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97–973 2016

SUPPORTING SUCCESS: EMPOWERING SMALL 

BUSINESS ADVOCATES 

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 

DECEMBER 9, 2015 

Small Business Committee Document Number 114–033 

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 

EMILY MURPHY, 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 

Hon. Angela B. Styles, Chair and Partner, Crowell & Moring LLP, Washington, DC, testifying on behalf of the Defense Industry Initiative on Business Ethics and Conduct ..................................................................................... 4 

Mr. Davy G. Leghorn, Assistant Director, National Veterans Employment 

and Education Division, The American Legion, Washington, DC ................... 6 

Ms. ML Mackey, Chief Executive Officer, Beacon Interactive Systems, Cambridge, MA, testifying on behalf of the National Defense Industrial Association ........................................................................................................................ 7 

Ms. Tracy Balazs, Founder, President and Chief Executive Officer, FSR, 

Annapolis, MD, testifying on behalf of US Pan Asian American Chamber 

of Commerce ......................................................................................................... 9 

APPENDIX 

Prepared Statements: 

Hon. Angela B. Styles, Chair and Partner, Crowell & Moring LLP, Washington, DC, testifying on behalf of the Defense Industry Initiative on 

Business Ethics and Conduct ....................................................................... 20 

Mr. Davy G. Leghorn, Assistant Director, National Veterans Employment 

and Education Division, The American Legion, Washington, DC ............ 46 

Ms. ML Mackey, Chief Executive Officer, Beacon Interactive Systems, 

Cambridge, MA, testifying on behalf of the National Defense Industrial 

Association ..................................................................................................... 51 

Ms. Tracy Balazs, Founder, President and Chief Executive Officer, FSR, 

Annapolis, MD, testifying on behalf of US Pan Asian American Chamber of Commerce ........................................................................................... 55 

Questions for the Record: 

None. 

Answers for the Record: 

None. 

Additional Material for the Record: 

None. 

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(1) 

SUPPORTING SUCCESS: EMPOWERING SMALL 

BUSINESS ADVOCATES 

WEDNESDAY, DECEMBER 9, 2015 

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

Washington, DC. 

The Subcommittee met, pursuant to call, at 11:00 a.m., in Room 

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

Present: Representatives Hanna, Knight, Kelly, Vela ́zquez, and 

Chu. 

Chairman HANNA. This hearing will come to order. 

It has been four years since this Subcommittee held a hearing on 

the role of small business advocates, although we have spent a lot 

of effort strengthening these offices. During those four years, we 

have worked with the Minority to create minimum requirements 

for each of the small business advocates. 

We have added clarity and precision to the roles of the Procurement Center Representatives, PCRs, and the Offices of Small and 

Disadvantaged Business Utilization, OSDBUs. We have worked to 

improve the data and systems upon which they rely, and to give 

them new tools to assist small businesses competing for prime contracts and subcontracts. However, there is still much work to be 

done. 

Unfortunately, the regulations and standard operating procedures in places across the Government have not kept pace with the 

Small Business Act or the reality of Federal contracting. 

What does that mean? First, job descriptions for the business opportunity specialists and commercial market representatives are 

woefully out of date. Second, PCRs are regulatorily prohibited from 

looking at many consolidated contracts. Third, OSDBUs are not 

able to catch agency personnel evading the Small Business Act. 

Fourth, small contractors are losing opportunities to compete. 

Finally, it means that we are not explaining to new contractors 

that winning an award is only the first hurdle, next, you have to 

comply with obscure, confusing compliance regulations. 

Today, we are here to learn from small businesses and those that 

work with them how we can ensure that the small business advocates created by the Small Business Act can be more effective. 

I especially what to hear suggestions on what Congress can do 

to alleviate these burdens. I think it is appropriate that we periodically review the efficiency of these programs and make improvements so that the reality of the programs remains true to the spirit 

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2 

of the Act. I think we have an opportunity to work on these issues 

in a bipartisan manner. 

As we have discussed numerous times this year, we know that 

we are losing small contractors, and it will be difficult if not impossible to replace these sectors of our technological and industrial 

base. Supporting the advocates who support small businesses is a 

crucial element of small business success. 

I now yield to the ranking member for her opening statement. 

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

to be filling in for Mr. Takai. 

Each year, the federal government spends approximately $440 

billion on a variety of goods and services needed for its daily operations. It has been the mission of this committee to ensure that 

small businesses receive their fair share of dollars generated by 

these contracting opportunities. 

As such, we have provided small businesses with tools to assist 

them in entering and competing in the federal marketplace as either prime contractors or subcontractors. While their effects were 

not immediate, these tools have slowly proven the effectiveness in 

getting results. 

Through small business set-aside programs, the dollars awarded 

to small businesses increased to $91 billion in 2014, accounting for 

25 percent of contracting dollars. In fact, there were also increases 

in the awards to small business subgroups. 

For example, service disabled veteran owned businesses received 

$13 billion, and small disadvantaged businesses were awarded $34 

billion. 

However, more work is needed to get all small businesses their 

fair share as the government has failed to meet its goal for women 

owned small businesses. 

Additionally, the mindset of contracting officials needs to be 

changed so that they see these goals as floor rather than ceiling. 

It is to that end we must have strong small business advocates 

placed throughout the acquisition process. 

The amount of resources dedicated to these officials would seem 

to indicate that the Small Business Administration places no importance on the role they play for small businesses. 

Procurement center representatives are the first line of advocacy. 

These officials are tasked with overseeing contracts to determine if 

it should have been set aside for small businesses or whether it 

was improperly bundled. 

Despite their important function, there are only 49 of these advocates overseeing more than 50 million contracting actions; 49. 

What I would like to say, Mr. Chairman, to the committee is the 

fact that sequestration and budget cuts have consequences. We are 

here to make sure that we provide a level playing field for small 

businesses to be able to access the marketplace, the federal marketplace, but in order for the staff at the Small Business Administration to do their job, they need resources. 

As a result of the short staffing, PCRs are no longer reviewing 

actions if there is any kind of set-aside on the contracts. These officials are allowing the bare minimum small business representation, and that is just unacceptable. 

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3 

Commercial market representatives face staff shortages with 

only 27 advocates to monitor the subcontracting plans of large 

prime contractors. Their effectiveness is further diluted as many of 

them have other responsibilities to perform, taking them away 

from the CMR role. 

The same can be said for business opportunity specialists, who 

are often pulled by their district offices to help with other small 

business programs rather than overseeing the 8(a) participants as 

intended. 

