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CONTINUING CHALLENGES FOR SMALL 

CONTRACTORS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON CONTRACTING AND 

WORKFORCE 

OF THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

NOVEMBER 18, 2015 

Small Business Committee Document Number 114–030 

Available via the GPO Website: www.fdsys.gov 

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Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

STEVE CHABOT, Ohio, Chairman 

STEVE KING, Iowa 

BLAINE LUETKEMEYER, Missouri 

RICHARD HANNA, New York 

TIM HUELSKAMP, Kansas 

CHRIS GIBSON, New York 

DAVE BRAT, Virginia 

AUMUA AMATA COLEMAN RADEWAGEN, American Samoa 

STEVE KNIGHT, California 

CARLOS CURBELO, Florida 

MIKE BOST, Illinois 

CRESENT HARDY, Nevada 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

YVETTE CLARK, New York 

JUDY CHU, California 

JANICE HAHN, California 

DONALD PAYNE, JR., New Jersey 

GRACE MENG, New York 

BRENDA LAWRENCE, Michigan 

ALMA ADAMS, North Carolina 

SETH MOULTON, Massachusetts 

MARK TAKAI, Hawaii 

KEVIN FITZPATRICK, Staff Director 

STEPHEN DENIS, Deputy Staff Director for Policy 

JAN OLIVER, Deputy Staff Director for Operation 

BARRY PINELES, Chief Counsel 

MICHAEL DAY, Minority Staff Director 

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(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Richard Hanna ................................................................................................ 1 

Hon. Nydia Vela ́zquez ............................................................................................. 2 

WITNESSES 

Ms. Anne Crossman, Head Revolutionary, Completed Systems, Oakton, VA, 

testifying on behalf of Women Impacting Public Policy .................................... 4 

Mr. Edward T. DeLisle, Partner and Co-Chair, Federal Contracting Group, 

Cohen Seglias Pallas Greenhall & Furman PC, Philadelphia, PA, testifying 

on behalf of the Associated General Contractors of America ........................... 5 

Mr. Michael D. Janeway, President and CEO, APG Technologies, LLC, Sterling, VA ................................................................................................................. 7 

Ms. Karen Ward, President and CEO, WESSGRP, Fredericksburg, VA, testifying on behalf of the U.S. Women’s Chamber of Commerce ........................... 8 

APPENDIX 

Prepared Statements: 

Ms. Anne Crossman, Head Revolutionary, Completed Systems, Oakton, 

VA, testifying on behalf of Women Impacting Public Policy ..................... 19 

Mr. Edward T. DeLisle, Partner and Co-Chair, Federal Contracting 

Group, Cohen Seglias Pallas Greenhall & Furman PC, Philadelphia, 

PA, testifying on behalf of the Associated General Contractors of America ................................................................................................................... 24 

Mr. Michael D. Janeway, President and CEO, APG Technologies, LLC, 

Sterling, VA ................................................................................................... 34 

Ms. Karen Ward, President and CEO, WESSGRP, Fredericksburg, VA, 

testifying on behalf of the U.S. Women’s Chamber of Commerce ............ 40 

Questions for the Record: 

None. 

Answers for the Record: 

None. 

Additional Material for the Record: 

None. 

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SBREP-219 with DISTILLER

(1) 

CONTINUING CHALLENGES FOR SMALL 

CONTRACTORS 

WEDNESDAY, NOVEMBER 18, 2015 

HOUSE OF REPRESENTATIVES, COMMITTEE ON SMALL BUSINESS, SUBCOMMITTEE ON CONTRACTING AND WORKFORCE, Washington, DC. 

The Subcommittee met, pursuant to call, at 10:00 a.m., in Room 

2360, Rayburn House Office Building. Hon. Richard Hanna [chairman of the subcommittee] presiding. 

Present: Representatives Hanna, Gibson, Vela ́zquez, and Lawrence. 

Chairman HANNA. Thank you all for being here. We will call 

this meeting to order. 

There is an old adage in business that you cannot manage what 

you do not measure. The very active tracking often drives behavior. 

However, today, we are here to talk about what happens when 

measurements are distorted or ignored? In the realm of federal contracting, it usually means small business suffers. For example, 

when you look at small business goals, the SBA grades results. 

However, what SBA reports is not what we told it to measure. Congress created a goal of 23 percent of prime contracts to small businesses each year, and the SBA reports that it exceeded that goal 

for the last 2 years. Unfortunately, the truth is that the federal 

government excludes nearly 20 percent of its contracts before it figures out whether or not it met its goals. Kind of strange, is it not? 

Due to the way SBA counts the exclusions, some agencies are not 

required to do much for small businesses. Agencies, like the Department of Transportation, report that over 45 percent of their 

contracts went to small businesses, but in reality, it was only 13 

percent because DOT excludes 72 percent of its contracts as unsuitable for awards to small businesses. The General Service Administration, an agency that has procurement as its mission, reported 

that 40 percent of contracts went to small businesses, but the truth 

is only 17 percent went to small business firms because the GSA 

thinks that 44 percent of its contracts count. This fuzzy math costs 

small businesses around 11 billion bucks a year. 

Likewise, when it comes to subcontracting, the Small Business 

Act requires that large prime contractor businesses must negotiate 

goals for using small subcontractors. However, the last time a company suffered a penalty from this, if you can believe it, was 1982. 

Indeed, SBA lowered the subcontracting goal again last year but 

agencies are still missing the goal. The Subcontracting Achievement Report does not even provide dollars, although this informaSBREP-219 with DISTILLER

2 

tion has been required since the 1970s. Many large contractors do 

not even bother submitting reports about their subcontracting activities. All of this sends a message that while Congress may want 

small businesses to thrive and succeed, the Executive branch has 

not followed the law or measured the results. What we measure 

and the time we recognize the contributions small businesses both 

as prime and subcontractors make to the economy, they increase 

competition, increase innovation, create jobs, and save taxpayers’ 

dollars. 

As this Subcommittee considers the issues surrounding small 

businesses and federal contracting, we want to learn today how we 

can ensure we are using the right metrics and getting complete 

data. If we succeed at that goal, we will help small businesses compete, create jobs, and save taxpayers money. 

I want to thank our witnesses for participating today, which will 

help us achieve those ends. 

Now, I yield to Ranking Member Vela ́zquez, for her opening remarks. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. It is my pleasure 

to again be filling in for Mr. Takai. 

In fiscal year 2014, the federal government spent more than $440 

billion on the purchase of goods and services netted for its day-today operations. As such, the U.S. government remains a consistent 

and reliable client, which attracts small businesses looking to enter 

the federal marketplace by becoming either prime contractors or 

subcontractors. We have seen some success in ensuring that small 

businesses receive their fair share of these contracting dollars. 

Last year, small primes received over $90 billion, amounting for 

almost 25 percent of contracting dollars. By this measure, the government has once again met its small business contracting goal. 

However, when taking a closer look at the data, not all is as it appears. It seems that a lack of transparency in the reporting of these 

numbers is skewing the results. For example, billions of dollars 

continue to be excluded from the Small Business Goaling Reports. 

In fiscal year 2014, $80 billion, nearly 20 percent, was deemed not 

eligible for small businesses, and as a result, not included in the 

base of calculating the small business goal. 

While some of these contracts have been set aside for other 

groups, there are those that argue that small businesses are incapable of performing some of these contracts. This is just not the 

case. The capabilities of small businesses continue to grow, and we 

have seen many instances in which small businesses were awarded 

these contracts even without the use of set-aside procedures. Additionally, there is no statutory language that exempts these contracts from being included in the calculation of the goals. 

Unfortunately, the lack of transparency does not end there. At an 

earlier hearing, we heard allegations that one agency has been 

underreporting its contracting dollars by $6 to $10 billion for the 

past 5 years. Also, we continue to see large companies among those 

listed as receiving small business contracting dollars. SBA cannot 

continue to claim that 23 percent of prime contracting dollars have 

been awarded to small businesses if the data being used to arrive 

at that conclusion is incomplete and inaccurate. 

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3 

However, prime contracting is only one part of the equation to 

becoming successful in the federal marketplace. Before becoming 

prime contractors, many small businesses first enter the marketplace as subcontractors, yet we continually hear how difficult it has 

become for firms to get subcontracts as prime contractors are doing 

more of the work themselves. 

Our supply chain needs a robust and varied source of subcontractors. Not only do they allow for more specialized businesses, but 

subcontracting allows for the benefit of these contracts to flow further into communities, creating more jobs and increasing economic 

development. For these reason and many more, we need to make 

sure that prime contractors are fully utilizing small businesses as 

subcontractors to the maximum extent possible. 

You have heard us say time and time again that a small business contract creates a win-win situation for both the business 

itself and the federal government. Competition is good, and that is 

one of the fundamental principles of our system. I hope that today’s 

hearing will allow us to get some insight as to how we can create 

more of these win-win situations and ensure that small businesses 

are getting their fair share of federal contracts. 

I want to thank all of the witnesses for being here today, and I 

yield back the balance of my time. 

Mr. Chairman, I just would like to share with the members of 

the panel that I am filling in for Mr. Takai, who is the ranking on 

this subcommittee, but he is absent, and so I am here making this 

opening statement, but I have to go to my other hearing of the Financial Services Committee, where chairwoman of the SEC is testifying, and I have legislation that is very important, and I would 

like to ask her some questions, so I will have to excuse myself. 

Chairman HANNA. Thank you. 

Ms. VELA ́ ZQUEZ. Thank you. 

Chairman HANNA. Do you have something to say? Go ahead, 

please. 

Ms. VELA ́ ZQUEZ. It is my pleasure to introduce Ms. Karen 

Ward. Ms. Ward is the president of Ward ENG Support Services, 

an economically disadvantaged, women-owned business located in 

Leesburg, Virginia. The company specializes in system engineering, 

cyber security, and information assurance, as well as program 

management. Ms. Ward has a Master of Science in Software Engineering and is a doctoral candidate of Engineering. Ms. Ward is 

also here testifying on behalf of the U.S. Women’s Chamber of 

Commerce, an organization that represents 500,000 members, 

three-quarters of whom are small business owners and federal contractors. Welcome, and thank you for being here. 

Chairman HANNA. Thank you. 

Our first witness today is Ms. Anne Crossman, who is the Head 

Revolutionary with Completed Systems in Oakton, Virginia. Completed Systems is a software development Ms. Crossman founded 

in 1996. She is testifying on behalf of Women Impacting Public Policy. Thank you for being here. 

