly in northern New Mexico. One of the areas

that Representative Udall and we have discussed is the lack of

high speed fiberoptics in northern New Mexico for interconnecting.

We also put out a newsletter, monthly, so we can bring our small

businesses up to speed and communicate with them as effectively

as we can.

One of the things that we learned in our conversations and the

conferences we had is that many small businesses have concerns,

some of these concerns you’ve heard here today. We have established in our ombuds office a special desk for special programs so

18

that the small businesses have the ability to communicate with the

laboratory, address their concerns, with a sense of confidentiality,

so we too can address the concerns internally within the laboratory.

The two areas that do concern me, Mr. Chairman, is essentially

the Price Anderson Act that is taking place, both in the budgetary

and regulatory areas of DOE, and how that will impact the laboratory particularly, and our small business suppliers. That act basically will create an additional burden on our small business activity because of the quality assurance review dealing with our nuclear facility. That is an area, the full impact of which we don’t

fully understand at this time. Benny Gonzales is attempting to

move forward aggressively to see what we can do to help facilitate

the quality assurances necessary to meet the Price Anderson Act

that is within regulation form within DOE now that may become

applicable in a regulatory component if the legislation passes this

year. We, as a nonprofit organization, had not been subject to that

for a period of time.

We also are moving forward with our 8(a). For the first time

ever, we have created an 8(a) service set-aside in our construction

activity. We have two contracts that will be let within the next 60

days, for approximately a total of $21⁄2 million.

We understand, and Director Browne understands, that we need

an aggressive program to move forward. The difficulties that we

deal with, we need to create an economic base in the northern New

Mexico area, living in rural America, and Dr. Browne is committed

to a very proactive and aggressive approach to help ensure that

success.

[Mr. Salgado’s statement may be found in appendix.]

Chairman MANZULLO. Thank you very much. I appreciate it.

I would like to go to Patty Wagner. Patty is the assistant manager, Office of Management and Administration.

Patty, when I examined your testimony, I took a look at the budget here for the lab, $4.9 billion, and I know this was not a

completed function, either, but—in fact, I discussed it on the airplane with Michael Day, on the way here, and it seems $114 million is a pretty small amount of money, of the total amount, that’s

going towards procurement.

Ms. WAGNER. That’s just for the Department of Energy. If you look at the $3,676 in there, that goes to the M&Os, and that’s

where their small business opportunities come from. So you would

have to get from them how much of their money goes to small businesses, so——

Chairman MANZULLO. This is the Department of Energy, Los Alamos budget.

Ms. WAGNER. Okay, let me try to explain it. This is—the Albuquerque operations office has all of the money that’s appropriated,

authorized by Congress come to its office. It then sends it to its five

M&O contractors, management and operating contractors, which

includes Los Alamos National Lab, Sandia National Labs, and so

forth. So the $3.6 million that you see there goes to the M&O contractors, and from there, they could respond to you as to how much

of the money that comes to them is then infused into small businesses.

19

So, for example, I believe that it’s 1.3 or 1.2 for Los Alamos, and

similar for Sandia, of that 3.6. So the 114 represents only what is

actual Department of Energy, as an entity, as opposed to its contractors.

Does that help you?

Chairman MANZULLO. I think so.

Why don’t you go ahead with your testimony. You understand

this a lot better than we do. That’s why we’re having a hearing.

STATEMENT OF PATTY WAGNER

Ms. WAGNER. All right. And that is in my written testimony, by

the way, so I won’t really be talking about it orally, but I’d be

happy to address it.

First of all, good morning. We’re delighted for you to have this

in New Mexico and, especially, myself being from Santa Fe, in my

hometown. So I hope you’re enjoying the city.

I am Patty Wagner. I’m the assistant manager for the Office of

Administration of the Department of Energy, National Nuclear Security Administration, the Albuquerque Operations Office.

The majority of Albuquerque’s mission is accomplished through

the use of five management and operating contractors, also referred

to as M&O contractors. They include the University of California

at Los Alamos National Laboratory; Lockheed Martin at Sandia

National Laboratories; Westinghouse, TRU Solutions at the Waste

Isolation Pilot Plant at Carlsbad, New Mexico; Honeywell, at the

Kansas City Plant, and BWXT Pantex, at the Pantex Plant in

Amarillo, Texas. Other efforts requiring contract services or items

to support DOE Albuquerque’s mission are accomplished through

supply or support service contracts.

It is my understanding that our M&O contractors at Los Alamos

National Laboratory and Sandia National Laboratories will provide

independent statements regarding their small business programs.

Therefore, my statement will focus on DOE Albuquerque.

The mission of our small business office is to serve as an advocate for small business to ensure they receive a portion of the contract awards.

We have been successful in meeting our socioeconomic goals in

the past. We have a deliberate and methodical process for establishing goals for contracting with the small business community.

Through this process, we annually examine total available procurement dollars, excluding our M&Os, and take into consideration

funds required for existing contracts and forecasted requirements.

In fiscal year 2000, approximately 50 percent or $66 million of our

total dollars obligated were awarded to small businesses, an accomplishment we are very proud of, and three of the last five years,

our Albuquerque office has won the Secretary of Energy’s award for

being aggressive and the most successful small business contracting.

We’ve been able to achieve our goals due to extensive outreach

efforts. Our small business program manager and local DOE management participate in numerous small business conferences, educational seminars, trade fairs, matchmaker events, and networking

functions with community organizations.

20

Some of the activities or organizations that we have been actively

involved with include the Rio Grande Minority Purchasing Council,

including co-sponsoring the council’s annual conference and trade

fair, the Small Business Administration, the State of New Mexico

Procurement Assistance Program, the 8(a) Association, and the Air

Force Research Laboratory to provide training and educational sessions; the SBA annual ‘‘Dollars & Sense’’ conference focusing on

women-owned businesses; also the nationwide Second Annual DOE

Small Business Conference, the Professional Aerospace Contractors

Association Annual Briefing for Industry, and the Air Force Research Laboratory in a veteran’s outreach event. And all of those

are outreach efforts for the Department of Energy.

This year, we are expanding our outreach efforts to include historically underutilized business zones, commonly referred to as

HUB zones, which I think Abe talked about.

Recently, our small business program manager met with the governors of the eight northern pueblos to provide an overview of how

to do business with DOE and to generate mutual interest in doing

business.

The Albuquerque operations office has many success stories of

awarding contracts to small business concerns. One example is

ATM Services, an 8(a) woman-owned small business. It’s initial

contract for personnel security had an estimated value of $5.6 million. When the contract was recompeted under 8(a) competition, the

scope was expanded to include physical and cyber security, and

ATM won the award estimated at $15.8.

Another example is Terradigm. Terradigm is an 8(a) company

that was competitively selected under an 8(a) solicitation to provide

environmental consulting at a total contract value of $6.5 million.

Terradigm received an SBA Region VI award as an exemplary

small business in July of this year.

We recently awarded a contract to Au’ Authum Ki, an 8(a) Native American, woman-owned, HUB zone company, in the amount

of $163,000. This construction work involves asbestos abatement

and lead paint removal, and the contractor has successful experience performing similar work at military installations.

We also work closely with our M&O contractors to set annual

small business goals. The process for establishing those goals is detailed in my written testimony. In addition, we maintain an ongoing interaction with our contractors to encourage their support and

participation in numerous outreach activities.

In an effort to improve contracting with small businesses, we

have three suggestions for the committee. We suggest you consider

establishing a set-aside mechanism for women-owned businesses so

that we can contract directly with these companies. We have goals

for contracting with women-owned businesses, but we don’t have a

set-aside mechanism providing funding for mentor/prote ́ge ́ programs, but we think it would be helpful to have specific funding

to incentivise that and provide funding for monetary incentives for

subcontracting with Native American economic enterprises or organizations. FAR regulations allow this, but it’s the same issue in

terms of incentivising.

In summary, DOE Albuquerque will continue to make every effort to award prime contracts to small businesses by identifying poVerDate 11-MAY-2000 03:18 Apr 04, 2002 Jkt 077298 PO 00000 Frm 00024 Fmt 6633 Sfmt 6602 E:\HR\OC\A298.XXX pfrm13 PsN: A298
21

tential set-asides as contracts expire, perform outreach efforts and

identify small businesses with the capability to support our requirements, monitor progress of our prime contractors, including

our M&Os, in achieving their small business goals, and promote

the small business program to in-house technical personnel who

have upcoming contractual requirements.

Small businesses have contributed immensely to the accomplishment of our mission and the economy of our nation. We will continue to tap into their unique talents, capabilities, and expertise to

successfully support our operation.

And since you said I could ad-lib a little, I will. It’s not in the

statement, but I think the point on the in-reach is very important,

and I know the contractors, both LANL and Sandia and DOE, are

all working to expand their in-reach programs, in particular making sure that all of our purchasers and buyers are aware of New

Mexico firms.