Many of the problems with the CMR and BOS advocates are 

compounded by the fact that neither of these positions are laid out 

in the statute. Instead, they have been left to develop with SOPs 

and common practices. This begs one critical question. How can 

small businesses know what these advocates can do for them if 

their roles have not been clearly defined? 

With 100,000 fewer small business contractors registered to do 

business with the government than in 2012, and the average contract size increasing because of more bundling, it is more important 

than ever that actions are taken to reinforce the importance of 

small business advocates. 

I hope that today’s hearing will help us gain some insight as to 

how we can strengthen the role these advocates play in not only 

assisting small businesses navigate the marketplace but also ensuring these businesses receive their fair share of contracting dollars. 

I thank all the witnesses for being here today, and I yield back 

the balance of my time. 

Chairman HANNA. Thank you. If additional members have 

opening statements prepared, I ask that they submit them for the 

record. 

Thank you all for being here. In a moment I will introduce you 

individually, but so you understand the timing, you have five minutes. When it turns red, you have one, but we want to hear what 

you have to say, so do not sweat the program too much. 

We have one panel today. Our first witness is Angela Styles, 

Chair and Partner at Crowell & Moring. She is testifying on behalf 

of the Defense Industry Initiative on Business Ethics and Conduct, 

a non-profit organization dedicated to a culture and practice of ethics and integrity in all business dealings with the Department of 

Defense. 

Our second witness is Davy Leghorn, the Assistant Director of 

the National Veterans Employment and Education Division at the 

American Legion. The Legion is the largest wartime veterans service organization. Thank you. 

Our third witness is Ms. ML Mackey, CEO of Beacon Interactive 

Systems, a successful SBIR contractor. She is testifying on behalf 

of the National Defense Industrial Association. 

I now yield to the ranking member to introduce our last witness. 

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

to introduce Ms. Tracy Balazs, the Founder, President, and CEO 

of Federal Staffing Resources. FSR is a woman-owned minority 

business located in Annapolis, Maryland, with over 11 years of experience, the business also successfully graduated from SBA’s 8(a) 

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4 

business development program, and now serves as a mentor in the 

program. 

Ms. Balazs is also here testifying on behalf of the US Pan Asian 

American Chamber of Commerce, whose goal is to open doors for 

Asian American minority businesses and their business partners in 

corporate America, in federal, state, and local governments. Welcome. 

Chairman HANNA. Thank you. Ms. Styles? 

STATEMENTS OF ANGELA B. STYLES, CHAIR AND PARTNER, 

CROWELL & MORING; DAVY G. LEGHORN, ASSISTANT DIRECTOR, NATIONAL VETERANS EMPLOYMENT AND EDUCATION 

DIVISION, THE AMERICAN LEGION; ML MACKEY, CHIEF EXECUTIVE OFFICER, BEACON INTERACTIVE SYSTEMS; TRACY 

BALAZS, FOUNDER, PRESIDENT, AND CHIEF EXECUTIVE OFFICER OF FEDERAL STAFFING RESOURCES 

STATEMENT OF ANGELA B. STYLES 

Ms. STYLES. Thank you very much, Chairman Hanna, Congresswoman Vela ́zquez, and members of the Subcommittee. I appreciate the opportunity to appear before you today as the coordinator of the Defense Industry Initiative on Business Ethics and 

Conduct, or DII, to discuss ways to empower small businesses to 

comply with the many, many requirements of the Federal marketplace. 

DII is a non-partisan and non-profit 501(c)(3) association of U.S. 

defense companies who are committed to a culture and practice of 

ethics and integrity. 

In 1986, the chief executive officers and senior officials of 18 defense contractors, who were led by Jack Welch from General Electric, voluntarily met and created DII and drafted self governance 

principles. Today, 76 defense contractors including both small and 

large businesses, are signatories to the DII self governance principles. 

As part of its mission, DII provides the resources and assistance 

to help train hundreds of thousands of defense industry employees 

in ethics and compliance. 

In an ideal world, all businesses that participate in the Federal 

marketplace would have the wherewithal to understand and comply with all of the obligations that go hand in hand with Federal 

contracting. Unfortunately, this is not an ideal world. 

The scope and complexity of the regulations faced by contractors 

challenge are enough to regularly challenge even the largest companies with robust ethics and compliance programs. With less resources, measured by both money and manpower, and less experience with Government contracting, the hurdles faced by small businesses are monumental. 

As a result, the Federal Government is undoubtedly contracting 

with small businesses that do not know the full extent of the laws, 

regulations, or provisions required for Federal contracting. Some 

are not monitoring their compliance with these requirements, and 

some have no process to voluntarily disclose violations to appropriate authorities. 

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5 

Although there are numerous Federal agencies, centers, and offices that work with small businesses engaged in Federal contracting, DII has extensively searched—when I say extensively, we 

have done web searches, we have made phone calls, we have had 

meetings with all different levels of Government officials, we have 

not found Federal Government resources that provide guidance to 

small businesses to aid in the adoption of codes of conduct or the 

establishment of broader compliance in ethics programs for small 

businesses. 

Because the Federal resources for small businesses seem to be 

woefully lacking in the Federal Government, DII itself recently undertook several significant initiatives to provide ethics and compliance resources to small business contractors. 

In 2014, we published a model Code of Conduct for suppliers, 

and I have provided that as Attachment C to the Committee. We 

also have on our website a supplier toolkit that is available for 

small businesses and all businesses as well. 

Following the publication of both our Supplier Code of Conduct 

and our toolkit, we were making our way around to different suspension and debarment officials at the Department of Defense, and 

they kept telling us it really was not enough, that they really wanted to see if the private sector could help with ethics and compliance 

programming for small businesses. 

One thing they do not want to do is suspend or debar small businesses because they did not have the resources or the ability to understand how to comply with the laws and the regulations. 

As a result of those meetings, DII has committed to provide additional resources to small businesses that are Federal contractors, 

both prime and subcontractors. 

To that end, at the specific request of the Army Suspension and 

Debarment Office, we actually put up training for small businesses 

on our website, but that is just the first step. We have a webinar 

available. I have provided the slides of that webinar. Even you can 

get on and take a look at what we provided. 

They told us how important it was to have some basic training 

about small business programs up and available, so we put together that training, we put it up on our website, but we are not 

stopping there. 

This spring, we are going to launch a very robust small business 

toolkit, which includes structure and organization of a compliance 

program, some materials so they can build their own compliance 

program. 

We are going to have specific codes of conduct, policies and procedures for small businesses to be able to literally lift out of our 

website and use at their companies. 