Our second witness is Mr. Edward DeLisle, partner and co-chair 

of the Federal Contracting Group at Cohen Seglias Pallas 

Greenhall and Furman—a lot of people—in Philadelphia, Pennsylvania, where he consults clients in all aspects of small business 

SBREP-219 with DISTILLER

4 

procurement. He is testifying on behalf of the Association of General Contractors of America. 

Our third witness is Michael Janeway. Mr. Janeway is the 

founding member and president of APG Technologies, LLC, a service-disabled, veteran-owned small business headquartered in Sterling, Virginia. 

Thank you all for being here. 

Ms. Crossman, you may begin. 

You know how the lights work. 

Ms. CROSSMAN. I am working on it. 

Chairman HANNA. You have 5 minutes and the light will go on 

and that will tell you when you have—that is a 1 minute warning, 

but we want to hear what you have to say, so you may begin. And 

stay relaxed. 

STATEMENTS OF ANNE CROSSMAN, HEAD REVOLUTIONARY, 

COMPLETED SYSTEMS; EDWARD T. DELISLE, PARTNER AND 

CO-CHAIR, FEDERAL CONTRACTING GROUP, COHEN 

SEGLIAS PALLAS GREENHALL & FURMAN PC; MICHAEL D. 

JANEWAY, PRESIDENT AND CEO, APG TECHNOLOGIES, LLC; 

KAREN WARD, PRESIDENT AND CEO, WESSGRP 

STATEMENT OF ANNE CROSSMAN 

Ms. CROSSMAN. Thank you very much. Good morning, Chair 

Hanna and distinguished members of the Subcommittee. My name 

is Anne Crossman. I am the head revolutionary at the Completed 

Systems, a women-owned small business based in Leesburg, Virginia. Our company is dedicated to completing information technology projects that others have given up on. I am also president 

of Vertical Jobs, a company that provides experienced role players 

to law enforcement and government agencies. I am here today representing Women Impacting Public Policy, where I serve on its 

Leadership Advisory Council. WIPP plays a key role in developing 

women-owned businesses and its successful federal government 

contractors through its Give Me 5 and ChallengeHER programs. 

On a personal note, clarity of teaming relationships and the 

length of time between an RFP and an award, are continuing challenges. Thankfully, under the Committee’s leadership, the Congress has enacted much needed changes for small contractors. 

While the federal government has yet to reach its 5 percent goal 

of prime contracts awarded to women, the size of the WOSB procurement program has tripled since 2011. In 2011, WIPP testified 

before this Subcommittee on subcontracting issues. Since that time, 

the Committee has made a number of improvements that we applaud, including allowing women-owned small businesses to better 

partner with one another on federal contracts. In addition, the 

Committee’s efforts to increase accountability for agencies to meet 

their subcontracting goals and incorporation of subcontracting 

goals for DoD are much appreciated. In reviewing our past testimony before this Committee on barriers facing women business 

owners in the federal market, we identified two continuing challenges, subcontracting plan issues, and data transparency. Many of 

the problems faced by subcontractors are symptoms of the underSBREP-219 with DISTILLER

5 

lying issue that the subcontractors have no real relationship with 

the federal government. 

In 2011, we raised several questions about subcontracting plans. 

How are they reviewed prior to award? How are they enforced? 

Should subcontractors have access to the plans? WIPP members 

tell us that many of these questions have not yet been addressed. 

We continue to believe that prime should adhere to an ‘‘if you list 

us, use us’’ policy. 

With respect to data transparency, GAO has found issues with 

the collection and availability of subcontracting data. It seems to 

us that using four systems to report disparate data is inefficient. 

Data issues, however, are not limited to only subcontracting 

plans. The annual scorecard should be accurate given the roles 

these reports play in encouraging agencies to contract with small 

businesses. We offer three suggestions. First, the data reported in 

the scorecard needs to be accurate. The SBA OIG found widespread 

misreporting by agencies. Second, the scorecard should measure 

the entirety of federal spending. Exclusions from the score card significantly change goal achievement progress. 

Third, reporting the number of firms winning contracts, not just 

the total dollar amount would enhance the scorecard. While the 

amount awarded to small businesses is increasing, there are fewer 

firms participating in these contracts. 

In conclusion, women entrepreneurs consider the federal marketplace a key opportunity to grow their businesses. For many, subcontracting is a staple of their federal business. Ensuring that the 

rules governing federal contracting are accurate and fair is of paramount importance to their success. 

Thank you for the opportunity to testify, and I would be happy 

to answer any questions that you may have. 

Chairman HANNA. Thank you. 

Mr. DeLisle? 

STATEMENT OF EDWARD T. DELISLE 

Mr. DELISLE. Yes. Thank you, Chairman Hanna, for inviting 

me to speak before the Committee today about a number of very 

important issues that are confronting small business today. What 

I am going to do is stress two points during my oral testimony this 

morning. The first pertains to transparency in federal small business contracting, and the second pertains to the change order and 

the claims process that small business construction contractors in 

the federal marketplace are having a more and more difficult time 

navigating based upon how that process or those processes are 

being administered by the federal government, because you see, the 

difficult part of being a small contractor does not end with the procurement process, the solicitation process. It continues after project 

award. And so I will speak about some of those issues as well. 

With respect to transparency, the issue is, how well is the federal 

government providing access to opportunities for small business? 

And are these opportunities placing small businesses in a position 

to succeed and thrive? In order to answer those critical questions, 

there has to be an understanding as to where contracting opportunities are presenting themselves for small business as part of the 

contracting continuum, which there are many layers in the conSBREP-219 with DISTILLER

6 

struction industry. Prime contractor, subcontractor, and various 

different levels. Where are subcontractors being provided those opportunities, and what percentage of federal government contracts 

are, in fact, they getting? 

Well, that is where transparency in the reporting issue all come 

into play, and this Committee has played a leading role in attempting to increase transparency and generate the data necessary to 

answer the questions that I just posed a few moments ago. And the 

scorecards which have been mentioned are a good first step in determining exactly how small businesses benefitting from the programs that do exist currently with the federal government. AGC 

thanks the Committee for its efforts up until this point and asks 

for the Committee’s help in seeing another important initiative 

come to fruition. 

On December 26, 2013, the President signed the National Defense Authorization Act of 2014, and section 1614 of the Act calls 

for reporting and counting of lower tired small business subcontractors towards the fulfillment of small business contracting goals. 

Under the old system, only small businesses at the first tier or subcontracting level are reported and counted towards obtaining small 

business goals for any given contract and, in fact, we are still operating under that old system now. Under the new system, the idea 

is to provide a more in-depth analysis and understanding of how 

and how many small businesses are benefitting from any given 

contract. Under the old system, you do not get that. 

Why have we not seen the new law go into effect? Well, it because of the rulemaking process. The SBA and FARC Council are 

still in the rulemaking process. Under the law when it was initiated, when it was signed, they had 18 months to complete the rulemaking process. We are not there yet. We are 23 months out. And 

while we have a proposed rule from the SBA to implement the new 

law, we are just not there yet, which is affecting the ability to understand even how small business is being impacted all through 

the contracting continuum. So from AGC’s standpoint, we would 

urge the Committee to push the SBA and FARC Council to complete the rulemaking processes so that this important initiative can 

be put into effect. 

Now, with respect to change orders and claims, once a small 

business contractor gets through the initial process of obtaining a 

contract, it does not end there. Changes happen on federal contracts all the time. Government needs change, conditions from a 

construction contractor’s standpoint in the field may change, and 

work becomes more expensive, and additional time may be needed 

to complete whatever work might be required under a given contract. 

Small businesses can adapt and adjust to changes like that. 

However, the processes for dealing with changes need to be fair, 

and the process needs to be timely. Unfortunately, many times it 

is unfair and untimely, and there is no better example than the 

VA’s project in Aurora, Colorado, about which I have a lot of experience. I had a client on that particular project who had an $18 

million renovation job on an existing facility, and it cost $32 million 

to complete. The change order process never took place, forced this 

contractor to submit claims, prolonged the process, and but for luck 

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7 

and circumstance, my client would have been out of business. And 

there are many small businesses that are in exactly that same 

boat. 

We, at AGC, encourage this Committee to investigate issues like 

those, the change order and claims process, and AGC is committed 

to working with the Committee as part of any investigative process 

that it deems appropriate. 

Chairman HANNA. Thank you. 

Mr. Janeway? 

STATEMENT OF MICHAEL D. JANEWAY 

Mr. JANEWAY. Good morning, Chairman Hanna and the members of the Committee. I would like to thank you for inviting me 

to testify today to discuss the continuing challenges facing small 

contractors, and specifically, how the federal government has not 

met its subcontracting goal in 5 years. 

My name is Mike Janeway, and I am the founding member and 

president and CEO of a small business called APG Technologies, 

LLC, located in Potomac Falls, Virginia. My expertise in this matter is as a private business owner, a board committee member of 

several professional associations, and a retired Air Force lieutenant 

colonel with defense acquisition experience on large ACAT 1 programs. 

I founded APG Technologies in March 2008, as a service-disabled, veteran-owned small business, with a goal of providing high 

value ROI data management designs and solutions to the Department of Defense and various intelligence agencies. We have about 

30 employees located in multiple states where we have successfully 

delivered programs used in the War on Terror. We maintain an excellent reputation and have grown slow but steady, and are known 

as a niche provider of high-value, secure data management solutions. 

Since our deliverables are typically a component of a large overall development, most of our revenue comes from being a subcontractor. The last 3 or 4 years have been extremely challenging, especially for small businesses. We have seen the impacts of sequestration, delays in acquisition cycles, contracts canceled, short duration purchase orders for 4 to 6 weeks at a time, contracts combined 

into large purchase agreements, turmoil in our large partners as 

they merge and spinoff business units, and an acquisition with 

poor to nonexistent communications and an overriding focus on low 

price awards. The results of this have driven many small businesses out of business. And while I do not have the numbers, I had 

a senior SBA executive tell me at a recent event they have seen 

large and dramatic number drops in the number of small business 

supporting federal. 