[Ms. Wagner’s statement may be found in appendix.]

Chairman MANZULLO. I guess—I know it’s predetermined questions, but we’ve heard testimony like this in Washington, on several occasions. All the agencies are working overtime, providing all

kinds of opportunities, and yet, we get hundreds and hundreds of

letters from people like this that have been shafted; their companies grow smaller, the opportunities grow less, the prime contracting goes on more and more. And I’ve had one person from a

federal agency actually come in and say the Small Business Committee is right, there’s something seriously wrong with the whole

procurement process.

Now, I appreciate your testimony, Patty, and you’re a numbers

cruncher, I know, and you’ll do what you can on it.

Mr. Salgado, I appreciate yours, too, but I want to hear some response, perhaps from Mr. Nelson or Ms. Woodard, with regard to

what these people are testifying to, and so far I see nothing except

more promises of more outreach and asking Congress for more

money in order to sit down to talk to the Native American tribes.

I don’t understand that.

Why are you coming to us with a $4.9 billion budget and asking

for money, seeing as you could talk to the Native Americans who

populate this area.

Ms. WAGNER. May I respond?

Chairman MANZULLO. Of course. This was not directed at you

personally. This is the big ‘‘you,’’.

Ms. WAGNER. That’s fine. I think what we’re saying is that we

think the mentor/prote ́ge ́ partnership between large business and

small business is very successful in helping small businesses to

grow their businesses, and money to incentivise the programs, typically speaking, have money reserved to run their programs, and

incentivising larger businesses to help small businesses to become

successful is what we’re talking about, in terms of——

Chairman MANZULLO. I think they want orders. I’m going to ask

the question, here, where are you buying your pens and paper at

Los Alamos? I’m going to ask the question, what percentage of office desks, pens and paper, computers, consumer products used at

Los Alamos are coming from New Mexico, and how much is coming

from out of state? I think that’s why these people are here.

22

In Washington, you know, Congress does everything we can in

order to incentivise in order to get people to come out of poverty.

And Native American tribes have had, obviously, a very difficult

time, historically, in this country, and they are coming to us Republicans and Democrats, saying, ‘‘Look, the opportunities we have

had in the past to contract with the federal government are diminishing.

Well, let’s go on.

Ms. Woodard, let’s go to you.

STATEMENT OF JOAN B. WOODARD

Ms. WOODARD. Thank you, Mr. Chairman, Mr. Vice-Chairman,

Congressman Udall. I appreciate the opportunity, on behalf of Paul

Robinson, to offer my words and his testimony. I will attempt to

summarize my written remarks, which are quite extensive, in a

way that will give you some material that will be of use in trying

to understand the issues facing Sandia.

Sandia is a national laboratory serving the country with technology for national security. As a laboratory, we are to meet the

country’s needs with the best business practices and a strong foundation of quality. Just as the Department of Commerce, Malcolm

Baldridge’s national quality award emphasizes the importance of

having a strong supplier network, we, too, see that as an important

cornerstone, and small business is a cornerstone of our quality supplier network. We value our suppliers and strive to have relationships with them so that both we and the supplier community can

achieve excellence.

As a federal contractor, we establish goals for small businesses,

small disadvantaged, women-owned businesses, and 8(a) businesses. In the past five years, 57 percent of our procurement was

done with small business. This past year, that percentage was 67

percent, or $275 million. In the past five years, an average of 50

percent of all of our procurement was done with firms in New Mexico. In fiscal year 2000, Sandia contracted with 1,214 firms in New

Mexico, 89 percent of which are small businesses.

Over the past five years, New Mexico companies received 93 percent of the total dollar volume of Sandia’s construction and architectural engineering projects, nearly 60 percent of that going to

small businesses. We do not practice a preference to small business

regardless of quality, however. Our strategy is to work with small

businesses so their capabilities can benefit firms anywhere. Similarly, we do not have a policy of preference for New Mexico firms,

but find that it makes really good business sense to have suppliers

who are responsive and knowledgeable about the laboratory, and

highly competitive in their capabilities.

We measure success in many ways. First, successful delivery to

our customers of our technology products. To achieve the goals that

I have mentioned above, we conduct surveys of our suppliers to understand problems that they face with our practices, and we look

at awards and citations that the laboratory has received.

In 2000, the Small Business Administration awarded Sandia the

Dwight D. Eisenhower Award for Excellence in Use of Small Business, and in 2000, DOE named Sandia the management and operating contractor of the year, in recognition of our outreach activiVerDate 11-MAY-2000 03:18 Apr 04, 2002 Jkt 077298 PO 00000 Frm 00026 Fmt 6633 Sfmt 6602 E:\HR\OC\A298.XXX pfrm13 PsN: A298
23

ties to encourage small businesses to work with the laboratory.

Sandia received additional recognition when the United States Hispanic Chamber of Commerce named Sandia the southwest region

business advocate of the year for 2000. Also personnel in the laboratory, like Ms. Cynthia Schneeberger, and Ms. Corina Gallegos

have been recognized for their hard work on behalf of small business. Sandia’s success in contracting opportunities for small businesses is the result of an intentional strategy.

In 1999, the laboratory director, Paul Robinson, established a

procurement council to oversee and provide executive ownership of

our strategy and the small-business responsibilities. As a best business practice, it is important to develop a team relationship with

suppliers, which can help us learn where we must fix problems. A

good example of that, in action, was with our staff augmentation

contractors. Some years ago, listening to our contractors, we

learned of the problems with our practices and made substantial

changes, and we look forward to continuous improvement and

teamwork with our staff augmentation contractors to help improve

our practices.

There is a trend in global commerce today toward a highly competitive customer-supplier relationship. Large companies often invest significant effort in helping with guidance and expertise to

their suppliers. We have four fundamental parts in our small business program. The first is teamwork and communication. Through

our supplier community advisory council, we establish a mutual

understanding, corporation and trust with our executives. Many of

us participate on boards and chamber boards and panels in the

community, working with small business. We have a business partner program that provides outreach.

Second, we create knowledge both ways. We have conducted

small business orientation programs where we help the community

businesses learn about the opportunities at the laboratory. We also

have an office of small business advocacy, with the responsibility

to raise awareness of small business capabilities within our internal organizations at the laboratory.

Third, we offer support to our suppliers for development of their

business practices. Included in that is business training and ISO

9000 certification training, both of which were done in collaboration

with Los Alamos and other entities in this state. Sandia also offers

workshops in the areas of lean manufacturing and patent application principles and procedures.

Fourth, we offer technical assistance to suppliers. We have had

a successful program through small business technical assistance,

funded by DOE Defense Programs. We’re at the end of that program. We now have a new program with the help of the state legislature.

In 2000, the New Mexico state legislature passed the Laboratory

Partnership with Small Business Tax Credit Act. With limited

gross receipts tax rebates, Sandia is now able to provide technical

assistance to small businesses in New Mexico.

Within one month of the establishment of this law, we started

our program. To date, we have 400 inquiries, 300 from outside of

Albuquerque, completed 145 projects, 112 of which are from nonmetropolitan areas. We recognize that a large percent of our busiVerDate 11-MAY-2000 03:18 Apr 04, 2002 Jkt 077298 PO 00000 Frm 00027 Fmt 6633 Sfmt 6602 E:\HR\OC\A298.XXX pfrm13 PsN: A298
24

ness is with New Mexico firms in the Albuquerque area, and hopefully, through this program, we will develop a relationship, as well

as help, working with these rural companies, to improve their capabilities so they can be quality suppliers.

Sandia is also a catalyst for regional development. We have an

entrepreneurial program called New Ventures for employees to

leave the laboratories and spin off small companies based on laboratory technology, personnel, or activities.

So, in conclusion, Sandia Laboratories is committed to enhancing

the opportunities for small businesses. It makes good sense. At the

same time that we promote regional economic development, we will

strive to emulate best business practices and emerging trends in

industrial customer-supplier relationships and realize the management efficiencies that our sponsors expect of us. We see no conflict

in these goals. Our desire is to work with small businesses to improve their level of quality. We are partners with our small business suppliers for mutual excellence.

Thank you.

[Ms. Woodard’s statement may be found in appendix.]

Chairman MANZULLO. Thank you very much.

Our last witness is Ronald Nelson, who is Director for Contracts

Management, University of California Office of the President, Vice

President for Laboratory Management. We look forward to your

testimony.

STATEMENT OF RONALD A. NELSON

Mr. NELSON. Thank you, Mr. Chairman, Mr. Vice-Chairman, and

Congressman Udall.

As you’ve indicated, I am the contracts manager for the University of California. In listening to the various people who have

talked this morning, I thought I would depart a little bit from my

written statement, simply to try to be more responsive to a lot of

the comments made.