We are making sample training videos for them to be able to 

train their employees on critical ethics and compliance issues in 

Federal contracting, and we are also going to provide them with 

templates on how to monitor and audit your own compliance program. 

We are very hopeful that these with a mentor-prote ́ge ́ program 

that we are putting together for a list of mentors that are available 

within DII to assist, take phone calls, answer questions from small 

businesses. We hope this will actually help. 

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6 

I will tell you this cannot just be the private sector alone. While 

DII and many of the defense contractors are very committed to 

making resources available, we really want this effort, this education and training effort, to be done in coordination with the Department of Defense and with our Small Business Administration 

colleagues. 

It takes both the public and private sectors, I think, to ensure 

that small businesses have the resources and tools to wisely, legally, and ethically perform Federal contracts. 

This concludes my prepared response, but I do want to thank one 

of my colleagues for assisting me with this testimony. She is here 

today, Olivia Lynch, with my office. 

There are very few, aside from your counsel that have here on 

the Committee, people that actually understand small business 

statutes and regulations and how difficult this is, but I can tell you 

Ms. Lynch, who helped me with the testimony, and certainly the 

counsel you have on your Committee, are certainly some of the 

leading experts around. 

Thank you very much. 

Chairman HANNA. Thank you. Mr. Leghorn? 

STATEMENT OF DAVY G. LEGHORN 

Mr. LEGHORN. Good morning, Chairman Hanna, Ranking 

Member Vela ́zquez, and members of the Subcommittee. On behalf 

of our National Commander, Dale Barnett, and 2.3 million members of the American Legion, we thank you for this opportunity to 

testify at this hearing. 

In the midst of obstacles for veteran entrepreneurs seeking Federal contracts and the VA purchase card scandal, the American Legion recognizes the need to empower the Small Business Administration and the offices of small and disadvantaged business utilization to hold the Federal agencies accountable. 

Our Government has a fiduciary responsibility to not circumvent 

the procurement process with questionable shortcuts. The American Legion can appreciate that VA misused purchase cards in fulfilling their duties to provide adequate care to veterans, but we are 

concerned that this deliberate undermining of the procurement 

process is putting our veterans at risk. 

This issue is paramount to the American Legion as it directly affects the care of a vulnerable segment of the veterans’ population. 

Federal contracts protect veteran patients with terms and conditions and hold medical suppliers or health care administrators accountable. 

None of these protections are in place when equipment and services are acquired outside of the procurement process. Never mind 

that VA is likely being overcharged or that the abuse of purchase 

cards is unfair to small businesses. This is foremost a safety concern that needs to be addressed. 

The American Legion believes that VA contracting officials misused purchase cards because of short staffing and bad training. We 

would like to believe that the perpetuated culture of foiling the procurement process is unintentional. With that in mind, there are 

measures that VA can implement to ensure that our veteran paSBREP-219 with DISTILLER

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tients are safe and all purchases that are set aside for small businesses remain reserved for small businesses. 

VA OSDBU must train and re-train contracting employees. VA 

should hire additional staff to write and oversee contracts in order 

to decrease the existing workload. VA must account for purchase 

card expenditures and they must start recording it in a database 

like that of the FTPS. 

Another issue harmful to veteran small businesses is the Federal 

Strategic Sourcing Initiative. The American Legion has never 

thought that the FSSI was good for small business. While this initiative streamlines Government procurements, it is flawed in that 

it drastically reduces competition for Government spending. 

As we mention in our written testimony, with the latest generation of FSSI, the bidding process is burdensome and cost prohibitive to small businesses. Further, it is equally frustrating to sell to 

an agency despite having been identified as a small business prime 

under the FSSI. 

We have come to terms that this generation of FSSI is here to 

stay, so the American Legion would like to make a few recommendations to ensure that at least a few of our veteran small 

businesses can benefit. 

Procurement center representatives are supposed to be our advocates. They ensure a fair portion of contracts and subcontracts are 

allocated to small business. Unfortunately, there are simply not 

enough PCRs to review every contract for compliance, and PCRs do 

not review outgoing FSSI delivery orders. 

The contracts under the FSSI are so large that the American Legion believes that it will be of benefit to the small business community if PCRs are required to review outgoing FSSI contracts. 

The American Legion goes a step further and recommends an 

SBA budget increase for the hiring of more PCRs. 

Over the years, procurement initiatives and tools like the FSSI 

reverse auctions and large IDIQ contracts were all partially aimed 

at alleviating the workload of contracting employees. A case can be 

made that these initiatives and tools are not working because contracting employees are still looking for shortcuts. 

There is a need for additional competent Federal personnel to 

write, oversee, and monitor contracts because much of the frustrations our veteran entrepreneurs have stem from a lack of well 

trained procurement staff. 

The American Legion does not believe that Federal employees intentionally put veteran patients in danger or are maliciously suppressing the veteran small business industrial base with bad policy. They just need the requisite training and manpower to do the 

job correctly and be the advocates for small business that they 

were intended to be. 

In closing, the American Legion thanks this Committee for the 

opportunity to testify today, and we look forward to any questions 

you may have. 

Chairman HANNA. Thank you. Ms. Mackey? 

STATEMENT OF ML MACKEY 

Ms. MACKEY. Good morning, Chairman Hanna, Ranking Member Vela ́zquez, and members of the Subcommittee. My name is ML 

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Mackey, and I am the CEO of Beacon Interactive Systems, a small 

business with offices located in Waltham, Massachusetts and in 

Norfolk, Virginia. 

I am also the Legislative Affairs and Policy Committee Chair for 

the Small Business Division of the National Defense Industrial Association, NDIA. 

In each of those roles, my motivation is the same, to utilize small 

business effectively to increase innovation, cost savings, and competition in the Federal acquisition ecosystem. 

Chairman Hanna, Ranking Member Vela ́zquez, I appreciate your 

leadership and the efforts of your Subcommittee taking the form of 

your obvious interest in and commitment to leveling the playing 

field for small businesses to compete in the Federal marketplace 

and the many pieces of legislation you have authored and passed 

to that end. 

My role at NDIA places me in regular discussions of small business legislation. The overwhelming response of my colleagues to 

your efforts and your Committee’s efforts is sincere appreciation, so 

please let me begin by saying thank you. 

As I said, this Subcommittee has demonstrated a deep commitment to leveling the playing field for small business. This concept 

is important to today’s discussion because if one accepts that small 

business has a lot to offer and that in many cases small business 

is where innovation occurs, what we are all fighting for makes 

sense, this level playing field. Your efforts make it possible for the 

best, not just the biggest to rise to the top. 

