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[Senate Hearing 106-812]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 106-812

                      WHAT IS CONTRACT BUNDLING?

=======================================================================

                               ROUNDTABLE

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 13, 2000
                                     

              Printed for the Committee on Small Business

                                 ______

                   U.S. GOVERNMENT PRINTING OFFICE
68-451                     WASHINGTON : 2001

_______________________________________________________________________
            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 
                                 20402

                      COMMITTEE ON SMALL BUSINESS

                       ONE HUNDRED SIXTH CONGRESS

                CHRISTOPHER S. BOND, Missouri, Chairman
CONRAD BURNS, Montana                JOHN F. KERRY, Massachusetts
ROBERT F. BENNETT, Utah              CARL LEVIN, Michigan
OLYMPIA J. SNOWE, Maine              TOM HARKIN, Iowa
MICHAEL ENZI, Wyoming                JOSEPH I. LIEBERMAN, Connecticut
PETER G. FITZGERALD, Illinois        PAUL D. WELLSTONE, Minnesota
MIKE CRAPO, Idaho                    MAX CLELAND, Georgia
GEORGE V. VOINOVICH, Ohio            MARY LANDRIEU, Louisiana
SPENCER ABRAHAM, Michigan            JOHN EDWARDS, North Carolina
VACANCY
                     Emilia DiSanto, Staff Director
                      Paul Cooksey, Chief Counsel
             Patricia R. Forbes, Democratic Staff Director

                            C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page

Bond, The Honorable Christopher S., Chairman, Senate Committee on 
  Small Business, and a United States Senator from Missouri......     1
Cleland, The Honorable Max, a United States Senator from Georgia.    21

                            Committee Staff

Smith, Cordell, Professional Staff, Majority Staff...............     *
Forbes, Patty, Staff Director and Chief Counsel, Minority Staff..     *

                              Participants

Aguilera, Esther, Director, Office of Small and Disadvantaged 
  Business Utilization, Department of Energy, Washington, D.C....     *
App, Steven, Deputy Chief Financial Officer and Acting Deputy 
  Assistant for Secretary for Management Operations, U.S. 
  Department of the Treasury, Washington, D.C....................     *
Ashley, Ivan R., Director, Office of Small and Disadvantaged 
  Business Utilization, Agency for International Development, 
  Washington, D.C................................................     *
Bonkowski, Casimir, Director, Office of Small and Disadvantaged 
  Business Utilization, Department of Housing and Urban 
  Development, Washington, D.C...................................     *
Boshears, Kevin, Director, Office of Small Business Development, 
  U.S. Department of the Treasury, Washington, D.C...............     *
Brown, Jeanette L., Director, Office of Small and Disadvantaged 
  Business Utilization, Environmental Protection Agency, 
  Washington, D.C................................................     *
Bryan, Ken, Director, Office of Small and Disadvantaged Business 
  Utilization, Department of Justice, Washington, D.C............     *
Capuano, Joseph A., Acting Director, Department of 
  Transportation, Washington, D.C................................     *
DeLuca, Anthony, Director, Office of Small and Disadvantaged 
  Business Utilization, Department of the Air Force, Washington, 
  D.C............................................................     *
Denniston, Scott, Director, Office of Small and Disadvantaged 
  Business Utilization, Department of Veterans Affairs, 
  Washington, D.C................................................     *
Faithful, Robert, Director, Office of Small and Disadvantaged 
  Business Utilization, Department of the Interior, Washington, 
  D.C............................................................     *
Foreman, Tim, Deputy Director, Office of Small and Disadvantage 
  Business Utilization, Department of Defense, Arlington, 
  Virginia.......................................................     *
Gerich, Michael, Deputy Associate Administrator, Office of 
  Federal Procurement Policy, Washington, D.C....................     *
Gisondi, Frank, Business and Procurement Specialist, Office of 
  Small and Disadvantaged Business Utilization, Department of the 
  Interior, Washington, D.C......................................     *
Green, Mike, Deputy Director, Office of Small and Disadvantaged 
  Business Utilization, Department of Agriculture, Washington, 
  D.C............................................................     *
Harris, Sharron, Director, Office of Small and Disadvantaged 
  Business Utilization, Department of Agriculture, Washington, 
  D.C............................................................     *
Hopewell, Luz A., Director, Office of Small and Disadvantaged 
  Business Utilization, Department of Transportation, Washington, 
  D.C............................................................     *
Jackson, Mirinda, Deputy Associate Administrator, Office of 
  Enterprise Development, General Services Administration, 
  Washington, D.C................................................     *
Jaramillo, Vi, Director, Office of Small and Disadvantaged 
  Business Utilization, Department of Education, Washington, D.C.     *
Jones, Ramona, Procurement Analyst, U.S. Department of Commerce, 
  Washington, D.C................................................     *
King, Lynn Sheri, Program Manager, National Women's Business 
  Council, Washington, D.C.......................................     *
Kuders, Anthony J., Deputy Director, Small and Disadvantaged 
  Business Utilization, Defense Logistics Agency, Fort Belvoir, 
  Virginia.......................................................     *
Martin, Arthuretta, Deputy Director, Office of Small and 
  Disadvantaged Business Utilization, Department of Health and 
  Human Services, Washington, D.C................................     *
McCall, Stan, Small Business Specialist, National Aeronautics and 
  Space Administration, Washington, D.C..........................     *
McNabb, Dale, Deputy Director, Office of Small and Disadvantaged 
  Business Utilization, Department of the Air Force, Washington, 
  D.C............................................................     *
Mukitarian, Diana, Chief, Small Business Program, National 
  Institutes of Health, Rockville, Maryland......................     *
Murfree-Fleming, Valda, Contract Specialist, Library of Congress, 
  Washington, D.C................................................     *
Murphy, Debra, Chief, Contracts and Logistics Service, Library of 
  Congress, Washington, D.C......................................     *
Neal, Robert, Jr., Director, Office of Small and Disadvantaged 
  Business Utilization, Department of Defense, Washington, D.C...     *
Oscar, Ken, Acting Deputy Administrator, Office of Federal 
  Procurement Policy, Washington, D.C............................     *
Pinson, Tracey L., Director, Small and Disadvantaged Business 
  Utilization, Department of the Army, Washington, D.C...........     *
Quiros, Raul, Director, Office of Small and Disadvantaged 
  Business Utilization, Minority Business Development Agency, 
  Washington, D.C................................................     *
Robinson, Jackie, Associate Administrator, Office of Enterprise 
  Development, General Services Administration, Washington, D.C..     *
Robinson, June M., Director, Office of Small Business Programs, 
  Department of Labor, Washington, D.C...........................     *
Saji, Ben, Program Manager, National Park Service, Washington, 
  D.C............................................................     *
Senich, Donald, Senior Advisor, Small Business Procurement 
  Policy, National Science Foundation, Arlington, Virginia.......     *
Tarrant, Nancy, Director, Small and Disadvantaged Business 
  Utilization, Department of the Navy, Washington, D.C...........     *
Trakowski, Frederick, Special Assistant to June Robinson, 
  Department of Labor, Washington, D.C...........................     *
Tychan, Terrence J., Director, Office of Small and Disadvantaged 
  Business Utilization, Department of Health and Human Services, 
  Washington, D.C................................................     *
Vera, Mauricio, SDBU Program Manager, Smithsonian Institution, 
  Washington, D.C................................................     *
White, Durie, Director, Office of Small and Disadvantaged 
  Business Utilization, Department of State, Washington, D.C.....     *
Wiggins, Elois, Small Business Program Manager, Nuclear 
  Regulatory Commission, Washington, D.C.........................     *
Williams, Linda G., Associate Administrator, Office of Government 
  Contracting and Minority Enterprise Development, Small Business 
  Administration, Washington, D.C................................     *

*Comments (if any) at various points throughout the roundtable.

 
                       WHAT IS CONTRACT BUNDLING?

                              ----------                              

                     WEDNESDAY, SEPTEMBER 13, 2000

                              United States Senate,
                               Committee on Small Business,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 9:30 a.m., in 
room SR-428A, Russell Senate Office Building, The Honorable 
Christopher S. Bond (Chairman of the Committee) presiding.
    Present: Senators Bond and Cleland.

    OPENING STATEMENT OF THE HONORABLE CHRISTOPHER S. BOND, 
  CHAIRMAN, SENATE COMMITTEE ON SMALL BUSINESS, AND A UNITED 
                  STATES SENATOR FROM MISSOURI

    Chairman Bond. Good morning and welcome to another one of 
our Small Business roundtables. I am pleased once again to be 
able to welcome the directors of the various Offices of Small 
and Disadvantaged Business Utilization, or OSDBUs. We had an 
OSDBU roundtable last November. It was a great success. We 
learned a lot from it. We thought we would try it again and we 
hope to learn and to share information with you as we did 
before.
    I apologize, I have to leave to go to a VA/HUD markup in 
subcommittee this morning. For any of you whose agencies are 
independent agencies, you probably would like to know: we think 
we have got the money to keep the Government running in the VA/
HUD agencies area, but it is close. It is always interesting.
    Today's roundtable has a particular focus, the problem of 
contract bundling. We have heard from small business owners 
that it is the No. 1 problem. I had a women's small business 
conference in Kansas City in June of this year and contract 
bundling was really an overwhelming problem for women small 
business owners, as well as all other small business owners.
    The Small Business Act challenges the OSDBUs to ensure that 
small business has ``the maximum practicable opportunity to 
participate'' in agency procurements. You know how difficult 
this is, however, when agencies take discrete, small contracts, 
and roll them into massive procurements that are too large for 
small businesses to handle.
    That is why the Small Business Reauthorization Act of 1997 
directed OSDBUs to help identify instances of such bundling and 
to recommend alternative approaches to ensure small business 
participation. The law also enhanced the SBA's ability to 
identify and challenge bundling. That is what we will focus on 
today. The SBA recently published its final rules to implement 
the 1997 law, and we would like to hear from you today in 
detail about how those rules work, could work, should work, and 
will work in the real world.
    Last year, the Federal Government engaged in over 10.5 
million contract actions worth a total of $199 billion. On 
average, that means almost 20 contract actions every single 
minute of every single day of the last year. Every minute the 
Government purchased an average of $377,000 of goods and 
services. We, the Congress, could not review all those actions. 
We depend upon you to help make sure that the appropriate share 
goes to small disadvantaged businesses.
    We reserve the right to review and oversee any of the 
actions as circumstances warrant it, but we know it will be 
more productive to have a sound agency review process in place. 
Solid anti-bundling regulations will allow those close to the 
action to intervene in time to make a difference. I think that 
the SBA's long-overdue publication of those rules is a step in 
the right direction. Again, we welcome your comments.
    Publication of these final rules also permits the Federal 
Procurement Data Center to make software revisions to collect 
data on bundling. A study I requested from the General 
Accounting Office indicated that publication of those final 
rules was the last hold up in getting that data collection 
started. We cannot simply wait for those data to accumulate so 
that we have a statistically useful sample. By that time, it 
may be too late.
    Someone out there has the information. That is one reason 
we are coming to you--as the advocates for small business at 
your agencies. What have you observed in the contracts you have 
seen? The SBA's rules provide thresholds to determine when a 
bundling provides ``measurably substantial'' benefits that may 
make bundling ``necessary and justified'' under the law. But we 
ask you the question, ``How do these thresholds compare to the 
size of the contracts you see at your agencies?''
    Finally, the SBA rules do not expressly mention the OSDBUs 
as part of the process. The SBA envisions a vigorous role for 
the Procurement Center Representatives or PCRs. How sure are we 
that PCRs will even find out about proposed bundlings? Can you 
find out about them in time to take remedial action?
    These are questions we would like to have you discuss 
today. We hope to learn from your personal experiences. We 
appreciate very much the hard work you do. It sometimes seems 
like a thankless job, but I can tell you it means a great deal 
to the women and the men who are out there trying to make small 
businesses work, and we want to see them get their share of 
contracts.
    We, at the Committee, hope to develop a closer relationship 
with you. We want to learn from your experiences and we 
appreciate your coming to share them with us.
    I am off to an appropriations hearing. My colleague, good 
friend and Ranking Member, Senator Kerry will be joining us 
before long. Obviously, we have the staff here, and the staff 
for all the Committee will be paying a great deal of attention. 
We thank you for your time and wish you well and look forward 
to the guidance that you can give us today. Thanks very much.
    Mr. Smith. Good morning. Thanks to everyone for being here. 
Let me just say a couple of quick words about how this works. 
Most of you were here last year so you already know, but we 
will go over the ground rules just for a quick refresher.
    Generally, we have found it works very well that if you 
have something that you want to say, just take your name tent 
and turn it up prominently so that I can see it from over here, 
and I will be happy to get to you just as quickly as possible. 
That has proven to be the best way to let us know when you have 
something to say.
    Obviously, it is not a confrontational setting of any kind 
so it is a chance for you to throw something out if you have 
something you would like to say on these issues. If not, if you 
have nothing to say on the subject at hand, that is fine. It 
will help us to stay on time. So that is good, too.
    We are not really going to try to look so much at specific 
contract actions that are out there that people are concerned 
with. Most of those are hideously complex and we will not 
resolve this morning whether they are good or bad for small 
business or good or bad in terms of the bundling regulations. 
Our hope here is to focus on the process rather than on 
individual procurements. Now, individual contracts may come up 
to the extent that they illustrate the process; however, the 
hope here this morning is to focus on the process.
    We are not really out to attack the regulation. When we 
wrote our law 3 years ago, we took a stab at this issue and 
tried to come up with something that works, and the SBA has 
done the same thing and taken a stab at it. We are all going to 
learn from this experience, and hearing about that experience 
is what we are trying to do here today.
    So, that is all that I had for opening. Patty, did you want 
to say a couple of quick words?
    Ms. Forbes. Thank you all for coming. It is really a very 
impressive group. I did not realize there were quite so many of 
you but I am glad you could make it today.
    This is obviously a very important issue for small 
businesses. We are trying to struggle, this Committee is trying 
to struggle with the conflicts of streamlining and reserving 
contracts for small businesses or making sure there are 
contracting opportunities for small business. We do have 
concern that if there is too much streamlining there will not 
be enough competition when, in fact, we need competition in the 
future.
    Senator Kerry is going to try to come. He has a scheduling 
conflict at this time which is why he could not be here to open 
the roundtable with Senator Bond but he will be very interested 
in all your comments. So thank you very much for coming.
    Mr. Smith. Thank you, Patty. Also just one quick reminder 
as you see us trading the microphones back and forth, please 
feel free to do the same so that our court reporter is able to 
get a good record of what is going on and to generate a useful 
transcript. It helps also if, when you are speaking, and given 
the size of the group, if you will identify yourself and the 
agency that you are from.
    I want to start just a little bit with the question--the 
title of the roundtable is ``What is Contract Bundling?'' and 
you see that statement is written a little farther down on the 
agenda. I want to start with the broader question of who 
decides.
    I have a chart here, and you have copies in your packets. 
If you look, there is one that reads, ``Does Procuring Activity 
Need to Supply Documentation To PCR for Buying Activity?''