One of the questions that you seemed to have raised, Mr. Chairman, is what is the role of the contractor in a region such as northern New Mexico, particularly as alluded to by Abe, the 60-year experience that the contractors have here, and the impact on the

community.

I would like to bring to your attention the Time of Communities

Act in 1955, which was legislation which targeted various specific

areas such as Los Alamos, Washington, Oak Ridge, et cetera. So

during the period that this act was in place, that was a congressional statement of the role of the federal government in helping

those communities in areas where the government predominated.

And so, for many years, the role of contractors was somewhat secondary to the role of the federal government in that area.

With the expiration of that act in the early 90s, this changed,

and from that point forward, the Department of Energy has encouraged its contractors, including the University of California, to

develop programs that would help step into the breach, as these

federal dollars were removed, that there would be ways in which

economic development could occur in those areas where the contractors helped out, and that’s really the context in which—in my

written statement, I talk about the four-part initiative that the

25

University of California developed with regional leaders in 1996, in

response to this.

And those four part areas involve the regional procurement program, which has been alluded to already, where it focuses its efforts on improving awards to northern New Mexico business enterprises, the majority of which, of course, are small businesses. We’ve

done so through a preference program, as mentioned by Deputy Director Salgado, approved by the Department of Energy, and is documented in our procurement system at Los Alamos.

We have encouraged major suppliers, such as Johnson Controls,

which is the on-site contractor, and Protective Force Technologies

of Los Alamos, which is our large security supplier, to purchase regionally, as well. The University and Los Alamos have also established a procurement advisory group, which Tony alluded to in his

participation, which involves regional business representatives to

discuss evolving purchasing practices at Los Alamos and to share

their business concerns.

The second part involves corporate citizenship. We opened a

northern New Mexico office in 1996, as a means of being better engaged locally. The University and Los Alamos also established a

foundation, which has been mentioned, that provides funds to regional education and community efforts.

Let me say, for a moment, the Los Alamos National Laboratory

Foundation and the provisions that talk about how funds are distributed within the region represent a significant diversion from

the prior history where the educational funds were focused in the

Los Alamos community, and based upon the formulation that was

agreed to with the Department of Energy, a process was established whereby schools in the region, with children of Los Alamos

employees, would have an opportunity to enhance educational

funding. If you so desire, we’d be happy to provide you with additional details about those procedures.

The University and Los Alamos also participates in the Northern

New Mexico Supplier Alliance, an organization of major suppliers

to the laboratories that looks for ways to further the goal of regional economic diversification.

The third part involves education and research. The University

and Los Alamos established the Northern New Mexico Council on

Excellence in Education to enhance the intellectual capital of the

region, the place from which we draw the work force of tomorrow.

The council includes educators drawn from northern New Mexico

K through 12 schools, colleges, businesses, and the New Mexico Department of Education. The University and Los Alamos also sponsor a variety of research activities at New Mexico colleges and universities with funds derived from the management fee in Los Alamos.

The fourth part involves commercialization of Los Alamos-developed technologies, with an emphasis on creating new businesses in

the region. The University and Los Alamos have an entrepreneurial leave program approved by the Department of Energy that

encourages technologists at the laboratory to establish new businesses. The University and Los Alamos also license technologies to

regional businesses, provide some basic training in business skills,

26

and offer technological assistance to regional enterprises at a lower

cost than that charged to other businesses.

The University and Los Alamos have created an MBA fellowship

program to bring MBA candidates from business schools, such as

UC-Berkeley, Stanford and the University of New Mexico to Los

Alamos to look at opportunities to establish businesses based upon

Los Alamos technologies and to provide assistance to regional enterprises in need of business advice.

You can see that our four-part strategy directly involves small

business enterprises both in our regional purchasing and our technology commercialization. Our four-part strategy also benefits the

regional small business community indirectly through our community and education efforts.

To summarize, we understand that small business enterprises,

as you have indicated, Mr. Chairman, and particularly those in

northern New Mexico, are important to the Los Alamos National

Laboratory, both as a high quality supplier base, and as a place for

future employees. For these reasons, the University sees itself as

having a stake in the success of its small businesses.

Earlier, you heard testimony from Deputy Director Salgado regarding the statistical information about the success of the program thus far, and some of the plans for the future.

I thank you very much.

[Mr. Nelson’s statement may be found in appendix.]

Chairman MANZULLO. Thank you very much.

Mr. Udall.

Mr. UDALL. Thank you, Mr. Chairman. The issue here—and the

chairman has hit on it a little bit, and I want to ask some of the

second panel members about that—the business people that are

here today are not unusual, in northern New Mexico, in their statements and complaints, and saying how we could improve. In fact,

I met with the chamber group in Los Alamos recently where business people who had been in business a long time, right in Los Alamos, feel they’re being ignored by the Los Alamos National Laboratory, that they aren’t consulted on major changes that occur that

impact their businesses.

The one example that they gave me is there’s been a whole

change in the work schedule at Los Alamos where there are now

Fridays—Fridays end up being a free day, and with the work

schedule, the way it works—and you know, Mr. Salgado, more than

I do about this work schedule change, but this has had a dramatic

impact on every business in Los Alamos, and their position—I don’t

know whether it was true or not, but their position was, they

weren’t consulted, they weren’t asked to come in and say, ‘‘Is there

some way we can work through this so that it is better for Los Alamos businesses?’’

And so, when I hear these things over and over again, I have to

believe that there’s some—where there’s smoke, there’s also got to

be fire. And I was wondering how you measure—how you really

measure your success, in terms of engaging small businesses, increasing contracts, trying to do everything you can to improve the

economic situation in northern New Mexico.

Many of us know that two of the surrounding counties have had

very, very high unemployment rates since the Great Depression. I

27

mean, for all of the good words and intentions and everything else,

we still, in Rio Arriba County and Taos County, have real problems

in terms of getting people jobs, and those of you that are administering these, as the chairman said, billions of dollars, have an opportunity to open the door to many of these people to get jobs.

So my first question is, you know, how are we measuring success? Are we talking dollars to small businesses? Are we talking

about an increase in contract numbers? Are we talking about an

increase of jobs in these communities? I mean, how are we measuring our success, and can you point out for me, over the last five

years, how you’ve—whatever measure you’re using—how you’re increasing and making progress in those areas.

And Mr. Salgado, why don’t we start with you, since you put in

your testimony that your goal is to place 35 percent with small

businesses, $335 million, and you’re on track to see that goal. I’m

wondering, are these prime or subcontractors? Who are we talking

about?

Mr. SALGADO. We are talking about dealing with the world of

small businesses that we deal with in our procurement. We put a

35 percent goal on an estimated $1 billion procurement base.

As you’re well aware, Mr. Congressman, there are large contracts

up there with the guard force, or Johnson Control, so a substantial

amount of our procurement dollars are tied into basically some

major contractors and some unique circumstances, such as the fire

department and things, given our geographical configuration and

our location. So that 35 percent, the $350 million, is for small business. Those were the goals negotiated and accepted by the Department of Energy that we, as a laboratory, need to meet in order to

fulfill those obligations.

I would indicate to you—you mentioned the Friday program at

Los Alamos that has Los Alamos County concerned. That is a program by which the work force, over a period of two to three years,

decided they would like to be able to have every other Friday off

in some type of sequence. There was a lack of communication with

the small business community in Los Alamos. It has negatively impacted some of the restaurants and other businesses in Los Alamos

County, and we have made every effort to try to continue and enhance the dialogue with Los Alamos County so that type of situation does not increase itself.

Mr. UDALL. Are we talking about prime contractors, or are we

talking about subcontractors?

Mr. SALGADO. We are talking about prime contractors that essentially tie into the supply designed into those areas that are dealing

with providing services and supplies to Los Alamos National Laboratory. The prime contractors, we do not have the—Johnson Controls, the prime contractor, they have some subcontracts that they

basically put into place, as well as some of the major construction.

Chairman MANZULLO. Would you be willing to furnish a list of

those subcontracts?

Mr. SALGADO. Yes, sir.

Mr. UDALL. So on these prime contracts, then, Los Alamos really

isn’t doing any of the work, you’re passing this on to the contractors, basically, the prime contractors.

28

Mr. SALGADO. There are prime contractors such as HanzelPhelps, which is building the new supercomputer building up

there, they have subcontracts with a minority firm. Those are not

included in our numbers. There is a long list of what I would call

prime contractors. Johnson Controls, the Protective Guard Force,

those are prime contracts that may have in and of themselves other

subcontracts contracting with small business firms and minority

firms. I do not have the numbers for you. The numbers provided

here are our prime contracts for supplies and services at Los Alamos National Laboratory, providing services to us as a laboratory,

and that’s the 35 percent number.

Chairman MANZULLO. If you will, what is—the $335 million at

Los Alamos, is that going to people like these people here?