The goal of your efforts is not to make it easy on small business, 

and it is not, but rather to ensure that we have a diverse industry 

that supplies the Government with the very best goods and services possible at the best possible price. 

Unfortunately, the level playing field is as difficult to create as 

it is important to maintain for the well being of the Government 

contracting ecosystem. 

Fortunately for those of us that advocate for small business interests, we have strong advocates like this Committee. Your efforts 

in the recent legislation regarding small business Federal contracting in the fiscal year 2016 NDAA demonstrate once again that 

small business can depend on Congress to work for a fair and 

healthy acquisition system. 

Of course, new legislation is just the beginning of this process. 

Each one of your provisions must be written into clear regulations 

and policies that each agency can implement. Next, the Congress, 

the Small Business Administration, and each agency must oversee 

the implementation of these regulations and policies to be sure 

they are followed. 

With that in mind, what I can offer today is some feedback from 

my experience in my own company as well as some of my NDIA 

colleagues’ experiences with their small businesses. 

I make five recommendations in my prepared testimony, but in 

the interest of time, I will read only two of them here today and 

submit the others for the record. 

The first one I want to discuss with you is the lack of PCR involvement in consolidated contracts. This limits small business participation. We suggest that PCRs should actively advise on consoliSBREP-219 with DISTILLER

9 

dated contracts, inviting PCRs to advise on a consolidated acquisition strategy will help better identify those requirements where 

small businesses can best perform, and help structure the solicitation such that more small businesses can compete. 

Over the recent decade, the Federal Government has seen widespread and far reaching changes in the way it procures services 

and technology. There has been significant growth of consolidated 

contracts. Although this has helped the Government cope with the 

reduction on the acquisition workforce through fewer contracts, it 

tends to bundle requirements that are out of reach of most small 

businesses. 

For example, technology contracts are generally the result of consolidating multiple discipline requirements into a single solicitation 

for large business team competition. Empowering PCRs to advise 

on consolidated contracts will help to ensure that the requirements 

are within the reach of small business. 

The impact will be increase small business participation and 

competition resulting in more cost effective and innovative solutions for our warfighter. 

The second problem I will speak to is post-award compliance. The 

Government has created barriers to entry in the Federal market 

and thus, is not getting all the companies participating that it 

would like to have. Many entrepreneurial small business owners do 

not want to deal with the compliance headache and risk of engaging with the Federal Government. 

To be clear, Beacon became a Federal Government contractor 

when after 10 years of running a successful private sector software 

company and in the wake of the tech bubble burst, our market 

dried up. We engaged with the Navy’s SBIR program to accomplish 

a pivot into the Federal market. 

Once we got through the initial burden of understanding some of 

the Federal contracting compliance issues, it has wound up being 

a net positive experience both for our company and our Federal 

customers, but overcoming the barriers was really hard at first. 

Honestly, it still is at times. 

I suggest we develop paths and provide resources for non-traditional entrepreneurial small businesses to drive the innovation, 

cost effectiveness, and improve competition so desperately needed 

in Federal procurement. 

The impact would be increased small business participation and 

improved quality across the board, not just on the high quality of 

what these entrepreneurial small businesses will directly provide, 

but also by the competition they will incite across the Government 

supplier base. 

Mr. Chairman, on behalf of both the National Defense Industrial 

Association and myself, I hope that these suggestions will be useful 

in your ongoing work. 

I would like to thank you and the Committee for your leadership, 

and I would be pleased to respond to any of your questions. 

Chairman HANNA. Thank you. Ms. Balazs? 

STATEMENT OF TRACY BALAZS 

Ms. BALAZS. Good morning, Chairman Hanna, and Ranking 

Member Vela ́zquez, and members of the Subcommittee. Thank you 

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for this opportunity to provide testimony regarding my personal experiences as a woman owned small business owner who has graduated from the SBA 8(a) program, and is now an approved SBA 

mentor. 

My name is Tracy Balazs. I am the Founder, President, and 

Chief Executive Officer of Federal Staffing Resources, also known 

as FSR. I am also a retired registered nurse. 

I am testifying today on behalf of FSR regarding the advocacy 

and support of small business representatives from the following 

departments that I have had experience: 8(a) Business Development Program—Business Opportunity Specialists, BOS, the Procurement Center Representatives, PCRs, and the Office of Small 

and Disadvantaged Small Business Utilization, OSDBU. 

As a member of the US Pan Asian American Chamber of Commerce, an organization whose mission is to be the gateway to corporate and Government contracts, while opening doors and making 

connections for the Asian American minority businesses and their 

partners, I am grateful for their recommendation that FSR should 

provide testimony today. 

Federal Staffing Resources is a successful business with 250 employees, in large part due to the programs, the guidance, and the 

support provided by the SBA. 

FSR has been a Federal contractor since its inception in February 2004. Our core competency has been in support of those who 

have sacrificed for our freedoms—the active duty men and women 

and the veterans of the U.S. Armed Forces, by providing the best 

in class health care personnel and program management expertise 

to the Department of Defense and the Veterans Health Administration. 

We strongly believe that the SBA has given FSR the opportunity 

to provide these services to the best of our ability by giving us support we needed. 

The 8(a) program was crucial to our early survival in business. 

My experiences have been extremely positive, and FSR has benefitted greatly from the 8(a) certification. It has not been without 

challenges, however, since the compliance requirements of 8(a) certified companies are rigorous. 

The Government contracting process is complex and confusing. 

Most small businesses do not have the time or the money it takes 

to fully understand how to succeed as a Government contractor. 

The SBA provides essential guidance to business owners. 

One issue that I had encountered while I was working with the 

SBA is the interpretation and implementation of standardized policies and procedures. They are handed down from headquarters to 

the regional offices, the district offices, and finally to the individual 

SBA representatives. 

Even within the same office but mostly across state lines and districts, interpretations of policies may differ. I have had conflicting 

experiences regarding how the SBA reviews its financial eligibility 

and size standards and how it applies this criteria to award or to 

deny contracts. 

Some guidance is misleading, conflicting, and misinterpreted, 

which can result in inappropriate action, such as improper awards. 

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Increased training for the representatives as well as inviting industry to offer their experiences may help mitigate confusion, and 

ensure uniform compliance. Non-compliance and lack of attention 

to the rules may be potentially fatal for a small business. 

Even from the beginning, I knew that the relevant statutes and 

regulations must be respected and never ignored. We take compliance very seriously, and so much so that FSR has a Director of 

Compliance. 