[GRAPHIC] [TIFF OMITTED] T8451.001

    Mr. Smith. That issue is what gets the whole ball rolling 
on this regulation: when a proposed contracting strategy is 
underway that needs the attention of small business advocates 
at the agencies and at SBA. This chart here illustrates that 
there are four basic screens that proposed strategies have to 
go through to determine if requirements need documentation 
submitted to the PCR.
    The first screen tests whether it is something that is 
currently being performed by a small business. This is a 
relatively objective thing. You can see whether there is a 
current contract that small business is doing. You can 
determine that.
    Is participation likely or unlikely by small business? That 
is a little bit on the subjective side.
    Does it package discrete construction projects? Again, 
objective.
    And then we have the contract bundling definition itself as 
the last screen.
    If you get past all four of those screens, no documentation 
is required to the PCR or the SBA Office of Government 
Contracting.
    So my question to you, based on your experience in dealing 
with these problems at your agencies, is: will the SBA's PCR 
ever get documentation about a proposed bundling action to get 
the chance to review it in the first place? Will the 
documentation go to the people who need to see it and will PCRs 
even know that something is in the process that needs their 
attention? What have you observed in your agencies with this 
regulation?
    Mr. Denniston.
    Mr. Denniston. Somebody has to start this off. Scott 
Denniston, Department of Veterans Affairs.
    For a minute forget the definition of significant bundling, 
the $75 million, but just look in terms of consolidation, if 
you will, of discrete opportunities. The answer to your 
question, as it relates to the Department of Veterans Affairs, 
is no.
    The reason I say that is because we have got 200 buying 
centers around the country, but we have PCRs that are assigned 
to less than a dozen of those 200 facilities. So just by those 
sheer numbers, most of the facilities that we have do not have 
PCRs covering them.
    Mr. Smith. How does that compare to other people's 
experiences?
    Mr. McCall.
    Mr. McCall. Stan McCall, NASA.
    We have about 10 buying centers. Any requirement, not 
necessarily based upon the $75 million dollar range, should 
face some mechanism to involve the PCR in anything of this 
magnitude. The normal process should provide some involvement 
with the PCR to determine the impact the contract is going to 
have on small business.
    Normally, if you have got a relationship going, there is a 
dialog on the overall program and anything of that significance 
will just automatically be discussed.
    Mr. Smith. That is actually one thing I definitely want to 
focus on, because I want to know, in places where PCRs have 
been assigned, are they part of the acquisition team to begin 
with? Do they know what is happening? Are they part of the 
sessions as the strategy is being prepared, or do they simply 
have to hope that they can find out about it as things go 
along?
    Mr. Bryan.
    Mr. Bryan. Ken Bryan, Department of Justice. I think one of 
the significant things that you just talked about was the 
presence of the PCRs themselves. Again, we are not slamming 
anyone, here. But because of the cutbacks of the PCRs 
themselves, there are not that many to go around to be able 
even to review the contracts you are talking about.
    At the Department of Justice I cannot remember the last 
time that our PCR may have reviewed a consolidated contract, or 
any contract for that matter. And it is not because they do not 
want to but, again, it is because of the scarcity of the PCRs.
    Mr. Smith. Ms. Brown.
    Ms. Brown. Jeanette Brown, EPA OSDBU. The same thing here 
for the EPA. We are in contact with the PCR. We talk when we 
need to, but my PCR is assigned to four agencies and as a small 
agency we do not get that kind of attention.
    Mr. Smith. Ms. Pinson.
    Ms. Pinson. Yes. Tracey Pinson, Department of the Army.
    We experienced the same problem in terms of coverage of 
PCRs. We have over 200 buying activities and some PCRs are 
assigned there on a resident basis, and some are roaming which 
means they get there if they can. But we do have our small 
business advisors there, small business specialists there at 
all of our contracting activities that do review all the 
acquisition plans that come out of contract.
    In fact, there is a Form 2579 in the Defense Department 
that basically requires the SADBU to concur on the acquisition 
strategy.
    Mr. Smith. So there is a place for you and your office to 
sign off?
    Ms. Pinson. Not my office but, yes, at the contracting 
office level.
    Mr. Smith. Right. Someone in your office at some level to 
sign off that they have seen it?
    Ms. Pinson. SADBU. Right.
    Mr. Smith. And that way it gets routed past----
    Ms. Pinson. And if there is a PCR assigned, then that PCR 
would also have to sign off on that 2579 as well.
    Mr. Smith. I see.
    Ms. Williams.
    Ms. Williams. In conjunction with the number of PCRs we are 
the first to admit that there are not enough. We have tried to 
get coverage where it is possible and we have hired an 
additional 13 PCRs to try to expand our coverage but our 
regulations also say that when there is not an applicable PCR, 
the documentation should come into the area office that has 
responsibility for that activity. As Ms. Pinson mentioned, 
agencies have small business specialists, and our PCRs work 
with them in order to review these requirements.
    I mean if there were not bundling regulations the PCRs 
would still have a role to play in looking at opportunities 
that should be set aside for small businesses. So all of this 
is still within the normal responsibility of the small business 
specialists and the PCRs.
    Mr. Smith. That is an excellent point to make. One thing 
that I wanted to ask regarding the SBA Government Contracting 
area office, when notification comes in, is there a person in 
that office who is asked to do something with the documentation 
when it arrives? Is there someone at each area office that is 
the substitute PCR for this office? One of the charts in your 
packet describes this situation.
    [The chart follows:]

    [GRAPHIC] [TIFF OMITTED] T8451.002
    
    Ms. Williams. We try to funnel it to the appropriate person 
to handle.
    Mr. Smith. Is it possible to cover all the workload? 
Because I could see an area office covering a lot of 
contracting activities and getting a lot of material that is 
more than one person can handle. What is the word you are 
hearing on how that is working?
    Ms. Hopewell. My name is Luz Hopewell. I am the Associate 
Administrator for Government Contracting at the SBA. We do have 
a very large workload. I just started with the SBA 2 months 
ago.
    I have been evaluating everything that is going on. The 
workload on the PCRs is really significant. The number of PCRs 
that we have across the country is very limited. I know the SBA 
has taken corrective action and we have actually hired 13 new 
ones that we are training at the end of this month. Then for 
2002 we will be getting 15 more. But I think in terms of the 
requirements, we do need more coverage.
    Mr. Smith. So it would be helpful to have more staff. It 
would also be helpful to make sure you have a process--
something like the Army has--where people actually get 
something routed past them to make sure that it actually gets 
seen?
    Ms. Hopewell. That is correct.
    Mr. Smith. That actually raises another question. Is there 
some place where acquisitions, before they end up in Commerce 
Business Daily, are printed or some sort of information is out 
there that is a resource where people who are small business 
advocates can look to find out about stuff that is happening, 
or is it just kind of a game to see if we can get the 
acquisition out the door before the small business people find 
out about it?
    I thought I saw that Mirinda Jackson had a comment, I am 
sorry, a moment ago.
    Ms. Jackson. I was going to comment on a previous question. 
I am Mirinda Jackson with the GSA.
    We have a process in place that allows the PCR to sign off 
on all of the GSA's procurements that are not set aside for 
small businesses. We have a form that is called a GSA Form 89.
    Mr. Smith. I see. So some agencies have various forms that 
do allow the routing. Some do not, but some do, is the 
impression that I am getting; is that about right?
    Stan McCall.
    Mr. McCall. We call it an acquisition forecast.
    Mr. Smith. Right.
    Mr. McCall. And anything of this magnitude would probably 
be caught in the acquisition forecast. We probably would give 
some kind of indication that it would be a bundling-type 
activity.
    Mr. Smith. I see. And that is OSDBU that puts that out? 
Does everyone put out the forecast from OSDBU or is that other 
places? It looks like we got a lot of yeses there.
    Let me look at a couple of specific questions on this. I am 
sorry, Ms. White, you had something?
    Ms. White. In addition to the forecast I know some of the 
agencies also publish an inventory of active recurring 
contracts that kind of cues people that, next year, a 
particular contract is coming up. We also have on our website 
at the State Department our Information Resource Management 
(IRM) strategic plan, which high-tech companies can read to see 
what is coming up.
    Mr. Smith. I see. Let us go ahead and look at a couple of 
points on the specific tests here that are on this chart. 
Again, you have a copy in your handouts.
    [The chart follows:]

    [GRAPHIC] [TIFF OMITTED] T8451.003
    
    Mr. Smith. This kind of raises a question that I had when I 
was going through the regulation. There were two pieces of it I 
was not sure how they fit together.
    One of those was the requirement to perform market 
research. The market research seems to end up with the judgment 
of whether the benefits are measurably substantial and then you 
can make a judgment whether the bundling is necessary and 
justified. It seems to me that if you get all the way down to 
the test here, the last diamond of the chart that asks, ``Is 
the acquisition strategy a bundled requirement?''--then the 
Agency has to submit a written statement stating that the 
bundling is necessary and justified. Then obviously, at that 
point, they need to have the market research done in order to 
be able to make that statement and supply that documentation.
    As part of the market research process, it says that the 
acquisition team should consult with the PCR, or the Office of 
Government Contracting. It does not say that they must but that 
they should.
    Have you all run into some examples of the market research 
and how that is working? There is one instance that I know of 
with the Air Force, but I am not aware of other instances in 
the market research process and how that works yet. Mr. 
Capuano, you had something on the previous issue I think?
    Mr. Capuano. Joe Capuano, Department of Transportation.
    I wanted to mention on the PCR issue--of course, we commend 
the SBA for getting additional PCRs. We are very fortunate at 
Transportation. We feel we have one of the best in Reggie 
Holloway. He is resident in our headquarters building. We have 
been very fortunate.
    I also think the issue of establishing relationships with 
the small business specialists throughout the department and 
with our procurement officers is very important. Reggie 
Holloway does that. We include him in all of our monthly 
meetings. We include him in our major decisionmaking and he is 
very helpful to us in that respect. So, I think it is important 
to establish the balance, especially on large procurements.
    The second point is on the procurement forecast. Many of us 
publish it electronically on our website. Transportation has 
one of the better websites in the Government. We are very 
pleased with it.
    But again in working with the PCR it is very important to 
involve them even as you get into your procurement planning 
processes. And that is, I think, where the issues are because 
they are so drained in terms of other responsibilities and 
other programs. The key issue is how to develop the priorities 
for the PCR working together? I think that is extremely key.
    Mr. Smith. Thank you.
    Ms. Pinson.
    Ms. Pinson. On the issue of market research, we found that 
it is very easy to just say we will put something in the 
Commerce Business Daily to ascertain the interest in the small 
business community and if we do not get any interest, so be it. 
But we found that we have had to go one step further and work 
with the SBA, ask them to give us firms and also hold forums 
with the small businesses that may be interested in the 
procurement, because invariably on some procurements the Small 
Business Administration might appeal us. We want to demonstrate 
that we did adequate market research and that is not just 
putting a notice in the Commerce Business Daily because for 
whatever reason we do not always get a good response.
    Mr. Smith. Does the likelihood that the SBA might appeal 
become, basically, a club that can be used to say this is a 
reason why you should get the PCRs in early to avoid delay at 
the end of the cycle?
    Ms. Pinson. I think so. Yes.
    Mr. Smith. Ms. King.
    Ms. King. If I could just follow-up on what Mr. Capuano is 
talking about in regard to the PCRs and the procurement 
forecast from the perspective of business owners: How do they 
know about these PCRs? How do they know where they are? How do 
they know they can get in touch with them? And things like that 
because relationships should be developed both on the PCRs 
extending outreach to small businesses and vice versa.
    Small businesses need to be proactive with these PCRs but 
they need to know who they are and how to get in touch with 
them.
    The second point is on the forecast. There are still some 
agencies that do not put their forecast on their web page. 
Whatever the agencies and OSDBUs can do to deal with that, it 
is necessary. It really needs to be, in the information age, on 
the web pages.
    Mr. Smith. Thank you.
    Mr. Bryan.
    Mr. Bryan. To follow with what Tracey Pinson was saying, I 
think the Commerce Business Daily (CBD) is an important tool 
that all the agencies use. I know at the Department of Justice 
even though it is, in fact, a part of the market survey, many 
times that is a copout. One of the things that I have heard 
many small business representatives say is that they do not 
actually take it seriously because many times they think that 
by the time it hits the Commerce Business Daily it is already 
``awarded'' to someone anyway.
    So I think this may be one of the reasons why some of the 
smaller businesses are not necessarily responding to the 
Commerce Business Daily--because they do not necessarily take 
it that seriously.
    Mr. Smith. Ms. Jackson.
    Ms. Jackson. We use the CBD but we also use some of the 
small business media. We use the Set-Aside Alert. We use the 
Minorities In Business Insider. We post all of our major 
acquisitions on our home page. Whenever we have a major 
acquisition we do what we call a networking session. We try to 
bring together potential prime contractors and potential small 
businesses so that they can consider partnering or doing a 
joint venture. And that has worked for us.
    Mr. Smith. Jeanette Brown.
    Ms. Brown. Even after it is publicized in the CBD I know 
there is a tendency--because we have to make a recommendation 
as to whether or not there is a small business community out 
there that can, in fact, do the work. The program offices are 
really sharp in coming up with ways of saying that they are 
technically not qualified.
    A lot of times when the small businesses respond they give 
us a general response in terms of what their overall 
capabilities are. Often that is to their disadvantage because 
they do not speak directly to the requirement that is at hand 
and they may or may not have enough information to give us at 
that time because it is a brief synopsis of what the 
requirement is. That also is a barrier to the small businesses 
participating. That is what we have seen at the EPA.
    Mr. Smith. Would it be useful, and I have not seen one of 
these notices in Commerce Business Daily or in the various 
other media on this--is there usually a phone number where if 
people do not understand they should call and develop a 
relationship and ask questions about what the information is 
that you are seeking and how they can be responsive? Or how 
does that work?
    Ms. Brown. There is a phone number and a point of contact 
and we also solicit information over the Internet.
    However, when the paperwork comes in what we have seen in 
the past is that it is not detailed enough to make a valid 
determination as to whether or not a small business, in a lot 
of instances, is really qualified for the work.
    Mr. Smith. Let us go ahead and move on to the next phase 
here. Thank you for your input on this question.
    We will look at the main focus here on ``What is contract 
bundling?'' You will recall that the last screen before we 
decide whether documentation is required for the PCR or the 
Office of Government Contracting is, ``Is the acquisition 
strategy a bundled requirement under the definition in the Code 
of Federal Regulations?''
    I think some of you saw the definition as you came in the 
front door here this morning. We put it out on the little 
poster there. It is quite an involved little definition. There 
are a lot of implications to some of the word choices and all 
those other good things.
    [The chart follows:]