Mr. SALGADO. That is going to all the small business activity

both here and across the nation that basically supply goods and

services to Los Alamos.

Chairman MANZULLO. But that’s the prime contractors.

Mr. BARTLETT. No.

Mr. SALGADO. No, that is with Los Alamos.

Our prime contractor, Johnson Controls, they have a $135 million general contract. They also buy goods and services. They are

not included in the 35 percent goal objectives.

Chairman MANZULLO. This $335 million, none of this is represented by these prime contractors.

Mr. SALGADO. None of that is represented by the prime contractors.

Chairman MANZULLO. Can I ask you a question? Where do you

buy your stationery?

Mr. SALGADO. Our stationery is bought through just-in-time services. I don’t have the names of the businesses.

Mr. ROYBAL. That is Boise Cascade. They currently hold the

Just-in-Time (JIT) contract.

Chairman MANZULLO. And Boise Cascade holds the contracts for

the post offices cross the nation.

Mr. ROYBAL. Sierra Vista was a small business, minority disadvantaged business here in Albuquerque, that had the JIT contract in Los Alamos, and they were purchased by Boise Cascade.

Chairman MANZULLO. Could you identify yourself.

Mr. SALGADO. This is Dennis Roybal, head of procurement at Los

Alamos.

Mr. MANZULLO. Would you spell your last name for the record.

Mr. ROYBAL. R-O-Y-B-A-L.

Chairman MANZULLO. So Boise Cascade is—you’re going to them

for your office supply products?

Mr. SALGADO. Mr. Chairman, we had a contract with a small

business in Albuquerque. Boise Cascade bought that business, and

we had to honor that contract for a period of time. It’s still under

that contract.

Mr. ROYBAL. That’s correct.

Mr. SALGADO. They bought out a small business, and the contract was with the small business, and so that contract has stayed

in place.

29

Chairman MANZULLO. So they bought out that small business.

The amount of procurement from that small business, did that increase once they bought them out?

Mr. SALGADO. Did the amount increase after Boise Cascade

bought out the small business?

Mr. ROYBAL. Probably not. But it’s based on demand, so it’s relatively the same dollar amount.

Chairman MANZULLO. Do you know where the stuff is coming

from?

Mr. ROYBAL. That Boise Cascade purchases?

Chairman MANZULLO. Yes.

Mr. ROYBAL. No, I don’t. I imagine that Boise Cascade has several suppliers for different products.

Chairman MANZULLO. Do you know if any of those suppliers are

local?

Mr. ROYBAL. I do not know, sir.

Chairman MANZULLO. This is the problem.

Mr. SALGADO. Mr. Chairman, I agree with you it’s a problem.

The problem we have is with the contract negotiated with the

small business in Albuquerque which was bought by Boise Cascade. That contract has not expired, as far as I know, and has not

been renewed. It’s still the same existing contract; is that correct?

Chairman MANZULLO. So you contracted with a small business

company for all your office supplies?

Mr. SALGADO. Or a portion thereof, yes.

Chairman MANZULLO. Is that correct?

Mr. SALGADO. Yes, that’s correct.

Chairman MANZULLO. Did you contract with any other small

businesses, besides the one that was bought out?

Mr. ROYBAL. We have 38 just-in-time contracts, such as with Ms.

Morales, contracts that provide goods and services to the laboratory. Of the 38, 33 are awarded to small businesses, and 20 of

those 33 are women-owned businesses.

Chairman MANZULLO. How does Boise Cascade figure into this?

They are, obviously, not a small business.

Mr. SALGADO. They just bought the contract, and the contract remained in full force and effect.

Chairman MANZULLO. I think that DOE—we’re here as the

Small Business Committee—is representing that Boise Cascade

could come in and buy up a company that you’re under obligation

with, that the government’s certified as a small business

provider——

Mr. SALGADO. That’s correct.

Chairman MANZULLO [continuing]. At some point, either in the

amount of the value of the total company, or the assets of the individual owner—in most cases, that’s $750,000. Now we’ve got Boise

Cascade who, incidentally, has a contract with all the US post offices, supplies them their pens and paper nationwide, to the exclusion of local supply stores, such as Mr. Martinez’, that comes in;

even though we passed these goals in Congress. This is not what

we had in mind. This is not what we want.

So what I would like to see from the lab is a list of the small

businesses that you’re dealing with. I want to know who they are.

30

I want to know who the owners are. I want to know how much

they’re worth.

How do you answer Mr. Martinez, who’s laid off half of his people that used to sell pens and pencils and paper supplies?

Is that right, Mr. Martinez?

Mr. MARTINEZ. Yes, Mr. Chairman. On top of that, when the JIT

was formed in the 80s, they still went to the their local office supply store in Los Alamos and purchased about $1 million in goods

and services over the ensuing five years. I couldn’t go and open a

store in Los Alamos, because my overhead would have increased

twice what it was, and I couldn’t have been competitive, with a

double overhead.

Chairman MANZULLO. Mr. Montoya, do you have a statement?

Mr. MONTOYA. Yes, sir, Mr. Chairman. Thank you.

I think we’re going back to attitudes again, and the attitudes are

reflected in the way the numbers are expressed, and I assure you

those numbers are developed, and as I say, statistically, you can

get them to say whatever you want.

Now, as far as the University of California, I see them as being

the prime contractor. Johnson Controls, PTLA are subs, and they

keep referring to them as subcontractors. Now, when you talk

about subcontractors and prime contractors, well, where do those

goals apply, the goals set forth by the Small Business Administration, by the Small Business Committee?

Now, how does that get down to us? That’s where the problem

starts, is with the attitudes. How can they represent and say that

they feel good with what they’re doing, if part of their multibillion

dollar budget, one point some million of it goes to a contractor like

Johnson Controls?

Now, when they say 35 percent, 35 percent of what? Of the procurement dollars they have set a aside for procurement, or 35 percent of the total budget for Los Alamos, as the University of California being the prime contractor?

Now, if you take 35 percent of the total budget, then you’re talking about the way NASA does it when they release these large

multibillion dollar contracts, and they say okay, 35 percent must

go to small, minority, 8(a), women-owned businesses.

Chairman MANZULLO. I think the problem here is—— Mr. MONTOYA. How we play with numbers.

Chairman MANZULLO. You are the prime contractor, here.

Mr. NELSON. Yes, we are the prime contractor. Johnson Controls

and PTLA are major subcontractors.

Chairman MANZULLO. To you?

Mr. NELSON. To us, that is correct. And then they, in turn, I believe—and Dennis can address this more specifically, but when we

have major subcontractors, such as PTLA and Johnson Controls,

they have flowed down to them the various subcontract requirements associated with small business.

Chairman MANZULLO. But where are the companies they are contracting with?

Mr. NELSON. Where are they?

Chairman MANZULLO. Yes. Where are they coming from?

Mr. NELSON. A number of them are in northern New Mexico, and

some of them are elsewhere.

31

Chairman MANZULLO. How many are in northern New Mexico,

and how many are not?

Mr. NELSON. I wouldn’t have that information.

Chairman MANZULLO. I think you should know that. I mean, the

reason we are here is because of the tremendous amount of unemployment in this congressman’s district, and when I see Native

American councils that are here begging for work, and then you,

as the prime contractor, don’t even know where this work is going,

I think there’s an obligation to keep it here as long as it’s certified

and it’s competent.

Mr. SALGADO. Mr. Chairman, if I could just add, part of the issue

of what I will call the major subcontract, whatever terminology we

use, part of those, under appendix J, when they negotiate the contract, there are economic development provisions in those contracts

and commitments made by those subcontractors, such as Johnson

Controls, or Day & Zimmerman, which owns PTLA. They have

committed to create jobs in the valley, number one, and to create

a financial structure to help the infrastructure, economically, in the

valley. So at the same time we are looking for subcontractors, there

are commitments they have made, pursuant to those subcontracts,

for economic development.

Chairman MANZULLO. So you’re going to a subprime contractor

who doesn’t have a base here; is that correct?

Mr. SALGADO. Johnson Controls, that’s correct—I’m sorry for interrupting. They have established—as a tax base, they have established corporate offices, as I said, in northern New Mexico.

Chairman MANZULLO. Well, that means you’re bringing in out-ofstate companies to sit down and advise you on how they are going

to develop the local people economically. That’s what your subcontract does.

Mr. SALGADO. That’s part of their requirements under that contract.

Chairman MANZULLO. No, I understand that, but obviously, it’s

not working. Abe?

Mr. SALAZAR. Yes. Let me give you some insight, because I’ve

been in the valley, I’ve been on a lot of committees. I’ve seen Los

Alamos come in and out of the valley, and they have a lack of commitment; bottom line, a lack of commitment.

Some of the examples of these initiatives was, again, when they

renegotiated what they call the prime contracts. What they did in

their contracts was to implement a little subsection in there, stating within their contract, within those five years, you have to have

some type of economic development in the northern New Mexico

section. It doesn’t say how you do it. It doesn’t give you specifics.