Since the 8(a) program is highly regimented, certified 8(a) contractors are under greater scrutiny for compliance than any other 

small businesses that do not have a certifying body mandating an 

annual update of their business or financials. 

FSR is a mentor in the 8(a) Mentor-Prote ́ge ́ program. It is part 

of our duty to educate our prote ́ge ́ and make them aware of the pitfalls of non-compliance. 

The SBA helped us grow our business pipeline and our business 

network. The OSDBUs and the PCRs were essential in creating opportunities for the past decade. The OSDBUs work closely with the 

SBA and small businesses to ensure that we are aware of Federal 

opportunities and that we are aware of the growing statutes and 

regulations. 

The two areas that the PCRs may have a direct impact on small 

businesses is to make recommendation for small business setasides and to review the subcontracting plans and goals of large 

businesses. 

The monitoring of the small business subcontracting plans may 

merit review. The concern is that large businesses are not being 

fully assessed for compliance in the percentage of small business 

utilization, as specified in their contract. 

I understand from speaking to several OSDBUs and PCRs that 

the large businesses are expected to meet their small business subcontracting goals. However, due to insufficient numbers of Government personnel, they are unable to police all the plans. Therefore, 

these percentages are reported only by large businesses, and without verification from the subcontractor small businesses. 

The Government receiving a report on subcontracting revenue directly from small businesses so may themselves verify this objective has been met. 

In closing, I would like to acknowledge the SBA program and 

their personnel for assistance in helping me achieve business success. 

Chairman Hanna and Ranking Member Vela ́zquez, members of 

the Subcommittee, thank you very much for this opportunity. FSR 

hopes that our contributions and personal experiences may impact 

the way the SBA interacts with small businesses in monitoring and 

educating to ensure more compliance. 

Thank you very much. I am available for questions. 

Chairman HANNA. Thank you. There is a theme here, and that 

is that the SBA is shorthanded, which makes me wonder, they offered a buyout program last year to PCRs and CMRs, and 15 people retired. 

Ms. Styles, a couple of things. How does DII develop training on 

issues like limitations on subcontracting when the SBA and the 

FAR have not issued its own final rules, and could you give me 

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12 

some examples of the types of ethical issues that people are confronting that might not seem obvious? 

Ms. STYLES. The rules, as you know, are quite complicated. The 

statutes governing Federal contracting and the regulations governing Federal contracting are complicated even for the largest of 

defense contractors in our country. 

I can tell you what makes it even worse is when a new statute 

comes out and the regulations are not updated to reflect the new 

statute, so the regulations are incorporated into the contractor’s 

contract, so you sign on the bottom line and it becomes part of your 

contract, so you have to comply with the regulation that says one 

thing for limitation on subcontracting, but then there is also a statute out there that you also must comply with that says something 

else on the limitation on subcontracting. The best that we can advise our clients is that they have to figure out how to follow both. 

Chairman HANNA. They may not be in the same document. 

They could be completely separate and maybe even unavailable at 

the time? 

Ms. STYLES. Are we really anticipating small businesses to read 

legislation, statutes that pass? They rely on the contract. They rely 

on the Federal acquisition regulations. It is really hard to also expect them to go scour through the statutes to figure out what they 

are supposed to be doing in particular instances. It is very, very 

difficult. 

I will say even some of the simplest issues are hard to understand. Federal contracting is not commercial contracting. You cannot take Government employees out to lunch. You have to follow 

the specific terms and conditions of your contract. You cannot sell 

products that are made in China. 

There are things that are just really, really different that are 

easy to get tripped up on, and we see it every day. We see it every 

day with small businesses. 

Chairman HANNA. To anybody, what kind of implications does 

this have on bundling? Obviously, there is an incentive to do that. 

I had asked you what kind of ethical issues you might be confronted with that might not seem obvious. You said you had made 

a couple of examples. 

Ms. STYLES. Well, even the simplest things like pricing, certified cost and pricing information, where products have to be manufactured that are supplied to the U.S. Government. Simple gifts 

and gratuity rules. There are like pages and pages of gift and gratuity rules, not just for Federal employees, but also in terms of 

what would constitute what you can do with your suppliers as well. 

It is easy to get tripped up on—— 

Chairman HANNA. Would you say that it is almost impossible 

to follow, that anybody can make a mistake, and it depends on who 

is watching when that mistake is made? 

Ms. STYLES. Yes, even the largest companies make mistakes, 

and they have a lot of resources to comply and to put ethics and 

compliance programs in place. 

Chairman HANNA. Anyone else want to speak on that? 

Ms. BALAZS. I think it is easy to make a mistake. However, it 

is on the onus of the small business who is going to be working in 

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13 

the Federal space to be updated on the regulations. This is required on the 8(a) certification. 

You have to make sure that you comply with the terms of your 

contract. Therefore, you as a business owner has to do some homework. You have to be aware of what is going on and what you have 

to do while working in the Federal space. 

If the opportunity were there to be able to have our representatives to be able to support us and educate us and remind us that 

we have compliances to meet, I think that would help us, instead 

of just allowing the small businesses to figure it out for themselves. 

Chairman HANNA. Thank you. Ms. Vela ́zquez? 

Ms. VELA ́ ZQUEZ. Thank you. Ms. Styles, one of the main factors in staying active in the marketplace is to remain compliant. 

Can you help me understand why there is so little emphasis put 

into that? 

Ms. STYLES. I do not know why. I think a lot of the emphasis 

has been put on getting the contracts to the small businesses, 

which is great, right. We want our small businesses to get a good 

share of Federal contracts. 

I think the emphasis was put there to the exclusion of what happens once you get the contract, how you perform, how you follow 

the laws and regulations. 

Ms. VELA ́ ZQUEZ. How is it that DII does not find any government source that provides guidance on small business compliance? 

Ms. STYLES. We were really surprised when we started looking 

and realized what a big problem it was starting to become, at least 

from what we were hearing from our Government colleagues in 

terms of their concerns about whether the small business suppliers 

they were relying on, that provided good products and services, did 

not have a compliance program. 

We were getting tripped up in different areas, so that is why we 

started looking. 

Ms. VELA ́ ZQUEZ. Thank you. Ms. Balazs, you noted in your testimony that you have a Director of Compliance. This is not a step 

that has been taken by small businesses. Why do you choose to 

make this investment, and what kind of assistance did you seek 

when creating your program? 

Ms. BALAZS. So, I chose to make this investment because we 

wanted to be 100 percent compliant, and we did not want to risk 

being disbarred or suspended. The 8(a) certification is precious. 

You work hard to get it. You work hard to maintain it. Although 

there are many companies that feel they will not get caught, it is 

a risk that you take if you are not in compliance. 