Adding to all this is the talent flight we are starting to see from 

employees who leave federal for commercial. In the words of a 

former employee, ‘‘It is just too unstable, and I do not see a future 

in federal.’’ While this may seem overly dark, when you are in a 

small business and you make your living off subcontracts, it seems 

that way at times because you are at the bottom of a somewhat unstable and even dark chain, it seems. 

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8 

The government requires federal contractors to submit a small 

business subcontracting plan that outlines how they will meet the 

subcontracting business goals. Since the goals are administrative 

rather than statutory, there is a lot of flexibility in execution, and 

most of the time the goals are not met. Too often we see subcontracting plans written to adjust proposal goals with little to no follow-through after the prime contract is awarded. With no enforcement by the federal government to hold contractors accountable, 

the subcontracting plan seldom matches reality and goals are seldom met. 

APG Technologies has experienced this where we entered into a 

team agreement in good faith with a large defense integrator. We 

took engineering talent off billable gigs to write the solutions and 

proposals, and then were not awarded the contract afterwards for 

some convenient reason. That is not an uncommon story with a lot 

of small companies out there. Setting statutory subcontracting 

goals to be followed by all federal agencies are the key to establishing a degree of stability for small businesses. Without these 

measures, the federal government will continue to fail in meetings 

its small business subcontracting goals. I believe the solutions 

should be statutory, and government contracting officers need the 

authority and ability to enforce them. Subcontracting plans should 

no longer just be words on a paper; it should be an enforceable and 

executable management plan to address the statutory requirement 

that reflects the government’s desire for a healthy and vibrant 

small business community. 

Mr. Chairman, thank you for the opportunity. I will be glad to 

answer any questions you have. 

Chairman HANNA. Thank you. 

Ms. Ward? 

STATEMENT OF KAREN WARD 

Ms. WARD. Chairman Hanna, Ranking Member Vela ́zquez, 

members of the Committee, thank you for this opportunity to provide this testimony. I am Karen Ward, president and CEO of 

WESSGRP, testifying today on behalf of the U.S. Women’s Chamber of Commerce. 

Access to federal contracts is vital for the continued growth and 

vitality of American small businesses. Yet, in 2014, there were 

36,000 fewer small business government suppliers than there were 

in 2008. And between 2014 and 2015, small business awards decreased 20 billion. In this environment, decline in federal spending 

and decline in government suppliers, it is undoubtedly more important to ensure transparency in contracting and that the mandatory 

goal of maximum practical opportunity for small business concerns 

is being met government-wide. 

Prior to 2008, annual small business procurement reports on federal procurement provided more detailed, important information 

than they do today. But in 2008, these reports were stripped down 

to nothing more than an aggregated list of total amounts spent by 

agency. The current SBA goaling and federal acquisition reports 

are the antithesis of transparency. I ask that Congress act to require the SBA to restore the goaling and federal procurement reSBREP-219 with DISTILLER

9 

port format to include the in-depth data and analysis as was 

present prior to 2008. 

Inappropriate use of grandfathering is causing billions of dollars 

in awards to large businesses to be reported as part of small business goal achievement as federal agencies attribute awards to 

small businesses. Even when the business, as acquired by a large 

firm, is no longer qualifying for small business goaling. 

federal regulations require firms that qualify as small at the 

time of its initial offer may be considered small business for goaling 

purpose throughout the life of the contract. However, important exceptions apply. Within 30 days of a proved contract novation, a contractor must certify its small business size to the procuring agency. 

And if the firm is no longer small, the agency can no longer count 

the options or orders issued pursuit to the contract towards its 

small business goals. This is similarly true in the case of a merger 

or acquisition. There have been many instances where my firm has 

been forced to unjustly compete during RFPs against companies 

that were classified as a small originally, but if reclassified today, 

would no longer meet the small business size requirements. 

I call upon Congress to require SBA to include details in annual 

procurement reports detailing the contract actions and dollars attributed to small business goaling with firms that are no longer 

small. Each year, the Small Business Administration carves out 

billions of dollars in federal contracts to be excluded from small 

business goaling. Most of these exclusions are without merit. The 

practice should immediately be terminated. 

As a small business and lead for a small company prior to starting my own firm, I have seen and demonstrated that small companies are capable of performing work overseas. There can be no justification for claiming that American small businesses have limited 

chance to compete for awards pertaining to contracts performing 

outside the U.S., foreign sales, or American embassies. I ask Congress to act to require the SBA and these unwarranted exclusions 

from small business goaling and require that any exclusions be 

fully reported and justified annually. 

The federal government is still not meeting its subcontracting 

goals, holding business prime contracts accountable for the subcontracting plans can help the government meet these goals. As a subcontract, I have seen issues associated with the ability to perform 

the work within the rates defined by large primes. Large primes 

will list the small business participating on the subcontractor plan 

and then provide payment rates for subcontractors that are not 

executable. Consequently, due to the inability for the small business contractors to fill these positions, the large primes ultimately 

fill those positions with their own personnel. 

I ask Congress to require procurement center representatives to 

review all subcontracting plans, assuring they are complaint with 

the maximum practical opportunity for small business participation 

and empower the PCRs to deliver the acceptance of the prime contractor’s subcontracting plans should these plans not meet these requirements. 

Thank you for this opportunity to provide my testimony, and 

thank you for your efforts on behalf of the small business federal 

suppliers. 

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Chairman HANNA. Thank you, Ms. Ward. 

Oh, we are going to have Colonel Gibson ask the first question. 

Mr. GIBSON. Thanks, Mr. Chairman. And thanks for putting together this hearing. It has been very informative. I appreciate the 

testimony of the panelists here this morning with regard to issues 

that we are having on transparency, accurate reporting, and what 

might be done in terms of tweaking what we have on the books 

now, maybe tightening up some of the rulemaking timelines, or at 

least communicating our concern. I am hearing all that. 

And then also, Ms. Ward, I appreciate these comments as far as 

small businesses that may not be small anymore. And I am curious 

to know, just as a clarification, you had mentioned inappropriate 

use of grandfathering. Is that what you meant? Or can you give an 

example of that just for my understanding? 

Ms. WARD. So what I mean by that is there are so many times 

where there is a small business opportunity, and when you actually 

go after that opportunity, because they have been grandfathered in 

on an IDIQ, they are able to pursue that contract as a small. But 

in reality, they are no longer a small contracting firm. And so when 

you have companies like myself, which are truly small contracting 

firms, it is extremely hard to compete against those firms. And on 

top of that, you have got these numbers which show how small 

businesses have a number of opportunities by percentage of what 

is allocated for federal contracting. And in reality, because the fact 

that these companies are no longer small or getting these awards, 

it is showing that those companies specifically have—the federal 

agency is meeting those small numbers, percentages, but in reality, 

they are really not. And so the number of opportunities for someone like myself and my company and others like me within the 

U.S. Women’s Chamber of Commerce are decreasing. 

Mr. GIBSON. That helps. Thank you. And thank you for your 

strong leadership. 

Earlier in the testimony, and I think it was our expert from 

AGC, was suggesting recommendations to changes for the change 

order and claims process. I am curious to maybe put a finer point 

on that, any recommendations you have. And then also for the 

panel, anything they want to add on that. 

Mr. DELISLE. Excuse me. Yes, thank you. 

Specifically with respect to the claims process, I can tell you that 

I think that an alternative dispute resolution process would be extremely helpful. Any sort of early detection and process that would 

allow the parties, require the parties, to sit down and work through 

these issues before you get involved in costly litigation would be 

most beneficial. And I think that is definitely something to consider 

as you consider some alternatives moving forward because the 

process that we are dealing with now is just simply not working. 

Mr. GIBSON. And it would seem that that would make—I mean, 

candidly, that would make it harder because the smaller businesses have a harder time competing in terms of how much cost 

that would be in litigation, so it is a way of outflanking, if you will, 

small business. 

Mr. DELISLE. Yes. 

Mr. GIBSON. That is a fair point. 

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Any other panelist want to address that, or address anything on 

that score? 

Well, thank you. Again, this has been very helpful in my read 

up before this and then hearing you today, so it is meaningful for 

us when you come here and you provide that testimony. So Chairman, thanks for your leadership on this, and I will yield back. 

Chairman HANNA. Thank you. 

I want to ask you something. I pretty well get all this. I have 

been in construction, myself, for about 30 years, and what do you 

think individually of the exclusion that these different governmental agencies make which automatically kick out large sums of 

money simply because I guess the premise is that small businesses 

are not capable of—and you mentioned this in your statement, Ms. 

Ward—of doing work that apparently is either too large or too difficult or too complicated. Somehow they arrive at these numbers 

and exclude, which is why we are here today, because when you 

do that, you automatically reduce the total dollars available. I 

mean, does anybody have an opinion about how they arrive at 

that? The whole process seems so arbitrary and capricious, and because it is rulemaking and rules and not clearly defined obligations, legal obligations, it seems like these agencies take advantage 

of that to pretty much make up their own rules as they go along. 

We have some time here. I would just be interested in anybody’s 

insights on that. 

Mr. JANEWAY. Mr. Chairman, we have worked at a lot of different agencies within defense and intelligence and in general I 

would say most of them handle it in a somewhat uniform manner. 

They do a sources sought release where they try to find out what 

companies are out there that can bid on a particular scope of work. 

The challenge we find in those sources sought are hearing about 

them. Sometimes they are not always widely disseminated, even 

though they are supposed to be on CB, Federal Commerce Business 

Daily or the electronic version of it. CBO, I think it is. So they do 

release them. We do not always see them. Sometimes they are 

overly complex and complicated in how you have to respond to 

them. They almost become a proposal in themselves in the format 

and the volumes of material that comes back. So it is a challenge 

to respond to those in the timeline you are looking for and with the 

complexity or detail that they are looking at. 

Chairman HANNA. So somewhat of like a war of attrition the 

process creates by itself. 

Mr. JANEWAY. Exactly. Exactly. I mean, you find most businesses, small companies out there going after—I hate to use this 

term but it really is a reality. 

Chairman HANNA. Can you describe, you have taken people off 

of the workload that was productive, put them on something that 

was potentially beneficial but it fell apart? 

Mr. JANEWAY. Yeah, there are very few small companies out 

there, even large companies now, that have people that are not on 

billable engagements. If they are not working, they are definitely 

working proposals. So it is actually lost revenue when you do that. 

Exactly. 

Chairman HANNA. Ms. Ward? 