It doesn’t even say you have to purchase anything. It just says you

have to have some type of economic impact.

Chairman MANZULLO. And what did they do?

Mr. SALAZAR. At the end of the day, two years went by and these

primes didn’t have to do anything; just met and met and met, and

wasted a lot these business people’s time, my time, over meeting

after meeting, just to have another meeting, and at the end of the

day, two-and-a-half years after this, halfways in their contract,

then they build a building and say, ‘‘That’s our economic impact.’’

Chairman MANZULLO. For their corporate offices?

32

Mr. SALAZAR. Not even their corporate offices. Supposedly, they

were going to move some resources down to the valley. That never

happened. And the one contractor that did commit, Lou Ganal— they were the only contractor that committed to the valley—they

established themselves.

Chairman MANZULLO. Did you get an award for that?

Mr. SALAZAR. I sure did. I got a contract. They spent over $100,000 with my company the first year out, and then what do

they do? They cut the contract. Talk about backwards. That’s a little backwards, in my book.

On top of that, this is the game they play with numbers. You’ve

got to be very careful what they are stating in the numbers. When

they issue a contract, it doesn’t mean they have to purchase. That’s

the reality.

Chairman MANZULLO. Could you, Mr. Salgado, get us copies of

those contracts with Johnson Controls and Boise Cascade?

Mr. SALGADO. Yes.

Chairman MANZULLO. What other subs does the university have?

Mr. SALGADO. The other major sub would be Day & Zimmerman,

that has the protective guard force there.

Chairman MANZULLO. That’s the other major sub.

Mr. SALGADO. Yes. It’s a uniformed guard and security service

for the entire facility.

Chairman MANZULLO. Any other subs?

Mr. SALGADO. We have a whole list. Some are construction subs,

that are basically building the computer center. As I’ve indicated,

Hanzel-Phelps is another major contractor. They are completing

construction—— Mr. SALAZAR. Excuse me. More about the contract vehicle.

Currently, we do have a contract with Los Alamos for $100,000.

They write this up in the paper and say, ‘‘We just awarded another

local vendor a contract.’’ David, how much have they spent to date?

UNIDENTIFIED SPEAKER. Zero.

Mr. SALAZAR. Zero. They don’t have to purchase, but they can

write it up in the paper that they awarded another contract.

Mr. MONTOYA. Mr. Chairman, if I could make a point on how

they have been doing it for many, many years, and that is, the

prime contractor, as it flows down to their subs, they set goals.

They then write a business plan for providing—or contracting with

small minority businesses. In that business plan, it states what

they are going to contract for and what that goal is. The goal could

be as low as 5 percent. However, there are no penalties to that sub

or prime contractor if they don’t meet their goals. The penalties

should be, and we’ve been asking Congress to make that mandatory, is they should suffer at the award fee level. If you don’t meet

that requirement, then pull a certain amount of the award fee.

Johnson Controls and PTLA both have failed miserably in the

plans they provided Los Alamos on how to develop contracts with

small businesses.

Chairman MANZULLO. What doesn’t make sense is this: I was

raised in business myself, and back in Illinois, we have a lot of

manufacturing, for example, Caterpillar. Caterpillar, itself, deals

with hundreds of subs for parts, for services, et cetera. Why is the

33

lab contracting this out to a prime contractor and not doing their

own procurement? Why don’t you do your own?

Mr. SALGADO. Well, we do our own procurement, Mr. Chairman.

It goes back many decades, I believe. The fact of the matter is, for

basically the maintenance and smaller construction activity, there’s

been one general contractor for the entire laboratory because of 43

square miles, 200 different buildings. So it has been thought to be

extremely cost-effective to be able to have one contractor to come

in and to manage that large work force for the maintenance and

on-going infrastructure activity that the institution needs. That is

the reason why they have gone to one contractor.

Chairman MANZULLO. That’s for maintenance and infrastructure.

Here we’re talking about computers and paper and related services.

Mr. SALGADO. Many of those things, Mr. Chairman, are not

under a major contractor. When I talk about Johnson Controls has

to buy goods and services, they have to buy pens and paper, they

have that within their purview to handle, under the terms and conditions of their contract. The laboratory is saying this 35 percent

of the $1 billion procurement that will be put out in FY01, that

that’s what goes to the goods and services people around the table.

Chairman MANZULLO. Doesn’t it concern you that you’ll enter

into a contract with a prime contractor that will bring in items

from halfway across the country, to the exclusion of people right

across the street, that have the very same items, to be competitive?

Doesn’t that bother you?

Mr. SALGADO. Absolutely.

Chairman MANZULLO. What are you going to do about it?

Mr. SALGADO. First of all, there’s an assumption, and I don’t

have the information, that Johnson Controls, hypothetically using

them as an example, is bringing in those goods and services, is not

buying locally. I’m not quite sure of that, because—— Chairman MANZULLO. I would think you wouldn’t have this high

rate of unemployment if the local resources of this area were used,

with the amount of taxpayers’ dollars that are flowing into New

Mexico.

I mean, when Congressman Udall and I first discussed this

issue, about what was happening here, I had no idea it was as

grave, until I came to this hearing and listened to these people over

here, and then I heard you say the solution is more money from

Washington, to set up more outreach programs.

I’ll tell you what the solution is. The solution is to get away from

prime contracting and to do the work yourselves, to have your own

procurement officers, because prime contracting does not save

money.

The Department of Defense, Inspector General’s report showed

that prime contracting actually costs the taxpayers more money,

and it destroys local jobs.

Mr. SALGADO. Can I respond?

Chairman MANZULLO. Of course.

Mr. SALGADO. The majority of the Johnson Controls personnel— and I don’t have the exact numbers—are all local residents—there

may be one-half of 1 percent, possibly, that are not local residents—so those jobs and those employment jobs are staying here

within the community.

34

Chairman MANZULLO. You’re talking about supplies for the jobs.

Mr. SALGADO. Then, on the supply side, I don’t have the numbers

for you; I really don’t.

Chairman MANZULLO. Can you get those for us?

Mr. SALGADO. Yes, we will get those for you. We will take a look

at our top five what I call prime or major subcontractors——

Chairman MANZULLO. I want to see all of them. I want to see the

pattern here. I want to know where these supplies are coming

from.

Mr. SALGADO. We will gather that information.

Chairman MANZULLO. There are areas of this country, around

Chicago and around the beltway in Washington, D.C., around San

Francisco, around Los Angeles, that are just thriving commercially.

It’s incredible. Unemployment is at 1 and 2 percent. Then you have

pockets, such as New Mexico, with incredibly high unemployment

and vendors that are crying out, looking for work, and with the

people in charge of procurement, not knowing where the supplies

are coming from, I don’t know about that.

Mr. Bartlett.

Mr. BARTLETT. Thank you very much. I, in a past life, worked on

both sides of this issue. I worked for government and was involved

with procurement on a technical level, and I also was a small business owner and did business with the government. One of the problems that I saw, both in working with the government and working

for the government as a subcontractor, was the tendency of the

buyers to award contracts to suppliers, subcontractors that they

were familiar with, that had performed well in the past. And I understand how you get there, because if you’re a buyer in the government, you are rated on the basis of how well your contractors

perform. And so, if you issue an RFP, and you get half a dozen responses, and two of those are from companies you have dealt with

in the past, and if they are responsive proposals, you’re very prone

to go with them.

And in this arena, the rich tend to get richer and the poorer to

get poorer. And I understand how that happens, because the buyer

rests easy at night. If he has let his contract to somebody he’s familiar with, that’s performed well in the past, the probability is

they are going to perform well in the future.

How can we incentivize our buyers so that they are reaching out

to the kinds of small businesses that have testified here today, so

that they can be rewarded, so that they can—their appraisal can

include reaching out? There are some risks when you reach out.

There are certainly some risks. A new small business may, in all

honesty, present themselves as being qualified in an area; on

paper, they may appear qualified in the area, but they may not be

able to perform as well as they anticipated, or as well as the buyer

anticipated that they would perform. So there’s some element of

risk there.

How can we incentivize our buyers to assume this risk so that

they can reach out to firms like these involved here? We recognize

that there are going to be some work performance issues. You can’t

be reaching out to everybody and not have some contracts that are

not going to be performed as well as others.

35

How can we incentivize them to reach out so we can bring more

of these people on board? I’ve been concerned with this and interested in this now, for, oh, 40 years, I guess, a long time, working

with the government and working as a part of government.

What suggestions do you have?

Mr. SALGADO. I think probably the key, number one, is to establish some matrix by which we can see that there is a reachout and

maybe there is an infusion of new opportunity for small business,

putting those in a performance matrix, basically, and holding people accountable for that component.