We chose to be able to assign someone in our organization to be 

Director of Compliance. She is self taught. She has years of Government experience, and has had a great deal of resources that she 

has obtained through classes or seminars provided by the SBA and 

other agencies, et cetera. 

It really keeps our feet to the fire, to be able to make sure that 

if we are going to be working and competing in the Government 

space that we are going to do exactly what the Government tells 

us to do. 

Ms. VELA ́ ZQUEZ. Would something like the tools that Ms. 

Styles mentioned have been helpful to you? 

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Ms. BALAZS. Absolutely. If we had those resources at hand, we 

certainly would not have had to go and find them and seek them 

out. We did not get the assistance from the SBA. When we got our 

8(a) certification, it was just an understood thing that we would be 

compliant, although there was nothing that we were given in terms 

of a handbook on how to do it, what is the FAR, how do we read 

the FAR. Your toolkit would be absolutely great for any business 

but essentially those are going into the Federal space. 

Ms. VELA ́ ZQUEZ. It is great that now you provide compliance 

assistance to your prote ́ge ́. Did you find that other entities were 

lacking in terms of providing counseling to small businesses? 

Ms. BALAZS. I believe so. I think it is really focused on getting 

contracts, networking who you meet, who are the buyers, who are 

the acquisition teams. It is not really focused on after award and 

what is expected of the small business or the large business. 

Ms. VELA ́ ZQUEZ. Thank you, Ms. Balazs. Ms. Styles, other than 

money and manpower, what have you found to be the biggest obstacle in creating a compliance program? 

Ms. STYLES. It is the culture of the company. It has everything 

to do with the people who are leading the company. They have to 

embrace it and they have to understand it, and just like Ms. Balazs 

over here, that is exactly what you want. You want a company that 

says if I am taking Federal dollars and I am performing a service, 

I am going to do it right. 

Ms. VELA ́ ZQUEZ. Do you have an estimate on how much a basic 

compliance program would cost? 

Ms. STYLES. It is not inexpensive. You have to have a person at least partially committed to it. I would say at least $100,000 to 

put the very, very basics in place. 

Ms. VELA ́ ZQUEZ. I have other questions for the other two witnesses on the second round, because we have other members here. 

Mr. Leghorn, earlier this year we held a hearing on the alleged 

fraud and abuse of government purchase cards by the Department 

of Veterans Affairs. You spoke at that hearing, but yet veterans’ 

groups have yet to testify before the committee on this issue. 

Can you discuss further how this type of fraud has affected the 

veteran small business community? 

Mr. LEGHORN. Thank you for your question, ma’am. So, the 

way it affects veteran owned small businesses is that first of all, 

the small business goal and percentages that are reported by VA 

OSDBU come from—are taken from data from FDPS. 

Since purchase card expenditures are not reported in FDPS, the 

percentage that they actually report to the SBA is false. 

We do not think this is something that is completely just only 

relegated to VA, we think other agencies have violated the purchase card rules as well. 

Overall, it could be that more than one agency is reporting false 

small business percentages to the SBA, and the SBA does not really have any teeth to go after the agencies when discrepancies are 

found. 

Ms. VELA ́ ZQUEZ. How can we get acquisition officials to stop 

trying to shortcut the contracting process? 

Mr. LEGHORN. I think the best thing we could do is to leverage 

the OSDBUs within all the agencies and rely on them to really 

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train their contracting employees to use regular procurement vehicles or if things need to be expedited, to use maybe their sole 

source authority, but most importantly, they have to start reporting their purchase card expenditures. 

Ms. VELA ́ ZQUEZ. Thank you. Ms. Mackey, the committee often 

hears from small businesses that they do not know the role of certain advocates or know how to properly utilize them as resources. 

In some cases, they do not even know the advocate exists. 

What can be done to clarify these roles and ensure that small 

businesses know about both the advocates and resources available 

to them? 

Ms. MACKEY. I would tell you that when I first found out about 

PCRs, I thought oh, wow, what a great role. I was really excited 

to have them get engaged in some of the contracting discussions we 

were having, and then I realized how few there were and how 

stretched thin they were, and how they did not know the particulars, specifically of the SBI contracting we were doing. It was like 

this promise that just went passing by. 

I am very encouraged that we are talking about increasing those 

resources. I also would suggest that you reach out through the industry associations. What keeps striking me about the answers 

that I hear from my fellow panelists is this ability to initiate or do 

training. 

Ms. Styles, you talked about changing it from the top down. I 

think if you really want to change behavior, you want to have this 

kind of compliance, you need a continuous maintenance of your 

operational procedures and how you act, and so many of us as 

small business owners find education in our industry associations. 

I would recommend to you that you reach out through the industry 

associations. 

Ms. VELA ́ ZQUEZ. Thank you. Thank you, Mr. Chairman. 

Chairman HANNA. Thank you. Mr. Kelly? 

Mr. KELLY. Yes. Mr. Leghorn, first, I want to thank you for 

your service in the American Legion and obviously before that. As 

a member of the American Legion, that is very important to me. 

You know that the procurement center representatives, PCRs, 

are supposed to be the small businesses’ advocates, ensuring a fair 

proportion of purchases, contracts and subcontracts that are allocated to small businesses. 

Can you explain why the SBA would have a regulation that 

keeps its procurement center representatives from reviewing some 

of the largest contracting opportunities for small businesses? By 

this, I mean contracts awarded as part of the FSSI and other consolidated multiple award contracts. 

Mr. LEGHORN. Thank you for your question, sir. PCRs only look 

at contracts that are above a certain dollar amount, because there 

simply are not enough of them to look at every outgoing contract. 

With some of the contracts that go out, the orders that go out 

under the FSSI, they already have a small business component 

built into them. 

For example, if you had seven primes that are designated, three 

of them could be small businesses, and four of them could be large 

businesses, and they are not obligated to look at them because 

small business is already built in. 

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Mr. KELLY. Ms. Mackey, you are welcome to comment as well. 

Ms. MACKEY. I am not sure that I could comment too much 

more than that except to add in that it is really important to articulate and discretely break up the kind of work that needs to be 

done, and make sure we keep all the opportunities open. I really 

appreciate what you had to say on that. 

Mr. KELLY. Mr. Leghorn, you know from your view there are 

not enough PCRs to keep up with the expedient review of every 

contract for compliance. In an ever increasingly difficult budget environment, outside of hiring additional PCRs, are there other steps 

that could be taken to modernize or create effectiveness within the 

PCR role? 