    [GRAPHIC] [TIFF OMITTED] T8451.004
    
    Mr. Smith. I have actually something a little more basic to 
ask and that is what is a ``contract'' and how does that differ 
from a ``contract action?'' I understand ``contract action'' 
takes in something a little bit broader but what constitutes a 
``contract'' as used in the bundling definition? And I can see 
that there would be a number of things that might happen that 
people would say, ``Well, that is not really a contract so, 
therefore, it cannot be a bundling.''
    What are you observing on that question? What constitutes a 
contract for the purpose of this definition? I have a specific 
question if no one volunteers.
    Actually, the following question I guess is on the question 
of Indefinite Delivery/Indefinite Quantity contracts (IDIQs). I 
have to say I am not sure exactly which one is the broad 
categorical term. I have seen IDIQs. I have seen multiple award 
contracts. I have seen Blanket Purchase Agreements (BPAs). I 
have seen Government-wide Acquisition Contracts (GWACs). I am 
not sure what the broad-basket term is for all of those. I 
would be interested in some discussion of how those differ from 
each other.
    The impression that I have is if you have a contract that 
is a standing arrangement to buy from somebody and various 
agencies come to it and buy off of it, they do not consider 
those additional orders to be contracts. They consider them to 
be orders, and, therefore, they are not contracts, and even 
though you are coming from several different agencies it does 
not constitute a bundling. What are you observing on that 
score?
    Mr. Gerich. First of all, I am Mike Gerich from the Office 
of Federal Procurement Policy. Because you have a little 
problem, I guess, on the definition of contract, I will take a 
shot and I will hope that individuals will come in. Now as far 
as experiences you are going to have to look to the agencies 
and their actions there.
    But the regulatory definition of contract, procurement 
contract, et cetera versus the general legal definition of 
contract--procurement contract obviously involves something the 
Government is buying as opposed to giving something away as far 
as grants.
    As far as contractual actions we have a procurement 
contract where you actually sign a contract, a contract 
document, that is generally the procurement contract. The 
Government is buying something. A contract action might be 
something like a contract modification as opposed to a 
beginning contract. You also might have orders under a contract 
where you already have a contractual document in place.
    It gets a little sketchier when you come to multiple-award 
contracts and orders under those, whether an order might be a 
contract per se for one purpose versus a contract for other 
purposes.
    Generally when you fund something, an order under a 
contract you are adding additional funding. That traditionally 
is considered another contract. Whether that is a contract for 
the purposes of contract bundling I do not know. I think that 
is probably where you are driving at. That is where we need to 
probably flesh it out a little bit.
    Mr. Smith. Right.
    Mr. Gerich. But that is just the general definition.
    Mr. Smith. Are there differences for this purpose between 
the BPAs and the GWACs and the IDIQs and various other things 
that seem to be variations on the theme here or are they pretty 
much all the same thing at least on this particular question?
    Mr. Gerich. My understanding is that some agencies are 
issuing supplemental regulations to the FAR, the Federal 
Acquisition Regulation, to provide more specific guidance on 
how to handle those orders. So there are some agencies that 
have gotten more specific in that area and how to handle this 
for bundling.
    Mr. Green. Mike Green with USDA.
    When we talk about contracts--anything that we use to buy 
goods and services is a contract. I think a lot gets confused 
with the FAR in using contract procedures.
    We have contracting procedures and we have got simplified 
acquisition procedures where, in fact, the question has to be 
raised: Is a simplified acquisition a contract? The answer is 
yes because we are buying a good or service. When people, 
companies, and government employees use the term contract they 
are typically talking about a document to buy goods and 
services even where different types of procedures were used to 
buy that product. And that is what we have a contract for.
    Now these IDIQs, these BPAs, these GWACs, are all basically 
the same. One is a contract and one can be a simplified 
acquisition with zero dollars in it and you issue task orders 
on an as-needed basis whereas an IDIQ typically is relegated to 
the use of that Federal agency.
    A GWAC contract can be a huge contract with maybe a 
stipulated amount, over the contract amount for the original 
buying agency, where other agencies can also buy off that by 
issuing task orders. For all intents and purposes I would think 
any GWAC contract would be a bundled contract if it is going to 
be that big.
    Any IDIQ contract, if it does not go to a small business, I 
think we can consider a bundled requirement because when you 
start lumping all these things together and giving Contract 
Line Item Numbers (CLINs) and all this, you have one contract 
where anybody can buy from that one source. If you are buying 
services, hardware, software from that one source, you are 
cutting the potential for other small businesses and other 
businesses who compete with that product.
    Mr. Smith. So if you have an arrangement in which different 
agencies can buy off of that same instrument, those probably 
would have been separate contracts from each agency previously. 
And now, you have a standing arrangement where they can all buy 
off of the same thing and it becomes a de facto bundling even 
if technically it is not.
    Mr. Green. Government-wide bundling is what that is.
    Mr. Smith. OK.
    Mr. Green. And then IDIQs are more of a localized agency 
bundling.
    Mr. Smith. Esther Aguilera, you had some thoughts?
    Ms. Aguilera. Yes, thanks. Cordell, I agree with Mike Green 
there. At the Department of Energy, we recently had to issue 
some guidance from our procurement head, as well as our Deputy 
Secretary, to clarify that GWACs are covered within the 
contract bundling definition because when we had the lawyers 
look at it they could not make a clear determination whether 
that was the case or not.
    So we just decided to go ahead and make it and send the 
word out that that is the case. One thing that is happening is, 
in a GWAC where you have a company chosen off of a schedule and 
that schedule only has large businesses in it, they are setting 
some of these up to then add more contracts and requirements 
later on.
    So they build on that vehicle and that I think is how the 
GWACs are being used.
    Mr. Smith. So you modify it down the road and basically it 
is the camel's nose under the tent and then you can modify it 
subsequently and it just gets worse.
    Ms. Aguilera. Right.
    Mr. Smith. And if the modification is a contract action, 
not a whole new contract, it would never come under these 
rules?
    Ms. Aguilera. Right. Well, what we did clarify at DOE is 
that for new contracts, subsequent modifications would come 
under the rules. We would have to review them for potential 
small business impact. But if that clarification were not in 
place, they would be able to go through the process of bringing 
modifications under that larger contract without our review. So 
we were able to catch it and have a process in place to have 
that review. But it is a potential danger there.
    Mr. Smith. Lynn King, you have had your card up for some 
time.
    Ms. King. I am actually here also representing Patricia 
Stout who is a council member, National Women's Business 
Council, and unfortunately she was unable to make it. Patricia 
owns the Alamo Travel Group in San Antonio, Texas. She is a 
small business owner.
    She prepared a definition of contract bundling that she was 
going to offer and I think it is a good perspective from the 
small business owner on what her perception is of contract 
bundling. And I will just read her words.

    The bundling of government contracts is a consolidation of 
requirements that may provide obstacles to participation by small 
businesses. The contracts are so large that it limits the potential 
prime contractors to a few giant companies.
    In fact, the potential contracts are so large they even limit the 
ability of medium-sized companies to bid. Bundling creates offerings 
that exceed the capability of small- and medium-sized businesses and 
reduces participation in these types of contracts to a mere fraction of 
the available competition. This runs contrary to every principle of 
competitive procurement.

    Mr. Smith. Mr. Foreman.
    Mr. Foreman. Tim Foreman from the Department of Defense. In 
regards to the IDIQs, BPAs and GWACs I think the important 
issue from a small business standpoint is the new environment 
that we are operating under in procurement, as a result of the 
Federal Acquisition Streamlining Act (FASA) and the Federal 
Acquisition Reform Act (FARA) and pressures on personnel 
reductions in the Department of Defense we have gone from about 
460,000 personnel involved in procurement down to 280,000.
    These are convenient tools and methodologies to get 
contracts out quicker. I do not know if I can say better, 
faster, cheaper but quicker is the key word, less 
administrative cost. And it is a new environment and does have 
a tremendous effect on small businesses. It does have a 
tremendous effect on our ability to meet the various statutory 
goals now that we negotiate with the SBA. So it is a critical 
issue.
    Do I want to turn the clock back? I do not know that I do. 
I have also, I think, learned a lot. And I think I have learned 
a lot in terms of small businesses that can perform other 
things in the commercial arena and also have been somewhat 
successful in these other arenas. So that is just food for 
thought, more than describing what they are.
    By the way, the largest of the group is probably the 
Federal Supply Schedule, which we did not really talk to but 
that is a huge and growing arena.
    Mr. Smith. Right. Actually I was hoping that someone would 
discuss all the different flavors of this thing. I had some 
questions on the Federal Supply Schedule that I wanted to do as 
follow-up but no one took the bait. Terry or Terrence, which do 
you prefer?
    Mr. Tychan. Yes, Terry Tychan.
    Mr. Smith. Nice to have you here.
    Mr. Tychan. I am from HHS and currently I am acting OSDBU 
while we are replacing ours. I have had a chance to have some 
conversations with all of our contracting officers and small 
business specialists because I have gotten a lot more 
interested in all of these issues and how we are achieving or 
not achieving our goals.
    I just wanted to mention and kind of echo the last remarks 
that the idea of GWACs and Federal Supply Schedules and all 
these larger-type contracts even transcend the questions of 
bundling, the issues of bundling. It is just as was described.
    It is all the reforms. They are good, they are very good in 
a way, but they present a very general problem. And that is: 
How do we meet our small business goals and ensure that we 
foster the capacity of small business and still take advantage 
of sensible economies of scale and so on? And I think that is 
where our department is really struggling, to see how can we do 
this. There have been a lot of good things that agencies have 
done in setting up those contracts.
    I think that is probably a key area where we want to do 
more and where we should look at how one sets up these 
government-wide contracts to make sure that small businesses 
are able to compete well. So just a general comment that that 
is a problem across the board.
    Mr. Smith. Mr. Neal.
    Mr. Neal. I am Robert Neal with the Department of Defense. 
I have got a couple issues with the description that IDIQs are 
just consolidation. We go through an extensive process of 
competing to select firms for IDIQs.
    We are in the process now that we have looked at a select 
number of case studies and what we have found is that a large 
number of those IDIQ awards have gone to small businesses with 
a substantial increase in the amount of contract opportunity 
that results in awards to small businesses. So to make the 
general statement that an IDIQ keeps out a small business I 
think is inaccurate.
    I think we need to recognize that there is a balance that 
has to be struck here. We have competing pressures. The most 
difficult task in looking at all of this is trying to strike 
that balance, being able to understand that we have pressures 
that are pushing all of our departments, with reduced 
personnel, to be more efficient and more effective and at the 
same time provide the same opportunities to small businesses.
    IDIQs in and of themselves do not preclude small businesses 
from winning. GWACs do not preclude small businesses from 
winning. The strategies that we employ in selecting the firms 
are the key here. When we have reserves that are set aside for 
small businesses it results in substantial improvement and 
opportunities for small business.
    We have a number of major bundle opportunities here where 
we have gone to the Nth degree to assure that small businesses 
get good opportunities. That means that the management has to 
be committed. It is not the tool, it is the management of the 
process that I think we really ought to start focusing on and 
stop throwing rocks at the tools because the tools are only 
effective in the hands of the individuals that are using them.
    Mr. Smith. Ms. White.
    Ms. White. I would just like to talk a little bit more 
about that segue with your comments, Mr. Neal.
    Oversight is a major problem with the GWACs as well. 
Whether an IDIQ and a GWAC and so forth constitute a contract 
is almost secondary to whether the OSDBUs and/or the PCR even 
know what is going on. We have no ability to influence whether 
something is going to go to a small business or not if a 
program officer decides to use a GWAC or another agency 
contract of some sort.
    A lot of people are using them to circumvent the small 
business program in my opinion. I also think it is going to 
create a problem in measuring how all the streamlining is--
well, for example, Federal Supply Service (FSS) does allow the 
funding agency to take credit for an award, but for all the 
other non-FSS GWACs it is a matter of the discretion of the 
agency and whether the agency pushes that award and whether it 
is Commerce or Federal Technology Service (FTS). If we push to 
get the credit for it, then yes, but if not, there is no 
uniformity.
    So we do not even know. Our measurement is sporadic as well 
because sometimes an FTS contract is credited to GSA, sometimes 
it is credited to State. So we do not know if we are getting a 
good measure.
    Mr. Smith. Thank you. Senator Cleland of Georgia has joined 
us. Senator, if you would like to say a few words, please feel 
free.