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Ms. WARD. I would agree with Mr. Janeway. That is the issue 

I have as well, and a lot of us small businesses, is that even with 

myself, I work on multiple different contracts, and there is really 

no one that is not billable within my organization at this particular 

point in time, so that I can remain competitive and keep the rates 

where I need to keep them so I can subcontract off of larger companies. But in the prior work that I have done working for other organizations, we were a small company and we were able to successfully do work in foreign countries and be able to succeed in providing those capabilities that they were looking for. And so I really, 

truly believe they need to open up those capabilities and give small 

businesses a chance to respond and go after those. 

Chairman HANNA. And why do you think they do not do that? 

Ms. WARD. You know, I think it comes down to the risks that 

they see. Right? I mean, typically, you are looking for the low risk, 

the ability to procure it and have an organization that they feel 

can—— 

Chairman HANNA. What you are really saying is the fact that 

you are a small business is almost evidence to them that there is 

risk associated for some bureaucrat someplace. It is easy for him 

to hire somebody big and proven than it is to take a chance on you? 

Ms. WARD. Yes. 

Chairman HANNA. Which would be, to me, an indication that 

we actually need laws rather than rules to help them facilitate and 

eliminate that anxiety, if you will. 

Ms. WARD. Correct. 

Chairman HANNA. Does that make sense to Ms. Grossman? 

Ms. CROSSMAN. I think maybe I might come at it from a slightly different perspective, but from a purely analytical perspective, if 

people are not including dollars, that just changes the total amount 

of money available. So I think making people who say it is not 

small business, this cannot be done by a small business, I think 

they should have to include that revenue in the bigger number and 

make more things available on work that is not part of that available to small businesses. 

Chairman HANNA. Do you agree, Mr. DeLisle? 

Mr. DELISLE. I think it is challenging. I can tell you that from 

my personal experience, I do a lot of overseas work, and I specifically am dealing with an awful lot of construction contracts that 

were built in Afghanistan right now. And I will tell you that the 

Corps of Engineers, Department of Defense has eaten large companies alive in places like that. It is very difficult to successfully perform overseas, and in that particular environment, it was extremely challenging. Lakeshore TolTest is one known example of a 

company that simply did not make it. Very large company that performed a lot of work in Afghanistan and simply could not make it. 

So I can understand it from the government’s perspective. Taking 

into consideration the risk involved in performing overseas, I can. 

I would say, however, that there are certainly opportunities for 

small businesses abroad, perhaps more at the subcontracting level, 

and that that issue does, in fact, need to be looked at more closely 

in terms of allowing participation. 

SBREP-219 with DISTILLER

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Chairman HANNA. So you would say then that if they kept better track of and allowed you to have transparency, which was one 

of your original points—— 

Mr. DELISLE. That is right. 

Chairman HANNA.—that you could actually have a better measurement of the small businesses that are used, and you might even 

feel better about the whole process because you would know that 

they actually are being used, and whether or not they are successful. And if there are requirements, then you would know how to fit 

your company into that space. 

Mr. DELISLE. And that is exactly the point. Yes. Yes, Mr. Chairman. 

Ms. WARD. The agency that excludes the highest percentage of 

its dollars from its base does not do overseas contracting. So it is 

not all overseas—we are all talking about overseas dollars, but the 

Department of Transportation excludes all but 28 percent of its 

spend. That is not overseas contracting. 

Chairman HANNA. But they all exclude substantial amounts. I 

mean, you cannot take that away. 

Ms. WARD. Well, of the nine agencies that exclude the highest 

percentage of dollars all seem to get As on their scorecard from 

SBA. 

Chairman HANNA. Which, we would argue, they should not get. 

Mrs. Lawrence? Thank you. 

Mrs. LAWRENCE. Thank you. 

Ms. Crossman and Ms. Ward, while equally successful in terms 

of results, women and minority business owners report investing 

more time and money in seeking federal procurement opportunities 

and submit significantly more than the average small business contractor does. What major challenges do you see women and minority-owned business facing in order to win these contracts? 

Ms. Ward? Do you need a moment? I can go to Ms. Crossman. 

Ms. WARD. Yes, I do. Please. 

Mrs. LAWRENCE. Ms. Crossman? 

Ms. CROSSMAN. I think that the new rulings for women-owned 

small businesses, giving them, the contracting officers the ability to 

sole source to women-owned small businesses has been a great 

thing for all women-owned businesses. I think the interesting part 

of this is all going to be how and when and if the contracting officers will begin to use the new rulings. It is new, and contracting 

officers sometimes do not like change, so I think encouraging them 

to feel comfortable setting aside a sole source for an EDWSB. You 

know, as we have been looking at the sources sought that are coming out, and as we talked with contracting officers, we have been 

trying to spread the word, and we bring around the information 

provided by women impacting public policy and try to connect the 

contracting officers. So it is an education. 

Mrs. LAWRENCE. So if I follow you, it is a tremendous amount 

of discretion that is given to the contracting officer, and so therefore, they can or cannot use this tool of sole sourcing? 

Ms. CROSSMAN. Well, they have the opportunity to use it. 

Mrs. LAWRENCE. Okay. 

Ms. CROSSMAN. But choosing to use it because it is new, right, 

not a lot of people have used it so far. It is new. It is a risk. 

SBREP-219 with DISTILLER

14 

Mrs. LAWRENCE. What is the risk? 

Ms. CROSSMAN. Because it is a new ruling. How are people 

supposed to use this new ruling? The 8(a) sole source has been in 

play forever. The women-owned small business is new. So I think 

it is just sort of educating the contracting officers and spending 

time convincing them this is a good thing for them to do. And it 

is a plus for them and a plus for women-owned small businesses. 

Mrs. LAWRENCE. That is good to hear. 

Ms. Ward, have you put your thoughts together? 

Ms. WARD. Thank you for giving me the time to think through 

it. 

So I hear what you are saying, and I would agree. One of the 

issues though in talking to the contracting officers is that they 

have not been given policy that allows them to actually execute direct awards for EDWSB. And I have heard that through a number 

of them. I have participated in a lot of industry-type U.S. Women’s 

Chamber of Commerce meetings where they bring a lot of large industry and agencies into the forum, and when we go around and 

we talk to them, they specifically say we do not have the rulings 

and the policy yet to put into place. I also deal with other contracting offices and small business advocates within the agencies 

and they say the same thing; that until they have policy within the 

DoD or within the federal government and the federal space, they 

cannot execute it because they have to have that policy which 

drives the actions that they take. 

Additionally, one of the issues that I see is that there are a number of organizations—this may not be the right forum—but there 

is a number of organizations that classify themselves in EDWSB 

and they do not have the certifications associated with it. My company, for the little bit of money that I spend, I go to a third party 

because I do want to justify the fact that, yes, if I am classifying 

myself as an EDWSB, I am actually a EDWSB. 

Mrs. LAWRENCE. Exactly. 

Ms. WARD. And that is one of the issues that I am seeing. Because there is more than once I have bumped into other companies 

and had discussions with them, and they say they are an EDWSB, 

but in reality, they are not. 

Mrs. LAWRENCE. I really appreciate your openness on that. 

Mr. Chair, I just had another question for Mr. DeLisle. In 2014, 

the federal government awarded $90 billion to small businesses. 

Despite spending such a considerable amount, a recent GAO report 

found that there was no single system currently in place that is designed to link small business contractors to prime contracts. What 

tools are necessary to help small businesses get those subcontracts? 

And second, how do we get the prime contractors to invest more 

resources in subcontracting contracts, opportunities? 

Mr. DELISLE. I can tell you that based upon my own experience, 

how it is done many times now. There are organizations, the National 8(a) Association is one of them, and I do a lot of work for 

the National 8(a) Association. And they will host meet and greets 

on a fairly regular basis trying to put large prime contractors together with potential subcontracting partners, both for large contracts that may be solicited by the government, as well as set-aside 

contracts where a teaming arrangement could take place, small 

SBREP-219 with DISTILLER

15 

business hiring large business. That is one way that it is done. I 

host them myself. As far as what government can do, it is a great 

question because right now there is a disconnect between the 

primes, or the large businesses I should say, and the small businesses, linking together, finding one another, to work together. And 

that is the biggest problem. I do not know if you can necessary 

issue legislation to force some sort of a system, maybe you could. 

Maybe you could require some sort of a meeting of some type at 

some point during the solicitation process and have the large businesses document the fact that, yes, well, we hosted a meet and 

greet of some kind, this is who we invited, and this is who attended. You could do that if you wanted to. Perhaps that is one solution that you may have. As it stands right now, companies are 

on their own. I have plenty of small businesses that I represent 

that actively solicit agencies that they are interested in working 

for, and that is what they do and they ask questions. Okay, well, 

who do you use on your big contracts? Who are they? Who is the 

contact person? That is how it is done oftentimes now. 

Mrs. LAWRENCE. Thank you so much. I yield back my time. 

Thank you, Mr. Chairman. 

Chairman HANNA. Ms. Vela ́zquez? 

Oh, I want to take a minute and congratulate you on your 

Sandy—— 

Ms. VELA ́ ZQUEZ. Yes. 

Chairman HANNA.—bill being passed Monday; right? 

Ms. VELA ́ ZQUEZ. Monday. So it is going to the president for his 

signature. 

Chairman HANNA. Good for you. Congratulations. 

Ms. VELA ́ ZQUEZ. Yes. Thank you. Yes. 

Mr. DeLisle, you stated in your testimony that by removing the 

exclusions to the small business goal, agencies will look to the construction industry to make up the difference in their goals What 

can we do to ensure that agencies are not relying on one industry 

for their goals and are looking to expand small business participation throughout all sectors? 

Mr. DELISLE. The construction industry, I think simply by its 

nature and the fact that you have so many different levels of contracting that typically take place. It ends up being a place, which 

is not a bad thing, where many, many smaller contractors can perform and succeed. The problem is that I do not believe, AGC does 

not believe and is concerned that other industries—take manufacturing for one example—will not shoulder a fair amount of the subcontracting load, if you will, and participate at the same levels. I 

think what you need is going back to the reporting and transparency issues that we have discussed earlier, we need more information. There has to be an industry-by-industry review of what is 

happening and an understanding from the bottom, or from the top 

down to the bottom, who is participating. And that gets back to my 

earlier testimony where under the National Defense Authorization 

Act of 2014, if we can move that along, I think you will get much 

of that information and then be able to make a determination as 

to what the appropriate levels are and where the participation level 

should be. 

