```

[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]

 
  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

                        U.S. GOVERNMENT PRINTING OFFICE
                                WASHINGTON : 2002
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512-1800  
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001

                      COMMITTEE ON SMALL BUSINESS

                  DONALD MANZULLO, Illinois, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
ROSCOE G. BARTLETT, Maryland             California
FRANK A. LoBIONDO, New Jersey        DANNY K. DAVIS, Illinois
SUE W. KELLY, New York               BILL PASCRELL, Jr., New Jersey
STEVE CHABOT, Ohio                   DONNA M. CHRISTENSEN, Virgin 
PATRICK J. TOOMEY, Pennsylvania          Islands
JIM DeMINT, South Carolina           ROBERT A. BRADY, Pennsylvania
JOHN R. THUNE, South Dakota          TOM UDALL, New Mexico
MICHAEL PENCE, Indiana               STEPHANIE TUBBS JONES, Ohio
MIKE FERGUSON, New Jersey            CHARLES A. GONZALEZ, Texas
DARRELL E. ISSA, California          DAVID D. PHELPS, Illinois
SAM GRAVES, Missouri                 GRACE F. NAPOLITANO, California
EDWARD L. SCHROCK, Virginia          BRIAN BAIRD, Washington
FELIX J. GRUCCI, Jr., New York       MARK UDALL, Colorado
TODD W. AKIN, Missouri               JAMES R. LANGEVIN, Rhode Island
SHELLEY MOORE CAPITO, West Virginia  MIKE ROSS, Arkansas
BILL SHUSTER, Pennsylvania           BRAD CARSON, Oklahoma
                                     ANIBAL ACEVEDO-VILA, Puerto Rico
                      Doug Thomas, Staff Director
                  Phil Eskeland, Deputy Staff Director
                  Michael Day, Minority Staff Director

                            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

  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 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 five-minute 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 
contractors 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 vibrantcommunities 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 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 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 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 end-users 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 just-in-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 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 out-of-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 
consortium 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, 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.

                  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 belief 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.
    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 promotingsmall 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 
Native-owned 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?
    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 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.
    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 
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 attemptto try to put preferences 
in northern 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 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 $2\1/2\ 
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.
    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.
    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/protege 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 potential 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 tosit 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/protege 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.
    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 activities 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 business 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 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, 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 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.
    Mr. Salgado. There are prime contractors such as Hanzel-
Phelps, 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.
    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. 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.
    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-
of-state 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?
    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 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.
    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.
    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 forthat 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 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 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 forsomething done on a purchase card for 
an out-of-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 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 
bidding, 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, 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, 
interms 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 
seven-county 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?
    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 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 dobusiness the old way. They 
still get shipped 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.
    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 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 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.]
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