        OPENING STATEMENT OF THE HONORABLE MAX CLELAND, 
              A UNITED STATES SENATOR FROM GEORGIA

    Senator Cleland. Thank you very much. I would like to 
congratulate the Chairman for convening this roundtable. May I 
say that the issue of contract bundling is an important one to 
many small business owners in this era of mega-mergers, global 
economics, and e-commerce. Small businesses still remain the 
backbone of our Nation's economy despite all the factors 
stacked against them.
    All too often government contracts are being bundled to 
create a single contract that is simply unattainable for many 
small businesses and I appreciate the Chairman convening this 
meeting. I am a Member of the Small Business Committee, and I 
am interested in your input here.
    In my own home State of Georgia there is a bundling issue 
that exemplifies the difficulties and the relationship between 
the Federal Government and small businesses. The heated debate 
over the Air Force's Flexible Acquisition and Sustainment Tool, 
or FAST Program, at Robins Air Force Base is just one example 
of many similar cases across the country.
    Certainly, as a friend of the Air Force, I find myself in 
the difficult position of wanting to do whatever I can to help 
Robins Air Force Base save money in a time of increasing 
responsibilities and extremely tight military budgets. The Air 
Force believes that this program, which also is under 
consideration at the other Air Force depots in Oklahoma and 
Utah, would conserve tax dollars and increase efficiency, two 
objectives which I share.
    However, I have always considered myself a champion of 
small businesses and I know how important it is for the small 
business person to have access to government contracts, both 
prime contracts and subcontracts.
    The concern, that some small businesses in Warner Robins 
and Macon have not had access to these contracts, is something 
I am closely monitoring. I have written to Secretary Cohen 
regarding this issue and I am pleased that the SBA is also 
focusing on trying to protect the interest of small businesses 
in such cases. As I mentioned earlier this is just an example 
of the difficulties faced by both the Federal Government and 
small businesses.
    I hope today's roundtable will help cast some light on some 
of these difficult questions so that both the Federal 
Government and small businesses can operate efficiently and 
effectively. Unfortunately, I have got to go to another 
Committee meeting. I am unable to stay for the entire 
roundtable but my staff will be here monitoring the testimony 
and I welcome any comments from the representatives of the Air 
Force or the SBA who may want to make a statement for the 
record.
    Thank you all for coming here today and I appreciate your 
participation in this roundtable. I appreciate your interests 
in the expansion and development of our small businesses. Thank 
you all very much.
    Mr. Smith. Thank you, Senator. Mr. DeLuca, would you like 
to say something quickly?
    Mr. DeLuca. I am Tony DeLuca and I am Director of Small 
Business for the Air Force and thank you for the segue, Sir.
    I appreciate that, to talk about what we have done in 
Warner Robins and what we intend to do with FAST. By way of 
background for those who are not aware of what we are 
attempting to do, we are attempting to go ahead and put a tool 
in place, as Robert Neal indicated, that would provide the Air 
Force an opportunity to do three things.
    First, it would give us an opportunity to go ahead and 
obtain rare spares, rare repairs in a very timely fashion. 
Second, it would be able to save the Air Force, we estimate, 
over $100 million a year. And third, it would increase total 
small business utilization by more than double the prime 
contract awards and probably more than triple the 
subcontracting awards.
    We talked earlier about the issue of the involvement of 
PCRs and the type of contracts that we look at. FAST and our 
work on FAST has been going on for at least 18 months that I 
know of in trying to work through that.
    If there is a lesson to be learned here, and I would share 
this with the entire group, it is that in the beginning when 
you stop working through things and you are really unsure of 
what to do, certain individuals will come out and make the 
pronouncements that something is a fait accompli when in 
reality it was not.
    That was one of the difficulties we ran into at FAST. There 
were things that were put out that were assumed to be the way 
we were headed, which indeed was not that way at all.
    When we first got into FAST, really the whole focus was 
originally just on large business as prime contractors because 
the work was thought to be so involved and so complex that 
small businesses could not do it. The infrastructure required 
in terms of being able to support payroll and so forth was 
fairly heavy.
    As we went through that we took a look at the work involved 
itself. And there was a real concern that what we were doing 
was going to take work away from existing small businesses down 
at Warner Robins and throughout the United States. We found 
that the work we were talking about was work that would be 
added to the work already being done at Warner Robins.
    What I mean by that, it was work that we had MIPRed 
(Military Inter-departmental Purchase Request) in most cases to 
the Army. The reason is that the Army had a vehicle that was 
good for us, that we could get to quickly and that would be 
able to satisfy the program manager's needs.
    I think, for all small business people, we have to look at 
ourselves and say what are we going to do? Are we going to put 
our heads in the sand and say, ``Gee, that is no good'' or are 
we going to provide the customer--in this case, the program 
manager--an opportunity to have a vehicle that can at minimum 
compete with something else that is out there? And that is what 
FAST has done.
    What we evolved into was a strategy that will have six 
contracts in place, two of which will be awarded to small 
businesses. We also address the area of bait-and-switch. This 
was another concern that small businesses have raised where 
they are part of a team when the contract is awarded, but guess 
what, they do not get any work afterward.
    We have addressed that through the incorporation of a 
matrix which identifies the team members as well as the 
Standard Industrial Classification (SIC) codes assigned to 
those team members and the type of work they will do. So, when 
those tasks are levied on the contractor, they must go to those 
companies and if they do not, they have to come back to the 
contracting officer before they can go to anyone else.
    The other thing that we have done is we have assigned a 23-
percent total contract value to the subcontracting portion and 
we intend to enforce that by measuring past performance in the 
utilization of task orders. The other thing that we have done 
is we have put in place an oversight board at the senior 
headquarters in the Air Force, and we have invited the SBA to 
join us on that senior oversight board.
    We want to ensure that what we tell people we are going to 
do, in reality we will end up doing. It is our sincere belief, 
and it is my sincere belief--and I will tell you, Senator 
Cleland, I have been in this job 10 years, I have been in 
Federal work for 32 years, I was a former competition advocate 
of the Air Force--this is a good deal for small business. And I 
would not say that if I did not believe it. We have worked 
through it hard and over.
    What it comes down to is how do you balance the need to 
ensure effectiveness and efficiency with the assurances that 
small businesses need to play. We have letters that come to us 
from small business teams that said, ``Hey, we believe in what 
you are doing. Let us get on with it.'' And that is what we are 
attempting to do.
    I think when all is said and done, hopefully we will get a 
contract in place, and we will be able to come down and sit 
with this group and really go through, wholesale, the lessons 
learned. I think from a standpoint of knowledge management, 
which is a new buzz word everybody is throwing around, about 
how one uses intellectual capital to ensure continued 
improvement, we will be able to share that intellectual capital 
with everyone. I hope that in the process we can all benefit 
from what we are doing.
    So, Senator Cleland, I want to assure you from an Air Force 
perspective we understand your concerns. We feel that we have 
addressed them, and we are willing to do whatever it takes to 
ensure that people understand that.
    Senator Cleland. Tony, a question. Andrew Carnegie once 
said to put all your eggs in one basket and then watch that 
basket. We are going to be watching your basket. OK?
    Mr. DeLuca. Yes, Sir.
    Senator Cleland. Thank you all very much.
    Mr. Smith. Thank you. Luz Hopewell, would you like to take 
a few minutes to comment because the SBA prepared the appeal on 
this. Then we need to move on to our regular agenda. However, I 
do want to get everyone's perspective on the record as long as 
the issue has been broached.
    Ms. Hopewell. As you know, we did submit an appeal to the 
Air Force on the FAST contract. We did look at it very 
carefully and we wanted to make certain that we were able to 
balance the requirements of the Air Force as well as the 
requirements for small businesses.
    We know that when you develop a strategy early on, and take 
into consideration the inclusion of small businesses in the 
process, it can work. I just came from the Department of 
Transportation and in Transportation we put in place two major 
GWAC contracts: ITOP I and ITOP II (Information Technology 
Omnibus Procurement). I am very proud to say that we had over 
40 percent participation by small businesses as primes. They 
were able to compete against large businesses for every task 
order.
    So it can be done, but the key to the whole thing is to 
have an open dialog at the very beginning when you start to 
develop the strategy that you are going to use for that 
acquisition. I feel that the sooner the OSDBU directors as well 
as the PCRs and the acquisition workforce come together and do 
that development and that planning, the sooner you will be able 
to succeed.
    I would like to put in the record the three points that we 
used in the appeal to the Air Force. One of them is that we 
felt that the statement of work was too broad. Because it was 
so broad it was difficult to point to small business 
participation. The contracting office did not provide 
information or complete the steps required to justify the 
contract bundling in accordance with the contract bundling 
regulations.
    The other major point is that an inappropriate Standard 
Industrial Classification code was utilized, resulting in an 
assigned size standard of over 1,500 employees and that really 
does not represent the majority of the work that is performed 
by small businesses.
    Mr. Smith. In the interest of moving on, if you, Luz and 
Tony, would submit clean copies of your appeal letter and your 
response letter, we will insert both of them into the record 
and we will let readers of the transcript decide for 
themselves. That way we can then proceed. Is that agreeable?
    Mr. DeLuca. I agree because obviously we do not agree with 
my good friend, Luz on this.
    Mr. Smith. Unfortunately, I think we could spend the next 3 
hours on this one.
    Mr. DeLuca. Right. I agree. We have been spending 18 
months; what is another 3 hours?
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    Mr. Smith. Let us move on then to the next segment on the 
specific standards and terms that are used in the regulation. I 
apologize for those of you who had additional comments but I am 
afraid we want to try to keep on track so the OSDBU council can 
meet on time after this is over. The one thing that caught my 
attention is one of the phrases that is used in the law and 
which appeared in the SBA's regulation--the term ``measurably 
substantial.''
    In order to determine whether a bundling is necessary and 
justified we look to see whether the benefits from it are 
measurably substantial. Both words are important because I 
thought the SBA seized on a very valid point in the 
regulations. The term ``measurable'' implies quantifiable. If 
you are going to measure it, you have to be able to put a 
number to it and there is certain logic to that.
    What I wanted to ask you was, how would non-monetary 
benefits be calculated? Especially since the thresholds in the 
regulation are expressed in terms of dollars. There are some 
thresholds such as quality improvements, reduction in 
acquisition cycle times, and better terms and conditions that 
do not automatically come to mind with a specific price tag 
associated with them.
    I wonder how well we know how to translate those non-
monetary benefits into a monetary standard.
    While someone is thinking of what to say on that, I will 
give the reason why I have a concern with this. I used to be a 
lot more thrilled with estimates of cost savings until I 
submitted an amendment once to the Congressional Budget Office 
(CBO) for an estimate. They came back with an estimate of $12 
million plus or minus $2.5 million, which was about an error 
margin of about 17 percent either way. I was kind of impressed 
at the level of arbitrariness in these estimates, so that 
concerns me.
    Stan McCall.
    Mr. McCall. I think Bob Neal said something earlier about 
there being opportunities within bundled contracts for small 
business participation. I think measuring the cost of doing 
this is really what we need to be looking at. I think we are 
paying a bigger cost than we realize.
    My observation has been that bundling is wreaking havoc 
with the development of new businesses. It is not only from the 
aspect of creating bundled contracts that large businesses win. 
We are also bundling within the set-aside programs themselves, 
in that small businesses and 8(a) firms are putting them 
together to make larger requirements. Once these instruments 
are in place they tend to soak up every new opportunity that 
comes along.
    Now I feel that over time the smaller requirements that 
were out there were developing the American small business 
base, which was building up the tax base. That is where the 
jobs are being created. It was also building competition, which 
was giving us better prices. I can point to many examples of 
small businesses that got their first small opportunity, grew, 
and then they were able to compete against the large companies, 
resulting in much better prices. But those opportunities have 
been soaked up not only by large businesses but other small 
businesses and 8(a) set-asides that grant these huge 
requirements that the little start-up company does not have 
access to anymore.
    How do you measure that impact? You cannot but I know it is 
there. And despite a 10-percent savings we might be getting up 
front, we are paying a bigger cost with less competition, less 
building of the tax base down the way. So where do we draw the 
boundary of where you measure the cost.
    Mr. Smith. So perhaps there needs to be a cost component to 
the definition somehow. Although in that case the costs are so 
wide you would be hard to attribute it to any particular 
contract but I think that is a very important concern.
    Mr. Robinson. Quick question. Based on the strength of his 
argument----
    Mr. Smith. Mr. Robinson.
    Mr. Robinson. Yes, I am sorry, Jackie Robinson from GSA. 
Based on the strength of your argument, Mr. McCall, what is 
your recommendation?
    Mr. McCall. I think one thing we have got to do is put more 
than just a cost definition on a particular bundle. Other 
additional approaches that we must analyze are, we must try to 
define what we put to this test, including contract 
consolidation, new requirements, a lot of things that are 
really bundling but they are not called that.
    Like I said we are even doing it within set-aside programs 
but it is not subject to any tests when we are doing it there. 
It is a start. Those are some of the things I think we could 
address.
    Mr. Smith. There was something that Charlie Alderman 
mentioned to me some months ago before he moved on to bigger 
and better things. And that was that there had been a study in 
the early 1960's about the effect of contracting in the, I 
guess it was at the Defense Department, and that before a lot 
of the small business program was well-developed, things had 
become so consolidated that a contractor was essentially able 
to name a price. Does that ring a bell with anyone?
    I have not been able to track down that study. I sure would 
be interested in knowing where that is or if anyone knows who 
produced it.
    Mr. Neal. What we are in the process of doing now is what 
we have gone through, as a commitment to the House Small 
Business Committee, of performing a bundling study in which we 
have invited several advocates to sit on our oversight review 
board for the study. What we are finding--we did not find that 
particular study because we did do a historical search and we 
were not able to locate it--but what we are finding as we go 
through the process is that the point that Stan McCall is 
making is one that many of us in procurement positions have not 
come to grips with.
    With the economies of scale that we are asking folks to 
look at, inherently we are looking for firms that have 
capabilities that are not present in emerging firms. You cannot 
ask us to serve the mature small business community and the 
emerging population at the same time and reduce our resources. 
You are having us at odds with ourselves.
    When we consolidate and when we go for efficiencies you 
have a tendency to look at mature firms with past performance, 
with history, that you have less difficulty and you spend fewer 
of your resources assisting. We do not have the people so we 
are looking for mature firms that can hit the ground running 
and do the job and we never have to look at them again. As we 
look at all of our consolidations at whatever level, the study 
is coming back to us and pointing out that we are having this 
schism occur.
    And so those are our preliminary results saying that we are 
focusing now on mature firms at the expense of emerging firms. 
Now we have a lot of programs that are out there for emerging 
firms, but do we have contracts that would allow the emerging 
firms to gain the experience? That is where we really have the 
difficulty in the agencies. Because if I have a choice as a 
program manager, I am not going to risk my program on an 
emerging firm when I know that there are mature small 
businesses that will give me a check in the check box and 
satisfy my oversight committees if I use a mature firm.
    So we are going to need some help in assisting our 
leadership as we come up with innovative strategies to try to 
enhance the opportunities for emerging firms. However, we are 
going to need some tools in order to assist the emerging firms. 
Now we used the Mentor-Protege program as one of the tools to 
assist an emerging firm. But it requires a commitment on the 
part of the commercial sector, requiring our prime contractors 
to invest their resources along with the resources that we have 
available. There is very strong sentiment that there should not 
be a Mentor-Protege program where we offset the cost. If that 
happens, then emerging firms are going to be dead in the 
Federal marketplace.
    One other point I want to make on this cost-benefit 
analysis piece, when you ask the question of whether or not we 
should have cost-benefit analysis, we have got to recognize 
that we went through a long, painful process with the Office of 
Management and Budget (OMB) Circular A-76 process to finally 
get to the point where we feel we have a cost-benefit tool that 
is useful. We have just begun to scratch the surface in small 
business and looking at consolidations and recognizing that we 
need a cost-benefit analysis tool that is useful.
    Now that we have recognized that, we can benefit from 
looking at what took place in the A-76 process and maybe 
appropriate that cost-benefit analysis tool that took years to 
develop, and also be able to use it in the area of 
understanding, what are the costs and the benefits of doing a 
consolidation. That is going to take us a little time. That is 
something--as some of the preliminary indications that we have 
gotten from our consolidation study show--that there is a great 
demand for us to have clear, concise, detailed guidance to 
everyone that is involved in the process on how to perform a 
cost-benefit analysis as it relates to consolidations.
    Because, as it is right now, we are throwing out very raw 
generalizations to our contract folks and we are expecting them 
to come back with A-76-type cost-benefit analyses and that is 
not what we are getting from them. What we are getting is the 
best that they have available to them at that particular point 
in time and within their abilities. But we are not getting the 
kind of detail that you would like to have, that we would like 
to have in order to make informed decisions and help our 
leaders make informed decisions on consolidations.
    It is one area that we are going to have to spend a 
considerable amount of resources, and when I say resources I 
mean money, in insuring that we have a good cost-benefit tool 
because that A-76 tool cost us considerable amount of resources 
over a number of years.
    Mr. Smith. And if we have already invented the wheel, there 
is not a lot to be gained by reinventing it. Do you recall how 
A-76 handles some of the non-monetary things like reduction in 
acquisition cycle times and terms and conditions and the non-
monetary things? Does it have a process that has already been 
thrashed out on how to translate those into dollar figures?
    Mr. Neal. They have tried to thrash out many of those 
areas. I would like to submit for the record copies of the 
cost-benefit analysis that is utilized by the OMB as the 
beginning where we can start to look and see where it may be 
tweaked to be more appropriate for what we use in the 
procurement field.
    Mr. Smith. If you will submit that to us, we will make that 
a part of the record. Thank you.
    [The information referred to follows:]