Ms. VELA ́ ZQUEZ. Okay, thank you. 

SBREP-219 with DISTILLER

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Ms. Ward, you noted in your testimony that in a merger, acquisition, or other contract innovation, small businesses are required to 

recertify their size status. Yet, we have continued to see dollars 

that are counted towards the small business goal going to large 

businesses as a result of such acquisitions. Why do you think this 

is the case? Are businesses gaming the system and not recertifying 

when they are supposed to? Or is the information just not being reported correctly? 

Ms. WARD. The reason I think that is the case is that if I get 

awarded an IDIQ, in the time I am awarded that IDIQ, I am a 

small business, but over time I am very successful and I am no 

longer a small business, but I am still on that IDIQ. I qualify as 

a small business on that IDIQ. So when I go after an opportunity— 

and some of these IDIQs are not just 5 years, they are 10 year 

IDIQs. And so when I go after an opportunity, I go after an opportunity as a small, but in reality, I am a multimillion dollar company. And I am way past the small thresholds. So what happens 

is companies like myself who are small and go on teams that are 

smaller, have a harder time in competing against those opportunities. 

So if the federal government was required to basically set them 

up as if they are on longer a small, and that is not part of their 

small thresholds, then we would see a reality of how many contractors that are small contractors who are actually getting a percentage of the dollars allocated to the federal contracting. 

Ms. VELA ́ ZQUEZ. I am just thinking in terms of legislative 

fixes. But I will come back to you. 

Ms. Crossman, prior to award, large prime contractors are required to submit subcontracting plans for review. If a contracting 

officer finds them to be inadequate, he or she can decide to not 

award the contract to the business. In your experience, how often 

are contracts not awarded due to inadequate subcontracting plans? 

Ms. CROSSMAN. From personal experience, I have not experienced that but we are also pretty particular about who we team 

with. But I do know of people where it has happened. It has not 

been my experience though. 

Ms. VELA ́ ZQUEZ. So do you think that if this happened more 

often, would contractors be inclined to submit higher subcontracting goals? 

Ms. CROSSMAN. Yes. 

Ms. VELA ́ ZQUEZ. And Mr. Janeway, in FY2014, it was reported 

that small businesses received 33 percent of subcontracting dollars, 

yet we know that this number has been overinflated in the past 

due to inaccurate reporting. Based on your own experience, what 

about the process allowed this kind of misinformation to be reported? 

Mr. JANEWAY. Ma’am, I am not sure I have enough detail on 

how the government actually reports that. All I can say is I see 

numbers that seem to be kind of spread all over the spectrum. You 

will see an association says that they did not meet their goals and 

then you will see something in the paper says an agency has declared success and they did meet their goals. So I do not have that 

insight. 

SBREP-219 with DISTILLER

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Ms. VELA ́ ZQUEZ. Ms. Ward, do you think that the federal agency, in this case SBA, has the authority to address the issue of small 

businesses growing into a big businesses and still applying or bidding for a contract that is intended to go to small businesses? How 

can we address that issue? 

Ms. WARD. So just to restate what you are asking, essentially 

what you are asking is that if a small contractor wins an IDIQ and 

they are small at the time that they won it—— 

Ms. VELA ́ ZQUEZ. Right. 

Ms. WARD.—and essentially, as the IDIQ moves forward and 

they are no longer classified as a small, how does the SBA ensure 

that that large company, even though they are on an IDIQ, can 

still go after that award? 

Ms. VELA ́ ZQUEZ. Mm-hmm. 

Ms. WARD. Unfortunately, in today’s contracting world, that is 

exactly what they are given the ability to do. What I would hope 

is that if you could look at the numbers and show that those companies that are winning those awards are not small, it would actually show the reality of whether or not they are meeting the small 

business contracting goals. And if they are not meeting those goals, 

they would take hopefully other avenues to provide opportunities 

to the small companies. 

Ms. VELA ́ ZQUEZ. Thank you. 

Chairman HANNA. Thank you. 

It seems that the ability to be arbitrary for the bureaucracy to 

protect itself, to move towards larger companies is almost inherent 

in the process. Would you agree with that? That contracting officers would choose to use less latitude by hiring larger companies 

simply because it is easier. It defends their positions and the likelihood of failure is reduced. So would it be safe to say then that the 

rulemaking process at the end of the day cannot necessarily, unless 

they are hard and fast rules which you asked for, Ms. Ward, which 

are actually laws, and it is tracked differently, and more transparency, if we do not do that, we cannot fix this problem. Is that 

too far a reach on my part? Anyone? 

Mr. JANEWAY. I would agree with you, sir. I think there is almost an inherent culture within acquisitions of risk aversion. Having been there, done that, you know, I remember us taking a risk 

where we had to, or we tried to buy down risk. But the culture 

today is very risk averse. It has always kind of been that way with 

contracting officers. I think it is the way they are trained to watch 

exactly how they do and who makes what decisions. But many 

times I think the entire, within the program management or execution side of it has also become risk averse. So it is much easier to 

hand a contract to a large defense integrator than break it off 

amongst—— 

Chairman HANNA. How big a factor is that? I mean, you see 

them effectively lower their goals by separating larger companies 

from small companies, so that is kind of an overt way, but what 

is the more subjective guess you might have about how that affects 

the ultimate awarding to small businesses? 

Mr. JANEWAY. I do not know that I could actually put a number on it. 

Chairman HANNA. It would be hard to do. 

SBREP-219 with DISTILLER

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Mr. JANEWAY. Yeah. 

Chairman HANNA. But you think it is a lot? 

Mr. JANEWAY. Yeah. Yes, I do. 

Chairman HANNA. Does everybody sort of agree, or not? 

Mr. DELISLE. Yes, Chairman. I think one thing that may play 

into this also is the fact that you have a government contracting 

workforce that had been getting older, and you had many that retired and left. And you have younger contracting officers, perhaps 

becoming contracting officers a little bit sooner than they otherwise 

should, who are much less willing to take a risk than somebody 

who may have been more experienced and older, and thereby, willing, to take that risk. I mean, that is certainly something that I 

have seen at least some of as part of dealing with very young contracting officers who you think to yourself, ‘‘Well, gee, they are 

really making these decisions.’’ Well, it is far easier for someone 

that fits that description to stick with the company that you know, 

or go with the larger company because there is less risk involved. 

There is less possibility that somebody is going to look at me that 

I made a mistake. So that could be playing into some of this as 

well. 

Chairman HANNA. And all of that demands more transparency, 

so at least those larger companies are required to also go to work 

with smaller businesses. 

Mr. DELISLE. That is right. 

Chairman HANNA. If there are on further questions? No? 

I want to thank you all for being here today. Given the hundreds 

of billions in federal contract dollars at stake each year, ensuring 

that small businesses have the opportunity to compote for federal 

prime and subcontracts is important. The goals are supposed to 

help us accomplish this, but currently, they are being used to paint 

a rosy picture rather than to capture reality, which we have heard 

today. We also need to make sure that subcontracting opportunities 

are real, and that subcontractors with a desire and a capacity are 

able to transition to become prime contractors. 

I look forward to working with my colleagues on these issues, 

and I ask for unanimous consent that each member have 5 legislative days to submit statements and supporting materials for the 

record. 

Without objection, so ordered. 

This hearing is adjourned. And thank you again. 

[Whereupon, at 11:00 a.m., the Subcommittee was adjourned.] 

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A P P E N D I X 

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Insert offset folio 19 here 97629.001
20 

1 Bisceglie, Jennifer. Statement to the U.S. House, Small Business Committee, ‘‘Subpar Subcontracting: Challenges for Small Businesses Contractors,’’ Hearing, October 6, 2011. Available 

at: http://smallbusiness.house.gov/uploadedfiles/bisceglie—testimony.pdf 

Good morning. Chair Hanna, Ranking Member Takai and distinguished Members of the Subcommittee, thank you for the opportunity to testify. 

My name is Anne Crossman. I am the Head Revolutionary at 

Completed Systems, a women-owned small business, based in 

Oakton, Virginia, dedicated to completing information technology 

projects that others have given up on. I am also President of 

Vertical Jobs, a company that provides experienced role players to 

law enforcement and government agencies. 

I am here today representing Women Impacting Public Policy 

(WIPP) where I serve on its Leadership Advisory Council. WIPP is 

a national nonpartisan public policy organization advocating on behalf of its coalition of 4.7 million business women including 78 

business organizations. WIPP plays a key role in developing 

women-owned businesses into successful federal government contractors through its Give Me 5 and ChallengeHER programs. Despite WIPP’s efforts, access to federal contracts continues to be a 

challenge for women-owned businesses. 

In my experience, two issues for small contractors are clarity of 

teaming relationships and length of time between Request for Proposal (RFP) response and contract award date. Many of the small 

business set-asides in today’s environment require teaming and 

working with competitors as partners. Clarifying each team member’s part and following through to ensure the subcontracting plan 

has been met takes time and focus. To a small business, time really 

is money and having to pay resources to be available not knowing 

when or if you will be performing the work is costly. 

With regard to these issues, I know I am not alone. Contracting 

challenges confront WIPP members on a daily basis and act as barriers to women business owners succeeding in the federal market. 

WIPP’s procurement committee continually updates women federal 

contractors on the changing landscape of procurement through 

communications and webinars. 

Under your leadership, the Congress has enacted much needed 

changes, increasing access to federal contracts for all small businesses. Women entrepreneurs continue to struggle to access federal 

contracts at both the prime and subcontracting levels. While the 

federal government is yet to reach its 5% goal of prime contracts 

awarded to women, progress is being made. Since its inception in 

2011, the size of the WOSB Procurement Program has tripled. We 

are heartened by Administrator Maria Contreras-Sweet’s commitment to meeting this goal in FY16. 

In October 2011, WIPP testified before this Subcommittee in a 

hearing entitled, ‘‘Subpar Subcontracting: Challenges for Small 

Business Contractors’’ on the issues small businesses face with respect to subcontracting.1 Since that time, the Committee has made 

a number of improvements that we applaud, including allowing 

SBREP-219 with DISTILLER

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2Small Business Government Contracting and National Defense Authorization Act of 2013 

Amendments, 79 Fed. Reg. 77955 (December 29, 2014). 

women-owned small businesses to better partner with one another 

on federal contracts. 