The second component that we have, that I addressed in my oral

statement, is, essentially, we need to basically educate our buyers;

and not just our buyers, but we need to educate the technical staff,

because many times our problems rest in the fact that our buyers

are merely getting information from technical staff members that

require very specific parameters for whatever they’re attempting to

buy, not just paper and pens, but other issues that have technical

requirements.

One of the issues that Benny has tried is going forward aggressively and educating the technical staff on the opportunity that

small businesses can bring to the laboratory, and that follows Dr.

Browne’s directive that we need to increase this activity.

So it’s a three-prong approach: The matrix for performance appraisals, holding people accountable, and setting standards.

Number two, education of the procurement staff and education of

the technical staff, because we have found that is also a major

problem. And you’ve indicated, rightly so, there’s a comfort level

and a comfort zone, and if they go to A, they’ll go to A and A again,

no matter what. And I think that is a problem we have to address,

and that is an institutional culture issue to deal with, particularly

with an institution like Los Alamos that has been doing this for an

extended period of time, with a limited supply source.

Mr. BARTLETT. You used the word ‘‘culture.’’ I personally think

this is probably the biggest challenge we have. It’s how to change

the culture, and I don’t know how to do that. If you’re reaching out,

if you’re pushing the envelope, there’s going to be some failures,

and I think that that needs to be anticipated and built into the appraisal. As a matter of fact, if a buyer does not, once in a while,

let a subcontract to somebody who doesn’t perform as well as might

be expected, he’s not really reaching out.

Mr. SALGADO. That’s very true.

Mr. BARTLETT. Somehow we have to build into—we have to anticipate that if you’re really pushing the envelope, there’s going to

be some failures out there.

Mr. SALGADO. You’re absolutely correct, because if you play in

the soft comfort zone, you’re never going to break out of that.

Mr. BARTLETT. Yes, and that’s where you’re playing. And I understand the incentive for doing that, because I’ve worked on both

sides of that. I can remember, in small business, I began going

through the small business contract area—I guess you can do that

now on the internet and—not look at that every day; subscribing

to that, it wasn’t cheap for small business—then I would read

things in there that I thought I could respond to, but, you know,

I really didn’t have a chance, because they didn’t know me and

36

there were going to be several people respond, that they did know,

that had worked for them before, and my proposal might have been

just as good as theirs, but they didn’t have any comfort level dealing with me, but they had a comfort level dealing with someone

else.

I think, Mr. Chairman, this is major problem we have in the

area, that we somehow need to change the culture. I think there

are good intentions from the top down. People really believe that

we have programs that are reaching out, but I think there’s a comfort level for that buyer, and he’s not going to let a contract to

somebody that might make him look bad, if he doesn’t know them.

They may look good on paper, but he knows Joe, and Joe has performed for the last 15 years, and you know, Joe is going to perform

well now, and this other guy looks just as good as Joe, but, you

know, he’s comfortable with Joe, so that’s where he’s going. How

do we broaden this field?

Mr. SALGADO. Well, we’ve talked about the areas to do it, and

ironically, many procurements are basically driven by the technical

staff. They come to a procurement and they say they need this

widget with these parameters. Again, it’s the technical staff, and

then, the buyer, he’s caught between the institutional goals and the

objectives, and the technical staff is sitting there, saying, ‘‘Wait a

minute, I don’t want to go off in this strange land. I want to make

sure I get my widget built the way I want to.’’ That’s a dichotomy,

and the culture has to change. We need interaction in introducing

the small business and minority firms, in New Mexico particularly,

to the technical staff, so they have the comfort level to know the

professional cadre and suppliers out there to meet their needs.

That is one of the first things to try to get in this cultural change.

Mr. BARTLETT. Do you have seminars that are generic in nature,

where you let the local small business people know the kinds of

goods and services that you need? There may be people out there

that could meet some of your needs, and you don’t even know they

exist out there, and they don’t know that they have the capability

of meeting your needs, because they don’t know what your needs

are.

Do you have these generic kinds of seminars that just lay out the

kinds of things you do and the kinds of support that you might contract for?

Mr. SALGADO. Yes, sir. In the last 18 months, we have had two

major conferences dealing with basically bringing the suppliers together and talking to the suppliers about what we at the lab need

in those areas.

We also had two separate distinct conferences where we had the

technical staff come in and meet with the suppliers so the suppliers

had an opportunity to talk to the technical staff and indicate what

their capabilities are in providing goods and services, and we’re

having—our third conference is scheduled in the next—in October,

again, for bringing them together, because what has happened, of

course, the lab, given our own geographical configuration, is a difficult place to do business with, spread over 43 miles, being very

decentralized between divisions and directorates, so, the answer is

yes, we have had—we’re having our third one, and we have had

two others where we’ve offered for the suppliers to come in and

37

present to the technical staff what their capabilities are. So we are

trying to create those lines of communications and comfort.

Chairman MANZULLO. Ms. Morales.

Ms. MORALES-GURULE. I just had a response to that.

Once again, I’m going to address the purchase cards. To me,

we’ve always referred to them as what we call ‘‘power cards’’, because end-users can receive those purchase cards, and I believe

they’re anywhere from—your limit is $2,500 per purchase card

user. So therefore, you have Los Alamos getting bombarded with

mail order catalogs left and right. You have a technical user who

has to get the job done, and get it done quickly. I think they’re well

aware of CJ and the JIT process, but it’s much easier, I believe,

to pick up that purchase card, call the 800 number and get it in

here.

The problem I see with that is, I can sell a product for $10 on the JIT, and a mail order outfit can sell it for $10. Well, they’ll advertise for $10, when it actually gets into the laboratory, after the

shipping and the freight, that little $10 item might have turned

into a $15 purchase that it costs the laboratory.

In the past, that division has picked up that shipping cost for the

purchase card person, but yet they won’t pick that up for me, as

a local JIT vendor. And I think Abe hit it real good—— Chairman MANZULLO. Wait a second. You’re saying the lab pays

for the shipping for something done on a purchase card for an outof-state vendor, but if you have it shipped to them, they don’t pay

for your shipping?

Ms. MORALES-GURULE. That’s how I’ve always understood it

works in the Bus division.

Chairman MANZULLO. What division?

Ms. MORALES-GURULE. Bus, Business Operations Division. The

laboratory pays for the freight charges for those credit card purchases, whereas on the JIT—this is just recollection—ground shipping. If anything comes in overnight, then the end-users are

charged for that. But what happens is, I, as a JIT vendor, have to

absorb that shipping and handling cost, whereas a purchase card

mail order, that’s picked up by the Bus division, and the bottom

line is, they’re still going out of state. We are both providing the

same service.

Chairman MANZULLO. Is that correct?

Mr. ROYBAL. That could be correct. What happens is, when we’re

issuing a contract or a purchase order, we negotiate the terms, we

negotiate delivery terms, and it can either be FOB point destination or FOB point delivery. So when a purchase card places an

order, the buyer will negotiate the terms and conditions, and sometimes it may be FOB point destination. There are times it could be

FOB delivery point.

When the contract was negotiated with CJ Enterprises, they had

the same opportunity to quote FOB, either destination or delivery.

Apparently, it was negotiated FOB point destination. So therefore,

she’s responsible for paying for all delivery to the destination.

Ms. MORALES-GURULE. But when has a buyer gone out and negotiated with the mail orders?

Chairman MANZULLO. What you’re doing is, you’ve got one contract with her, whereby she negotiates—it’s pretty tough for small

38

business people to negotiate with the government, in the first

place—whereby she negotiates to pay her own shipping, then you

issue these purchase cards, and people could just take those and

go outside the contract with her and buy whatever they want, and

the shipping—then you pay for your own shipping. Is that correct?

Mr. ROYBAL. Again, that’s partially correct. When she received

her contract and she bid FOB point destination, she could—her

price could have been based on those shipping costs built into the

price already. And so, again, many times, when you negotiate a

contract, a lot of those shipping charges are built into the price of

the product, and so it’s not quite that clear.

Chairman MANZULLO. I know, but with these purchase cards,

that’s not competitive, is it?

Mr. ROYBAL. No, they are not competitive because they’re usually under $2500, and most of them—— Chairman MANZULLO. That’s a lot of money for a small business,

per transaction.

Ms. MORALES-GURULE. Per transaction.

Chairman MANZULLO. According to Patty’s figure, what, $3.5 million, last year, was done on credit cards.

Ms. MORALES-GURULE. No. I had said that.

Ms. WAGNER. I didn’t provide that figure.

Ms. MORALES-GURULE. The number was $35 million was done on

procurement cards.

Mr. UDALL. Is that the figure?

Chairman MANZULLO. Was it $35 million?

Mr. ROYBAL. Yes.

Chairman MANZULLO. Was that on purchase cards?

Mr. ROYBAL. Approximately, yes.