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    Mr. Smith. Sharron Harris, you have been waiting very 
patiently.
    Ms. Harris. I would say that I recognize San McCall's 
concerns and I agree with what Bob Neal is saying. Part of it 
is looking at the tools that we have now that we are working 
with and making determinations for how this bundling will 
affect small businesses. There may be many small businesses 
that participate if we are making multiple awards for a 
requirement. That is a major opportunity if multiple small 
business partners get an opportunity at their varying levels of 
capability to perform. So we are still looking at the tools.
    Mentor-Protege is one of those tools that can help us with 
this. Subcontracting is another one of those tools if we are 
looking at large business as prime contractors in the bundling. 
And that is an area that we have got to do a lot of work in 
strengthening how we manage subcontracting. There are a lot of 
weaknesses in the tools that we have under subcontracting to 
make it work effectively.
    Ms. Williams. I just want to echo also what Bob Neal is 
saying. When we put the rules together and looked at the 
literal words of the statute, trying to do the measurably 
substantial benefit analysis and testing cost was grouped 
together as one factor. When we looked at trying to craft the 
rule we said agencies can look at costs as well as the other 
factors individually or in the aggregate to come up with their 
analysis. But, we certainly do need help in trying to come up 
with best practices that we can share with our PCRs as well as 
with the agencies to come up with a good model for trying to 
conduct these analyses. So we tried to craft the rule looking 
at benefits and recognizing that cost is one of those benefits 
that must be achieved.
    Mr. Smith. As an offset to benefits, right.
    Ms. Williams. Right.
    Mr. Smith. Ms. Aguilera.
    Ms. Aguilera. Thanks. I guess one of the key words that we 
found was balance in here and from what Stan McCall was saying 
there is clearly a role for the Federal Government to play to 
ensure we have a strong small business community. But we also 
have extraordinary tools through our contracting to help do 
that.
    The question becomes the tools and how we could promote 
programs within our program office. If I were able to go to a 
program manager and say, ``Listen, you do not need to worry, we 
have got some extra resources here to do some business 
development in that particular area of scientific work that 
they are doing,'' they would get excited about it. Right now we 
do not have that extra tool for business development.
    I do think that the subcontracting area is a huge area that 
is underutilized. I agree that prime contracting needs to 
continue to have a very strong push, but we should consider 
subcontracting as one of the ways where we can develop some of 
the smaller firms and things of that nature. There are 
weaknesses in subcontracting but that is a key tool.
    Right now we do not have a particular goal and we do not 
measure subcontracting and how much we do. There is a ton of 
opportunity there. So there might be a balance in looking at 
how we could leverage some of these opportunities.
    Mr. Smith. Tracey Pinson.
    Ms. Pinson. One benefit that I think that we have a 
tendency to overlook, that we probably should be trying to 
assess, is the extent to which small businesses will benefit 
from the bundled contract. Invariably we may take 20 or 30 
contracts and consolidate them down to one or two, but can we 
package those contracts in such a way that small businesses 
will still participate as prime contracts?
    I think that is what, since we are kind of accepting the 
fact that bundling is here to stay--I do not know whether we 
want to say that publicly or not, but I think that is a 
reality--but we want to make sure that small businesses can 
still play at the prime contracting level.
    So bundling is not always negative for small business. Now 
it may be negative for that small business that is being 
consolidated out of the process and may not be that one or two 
that gets the contract but again, our objective is if we have 
to live with the bundled contract, we want to make sure that 
the small business can play at the prime contracting level. I 
think that is a benefit that we have to take a look at, and a 
reality.
    Mr. Smith. Mike Green.
    Mr. Green. Just a little follow-up on the subcontracting 
aspect of bundled contracts. When you are talking about 
subcontracting plans, $500,000 or a million dollars, you have 
got these things called commercial plans that somebody puts 
together for all business and one agency accepts it so that is 
the plan that everybody accepts.
    The way subcontracting is currently structured, there is 
really no way to ensure that those companies, excluded from 
government opportunities by a huge bundled contract, would have 
an opportunity to participate as subcontractors instead.
    The Government does not have a right to direct prime 
contractors to consider specific firms for their 
subcontracting. Prime contractors do that themselves. But it 
would be kind of interesting to see if we are, in fact, losing 
numbers of small businesses in the prime contracting game.
    There is something to be done about commercial plans, 
something to be done for each contract that we issue. For a 
huge contract that the potential small contractors that have 
been weeded out, at least give them the opportunity to compete 
with that big prime for the requirements to become 
subcontractors. Nine times out of ten the big prime will 
already have their subcontractors in place and companies that 
are doing business with the agencies do not have such an 
opportunity to compete at all.
    Mr. Smith. Jeanette Brown.
    Ms. Brown. One of the other things, going to what Tracey 
Pinson was saying, I think we also need to look at and strongly 
encourage the small businesses to team together and do the 
joint venturing so that they can go after these large 
contracts. We do not see enough of that and I think it is our 
job to work with them to get them in that position. If contract 
bundling is here to stay and this is a factor that we have to 
live with, a lot of times they can team together to go after 
these contracts and win. But I think the onus is on us in the 
small business community to work more with them and the SBA to 
get them to that point.
    Mr. Smith. Michael Gerich.
    Mr. Gerich. If you will let me, I would like to just 
backtrack a little bit. This conversation started on the 
question of measurably substantial benefits, the statutory and 
regulatory definitions, the SBA regulation, et cetera. In 
defense of the SBA and also the Administration it did, in fact, 
yes, take a long time to come up with those regulations in 
interim and in final form. But I think that reflects the 
difficulty in balancing these situations.
    We have got competing, compelling interests on the part 
of--and DOD has given you examples of the reductions in 
manpower. We have to deal with these situations. Nevertheless, 
we all are committed to small business participation. It has 
only been since, I believe, July 26 that both the final 
regulations on contract bundling, SBA's and the Federal 
Acquisition Regulation (FAR) were put in place.
    The difficulty, I think, in arriving at those regulations 
reflects the fact that we have to balance these concerns: the 
small business interest, the bundling interest, and the 
procurement reform efforts that often reflect the reduced 
resources we have. I would hope that before we delve into 
mandatory changes in the statutory and regulatory definitions 
of measurably substantial benefits, et cetera, we give some 
time to operate for our agencies to experience these 
regulations and find out what is necessary. You see examples 
here where perhaps we need more best practices.
    We need to develop more practices using these regulations. 
Again, these may not be perfect but again, there was difficulty 
at arriving at those regulations. That reflects the various 
interests here: the interest of the major procuring agencies, 
the SBA and all involved. So I am hoping that we will have a 
little more time with those regulations and operations and 
agency experiences with those regulations.
    Mr. Smith. That is a very worthwhile comment. We are not 
wanting to use this as a chance to throw rocks at anybody at 
the SBA or the OFPP or anybody. This is just simply to get a 
temperature check to see how people understand the regulations 
as they currently are written and what they are beginning to 
see as it starts getting underway. So it is really intended to 
be more of an information session. So that is kind of what we 
are shooting for here. Ben Saji, you had a comment?
    Mr. Saji. Bundling, to me, seems to be really a return to 
business as usual with the potential for monopolistic 
practices. It was just a few years ago that we were using 
strategies on how to break out some of those big dollar 
contracts so that small businesses could participate. We did 
that because there was no real savings to the Government in the 
first place with what looked like monopolistic practices.
    Now I do not see any promise of government benefit and what 
we now say is we must have bundling procedures in order to help 
the Government. Whether or not it is hurting the small 
businesses seem to be clearly evident as they are screaming at 
the top of their voices that they are being hurt. I do not see 
how anyone is being helped by it.
    Mr. Smith. Let me make one quick statement and raise 
something for everyone and then move to you so that we can be 
thinking about the next thought. One of the tiers that the SBA 
came up with in its regulations was the $75-million threshold 
of looking at measurably substantial benefits at a two-tiered 
level, and trying to figure out when those benefits should be 
reckoned as a different figure above a certain threshold. The 
figure they used was $75 million.
    The regulations--the explanation and justification I think 
they called it--the SBA maintains records on the value of 
bundled contracts and over the past 4 years they determined 
that the majority of bundled contracts fell within a range of 
$50 million to $75 million and that is kind of the origin of 
that. And that is looking I guess at a government-wide basis, 
just collecting from all over. I was curious though about some 
of you.
    Some of you have smaller budgets than others, and I was 
wondering how you look at that $75-million threshold and how 
that applies to your agency. Is it very high for your agency? 
Is it very low for your agency? Or what is your experience? 
Lynn King, if you want to go ahead and comment, but if everyone 
would please be thinking about that.
    Ms. King. This will sort of tie in a little bit. Again, 
these are the words of my council member, Patricia Stout, and 
this is her experience, not to throw stones but to just provide 
information to the directors here from a small business owner.
    Last year, the GSA issued multiple-award contracts for 
travel services. That included a good number of set-asides to 
small business. The GSA included multiple awards for nationwide 
travel services whereby government agencies could select a 
single travel contractor to provide services to all those 
government agency's locations nationwide. This was done to 
allow the greatest flexibility possible to the various 
government agencies.
    The sheer size of the GSA contract line item for the 
nationwide coverage limited the competitors to the very few, 
very large travel companies. Through this practice the small 
business set-asides were not enforced. Just to give an example, 
the travel contract for the Department of the Interior was 
recently awarded to a nationwide single contractor for a total 
of $49 million and that again, ties with the threshold $50 
million to $75 million and has effectively removed its 
purchases from the small business set-aside. The INS, the GSA, 
and the SBA are a few of these agencies that are adopting this 
practice and this just happened this year.
    So I mean the issue of the $50 million to $75 million does, 
I think, depend on the agencies because obviously DOD for their 
contracting numbers that is all right, but smaller agencies and 
independent agencies might not have that threshold level of the 
$50 million to $75 million, maybe $49 million and under.
    Mr. Smith. Tony DeLuca.
    Mr. DeLuca. Just a couple of comments I guess. First of 
all, I would caution us all that we do not take something out 
of here as a given when indeed it has yet to be proven. What I 
mean by that is, we are going through a study in DOD now 
looking at what is happening in bundling and what is not.
    So I would hate to have everyone leave the room thinking 
that bundling is bad and we are bundling every contract we have 
and that small businesses cannot play because that is not true. 
We do not really know the answer to that yet. I think that is 
something that we have to find out.
    With respect to the teaming issue, I think that is a very 
good point. The SBA changed the affiliation rule and I co-
authored a letter with the head of contracting in the Air Force 
encouraging all contracting officers to take advantage of that. 
We have done that. At Brooks Air Force Base we awarded a 
contract to a team of two women-owned businesses for $100 
million. Individually they could not have done that. So I would 
note here again that is an opportunity that should be taken 
advantage of.
    The issues of tools and bundling and break-out reps--
reminded me of years back when I was competition advocate and 
being there we had to fight toilet seats and hammers. The way 
we did that is we introduced competition. Competition is 
nothing more than the phenomena of the marketplace. We have a 
cycle going now. And we see that cycle in large businesses.
    I saw this statistic and it was in the Democratic platform, 
and I am not saying I am for one or the other, but it stated 
that of the 22-million jobs created in the last 8 years, 90 
percent came from small businesses. So, are we bundling? Yes. 
Is it affecting small businesses? Well, if job growth is really 
there, I am not sure.
    I think the other thing we have to look at, Cordell, is 
that within the context of this overall 23-percent fandango, we 
have got so many subgoals it is like, which one am I pushing 
today? And oh, by the way, we in DOD have lost one of the 
biggest tools we had, which was our small disadvantaged 
business set-aside, because it was determined that we could not 
do that anymore.
    So I think as we go forth on this, yes, balance is to be 
achieved, but I think we need to take a look at what is 
happening in the environment out there. What does the economy 
look like? Sometimes we have to step back and say, ``If we are 
really going to make a difference, if the Federal Government is 
really going to step in and do something, then we have to 
understand that the role needs to be effectiveness, not always 
efficiency.'' Effectiveness sometimes runs right smack against 
efficiency, and that is something that we run into everyday.
    Mr. Smith. Sharron Harris.
    Ms. Harris. I agree with Tony DeLuca's comments but what I 
was also going to say was that as we look at that $75-million 
threshold for some agencies--and Agriculture is a large agency 
that is still in the higher scale for industry specific 
thresholds, and I know that creates a ton of confusion when you 
are looking at industry-specific thresholds--but that $75 
million is a large volume.
    We do a lot of food commodity acquisition. Mike Green and I 
were thinking. We cannot recall when we have done a food 
commodity acquisition at that threshold and we are struggling 
for small business participation in those industries. So that 
is a substantial threshold. It may not be for DOD, we recognize 
that there are agency uniquenesses but for some of the larger 
agencies that is a significant threshold, especially when you 
are looking at a rural constituency like the community we 
serve.
    Mr. Smith. Debra Murphy.
    Ms. Murphy. Debra Murphy with the Library of Congress. Our 
budget approaches basically $250 million a year so a $75-
million threshold is pretty high relative to our budget. But 
what we do have is a commitment. We are averaging roughly about 
60 percent of our awards going to small businesses. In the 
context of individual development, individual Indefinite 
Delivery Type Contracts (IDTCs) and multi-awards and all of the 
different types of contractual instruments that we have, many 
of them as Tracey Pinson has indicated, are going to small 
businesses.
    We are in the process of implementing a supplier diversity 
program where we plan on encouraging small business 
participation by way of teaming for a lot more of our more 
sophisticated projects for our exhibits. But I just wanted to 
say that while $75 million is a tremendous threshold, it 
certainly does not diminish the challenge that we all have in 
terms of balancing contributions and participation on the part 
of the small business community with the needs of our program 
managers.
    Mr. Smith. Thank you. I apologize to the rest of you. I 
think in order to stay on time we are going to have to move on 
to the next segment. So I apologize for moving on before 
everyone has had a chance to comment.
    Now, I want to go ahead and raise the issue of where OSDBUS 
fit into this process because that is obviously something that 
you all know better than I do and anyone else for that matter. 
I put up the chart over here of what it says is in section 
15(k). You have this also in your packet if you cannot see the 
large chart.
    [The chart follows:]