In the 2011 hearing, WIPP testified on confusion surrounding 

subcontracting requirements. The National Defense Authorization 

Act (NDAA) of 2013 addressed many of these fundamental problems by requiring the Small Business Administration (SBA) to clarify subcontracting requirements, including the amount that must 

be performed by both prime and subcontractor vendors. The SBA’s 

proposed rule would update performance and subcontracting requirements for small business and socioeconomic program set-aside 

contracts.2 We are hopeful that the final rule implementing these 

changes will be released soon. 

More recently, WIPP supports an effort to increase accountability 

for agencies to meet their subcontracting goals as part of H.R. 

1481, the Small Contractors Improve Competition Act of 2015, ultimately included in the FY16 NDAA. Incorporating subcontracting 

goals in Department of Defense procurement responsibilities is a 

positive step toward improving the subcontracting environment for 

small businesses. 

In reviewing past testimony before this Committee on barriers 

facing women business owners in the federal market, we identified 

two continuing challenges. These are concerns with the subcontracting environment and issues with data collection and transparency. I will use my remaining time to focus on these two challenges. 

Continuing Challenge #1: Subcontracting 

Not having a relationship with the federal government is one of 

the most significant problems facing subcontractors. Without that 

relationship, subs are wholly dependent on the prime to remain in 

the federal contracting system. We believe subcontractors would 

benefit from participating in the broader contracting process. Many 

of the problems faced by subcontractors are symptoms of the underlying issue that subcontractors have no real relationship with the 

federal government. 

When WIPP testified before this Subcommittee in 2011, we 

raised several questions about subcontracting plans: How are subcontracting plans being reviewed prior to award? How are subcontracting plans enforced? Should subcontractors have access to the 

plans? 

WIPP members tell us that many of these questions have not yet 

been addressed. Four years later, we still do not know the true 

amount subcontracted to small businesses or whether subcontracting plans are actively enforced. We suggest that the federal 

government should require disclosure of the portion of the subcontracting plan to the subcontractor that is listed. At WIPP, we call 

this recommendation a ‘‘List Us, Use Us’’ policy, and we believe ensuring that subcontractors are not used solely to win awards but 

to do the work will benefit women entrepreneurs. 

SBREP-219 with DISTILLER

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3Government Accountability Office, Linking Small Business Subcontractors to Prime Contracts Not Feasible Using Current Systems, December 2014. 4Government Accountability Office, DATA TRANSPARENCY: Oversight Needed to Address 

Underreporting and Inconsistencies on Federal Award Website, August 1, 2014. 5Small Business Administration - Office of Inspector General, Report on the Most Serious 

Management and Performance Challenges Facing the Small Business Administration in Fiscal 

Year 2016, October 15, 2015. 

The government should require prime contractors to share this 

information with the subcontractor upon award. We understand 

the complexity of asking federal agencies to monitor compliance 

with the subcontracting plan, but it is necessary to ensure that 

prime contractors are acting in good faith when they amend subcontracting agreements. 

WIPP has previously testified on the lack of information in the 

reporting of subcontracting plans. Since that time, the Government 

Accountability Office (GAO) has authored a study, ‘‘Linking Small 

Business Subcontractors to Prime Contracts Is Not Feasible Using 

Current Systems.’’ 3 This 2014 study highlighted the same concerns 

that WIPP expressed in its 2011 testimony. The report found that 

linking subcontracting plans to prime contracts was ‘‘especially difficult’’ because the subcontracting plans do not specify to which 

contract they belong. GAO surveyed the four reporting systems— 

the Electronic Subcontract Reporting System, USASpending.gov, 

Federal Procurement Data System and Federal Funding Accountability and Transparency Act Subaward Reporting System and concluded that not one of the four had fully comprehensive data. In 

addition, GAO found that less than ten percent of contracts reported all of the required data.4

WIPP supports the effort to make this data reliable and uniformly accessible. In addition, it seems to us, that using four systems to report disparate data is an inefficient and unnecessary 

method to gather and display subcontracting data. WIPP believes 

two pieces of information should be reported and easily accessible: 

subcontracting opportunities available for a given contract and the 

extent to which those opportunities are actually being performed by 

a small business. 

Continuing Challenge #2: Transparency in Federal Contracting 

Data 

Data issues, however, are not limited to only subcontracting 

plans. WIPP believes that annual scorecards must be transparent 

and accurate, given the role these reports play in encouraging 

agencies to contract with small businesses, including women-owned 

small businesses. The annual scorecards, however, could be improved in three ways to better reflect small business contracting 

achievement government-wide. 

First, the data reported in the scorecards needs improved accuracy. The SBA Office of Inspector General (SBA OIG) has cited accuracy in data reporting as a significant challenge for the agency.5

In a 2015 report, the SBA OIG found ‘‘widespread misreporting by 

procuring agencies...[and] many contract awards that were reported 

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6 Id at 6. 7Small Business Administration - Office of Advocacy, Evaluation of the Small Business Procurement Goals Established in Section 15(g) of the Small Business Act, June, 2014 at 13. 8 Burton, Robert. Statement to the U.S. House Small Business Committee, ‘‘Contracting and 

Industrial Base II: Bundling, Goaling, and the Office of Hearings and Appeals.’’ Hearing, March 

27, 2015. Available at: http://smallbusiness.house.gov/calendar/ 

eventsingle.aspx?EventID=397854#sthash.hPCLkrG8.dpuf 

formed by larger companies.’’ 6 WIPP believes that accurate and 

timely data reporting will aid SBA in establishing Agency goals 

and ultimately ensure that small businesses, especially subcontractors, receive their share of contracting awards. 

Second, these scorecards should measure the entirety of federal 

spending, Exclusions from the scorecard significantly change goal 

achievement progress. While SBA’s achievement of meeting the 

23% was impressive, it would only have been 19.2% with the incorporation of all spending.7 SBA’s recent decision to include international contracts in these numbers is a good start. 

Third, SBA scorecards would be enhanced by also measuring the 

number of firms winning contracts. Currently, the scorecards only 

measure dollars awarded to small businesses. While the amount 

awarded to small businesses is increasing, there are fewer firms 

participating in these contracts.8 As a result, contracting dollars 

are now concentrated in a smaller number of firms. WIPP was 

pleased to see this addresses in the FY16 NDAA. 

In conclusion, women entrepreneurs consider the federal marketplace a key opportunity to grow their businesses. With more than 

ten million women business owners nationwide, competition for 

government opportunities among women innovators and entrepreneurs remains strong. For many, subcontracting is a staple of 

women business owners in the federal market. Ensuring that the 

rules and systems governing both prime and subcontractors are accurate and fair is of paramount importance. This Committee has 

always acted to support these pillars of WIPP’s procurement policy, 

and we know you will continue to do so. 

Thank you for the opportunity to testify and I would be happy 

to answer any questions that you may have. 

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Testimony of Michael Janeway 

President and CEO 

APG Technologies, LLC 

House Small Business Committee Subcommittee on Contracting 

and Workforce Hearing: 

‘‘Continuing Challenges for Small Contractors’’ 

November 18, 2015 

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Good morning. I would like to thank Chairman Hanna, Ranking 

Member Takai and the members of the Subcommittee on Contracting and Workforce for inviting me to testify today to discuss 

the continuing challenges facing small contractors and specifically 

how the federal government has not met its subcontracting goal in 

five years, even though they have continued to lower the goal each 

year. 

My name is Mike Janeway, and I am the founding member, and 

President and CEO of a small business, APG Technologies, LLC 

headquartered in Potomac Falls, Virginia. My expertise is as a private business owner and as a retired U.S. Air Force Lt Colonel 

with experience working in the defense acquisition community as 

a program manager and program director of large command and 

control systems for both U.S. war fighters and our Middle East allies. 

I founded APG Technologies in March 2008 as a Service Disabled 

Veteran Owned Small Business (SDVOSB) with the goal of providing high value ROI engineered designs and implementation to 

the Department of Defense and the various intelligence agencies of 

the U.S. federal government. We have approximately 30 employees 

spread across operating locations in the Washington DC area; Dayton, Ohio; Denver, Colorado; Colorado Springs, Colorado; Dallas, 

Texas; and at times various locations in California, Florida, Kentucky, and New York. Our company has successfully delivered and 

supported a variety of programs and missions used in the war on 

terror. 

Having stayed true to our mission of providing high value data 

management solutions we have grown slowly, yet we maintain an 

excellent reputation in our market. Since o ur engineering 

deliverables typically center around components of much larger developments, most of our work is awarded as a subcontractor to 

much larger prime contractors. Our experience includes teaming 

with many of the large companies that typically bid on defense and 

intelligence contracts, including many of their operating locations 

across the U.S. 

Federal procurement is not just of singular importance to many 

small businesses—small-business participation is crucial to a 

healthy and competitive federal procurement process. Small businesses provide high-quality goods and services to federal-contracting agencies and infuse the federal procurement system with 

much-needed competition. In turn, the federal government invests 

in the most-dynamic and innovative sector of the U.S. economy. 

More than 30 years ago, Congress set a goal of having a certain 

portion of all federal contracting dollars go to small businesses and 

established sub-goals for small businesses owned by women, socially and economically disadvantaged individuals and service-disabled veterans, and for small businesses in Historically Underutilized Business Zones (HubZones). The current government-wide 

goal for small businesses’ share of contracting dollars is 23 percent. 

However, every year since 2006, the federal government has 

missed the 23 percent small business goal and all but one of the 

sub-goals. 

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Small firms accounted for 63 percent of the net new jobs created 

between 1993 and mid-2013 (or 14.3 million of the 22.9 million net 

new jobs). Small firms in the 20–499 employee category led job creation. This unrivaled success has been achieved with less than adequate governmental support, however. Although small businesses 

comprise 99.7 percent of all employer firms in the U.S., employ half 

of all private sector employees, and are responsible for more than 

50 percent of the country’s private, non-farm gross domestic product, they only receive a fraction of federal contracting dollars and 

a tiny sliver of federal research and development investment. In 

fact, in fiscal year 2012, only 22.3 percent of all contracting dollars 

went to small business. When small businesses are excluded from 

federal contracts, the federal government, American taxpayers and 

the nation’s economy lose out. 