Mr. LEGHORN. Sir, I think a really good start, if we are not 

going to hire any more PCRs, is to just have PCRs start looking 

at FSSI contracts, because those contracts that are going out are 

so large, there are actually very few small businesses attached to 

these contracts. 

I am pretty sure if any competent PCR looks at them, they could 

find other small businesses to break out contracts for. 

Mr. KELLY. Is there any other member of the panel that would 

like to comment on that? 

Ms. BALAZS. Would it be okay if I added something to that? 

When I think about PCRs reviewing the consolidated contracts, the 

thing I think I can offer is a perspective on what the small business owner experiences, perhaps we both can offer that. 

If you think about how long it takes to prepare, if you can qualify, to propose on one of those, some of our colleagues have told us 

that it takes half a man year to write one of those proposals. 

If you have a small business, it is 20 people, and they are writing 

one of these proposals, where they might get work and they might 

not, that is half a year, that is five percent of my workforce, let’s 

say I am a 20 person company. Often, the profit, the fee, that I can 

charge on a contract is five or six percent. 

It becomes unreasonable to think even when there are these 

kinds of contracts that small business can go after, that most of 

your small businesses will not. I think I am again emphasizing 

your points, but I did want to give that context. 

Mr. KELLY. Mr. Chairman, I yield back. 

Chairman HANNA. Thank you. It is worth noting that Mr. Kelly 

will be introducing a bill to ensure PCRs can review consolidated 

contracts, so this bill was written with the ranking member’s staff. 

Ms. Styles, how unusual is it that a company would have what 

Ms. Balazs has? Clearly, you have reached a critical mass to do 

what you have done. Is it unusual? 

Ms. STYLES. Very unusual for a company that size or a small 

business to have a chief compliance officer or head of compliance. 

Chairman HANNA. It makes a big difference? 

Ms. STYLES. Huge difference. 

Chairman HANNA. But extremely rare? 

Ms. STYLES. Very rare because it is a person, and you have to 

pay. 

Chairman HANNA. It is expensive? 

Ms. STYLES. Yes. 

SBREP-219 with DISTILLER

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Chairman HANNA. That only emphasizes again what you do, 

the importance of what you do, and the importance of PCRs in general. Amazing. 

How much of an impetus do you think this has towards moving 

to bundling and more consolidation, hence, as Ms. Mackey said, the 

difficulties associated with getting contracts in general? To anybody 

who would like to comment. 

We have seen the loss of 100,000 businesses; right? That is pretty severe. 

Ms. BALAZS. If I may, bundling creates a situation where the 

cost and the volume of all the contracts are so large that small 

businesses generally are not able to support that volume. However, 

I have heard through speaking with some OSDBUs and understanding through small businesses that there could be a tiered system in which when you look at the size for small businesses, the 

largest size standard currently is $38 million. That is a three year 

average. 

Anybody who is within that could be considered a small business, 

but that is a hospital standard size, for those who are in health 

care, this is a size that we bid under. 

I believe the largest size for research and development is 500 

person. We are at 250, but we are still a small business. As we continue, we will outgrow that size, but could still be a small business 

depending on the types of personnel we support. I believe the largest size for temporary services is $27.5 million, and the IT services is like $25 million. 

If there were an opportunity to look at these contracts that are 

coming out as a bundled contract, to be able to say okay, if there 

are small businesses in the mid-tier area that may be above these 

sizes, that they can come together possibly and be able to work on 

some of these contracts if it was offered to them. Right now, it is 

even full and open for billion dollar companies or small. 

If you do not have enough small’s that can say they can do it, 

along with their teaming partners, it will always go full and open 

for these bundled contracts. 

Chairman HANNA. Do you agree with that? 

Ms. STYLES. Yes, I definitely agree with that. I would say just 

on the bundling piece, I am seeing some recognition at the Department of Defense that at least on the compliance side, it does not 

really solve the problem, because the small businesses, if you bundle, many of these small businesses end up being in the supply 

chain, right. 

Whether they are a prime and bidding or whether they are in the 

supply chain, we have to fix these problems with compliance. 

I do think at least in some sense, there is a recognition at the 

Department of Defense that it is not the solution that maybe they 

thought it was, not that it does not make their life easier, right, 

to bundle things and just have one company. 

Chairman HANNA. One tends to think of bundling from the top 

down, but what Ms. Balazs is suggesting is from the bottom up, 

which is different than frankly I had thought about it before. 

Ms. Vela ́zquez? 

Ms. VELA ́ ZQUEZ. Yes, I have another question. Ms. Balazs, in 

your testimony, you talked about the lack of standardization of 

SBREP-219 with DISTILLER

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SBA policies that could lead to inappropriate actions on the part 

of small businesses. 

I would like to hear from your own experience, do small businesses usually rely on the business opportunity specialists to steer 

them in the right direction? 

Ms. BALAZS. The business opportunity specialists, ma’am, are 

really assigned to those certified companies that are in the 8(a) 

program. They are very specialized in supporting those 8(a) contractors. 

I have two examples of misinterpretation of some of the statutes 

and some of the policies. It comes down to the financial eligibility 

of small businesses on sole source. This is just an experience that 

I have had, and in talking with my contemporaries, that they may 

not have realized the same experience. 

When a sole source opportunity is approved and granted to an 

8(a) company, the contracting officer must double check with the 

BOS to make sure that person, that company, is viable, that they 

are eligible, and they are able to support. 

There is a financial aspect of that where they will ask the 8(a) 

company to present their tax returns to make sure they are within 

the size standards to receive that sole source award. Usually, it is 

based on the tax returns. 

Unfortunately, from my experience, and this is where I am saying interpretation is different amongst the BOSs—my BOS was extremely dedicated to her job, she was extremely by the book. I am 

not sure if this particular rationale is part of policy, but she asked 

for interim financials, a moment in time of what my financials are 

today before I can be awarded a sole source. 

If we are a growing company, that is ever changing, and hopefully it is growing. It is not based on the tax returns of the previous 

year. Therefore, I have been denied sole source contracts because 

we have reached a threshold during that growth period. 

Other SBA BOSs have not asked for interim. It is a surprise to 

them that we would be asked for interim financials. 

Ms. VELA ́ ZQUEZ. Let me ask you, do you see the fact that there 

is a lack of direct BOS oversight from headquarters a contributing 

factor to the lack of standardization, for example? 

Ms. BALAZS. I do not believe that is 100 percent true. I think 

it is just understanding the statutes and the policies and the rules 

and how they interpret them and express it to their 8(a) organizations. 