    [GRAPHIC] [TIFF OMITTED] T8451.092
    
    Mr. Smith. It is from the Small Business Act on OSDBUs--or 
SADBUs as the case may be--of identifying proposed 
solicitations and trying to find ways for small business to get 
into the process and work with reforming solicitations to make 
them better and so forth.
    We raised a question earlier, in the context of the 
procurement center representatives, about how they find out 
about potential bundlings. It looked like in some cases 
agencies had learned that it was in their best interest, in 
order to get an acquisition out the door, to work with the PCRs 
early on rather than wait until late in the game and having to 
go through an appeal process. Some of you had, I think, Joe 
Capuano, you were the one who mentioned about a PCR with whom 
you had very good working relationship and brought him into the 
process very early on.
    What is your experience as OSDBUs? The regulation itself 
does not mention OSDBUs in particular, it just mentions the 
PCRs. My supposition is that a lot of contracting probably 
occurs by rushing to try to get it out the door before you hear 
about it. How do you hear about procurements that are happening 
in your agency? When do you get the opportunity to intervene? 
How much of what your agency does do you actually get to see?
    Ms. Harris.
    Ms. Harris. At one time at the USDA we had a threshold that 
any requirement over $100,000 needed clearance through the 
OSDBU office if the acquisition strategy had not been to set 
the requirement aside.
    Now we have run into fierce competition among our 
procurement council members because part of what they do is 
negotiate. Part of what the small business reps in our 
different bureaus would do is negotiate when they can get an 
award set aside but some they would have to give up. So right 
now we suspended that strategy because of the challenges that 
we were getting and went to a more cooperative effort to 
encourage the business reps to reach their goals and then be 
given a waiver.
    So we are in a resting stage for that but that was one of 
the ways we tried to identify requirements that were not 
targeted for set-aside. And we set a threshold to do so. Now 
what has happened, though, is a number of agencies utilize 
instruments that will allow them to circumvent even making that 
requirement available. They may use a GWAC instrument. They may 
use a Federal Supply Schedule instrument or an interagency 
agreement of some type so that when they have requirements, 
another agency is going to procure for them. So it is a tug-of-
war to really get a strategy in place that works effectively.
    Mr. Smith. Scott Denniston.
    Mr. Denniston. A couple of things. I have been sort of 
quiet today because, after my first comment and hearing all the 
rest of how great the PCRs are, I did not want to put a 
negative tone on this meeting. But I would suggest to you that 
Tony DeLuca's comment about small business job growth--I cannot 
dispute that. Yet the SBA tells us we have 20-million small 
businesses in the United States, but if we look at the Federal 
Procurement Data System (FPDS) statistics, we have only have 
about 5,000 small businesses on a yearly basis that do business 
with the Government.
    So my point is, we are looking at a small universe compared 
to the 20 million. I think that is a problem. If we look at 
FPDS statistics over the last 6 years, even though we know that 
the percentage of the total procurement going to small 
businesses stayed about the same, the number of actions that 
have gone to small businesses in any category--whether it be 
small, SDB, women, 8(a)--has been cut in half.
    I would suggest that that gets back to Stan McCall's 
questions about what are we doing for the smaller businesses 
and some of these issues that we have been addressing. They are 
tough issues. I do not know that any of us have an answer. One 
of the biggest problems I have, though, is knowing what is 
going on. We have processes in place, like some of the other 
agencies where anything over $100,000 is not going to be bought 
through a small business program.
    It is supposed to come in to us to review but again we have 
got a staff of 10 people. We have got 200 buying offices. Quite 
frankly, the way we find out about what is going on is we 
review the CBD every day. That is how we know what actions are 
going on within the agencies, within the Veterans Affairs 
anyway.
    As an example, we have a brand new opportunity where the 
Office of Management and Budget (OMB) is telling us we have got 
to get out of the business of managing home loans. The private 
sector can do that better than we can. We are doing it under A-
76. We think a regional strategy would be excellent for small 
business but I am told that OMB is saying ``no,'' the only way 
we can do a fair cost comparison is we have got to do it 
nationwide. That is going to cut out opportunities for small 
business.
    Our folks are getting very creative at using GWACs. We have 
a major push on for Federal Supply Schedules. Even though we 
are the largest healthcare provider in the United States, we 
are only about 5 percent of the total contracting dollars that 
are spent on healthcare in the United States.
    Quite frankly, we do not have the kind of leverage that I 
think a lot of folks think we have to impose strong 
subcontracting goals.
    We go to a pharmaceutical company and we say we want a 
subcontracting plan. They say, ``Hey, we are the only game in 
town. You take what we have got or you do not buy our 
product.'' When it is healthcare, you know we are going to buy 
the product.
    We have the same problem when we spend a tremendous amount 
of dollars every year with our affiliated teaching 
institutions, those medical schools around the country that we 
use. In some instances, depending on the strength of the local 
management, people will say that the healthcare schools run the 
VA. We say to them, ``We want a subcontracting plan with 
opportunities for small business.'' They say, ``Hey, we are not 
going to play.''
    And it is very difficult sometimes to impose some of these 
requirements. When we do find out about them, do we get 
involved? Sure, we all do but the dilemma is that as we have 
new contracting strategies to use it gets more and more 
difficult for us to get some of that basic information that we 
are talking about in order to do our jobs.
    Mr. Smith. When your offices put out the forecast, does it 
specify a contracting approach or does it just say this is what 
we expect to buy?
    Mr. Denniston. Each agency does it a little bit 
differently. From our standpoint, most of our anticipated 
requirements we put out with no contracting strategy. The 
reason we do that is, for instance, we want to make sure 
everybody has an opportunity. If you find something in our 
forecast that you think you have the capability to perform, we 
want to hear from you.
    So we do not want to say this is going to be a HUBZone, for 
instance, or this is going to be an 8(a) or this is going to be 
a small business set-aside because in a lot of instances, 
especially with the 8(a) program and the HUBZone program, we do 
not know enough about the capabilities of the firms to make 
those types of determinations if they do not come to market us.
    Mr. Smith. The reason I ask that is, obviously for you to 
prepare the forecast, someone has to let you know what the 
agency expects to buy. But do they let you know a timetable? Do 
you have an idea of, well, that in November we will probably 
buy widgets, therefore I should probably contact this 
contracting officer to see what is happening or whether they 
are going to go buy it off the schedule without telling me? How 
much information does that forecast generate for you in terms 
of----
    Mr. Denniston. For those types of products and services 
that we buy on a recurring basis, the forecast is pretty 
accurate because we know when contracts are going to expire. We 
know what we are going to be competing for. The dilemma that we 
have is that many times when we put the forecast together the 
actual budget has not been approved.
    So when we are talking about new, unique things, especially 
in the IT world, it is very, very difficult to get people to 
tell us what they want to do. This is especially because the IT 
procurement people have all these other contracting vehicles; 
therefore, they do not need to go through the normal, 
traditional procurement process.
    So, quite frankly, not only don't they want us to know, 
they do not want our contracting people to know where they 
intend to spend their money because they want total autonomy to 
make those decisions. Those decisions are made based on who 
markets them and just because of economies small businesses do 
not market the same way some of the big guys in the industry 
do.
    Mr. Smith. Joe Capuano.
    Mr. Capuano. I would like to offer a comment on the 
question of access to information. Please excuse me, I am 
struggling with a cold. One of the things which--why don't I 
pass and then come back to me?
    Mr. Smith. Linda, you have been waiting for quite awhile. 
Why don't you go?
    Ms. Williams. I just wanted to clarify a point you raised 
earlier, Cordell, as to the mention of the OSDBU directors and 
the regulations.
    As you well know most of the OSDBU directors are 
headquarters-located. We put the responsibilities in the regs 
on the small business specialists because they are the people 
that are in the field offices that actually work with the PCRs 
and the procuring officials to determine the strategies. So 
that is why we did not mention the OSDBU directors. Instead, we 
mentioned small business specialists, but they are covered.
    Mr. Smith. Mr. Neal, I cut you off earlier so why don't you 
go next and then we will go back to Joe Capuano?
    Mr. Neal. Very quickly, one of the things that was slighted 
when you talk about small businesses and our effort, and again 
this is from our preliminary results from our consolidation 
study, what we found is from 1994 to 1999 we had an increase in 
the number of small businesses that DOD does business with. We 
went from 3,900 small businesses that we would--I am sorry, 
small disadvantaged businesses that we were doing business with 
to 4,600 small disadvantaged businesses. And in the area of 
small businesses we went from 16,000 small businesses to 18,000 
small businesses that we are doing business with. Those numbers 
are from 1994 to 1999.
    When you look at numbers like that, it gives you results 
that are counter-intuitive to a lot of the concerns about 
harming small business. So it gets back to this balance that 
everyone is trying to strike. There are some things that we are 
doing very well and maybe there are some areas that we are not 
doing as well.
    What I would encourage folks to start looking at is to sit 
down and really identify what principles we are operating under 
in terms of acquisition reform and acquisition efficiency, and 
what principles we are operating under for small business. Then 
sit down and work out a strategy that melds those two sets of 
principles together. But that requires a lot of heavy lifting 
and a lot of work on a number of levels.
    In particular with the leadership at all of the agencies it 
is going to be absolutely imperative--and I am talking senior 
leadership, not SADBUs. We do not sign any contracting 
documents. We do not make the commitments. The people that are 
making the commitments for the agencies have to be held 
accountable. That is where all of this is ultimately going to 
end up.
    I mean, although the numbers are going up, the balance has 
to be struck. But the people that are signing on the dotted 
lines are the ones that have to strike the balance because we 
are merely their consciences on their shoulders talking in 
their ears.
    Mr. Smith. Mr. Capuano, would you like to try again?
    Mr. Capuano. Yes. As a matter of fact, Bob Neal gives a 
good lead-in to this. One of the things which is really 
important on access to information and on contracts is to 
really have a good partnership. With Secretary of 
Transportation, Rodney Slater and Deputy Security of 
Transportation, Moritimer Downey, one of the things we started 
in 1995 with our former Director, Luz Hopewell, was to have the 
small business focus in our strategic plan. It was actually 
identified in our economic growth outcome. It is equally 
important in our new plan, but has been refined and has looked 
at some of the new areas that we need to focus on.
    The other key point that Mr. Neal mentioned was that the 
Procurement Center Representatives are very important. However, 
the procurement management council at DOT has access to those 
procurements across the department, and that is important in a 
$50 billion department, 100,000 employees, with a national 
focus. The relationship that I hope we have at DOT with our 
procurement management council as a result of the leadership of 
Luz and others has been excellent. We are actually a member of 
the council.
    So with that strategy which was started in 1997 we actually 
started to move forward anticipating where this was going. Now, 
we have a long way to go. Like many agencies we are struggling 
with some of the new requirements coming out, the lack of tools 
that was mentioned, the rule of one. Those tools at the 
operational level are critical for small business specialists 
and procurement officials on the big contracts out there. Those 
tools may be five times as valuable on the smaller contracts or 
those that are not being bundled.
    And so the balance that we look at is a combination of 
that, but the leadership that Bob mentioned is absolutely 
critical. I think that is essential across the board.
    Mr. Smith. Arthuretta Martin and then Esther Aguilera?
    Ms. Martin. Thank you. I am Arthuretta Martin. I am from 
the Department of Health and Human Services.
    I just wanted to respond to the question that was posed 