Subcontracting is an important avenue for small businesses to 

gain entry to the federal marketplace when they lack the capacity 

to compete at the prime contractor level and can also serve as a 

stepping stone to receiving work as a prime contractor. According 

to past NSBA survey data of those small firms that provide goods 

and services to the federal government, 48 percent said they have 

performed subcontracting duties for the federal government. 

Among businesses that do perform subcontracting for the federal 

government, approximately 66 percent said that at most 20 percent 

of their firms’ revenue is based on federal subcontracting. 

Subcontracting plans, where large business prime contractors explain how they will tap the talents of small businesses to help 

them in performing the contract are the key tool agencies have to 

facilitate opportunities for small businesses as subcontractors. 

While statutory and administrative goals are intended to provide 

small businesses with significant subcontracting opportunities, a 

lack of attention, consequences, and systems continues to plague 

the program. 

Unlike the small-business prime contract goal, the small-business subcontract goal is administratively rather than statutorily 

determined. Like small-business prime contracting, federal agencies set goals for the percentage of subcontracts that will be awarded by federal contractors to small businesses. To achieve these 

goals, the government requires many federal contractors to submit 

small-business subcontracting plans that outline how small businesses will participate in contract performance. 

Too often we see subcontracting plans written only to address 

proposal goals with little to no follow through after the prime contract is awarded. With no enforcement by the federal government 

to hold prime contractors accountable subcontracting plans seldom 

match reality and goals are never meet. The impact to a small 

business can be significant. APG Technologies and hundreds of others companies have experienced this same scenario where you 

enter into a teaming agreement in good faith, provide engineering 

and administrative talent at your own expense to develop a solution, hire recruiters to get a jump on recruiting the best talent, and 

may even pay an option to lease a larger office only to see the 

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prime contractor find some reason not to award the subcontract or 

to delay staffing. 

This allows the U.S. Small Business Administration (SBA) to adjust the subcontracting goal based on what it perceives to be the 

real opportunities for subcontracting. However, while SBA has 

steadily decreased the subcontracting goals from 36 percent to 34 

percent over the last five years, subcontracting achievements have 

fallen from 35 percent to 33 percent. Each time SBA decrease the 

goals, agencies manage to subcontract less with small businesses. 

This results in real losses to small businesses. 

In the Small Business Procurement Scorecard—which measures 

each agency’s progress in meeting their small business and socioeconomic prime contracting and subcontracting goals and provide 

accurate and transparent contracting data—published annually by 

the SBA, the agency reported the following subcontracting goals 

and achievement for FY 2013: 

Small Business Concern Subcontracting 

Goal 

Subcontracting 

Achievement 

Small Business 36.00% 34.00% 

Women Owned Small Business (WOSB) 5.00% 6.60% 

Small Disadvantaged Business (SDB) 5.00% 6.70% 

Service Disabled Veteran Owned Small 

Business (SDVOSB) 

3.00% 1.70% 

HUBZone 3.00% 1.20% 

In fiscal year (FY) 2013, small businesses received $86.7 billion 

in subcontracts, which is just about $5 billion less than they received in prime contracts. If federal agencies had met the then-goal 

of 36 percent, subcontract would have accounted for more dollars 

to small business than prime contracts. The fact that the goal 

keeps decreasing indicates that less and less is being provided to 

small subcontractors. 

APG Technologies’ experience is that prime contractors will comply with requirements the federal government frequently measures 

and enforces. The opposite is also true in that prime contractors 

pay little attention to requirements not measured, validated, and 

enforced. For example, APG Technologies has been a subcontractor 

on a large contract for a military service intelligence agency where 

we run the data management, integration, and architecture teams. 

The agency goal for SDVOSB awards is three percent but they 

rarely achieve half that annual goal and have shown little interest 

in enforcement on a contract with scope we could easily fulfill. Despite only achieving half their subcontract goal of three percent the 

prime contractor repeatedly recruits and staffs their own employees 

rather than award us new work. 

Recently, this same contract was re-competed and awarded to a 

new company which added us as a subcontractor. Under this new 

contract, from the same agency, for the same scope, some of the 

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sponse has been to cut APG Technologies’ hours which has resulted 

in staff reductions. 

Prime contractors on any contract with an estimated contract 

value exceeding $650,000 that has subcontract possibilities are required to submit a subcontracting plan to the government that assigns both percentage and dollar value goals to these opportunities. 

The government monitors the prime’s utilization of small businesses by reviewing this plan and reported achievements against 

the plan. The government’s review of performance against the 

plans is further complicated by antiquated supporting technology 

that still has contractors submitting plans and reports to the contracting officer in paper format in some cases. 

This further shows that the SBA’s subcontracting goals are arbitrary. In an attempt to improve this process, the National Defense 

Authorization Act (NDAA) for FY 2013 required that: 

Not later than 180 days after the date of the enactment of this 

part, the Administrator of the [SBA] shall review and revise the 

Goaling Guidelines for the Small Business Preference Programs for 

Prime and Subcontract Federal Procurement Goals and Achievements to the extent necessary to ensure that ... agency subcontracting goals are established on the basis of realistically achievable 

improvements to levels of subcontracting rather than on the basis of 

an average of previous years’ subcontracting performance. 

However, nearly three years after the President signed the 

NDAA, SBA has not issued new subcontracting goal guidelines. Indeed, instead of implementing goals that reflect ‘‘achievable improvements’’ the SBA has decreased the subcontracting goal since 

2013. This is not the solution. 

According to past NSBA survey data, nearly 79 percent of the 

small businesses surveyed supported the idea that the federal government should provide greater oversight and protection for federal 

subcontractors. Therefore, I was especially pleased to see that the 

Senate Small Business and Entrepreneurship Committee passed 

both the Small Business Subcontracting Transparency Act of 2015 

(S. 2138) and the Small Contractors Improve Competition Act of 

2015 (S. 2139), which examines the difficulties in dealing with the 

federal procurement process, and addresses small business challenges in level the playing field and ensure fair competition in government contracting. 

I also appreciate all of the work by House Small Business Committee Chairman Steve Chabot on his Small Contractors Improve 

Competition Act of 2015 (H.R. 1481), which would amend the Small 

Business Act and the FY 2013 NDAA, and is intended to increase 

the number of awards made to small businesses by addressing several perceived obstacles that inhibit opportunities to increase 

small-business participation in federal contracting. Especially crucial was Sec. 102 that dealt with subcontracting goals. 

Currently, when considering whether senior agency executives 

are eligible for bonuses, agencies must look at whether they met 

the small-business prime contracting goals. However, agencies do 

not look at whether the agency is meeting its subcontracting goals. 

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As a consequence, the percentage of subcontract dollars awarded to 

small businesses has been falling, and is down 2.5 percent since 

2010. With subcontracting being an important entry point for federal contractors, this provision holds senior agency officials accountable for meeting all the goals. I applaud these small-business 

contracting reforms being included into H.R. 1735, the National 

Defense Authorization Act for 2016 (NDAA) and look forward to 

President Barack Obama signing NDAA into law in the coming 

days. 

The solutions to these concerns should be statutory in law by requiring the SBA to return to the higher 36 percent goal, stop reducing subcontracting goals, and make the goals mandatory contract requirements for all federal acquisitions with procedures and 

penalties for failure. Administratively, the Federal Acquisition Regulation (FAR) should be changed to make and allow the following: 

1. Subcontracting plans should be contractually binding, 

compliant with SBA goals, and enforced by the federal contracting officers. 

2. Contract Officers should quarterly measure a contractor’s 

compliance with the subcontracting plan. 

3. Contracts Officers should be authorized to penalize contracts not meeting their subcontracting plan through payment 

withholds and other penalties. 

In short, the subcontracting plans should no longer just be words 

on paper to address a proposal requirement. It should be an executable management plan that is contractually binding under and 

which the prime contractor is measured and held accountable. The 

subcontracting plans requirements should be revised to increase 

small business subcontracting participation and enhance the electronic subcontracting reporting system to improve federal agency 

monitoring of prime contractor achievements against their subcontracting plans. 

As small businesses struggle to compete for federal contracts and 

subcontracts, I appreciate this subcommittee examining whether 

legislative changes could better protect and promote businesses 

such as mine. 

Mr. Chairman, thank you for the opportunity to provide you and 

your subcommittee with the insight of my company’s experiences. 

If there is anything I can do to assist you or your subcommittee 

I am more than eager to serve. 

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1See 15 U.S.C. 644§ 15(g)(1)(B): Achievement of Government Goals, http://goo.gl/Fq268c—Each 

agency shall have an annual goal that presents, for that agency, the maximum practicable opportunity for small business concerns, small business concerns owned and controlled by servicedisabled veterans, qualified HUBZone small business concerns, small business concerns owned 

and controlled by socially and economically disadvantaged individuals, and small business concerns owned and controlled by women to participate in the performance of contracts let by such 

agency. The Small Business Administration and the Administrator for Federal Procurement Policy shall, when exercising their authority pursuant to paragraph (2), insure that the cumulative 

annual prime contract goals for all agencies meet or exceed the annual Governmentwide prime 

contract goal established by the President pursuant to this paragraph. 

Testimony of 

Karen Ward, President and CEO 

WESSGRP 

on behalf of the 

U.S. Women’s Chamber of Commerce 

Before the House Small Business Committee 

Subcommittee on Contracting and Workforce 

for the Hearing 

‘‘Continuing Challenges for Small Contractors’’ 

Wednesday, November 18, 2015, at 10:00 a.m. 

Rayburn House Office Building, Room 2360 

Chairman Hanna, Ranking Member Velazquez, members of the 

committee—thank you for this opportunity to provide testimony before the Subcommittee on Contracting and Workforce. 

I am Karen Ward, President and CEO of WESSGRP. I am testifying today on behalf of the U.S. Women’s Chamber of Commerce. 

My firm, which is certified EDWOSB by the U.S. Women’s Chamber of Commerce, provides system engineering, cyber-security, 

database administration, software engineering and program management support to the federal government and commercial markets. 

Access to federal contracts is vital for the continued growth and 

vitality of American small businesses, the people they employ and 

their communities. In today’s environment of declining federal 

spending and declining government suppliers, it is doubly important to ensure transparency in contracting and that the mandatory 

goal of maximum practical opportunity for small business concerns 1 is being met government wide through direct small business 

prime contracts and subcontracting with small business. 

Facts: 

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2See https://www.fpds.gov/, Unique Vendors Reports from FY 2008 and FY 2014. The Federal 

Procurement Data System—Next Generation reports there were 144,857 unique small business 

vendors during FY 2008 vs. 108,762 unique small business vendors during FY 2014. 