Chairman MANZULLO. So that’s all done without competitive bid- ding, the $35 million.

Mr. ROYBAL. Yes, that’s correct.

Chairman MANZULLO. That’s not very efficient.

Mr. ROYBAL. Well, when you consider the number of buyers that

we have and the costs that would go into preparing solicitations

and doing all that paperwork, it is.

Chairman MANZULLO. What types of things can these cards buy?

Mr. ROYBAL. They could buy computers, they could certainly buy

office supplies, they could buy other products. We certainly encourage them to go to northern New Mexico, in our web site. When they

go in to place a purchase card order, they go in through the web

site, and it encourages northern New Mexico firms as where they

ought to go.

Chairman MANZULLO. You encourage your employees to buy from

northern New Mexico?

Mr. ROYBAL. Oh, certainly.

Chairman MANZULLO. But they can go outside the state and pay

even more, to the exclusion of the home-grown folks here.

Mr. MONTOYA. If I could address that, Mr. Roybal. You encourage

them, because you ask them to. Do you encourage them by saying

‘‘This will affect your performance evaluation’’?

Mr. ROYBAL. I’m sorry, Mr. Montoya, we really can’t do that, because these are federal dollars that are being spent. For us to go

ahead and tell them to go to northern New Mexico, another firm,

39

in Maine, can call up and say, ‘‘I want to be able to compete for

that project.’’ We must open it up. These are federal dollars, so

therefore—— Mr. MONTOYA. I understand totally; however, unless there is an

in-reach program that really has teeth to it, none of these things

we are talking about, and the reason we’re here, are going to work,

including those prime contractors that set goals where they’re

going to subcontract to small, minority, women-owned businesses.

But if they don’t meet their goals, what’s the consequence? Nothing.

Now, if you set their goals and they don’t meet their goals, and

they got hit on their award fee, I think there would be a little more

incentive.

Chairman MANZULLO. Mr. Udall, do you have some more questions?

Mr. UDALL. I want to go back to this 35 percent figure on procurements. I mean, are we talking about 35 percent of that is New

Mexico businesses? It’s your figure, Mr. Salgado. The goal is to place 35 percent, or $335 million, with small businesses. Are you

on track to reach that goal?

Mr. SALGADO. That’s correct.

Mr. UDALL. Are these all New Mexico businesses, the 35 percent?

Mr. SALGADO. No, sir, they are not all New Mexico businesses.

Mr. UDALL. Do you know what the percentages are?

Mr. SALGADO. Do you know the percentage of the 35?

Mr. GONZALES. Sir, I’m Bennie Gonzales, I’m with the small business office.

Mr. UDALL. You bet.

Mr. GONZALES. There is no specific goal for northern New Mexico.

Mr. SALGADO. Do you know what the percentage is, the percentage of that 35 percent? Do you know what has been—if we do the

35 percent of $350 million, do you know what the percentage for

northern New Mexico or New Mexico businesses is?

Mr. GONZALES. Yes, of the $110 million—and I’m going to be talking about the $110 million, sir, that we did in FY 00—of the

$110 million—I’m sorry, of the percentage goal that we had for small business in FY 00, we did $110 million in northern New

Mexico, which is approximately one-third of the particular goal in

00. And we have it also broken down, in terms of data, in terms

of how much we did in the seven northern counties.

Mr. UDALL. The other two-thirds is not New Mexico, then?

Mr. GONZALES. That is correct, sir.

Mr. UDALL. So it’s outside of New Mexico completely?

Mr. GONZALES. Outside of northern New Mexico.

Mr. UDALL. So when we’ve got this figure here, 35 percent small

businesses, $335 million, we’re talking two-thirds of that money is

going out of state, and a third of it is here in New Mexico?

Mr. GONZALES. No, sir. Two-thirds of that is outside the sevencounty area. So in terms of how much goes to the state, we don’t

have those particular—that particular data with us, sir. We can

provide that, but two-thirds goes outside of the northern New Mexico area.

Mr. UDALL. So can you break it down into New Mexico figures?

40

Mr. GONZALES. We can give you that information, yes.

Mr. UDALL. Do you have it on you now?

Mr. GONZALES. I don’t have it with me, sir.

Mr. UDALL. Okay. And the seven-county area includes Rio Arriba

and Taos, I assume.

Mr. GONZALES. Yes, sir.

Mr. SALGADO. Yes, sir.

Mr. UDALL. You all would agree that it’s important in those

counties, I mean, in terms of unemployment and the businesses

that are there, to try to do everything we can to remedy that unemployment situation, which has been long-standing there, and these

businesses are struggling to survive there?

Mr. GONZALES. Absolutely, sir.

Mr. ROYBAL. That’s correct.

Mr. UDALL. And of the 335, Boise Cascade, it came out clearly,

that can’t be included as a small business. Somebody that comes

in and purchases a contract, I mean, you’re not going to include

that in your figures next year; right?

Mr. ROYBAL. No, sir.

Mr. UDALL. Because that was a small business contract, and

then this big national company comes in and purchases the contract. So you wouldn’t use that next year to say to us, when we

come back, you wouldn’t say, ‘‘Oh, well, yeah, this was a small

business contract, because they bought the contract’’?

Mr. ROYBAL. That’s correct.

Mr. UDALL. And when you’re talking about contracts like this,

we’re not talking about a repeat of this Boise Cascade, where there

are existing small contracts where big companies come in and buy

them out.

Mr. ROYBAL. That is correct. To the best of my knowledge, that

has been an isolated case.

Mr. UDALL. Okay. Now, one of the issues, Mr. Salgado, that’s

been raised here is this issue with Johnson Controls, of putting

provisions in the contract so you can measure progress, and what

is the provision that—what is Johnson Controls told about dealing—are you dealing with percentages, or is it just as Mr. Salazar

says, it just says, you know, ‘‘work with small business’’?

Mr. SALGADO. I think there are two issues here. Number one,

there is a socioeconomic component of the contract where specifics

were laid out—just as indicated—were laid out for the creation of,

I believe, 600 jobs in the northern New Mexico area, and there

were additional other terms and conditions specifically laid out, as

far as their contributions to both public and civic activities in the

northern New Mexico area. That’s in the economic incentive component under the contract, in appendix J.

Under the other component, which would be the subcontracting

goals and objectives, I am not sure as to the specifics that we have,

if we have specific percentages that are required under that contract. And I’ll have to submit that, for the record, to you, sir.

Mr. UDALL. Well, wouldn’t you agree that for us to measure the

progress you’re making, you would be a lot better off having some

targets in there, some goals as to what we’re trying to achieve

when we’re dealing with a contractor, so we try to move towards

those, rather than using general language which, if it’s true, and

41

I have no reason to believe it wouldn’t be, that as Mr. Salazar said,

you know, they hold meetings and meetings and take up these

folks’ time, and then there’s no real business coming out of it. So

shouldn’t we have goals?

Mr. SALGADO. You’re absolutely right, and I’m not sure we don’t

have those in that contract. I don’t know. I know we have the economic development side, but you’re absolutely correct. That contract is coming up for extension—I think it’s been in place for

about four years, and it’s coming back up, so we can revisit that

entire contract. But you’re absolutely correct, Congressman, that

there should be goals and a matrix in that, on subcontracting in

northern New Mexico with small businesses.

Mr. UDALL. Okay. And I would hope you would look at that when

the subcontract comes up.

And the final question, and to get it in on this round, is, you

talked about a security company. Is that a New Mexico company,

the security company?

Mr. SALGADO. No—well, Day & Zimmerman is the corporate parent. It was established as a subsidiary in northern New Mexico.

The PTLA guard force is in northern New Mexico, but it is owned

by Day & Zimmerman, which is a large corporate company, I believe, in Ohio or in Philadelphia, and that was through a competitive process.

Mr. UDALL. And there are other security companies. I mean, we

have a local security company, AKAL Security, that provides security for all of the US courthouses in the state. I mean, there are

security companies that are here that provide those services, and

that was done through a competitive process.

Mr. SALGADO. That predates me, sir, but, yes, it was through a

competitive process.

Mr. ROYBAL. Yes, it was; and, also, it was one of the bidders on

that contract.

Mr. UDALL. Okay. And do you put any incentive in your competitive bidding to try to bring in companies that are going to look at

employment in northern New Mexico, and look at job opportunities,

and look at opportunities for businesses in that competitive bidding

process, and in your RFP say, you know, ‘‘We want you to do these

kinds of things.’’

Mr. ROYBAL. That’s correct, yes, we do, and that’s what Mr.

Salgado was talking about with regard to the northern New Mexico

initiative portion of our request for proposals, and they must submit a proposal addressing job creation and educational opportunities, outreach, and just civic outreach activities.

Mr. SALAZAR. Can I clarify something? I think I need to clarify

these initiatives, because what they have on paper sounds great,

they look good, but in all reality, that is not the way it works.