here and that was the OSDBU involvement in bundling. At the 
Department of Health and Human Services we have a process in 
which procurements are reviewed by both a PCR--we do have a PCR 
onsite--and also the small business managers.
    As far as the OSDBU's office involvement in that process, 
we are only as involved as the small business managers inform 
us. A small business manager's involvement is only as good as 
their ability to find out about the requirement. We have had a 
number of different OSDBU offices, and I hope that you have 
heard this repeatedly, say we even as small business managers 
do not always have access to the requirements.
    I think also what was said, and we need to really hear this 
is: Even the procurement community does not always have access 
to the requirements.
    We, as a community, do not have as much control over 
Federal dollars as we did once upon a time. I think that there 
is a lot of competition within the procurement community. They 
are competing from one procurement activity to another to make 
sure that they get work to do so that they will not become a 
part of an 
A-76 study. I think that also within the dollars available, the 
program officials do have a job to do and they do not want 
obstacles hindering them from being able to accomplish that. So 
if they can go to a GSA schedule or another agency's contract 
to meet their goal, they are going to do it.
    We have too many competing things going on in this 
environment to be able to do the job that we have been put here 
to do. Those contracting officers, when they get a requirement 
if the program official agrees and is willing to work with him, 
we can do a lot of work for small business. But it is important 
that you understand and that the deciding people understand 
that the person or the individuals that have the most control 
over this process are the program officials. We need their 
support. We need their buy-in in order to make this work.
    Mr. Smith. Esther.
    Ms. Aguilera. We have a process in our agency where we 
review contracts of $3 million and above. We are making some 
changes to that, but what we found is that we are getting them 
at the end of the process only when some of the key decisions 
have been made and they want to move with it quickly. So we 
have been meeting with all the program managers and offices to 
talk about plans for getting involved in the acquisition 
planning early on. I think that will make a big difference.
    But specifically on the role of OSDBUs and this bundling 
area I am concerned that this has not been mentioned. I think 
the important thing is, while the Small Business Act does place 
small business specialists in each of the procuring agencies 
and offices, the Department of Energy is in 23 States across 
the country. It is important to understand the role of these 
offices; how they are empowered or not and our role with them.
    They report to that program manager. They do not report to 
me. We do have monthly calls with them. We are constantly 
involved and engaged with the small business program managers 
in the field but it is important to understand the role.
    We had a couple of cases where the field office was 
involved in a procurement and the SBA and the PCRs contacted 
the local office to raise some objections and it went forward 
anyway. We did not find out about it until it was too late, the 
11th hour. We could make a bigger difference if we are somehow 
tied in and we are in the loop. Granted, I think that we have 
very good PCRs that work with us.
    Our small business program managers are very committed but 
they have managers that they report to as well. And unless we 
want to have some kind of more direct oversight, again in terms 
of our relationship with them, then I think it is a problem. I 
think OSDBUs want to help on some of these bundling issues, but 
we are not involved early enough. What we are looking to 
consider doing at DOE is try to figure out a way to make sure 
that my office is alerted about some of these things early on 
because it is not in the reg. It is not something that 
automatically happens.
    Mr. Smith. One quick question. Because the one time when 
the OSDBUs do get some information at some point is apparently 
in preparing the forecast. So that does give you some idea of 
what is coming up. How is that information compiled? Does your 
office happen to know what you expect because of contracts that 
are expiring over the next year or do program offices contact 
you? How does the OSDBU get involved before the forecast is 
actually developed?
    Ms. Aguilera. As I mentioned, actually we have two 
processes. One is the review of the contracts of three million 
and above. For our forecast we send out a notification asking 
specific questions of information we need to get to put 
together the forecast.
    We do ask about the acquisition method, and when it is 
going to be procured. And we get a very good response. The 
forecast has quite a few requirements in it but it does not 
represent the entire universe of what is happening out there. 
Our forecast contains maybe opportunities of about $3 billion 
over 3 years, which is a lot of money both in the prime area 
and the subcontract area, but it still does not capture 
everything that is happening out there.
    There are, I would say, two or three times more activities 
happening out there than what we capture in the forecast and 
others.
    Mr. Smith. We will put a pause on this discussion, on the 
role of the OSDBUs, because I had a couple of requests that I 
agreed to honor in terms of a few folks wanting to talk about 
some miscellaneous issues. So we put some miscellany on the 
agenda, and then if everyone decides that we wrap that up, we 
will go back and take some of the additional comments that we 
have not gotten to hear yet. Mr. Neal, I know you had some 
things you wanted to call to our attention so please proceed.
    Mr. Neal. There are two issues that I wanted to bring to 
the attention of the Committee and to the Members of the Small 
Business Committee. First of all, I have spent a great deal of 
time talking about the preliminary results that we are starting 
to see from our consolidation study. That study--we are 
expecting to wrap it up and to have a final report this month 
that will be available and it reveals some things that 
surprised us as advocates for small business and also it 
confirmed some things for us.
    As we go through the process we think it will be very 
instructive for Members of the Committee and for members of the 
small business community to take a look at this study and to 
take into consideration that this is one of the first times 
that we have actually had any organization spend the time and 
the money to develop some statistical measures of what is 
actually going on with respect to consolidation. It is very 
insightful for us.
    As we have looked at it we see some things that are 
indicating that small businesses are faring very well with 
consolidations. Then there are some other things that are of 
concern to us. Those are the types of things that we think we 
need to start focusing on in addressing the issues where the 
gaps exist, where we need to devote more resources and to 
devote our focus to, for example, cost-benefit analysis--being 
able to do a good job of not only performing the initial cost-
benefit analysis but to follow-up on things to find out if the 
cost savings that were projected were actually achieved. I mean 
we have that problem across the board whenever we use cost-
benefit analysis.
    Second, I wanted to bring to the attention of everyone here 
that, in looking at the issues that we are looking at today, we 
came to realize that we really needed to pull together a team 
to focus on how we get top level senior management involvement 
and accountability at every level. Not only is it important for 
our base commanders who are responsible for executing at the 
individual bases, but it is also important to have the senior 
leadership in the secretary's office and the secretary involved 
in these sort of things.
    Now when you have agencies that are very large and have 
very diverse interests, it is not always possible to put those 
types of things in front of the secretary and get them to spend 
a consistent amount of time focusing and reminding the 
management structure of how to do it. What we have come to 
recognize is that through a rapid improvement team that has met 
over the last 2 weeks, we have got some very concrete 
strategies that we are looking at utilizing within the 
Department of Defense to help focus our management attention 
and more importantly focus on accountability.
    We, as SADBUs and small business specialists, do not sign 
the documents. We do not make the commitments. In order to 
ensure that people are committed they have to recognize that 
that is one of the key parts of their jobs as program managers 
and contracting officers. What we spent the bulk of our time 
looking at is, how do we ensure that those individuals 
understand that it is a key function of their responsibility to 
ensure that small business opportunities are available? As soon 
as we are able to clear the review process within the Pentagon, 
we will be very happy to share that with anyone and to talk 
about how we arrived at those conclusions.
    We do feel that we are on the right track, that the grades 
that were handed out by the House Small Business Committee were 
a wake-up call. Not that we would agree with them in total, but 
we do believe that it pointed out to us that we could do more 
as an agency and we are committed to doing more. So the results 
that you will see as part of our consolidation study and as 
part of the report of our rapid improvement team will show that 
the Department of Defense has taken this task on and that we 
believe that we are going to be very successful.
    As Tony DeLuca pointed out in looking at the FAST, we are 
going to be very aggressive in how we address consolidations 
and insuring that small businesses receive great opportunities 
as a result of our efforts to consolidate.
    Mr. Smith. We will look forward to hearing the results of 
what you are putting together there. I think we are very 
interested and excited about the way that you have tackled this 
study. I think you are onto something. There is a lot of--the 
folks at the top may be aware of the goals and the agency as a 
whole is responsible for achieving them, but if everyone is 
responsible, no one is responsible. You need to find a way to 
get that down to the level of people that are making the day-
to-day decisions. So, I think we will be very interested in 
what you have on that. Mr. Robinson, you had something for us?
    Mr. Robinson. Yes. In reference to Bob Neal's statement 
about senior level management involvement and their support, at 
the GSA we are a part of the leadership; therefore, issues such 
as these, we have brought the record to the attention of the 
leadership and we get feedback, direct feedback.
    One of the questions that I had is, and it may have been 
addressed prior to my arrival, what do you expect to take place 
as a result of the things that you are hearing today with this 
roundtable? In addition to that, what is the timetable 
involved?
    Mr. Smith. As to the timetable, I can tackle that first 
because there are 440 Members of the House and 100 Members of 
the Senate who feel free to disagree with me on timing. I have 
never quite been able to understand that. But obviously, 
realistically we are probably pretty much out of time in terms 
of doing anything this year.
    In terms of how we can improve the goaling process or what 
improvements, if any, should be made to the contract bundling 
regulation, I think Michael Gerich raised some valid points 
about waiting and seeing for a little bit longer. On the other 
hand, if there are some obvious loopholes they might be worth 
closing. Those will all be things that we will be looking at 
very early in the 107th Congress which would be in January 
2001.
    As far as just exactly what we would do, that is going to 
depend on what we hear about what is actually happening. That 
is one of the things that this roundtable is designed to help 
us with and that is to get that information. I did make the 
commitment very early on that we would not ask you to help us 
write a new definition for bundling because you are not 
legislative--your legislative offices probably would not be too 
happy if I asked you to do that.
    But the information that you relate to us gives us some 
idea on how the real world looks at these terms and defines 
them and maybe gives us some ideas on how to go about making 
improvements.
    Mr. Robinson. A follow-up question. The report that you 
will draft, will that report be brought to the attention of the 
Committee Members or to this group that is here?
    Mr. Smith. You mean of this meeting?
    Mr. Robinson. Yes.
    Mr. Smith. There will be a transcript prepared and we will 
be happy to send that to you as soon as it has been published. 
Allow about 5 to 6 months for that. I mean it is a matter of 
going back and forth between the GPO and proofreading and 
typesetting and all that stuff.
    Mr. Robinson. I want to make sure I am clear on my 
question. Not the minutes from the proceeding but what will be 
the next step, the recommendations, et cetera.
    Mr. Smith. From this?
    Mr. Robinson. Yes.
    Mr. Smith. I do not envision that we would actually issue a 
report per se based on this meeting. It would just be the same 
as any of our Committee meetings. We come away with information 
that we would use when we start looking at legislation. I would 
think the work product would ideally be legislation. But there 
are more people involved in that question than just me.
    Ms. Forbes. Basically, I agree with Cordell that we are 
pretty much out of time. The bills that are going to get done 
this year are primarily Appropriations bills. There may be some 