3See https://www.fpds.gov/, Small Business Goaling Reports 

4FY 2007 Federal Procurement Report. Section 1: Total Federal Views - https://goo.gl/ 

LBUPDQ, Section 2: Geographic Views - https://goo.gl/acCBd4, Section 3: Agency Views - https:// 

goo.gl/bmFktt. 

5Letter from Fay Ott, Associate Administrator for Government Contracting and Business Development to the Directors of the Offices of Small and Disadvantaged Business Utilization, Re: 

Small Business Procurement Scorecard Guidance for Fiscal year 2008, 1/10/07. https:// 

www.sba.gov/sites/default/files/aboutsbaarticle/goals—revised—guidelines.pdf 

• In FY2014 there were 36,000 fewer small business government suppliers than there were in FY2008.2

• Small business awards were $23.6B less in FY 2015 than 

they were in FY 2010—including a large contraction of $20B 

between FY2014 and FY2015 alone.3

• Annual SBA goaling reports or procurement scorecards do 

not tell us how many new suppliers are securing awards each 

year or how many suppliers are lost or acquired. Nor do they 

report the acquisition vehicle used or the amount of competition. 

• SBA goaling reports or procurement scorecards tell us 

nothing about the details of contracts and contractors by agency, buying center, region or NAICS. They tell us nothing about 

the number of small businesses receiving contracts by socioeconomic category or the number of actions broken into dollar 

size ranges. 

• And, SBA goaling reports or procurement scorecards tell 

us nothing about the actions excluded from small business 

goals. 

Annual Small Business and Federal Procurement Reports 

contain extremely limited information providing few insights into the details of how federal acquisitions and small 

business goals are being met. 

Many on this committee may not know—prior to 2008, much 

of the informative data I just named as missing from SBA reports was included in an annual Federal Procurement Report.4

But, in January 2007, the Small Business Administration announced a sweeping, gutting change to the annual Small Business Procurement Scorecard.5 This change, along with the development of the Federal Procurement Data System—Next 

Generation, rendered the small business and federal procurement reports to be nothing more than a simple list of aggregated spending numbers. The current SBA goaling reports and 

federal acquisition reports are the antithesis of transparency. 

I ask that Congress act to require the SBA to restore the 

goaling and federal procurement report format to include the 

in-depth data and analysis as was present prior to FY2008. 

Inappropriate use of ‘‘grandfathering’’ is causing billions 

of dollars in awards to large businesses to be reported as 

part of small business goal achievement each year. 

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6See CFR Title 13: Business Credit and Assistance, Small Business Size Regulations, http:// 

www.ecfr.gov/cgi-bin/textidx?SID=cb5092954b2d88cc6f0e0b5c902fb1c3&mc=true&node=se13.1.121—1404&rgn=div8 7Testimony of Small Business Administrator Maria Contreras-Sweet, U.S. House Committee 

on Small Business (Sept. 10, 2014), https://goo.gl/nUXAMV. 

Federal agencies may be incorrectly attributing billions of 

dollars in awards annually as awards to small business—even 

when the business has been acquired by a large business and 

no longer qualifies for small business goaling. 

13 C.F.R. 121.404(g)(1 and 2) states, a concern that represents itself as a small business qualifies and qualifies as 

small at the time of its initial offer...(and) is considered to be 

a small business through the life of the contract. 

However the following important exceptions apply: 

‘‘(1) Within 30 days of an approved contract novation, a contractor must recertify its small business size to the procuring 

agency, or inform the procuring agency that it is other than 

small. If the contractor is other than small, the agency can no 

longer count the options or orders issued pursuant to the contract, from that point forward, towards its small business 

goals.’’ 

And, ‘‘(2)(i) In the case of a merger or acquisition, where contract novation is not required, the contractor must, within 30 

days of the transaction becoming final, recertify its small business size status to the procuring agency, or inform the procuring agency that it is other than small. If the contractor is 

other than small, the agency can no longer count the options 

or orders issued pursuant to the contract, from that point forward, towards its small business goals. The agency and the 

contractor must immediately revise all applicable Federal contract databases to reflect the new size status.’’ 6

However, in 2014, SBA Administration Maria ContrerasSweet testified before the House Small Business Committee 

that, ‘‘We have a rule in place that says that once you get a 

contract with government, that you are given five years. And 

so if a large company acquires a small business, then it is 

grandfathered in for a number of years.’’ 7 This statement 

clearly contradicts the regulations—and the objectives of our 

government. 

Additionally, the government reports regarding small business contracting do not provide transparency as to how many 

contracts awarded to small companies are truly being performed by small companies over the lifecycle of the contract 

and on IDIQs at award. There have been many instances 

where RFPs my firm has competed with companies classified 

as small but, if reclassified today, would no longer meet the parameters that classify the company as a small company. 

I call upon Congress to require the SBA to include details in 

the annual goaling and procurement reports about the contract 

actions and dollars attributed to small business goaling with 

firms that are no longer small. 

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8Per https://www.usaspending.gov, the federal government spent $445.6B in contract actions. 

Per http://smallbusiness.data.gov/, the SBA attributed only $367.2B as small business eligible 

actions. The SBA excluded $78.4B in contract actions from small business eligible actions. 

9The Impact of Small Business Exclusions on Army’s FY14 Performance, 4/13/15. http:// 

www.sellingtoarmy.info/content/impact-small-business-exclusions-army%E2%80%99s-fy14-performance 

10Small Business: More Transparency Needed in Prime Contract Goal Program, U.S. Government Accounting Office, August 2001. http://www.gao.gov/assets/240/21854.pdf 

Exclusions to small business eligible actions rob small 

businesses of billions of dollars every year. 

Each year, the Small Business Administration carves out billions of dollars in opportunities to be excluded from small business goaling. Most of these exclusions are without merit; the 

practice should be immediately terminated. In FY2014, $73 billion of federal spending was not included as part of the ‘‘small 

business eligible’’ actions.8 Considering that, at a minimum, 

23% of this spending should have been awarded to small businesses—small businesses lost over $16 billion in opportunities 

in FY2014 alone. 

For example, in FY2014 small businesses lost: $12.4B from 

the Department of Defense, $2.5B from the Department of 

State, $2B from GSA. A public report prepared by the Department of the Army tells us, ‘‘If all the goaling exclusions were 

removed for FY14, Army’s base would grow by 15.37B and 

small business dollars would grow by $.71B which would decrease (Army) small business achievement by 5.50%.’’ 9

In 2001, the General Accounting Office directed the Small 

Business Administration to, ‘‘re-assess its rationale for making 

certain types of exclusions.’’ 10 The GAO noted, ‘‘Since fiscal 

year 1998, SBA has directed FPDS to exclude certain types of 

contracts when calculating annual small business prime contract achievements.’’ However, ‘‘SBA’s rational for making 

these exclusions is not documented.’’ 

This report states that the reason for excluding foreign sales, 

contracts performed outside the United States, American embassies and certain actions by the Federal Highway Administration is because ‘‘small business have limited chance to compete for awards.’’ The report also finds SBA’s annual guidance 

on these exclusions ‘‘is confusing and incomplete.’’ 

As a small company and a lead for small companies prior to 

starting my own firm, I have seen and demonstrated that 

small companies are capable of performing work overseas. 

There can be no justification for claiming that American 

small businesses have limited chance to compete for awards 

pertaining to contracts performed outside of the U.S., foreign 

sales and American embassies—nor has the SBA provided evidentiary data to support this claim. Quite the contrary. In May 

2015 the SBA Associate Administrator of Government Contracting stated: ‘‘We couldn’t find a justification to continue to 

exclude overseas contracts. So coming in 2016, we’re working 

with the Office of Federal Procurement Policy, Defense, USAID 

and State on including those contracts in the base.’’ 

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11See Federal Acquisition Regulations, 52.219-B Utilization of Small Business Concerns, 

https://www.acquisition.gov/sites/default/files/current/far/html/ 

52—217—221.html#wp1136032 12See 15 U.S.C. 644 § 15(1)(2)(H), Awards or contracts. https://www.law.cornell.edu/uscode/ 

text/15/644 

I ask that Congress act to require the SBA to end these unwarranted exclusions from small business goaling and require 

that any exclusions be fully reported and justified in small 

business goaling reports annually so that the entire small business community might see the billions of dollars of opportunity 

lost every year. 

The federal government is still not meeting its subcontracting goals. Holding large business prime contractors accountable for their subcontracting plans can help the government meet these goals. 

Subcontracting opportunities are very important to small 

business suppliers. As part of the Small Business Jobs Act of 

2010, the SBA implemented rules that require prime contractors to ensure small business concerns are given the ‘‘maximum practicable opportunity’’ to participate in the performance of the work and conduct market research to identify small 

business subcontractors and suppliers through ‘‘all reasonable 

means.’’ 11

As a subcontractor, I have seen issues associated with the 

ability to perform the work within the rates defined by the 

large prime. A prime contractor may detail a number of subcontractor positions on their subcontracting plan—but, the actual dollars attributed to these subcontractors for the work to 

be performed is not executable by the subcontractors. On several subcontracting plans, where my company has provided resources and capabilities and where the list of small businesses 

participating are within the framework defined by the subcontractor requirements, the rates provided for the subcontractor 

are not executable. Consequently, due to the inability of the 

small business contractors to fill these positions, the large 

prime ultimately fills the position with their own personnel. 

I believe it is important to place cornerstone of accountability 

at this juncture—to assure that prime contractors are adhering 

to ‘‘maximum practical opportunity’’ requirement. Federal code 

states that Procurement Center Representatives shall, ‘‘be an 

advocate for the maximum practical utilization of small business concerns in Federal contracting.’’ 12 As such, it is appropriate for PCR’s to delay the acceptance of prime contractor 

subcontracting plans should these plans not exhibit maximum 

practical small business participation. 

I ask Congress to require Procurement Center Representatives 

to review all subcontracting plans to make sure these plans are 

assuring the ‘‘maximum practical opportunity’’ for small businesses to participate in the performance of the work and empower the PCRs to delay the acceptance of prime contractor subcontracting plans should these plans not meet this requirement. 

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Thank you for this opportunity to provide testimony and thank 

you for your efforts on behalf of small business federal suppliers. 

Æ 

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