When they did the initiatives, what you saw—and correct me if

I’m wrong, when they initiated these initiatives, what you found

was, you found a lot of what we call phantom companies. They establish themselves, so-called, in northern New Mexico; they get a

small office, put it some place in Espanola, or in Santa Fe, or wherever, and they man it with maybe one person, they meet the criteria on paper, but there is no real economic development put

there. They still do business the old way. They still get shipped

42

from someplace, they still deliver the services from someplace else.

Those are not real numbers that you can actually look at. The real

numbers are, you find the companies that are really established

here, then you ask the question ‘‘How much have they purchased

from you,’’ ‘‘How much have they purchased from you and you?’’ These are real. These other numbers are not real; those are phantom numbers. You’ve got to be very careful what they put down on

paper and what you’re seeing.

Again, this is a stats playing game.

Chairman MANZULLO. This is the beginning of the hearing. I am

very upset over what I’ve heard today. I think that what the labs

are doing is that they are disregarding, in their own testimony,

their responsibility, and just pandering it out to prime contractors,

just to get rid of it, relying upon them to come up with your stats.

I mean, for example, you could take the purchase cards, and you

could encourage the employees, and you could monitor where

they’re buying supplies from, whether they are coming from small

businesses. You could use that as part of the compliance with small

business set-asides. There’s so much money going out of here, so

many phantom companies, if Mr. Salazar is right. All we know is

this, if what you are doing is correct, these people wouldn’t be here.

You wouldn’t have the high unemployment in the surrounding

areas of Santa Fe that are Mr. Udall’s district. If what you are

doing is correct, you wouldn’t have these giant companies coming

from the outside that are being the prime contractors and buying

things to the exclusion of the local people.

There’s a disconnect. There’s something terribly wrong here, and

that is the fact that you don’t have to do prime contracting with

small businesses. That’s the lazy way out. That’s the lazy man’s

way out, is to do prime contracting. You enter into a contract and

say, ‘‘You do this and, by the way, come in here and do some good

for the local people.’’ And, by the way, establish some goals. Don’t

give this man a contract worth $100,000 and give him no business.

So I think this should come to an end, and I’m going to ask the

Department of Energy—which, by the way, got an F for small business set-asides, and I can see why now—I want to see a radical

change in what’s going on with these labs, and I want to know how

much the University of California is getting for its prime contract.

I mean, you’re sending people out here with MBAs from the University of California, people coming from California, or wherever

they are coming from, coming to this area to figure out how you’re

going to do local economic development, and that’s nothing less

than ludicrous. These people here know how to do it, with the eight

tribes. The people are here, the expertise is here. I mean, California created an MBA program for economic development, and

here’s a man representing eight tribes.

How many generations has your family been here, David?

Mr. CORDOVA. Many, many years.

Chairman MANZULLO. Many years. So people come in from the

outside.

Mr. CORDOVA. Mr. Chairman——

Chairman MANZULLO. Before we do that, there was a gentleman

from the SBA, and I wanted to get your name. Would you stand

up and give your name.

43

Mr. SILVA. Orlando Silva is my name, and I head the SBA program for—— Chairman MANZULLO. Spell your last name.

Mr. SILVA. S-I-L-V-A.

Chairman MANZULLO. Your first name is?

Mr. SILVA. Orlando.

Chairman MANZULLO. You’re with the SBA?

Mr. SILVA. That’s correct.

Chairman MANZULLO. And your official title?

Mr. SILVA. I’m assistant district director for business development.

Chairman MANZULLO. That would include—— Mr. SILVA. New Mexico.

Chairman MANZULLO. Go ahead, please.

Mr. SILVA. Well, what I wanted to clarify, a little bit, was the

Alaskan Native Corporation coming into New Mexico. What it did

was, it proposed under the A76, to take over a program at the Air

Force research lab, and it happened to be civil engineering. The result of that was that civil engineering does all of the design for the

Air Force Research Lab, for contracting, general construction, for

example. And since the Alaskan Native Corporation is an 8(a) certified firm, and they’re tribally owned, they are not subject to the

acquisitive threshold. So any project that they design is—they give

it to themselves, and they exclude New Mexico firms. And since

they’re not subject to providing subcontracting goals, because they

are disadvantaged, the New Mexico firms are not receiving any of

that work. And that’s what I was trying to clarify.

Chairman MANZULLO. Maybe we should take a look at that.

Mr. SILVA. I think so.

Chairman MANZULLO. Okay.

Mr. CORDOVA. Mr. Chairman, real quick.

Chairman MANZULLO. Okay, David, and then, let’s conclude here.

Mr. CORDOVA. You know, one final thing. With me, it’s hard not

to get angry about, statistically, how Rio Arriba, where I live, is

doing. We are angry, we’re upset, we’re concerned, we want to

move forward in the right direction. We don’t seem like we are getting quite the answers we need. We are not getting any accountability. Just like Mr. Salazar said, we are having meetings, but

there’s nothing coming out of the meetings, but you can put down

on paper that you had a meeting with us.

The eight northern pueblo governors are expecting some sort of

accountability for some of the issues going on here. We really feel

that this is a huge misuse of some of the land and some of the

things we’ve treasured for so years, and we definitely want to move

forward.

We have the businesses right now, and if we don’t have the businesses, we don’t want a handout, but what we definitely want to

do is to work with you to have you show us what we need to do

so we can go after those contracts, and we’re definitely here and

we want to do that.

And if we need training, put us in the position where we can be

trained. We want to learn, we want to learn and we want to learn

now. If it doesn’t happen now, then give us a five-year goal, give

us a three-year goal, give us a ten-year, long-term goal. That’s

44

what the governors want. And we really are looking forward to

working with Los Alamos, and we want to change some of these

figures, because the bottom line is, it’s going to help the people,

and that’s all we want to do is help the people.

We’re all in this picture together; and if we can all coordinate

and work together, I think it’s really going to help everyone out

here, and we are all going to live a better life being neighbors to

each other.

Chairman MANZULLO. We’re having the same problem with the

delivered healthcare services as we are witnessing today. The

Healthcare Finance Administration has 5,000 employees. They contracted 71 medical providers for the providing of Medicare/ Medicaid across the nation—that’s sort of like the prime contractor— and there’s no accountability. There’s zero. I don’t think there’s

ever going to be any accountability as long as you have the prime

contractor system set up the way it is now.

We’re going to continue these hearings in Washington to find a

way so that DOE will rise above an F. I mean, this is disgraceful,

it’s disgraceful, disgraceful to everybody. These small business people come here and find out that you have shirked your responsibilities simply by hiring a prime contractor, that promises in writing

to do something about economic development, instead of subcontracting to small business. That’s not why the SBA was set up. It

was set up to encourage small businesses.

Mr. ROYBAL. Mr. Chairman—— Chairman MANZULLO. Okay, we’re going to leave this record open

for 21 days—is that sufficient? Let’s make it 28 days. We’ll leave

the record open for 28 days for any member of the small business

community to submit questions in writing, which we would like answered in the corresponding period of time of 28 days. Anybody in

the audience that wishes to make a statement in writing, you’ll

also have 28 days, and I would suggest you get that to Mr. Udall’s

office. Could you facilitate that, Tom?

Mr. UDALL. Sure, you bet.

Chairman MANZULLO. Do you want to give the address.

Mr. UDALL. Michelle, will you give us the—Michelle is my district director here—for facilitating the statements through my office, and they should get them—what’s the address?

UNIDENTIFIED SPEAKER. It’s 811 St. Michael’s Drive, Suite 104,

87505. They haven’t changed the zip code on us.

Chairman MANZULLO. Okay. Thank you for coming. All of the

written testimony of the members of Congress and the witnesses

will be made a part of the record—I’m sorry, Mr. Bartlett.

Mr. BARTLETT. I just have two real quick questions. These phantom companies that I read about before I came here, and now they

have been brought up again, can you, in your regulations—I know

you want to be dealing with real local small businesses, you don’t

want to be dealing with phantom companies. Can you, in your regulations, do something to correct this, or do you need something

from us, in terms of legislation?

Mr. SALGADO. I think, under our help and procurement issues,

we can address that issue.

Mr. BARTLETT. The second thing is, something very intimidating

to small businesses is all of the legalese and the regulations, the

45

hoops you have to jump through. Do you have translators and

somebody to help these people?

Mr. SALGADO. We have had continuing training seminars dealing

with that. That was part of the reason for the conferences we held

in the Espanola Valley. We are instituting a process by which we’ll

have coaches to help people move through the maze, because it’s

intimidating and rather overwhelming.

Mr. BARTLETT. Thank you. Thank you very much, Mr. Chairman.

Chairman MANZULLO. Okay, this committee is adjourned.

[Whereupon, at 11:29 a.m., the committee was adjourned.]

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

101

102