others. We are hoping at least SBA's Reauthorization bill will 
get done, but it is not going to be anything involving bundling 
at this point.
    It is far too late in this year but what this roundtable 
will do is enable us to decide, when we are planning and 
discussing with our Senators and our Committee, what do they 
want for the legislative agenda for next year. This is a very 
timely date to have this roundtable so that information can be 
factored in. That is what I see. Also, it would not be 
concluded in January. We will start working on it in January.
    As I am sure you know, the Armed Services Committee and the 
Governmental Affairs Committee are very interested whenever we 
start focusing on bundling or anything that affects their work. 
It is a very complicated process.
    Mr. Smith. Mr. Faithful, you had something for us?
    Mr. Faithful. I am Bob Faithful, the Director of the 
Interior Department's OSDBU office. I wanted to come back to a 
point that Lynn King had made in her reading and I think that 
as a short-timer among the OSDBUs it has become evident to me 
that there are actually two government activities here.
    I think you were right to ask about the level of commitment 
that was set up. DOD, NASA, GSA and Energy are 4 out of the top 
20 organizations that do more than $5 billion a year in 
business. So you have got 16 of the organizations sitting 
around here that basically do about $31 billion.
    However, out of those 16, almost all of them met the 23 
percent goal for small business last year. The GSA in 
particular, if you are looking for a best practices among the 
larger organizations, was in the top five, I think, in almost 
every category in terms of looking for how accountability is 
handled.
    Also starting with the Departments of Transportation, 
Interior and State, they led with at least 50 percent of their 
organization's procurements going to small businesses. Is 
bundling the same type of issue? Are the standards that are set 
up correct? The answer is probably ``No'' in terms of what we 
do. In terms of the threshold of $75 million those are not 
realistic standards for the majority of Federal agencies that 
are out here.
    If you are looking for how small businesses will make 
contact, it is not always with NASA or, because of the need for 
security clearances, the Defense Department or with the Energy 
Department's contractors. The GSA, like I said, is doing a good 
job so you cannot say anything about the GSA. They are on top 
of their percentages. The reality is that most small businesses 
are going to come into contact with the rest of the Federal 
Government.
    Oftentimes the regulations are written to handle the large 
amounts of money, the $152 billion that go through those four 
Federal agencies. Somehow there has got to be a way to 
differentiate between the majority of Federal agencies that are 
sitting here and the rules that we also are trying to work 
under. Interior has a partnership with our procurement 
community. We need to talk with them. We have a meeting 
tomorrow.
    The reality is that with the smaller organizations maybe 
there is more flexibility, maybe we are different, you know. 
Maybe we do not have some of the same issues, but I think there 
has to be a look, by both the House and the Senate, at the real 
differences between those groups, and the fact that the 
majority of the Federal Government has been successful in 
meeting its goals on many of the areas.
    Women-owned businesses is another area that again we are 
going to have to take a look at, and find ways to have 
strategies that are successful such as some of the best 
practices whether by the State Department or the other 
organizations.
    Mr. Smith. In addition to women-owned businesses I would 
also add HUBZones, which is a major concern for Senator Bond. 
That is his program and some of you have heard from us lately 
on this issue. We are very concerned that that program is not 
getting off the ground as well as we would like. Some people 
have done really well and some have not done as well as we 
would like. So it is a mixed bag but we are hoping to make it 
more on the good side than on the bad side eventually.
    Lynn King.
    Ms. King. I would just like to put on my general National 
Women's Business Council hat. Actually, we do commend the GSA 
for their efforts on behalf of women businesses. In fact, on 
Monday we recognized Mirinda Jackson, seated at this table, for 
her efforts and the GSA's efforts in outreach to women-owned 
businesses. In terms of tools and in terms of accountability 
the Small Business Administration has a number of Memoranda of 
Understandings (MOUs) with Federal departments and agencies for 
increasing business and contracts to women-owned businesses. 
There are Federal departments and agencies, Cordell, at this 
table that have not signed their MOUs. They are out there.
    Perhaps maybe the Senate Small Business Committee could 
encourage the Federal departments and agencies to enter into 
and sign off on those MOUs with the SBA. Of the MOUs that are 
in place, the only agency has an accountability measure in it, 
and that at the Department of Transportation. It is not for 
lack of effort at the SBA trying to get that accountability in 
there, it is just a lack of people agreeing to sign off and 
this is, of course, a negotiable instrument. The Department of 
Transportation is the only one that would sign off on 
accountability. There are tools that can assist in this 
outreach and perhaps the Senate Small Business Committee could 
encourage the use of some of those tools.
    The final thought that I had was on the GAO report that was 
issued a couple months ago on contract bundling. It stated that 
it was unable at that point to determine if the contract 
bundling had an effect on small businesses. Is there going to 
be follow-up GAO report requested by the Senate Small Business 
Committee? Because I hear from the small business community 
that it does affect them and I hear from a lot of people at the 
table that it does not and the GAO is in the middle saying we 
do not know.
    Mr. Smith. I do not have a letter drafted to commission 
such a study right now. One of the things we did discover in 
that report is FPDS needed to make its changes to its computer 
system to start collecting the data, and they needed the final 
rules in place to do that and the final rules are out now.
    Now FPDS can go to work and obviously we would want to be 
at a point where there are enough data to be useful before we 
actually commission a study of that. But let me put it in a 
more general way. Contract bundling is a continuing concern 
here and it is a continuing concern of Senator Bond. I have got 
to tell you that of the phone calls I receive, I have not heard 
anyone say anything good about contract bundling yet.
    I understand the argument being made and obviously the 
calls I get are going to be from those who are injured or are 
perceived to be injured. So obviously, there is concern out 
there. And if there is a concern out there, then obviously we 
are concerned, too.
    Ms. King. On December 8, the GAO will be submitting to 
Congress their report on women-owned businesses and the 
barriers that do exist.
    Mr. Smith. Yes. We like to keep the GAO busy.
    Tony DeLuca.
    Mr. DeLuca. I guess just a couple of final thoughts here. I 
would hope that the Committee just does not get hung up on 
bundling, that there are other issues that need to be looked 
at. I mean, if you look at opportunity dollars that we have, 
opportunity dollars to us are much different than opportunity 
dollars made with other agencies in terms of the major systems 
that we procure. If the Congress gives the Department of 
Defense more dollars for major systems, that is fewer dollars 
that we could award at the prime contract level.
    Subcontracting is an issue we need to look at, I agree, but 
I think Scott's point should be well taken. If the marketplace 
does not support competition at the prime contract level and 
you only have one or two large businesses, then our ability to 
influence subcontracting is going to be very, very difficult. I 
think that point needs to be made.
    The other thing I think we cannot lose sight of is what the 
IMPAC card and credit cards have done to us. When Steve Kelman 
and OFPP came out and said, ``Let us go ahead and use credit 
cards,'' everybody said that is really good and everybody likes 
it. The fact of the matter is last year the Air Force did well 
over a billion dollars in credit card buys and we do not have 
any visibility where those dollars go.
    So one could argue that those dollars should all be small 
business dollars and we will credit the agencies as if they all 
are. I will tell you that DOD went well beyond 23 percent. So I 
think that is another issue that we need to look at.
    So I guess the message I would give you, Cordell, is that 
bundling is one of those things that is high interest right 
now. Should it be the only interest? No.
    Mr. Smith. I will agree with you on that. It is far from 
our only interest, and I will say again as long as Senator Bond 
is Chairman, the HUBZone program is another one--
    Mr. DeLuca. And we obviously support him, too.
    Mr. Smith. Mike Green.
    Mr. Green. Just one very quick comment. You know if you 
really want to improve small business numbers--the SBA is 
concerned about all the numbers, it seems like everybody is 
concerned about all the numbers, when it might be more 
contracts going to small businesses but fewer dollars--at least 
those are the numbers I have seen.
    If we are concerned about bundling and other issues, I 
think one major stumbling block that we have is that the OSDBU 
can recommend a lot of things but they do not have any teeth at 
all. If in the bundling arena, if I did not do anything, I 
would require the concurrence of the Director of the Small 
Business Office for every contract that is bundled. If you do 
not get that concurrence, then you do not go forward, other 
than just making a recommendation.
    Mr. Smith. Other thoughts?
    Ms. King. I support that.
    Ms. Brown. Just one more. I think it is important when Bob 
Neal said that we have a mission to support the small 
businesses and we try to do that as the OSDBU offices, but 
again you have to go back to the program offices and the 
contracting people.
    Until you recognize that and have that accountability we 
can serve as advocates all we want but it is not going to 
happen. We need to look at how we hold that sector accountable 
to this type of program. They cannot just give us lip service.
    I had this conversation just this morning with the Deputy 
Chief of Staff at the EPA. We have problems and we are doing 
everything we can with outreach and all of those things, but 
the bottom line is the contracting officer is signing off. The 
program manager is ultimately making the decision in terms of 
where those funds are going to go. Until we have a mechanism in 
place--one of the things that we were talking about was adding 
performance standards and accountability to the small business 
program. I think that is something that you really need to 
consider.
    Ms. Harris. Sharron Harris, the OSDBU Director of USDA. I 
will add to that, going back to Bob Neal's comment. The 
leadership commitment is key because that is going to influence 
the program manager's strategy for how they are going to put 
pressure on that contracting officer to support the program. 
Most of the time they lead to the larger business constituency.
    They have concern that their project requirement is 
successful. They do not tend to have the faith or the trust in 
the small business constituency so they steer that contracting 
officer's decision as best they can. The leadership support is 
the critical piece. That is going to affect positively 
everything.
    Mr. Smith. Luz Hopewell, then Mirinda Jackson, then Ramona 
Jones, and then I think we will have to wrap it up.
    Ms. Hopewell. I echo everybody's comments. It all really 
comes down to accountability and support from the very top. At 
DOT, just like Joe Capuano mentioned, the small business 
program is part of the strategic plan of the whole agency. 
Because of that, the Secretary is on top of the issues. 
Everybody's performance plan has criteria for small business 
participation within each agency. Each buying activity commits 
to it. Each program person commits to it.
    So it makes the job of the small business people a lot more 
manageable because those offices are really very understaffed 
and they cannot cover every activity. Until we are able to get 
small business participation as part of a department strategic 
plan, we are going to continue to have a fight.
    Mr. Smith. Mirinda.
    Ms. Jackson. I would like to say that we should hold the 
procurement executives accountable as well because they play a 
major role in the procurement world and also they are 
responsible for the contracting workforce.
    Mr. Smith. And Ramona.
    Ms. Jones. At Commerce, part of the evaluations for the 
chief financial officers is meeting small business goals. They 
are starting to pay attention.
    Mr. Smith. I would like to thank everybody again for your 
participation. I have gotten a note that there are two rollcall 
votes on the Floor, and I think we are only halfway through the 
first one so Senator Bond is not going to be able to come back 
for probably another half-hour to 45 minutes, so we will go 
ahead and wrap things up.
    I would like to thank everybody for a very helpful and 
insightful exchange and for taking time out to visit with us. I 
look forward to doing this again and I hope we will stay in 
touch. Your congressional liaisons always hate it when I say 
this but feel free to call me. I am always happy to talk on an 
off-the-record basis. So with that this roundtable is 
adjourned.
    [Whereupon, at 11:40 a.m. the Committee was adjourned.]

                                
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