I think what is there is a statute, and maybe they are just misrepresenting in the way they are explaining that to an organization, and I am seeing that it happens within the same organization, 

same office, as well as across state lines where other businesses 

are. 

As a mentor, I am working with a BOS that is in another state. 

My prote ́ge ́ is in another state. Therefore, some of the things they 

have said to us is a little bit different than the instructions and 

guidance I had received as an 8(a) certified company. 

Ms. VELA ́ ZQUEZ. Thank you. Thank you, Mr. Chairman. 

Chairman HANNA. Thank you. Implicit in that is there is some 

arbitrary and capricious opportunities because of the complexity, 

and the lady you talked to who wanted you to do interim finanSBREP-219 with DISTILLER

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cials, that is a lot of work and a lot of expense, and you thought 

it was not required, but you had no choice. 

Ms. BALAZS. I had no choice. I had to provide—the one other 

aspect, if I may, is audited financials. The 8(a) requires a company 

who is over $10 million and is a certified 8(a) to have audited financials. Audited financials are extremely expensive. That is mandatory for you to sustain your 8(a) certification. 

Most small businesses do not have that requirement to have audited financials, but it is important to make sure that company is 

sustainable. I have spoken with 8(a) companies that have never 

been requested to have audited financials, and in the entire nine 

years of my term in the 8(a) program, it cost me about $30,000 a 

year to have audited financials, and then I am working against 

other organizations who do not have audited financials. 

Chairman HANNA. If someone says to you you need it as of yes- terday, then basically that $30,000 you spent for year-end does not 

even help you. 

Ms. BALAZS. Correct. It was not an issue that we had to provide 

audited financials because we are compliant, we do what we are 

told. There was no issue with that, although I found it rather expensive, but it was the fact that it was not standardized across all 

the BOS offices. 

Chairman HANNA. Thank you very much. Those FSSI contracts 

displaced 500 plus small businesses in exchange for a handful of 

small businesses. In one case, we went from 1,000 small businesses 

regularly competing to only 30. This is something that the PCRs 

should review. 

If there are no further questions, I want to thank everybody for 

being here today, and for your ideas for solving some of these problems and potential solutions. 

It seems that some common sense reforms to PCR, OSDBU, 

BOS, and CMR programs would go a long way to helping our small 

businesses compete. I look forward to working with my colleagues, 

and there are a number of ideas on this Committee, along with one 

we have heard from Mr. Kelly. 

I ask unanimous consent that the members have five legislative 

days to submit statements and supporting materials for the record, 

without objection. 

I want to thank you all again. This hearing is now adjourned. 

[Whereupon, at 12:02 p.m., the Subcommittee was adjourned.] 

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A P P E N D I X 

STATEMENT OF ANGELA B. STYLES 

TESTIFYING ON BEHALF OF THE DEFENSE INDUSTRY 

INITIATIVE ON BUSINESS ETHICS AND CONDUCT 

BEFORE THE HOUSE COMMITTEE ON SMALL BUSINESS 

SUBCOMMITTEE ON CONTRACTING AND WORKFORCE 

DECEMBER 9, 2015 

CHAIRMAN HANNA, CONGRESSMAN TAKAI, AND MEMBERS OF THE

SUBCOMMITTEE, I appreciate the opportunity to appear before you 

today as the Coordinator of the Defense Industry Initiative on 

Business Ethics and Conduct (‘‘DII’’) to discuss ways to empower 

small businesses to comply with the multitude of requirements 

they are required to follow as contractors in the federal marketplace. 

DII is a nonpartisan, non-profit 501(c)(3) association of U.S. defense companies who are committed to a culture and practice of 

ethics and integrity in all business dealings with the United States 

Department of Defense. In 1986, the Chief Executive Officers and 

senior officials of 18 defense contractors (please see Attachment A 

for a list of founding Signatories) led by Jack Welch from General 

Electric voluntarily met to create DII and draft self-governance 

principles. Mr. Welch and the other pioneering defense contractors 

were guided by the ‘‘The President’s Blue Ribbon Commission on 

Defense Management’’ for defense contractors to improve the defense acquisition process through greater self-governance. By July 

1986, 32 major defense contractors had pledged to adopt DII’s core 

principles. Today, 76 defense contractors—including both small and 

large businesses—are Signatories to the DII principles (see current 

list of DII Signatories at Attachment B): 

We, the members of the Defense Industry Initiative on Business Ethics & Conduct (DII), affirm our commitment to uphold 

the highest ethical standards in all our business dealings with 

the government, as expressed through the following principles: 

(1) We shall act honestly in all business dealings with the 

U.S. government, protect taxpayer resources, and provide highquality products and services for the men and women of the 

U.S. Armed Forces. 

(2) We shall promote the highest ethical values as expressed 

in our written codes of business conduct, nurture an ethical 

culture through communications, training, and other means, 

and comply withy and honor all governing laws and regulations. 

SBREP-219 with DISTILLER

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(3) We shall establish and sustain effective business ethics 

and compliance programs that reflect our commitment to selfgovernance, and shall encourage employees to report suspected 

misconduct, forbid retaliation for such reporting, and ensure 

the existence of a process for mandatory and voluntary disclosures of violations of relevant laws and regulations. 

(4) We shall share best practices with respect to business 

ethics and compliance, and participate in the annual DII Best 

Practices Forum. 

(5) We shall be accountable to the public, through regular 

sharing and reporting of Signatory activities in public fora, including www.dii.org. These reports will describe members’ efforts to build and sustain a strong culture of business ethics 

and compliance. 

As part of its mission, DII provides resources and assistance to 

help train hundreds of thousands of defense-industry employees in 

ethics and compliance, with DII’s website providing free access to 

ethics training, instructional videos, and webinars on emerging ethics issues for defense-industry companies. DII also holds regular 

meetings and conferences to share best practices. As well, DII mentors suppliers and new firms in how to comply with the laws and 

regulations that govern U.S. defense companies. 

Small Businesses in the Federal Marketplace Lack 

Resources to Develop Compliance Programs 

In an ideal world, all businesses that participate in the federal 

marketplace would have the wherewithal to understand and comply with all of the obligations that go hand-in-hand with federal 

contracting. This is not an ideal world. The scope and complexity 

of regulations faced by contractors are enough to regularly challenge even the largest federal contractors with robust compliance 

and ethics programs. 

With less resources (measured both by money and manpower) 

and less experience with government contracting, the hurdles faced 

by small businesses in even setting up compliance programs are 

monumental. As a result, the federal government is undoubtedly 

contracting with small businesses that do not know the full extent 

of the laws, regulations, or provisions with which they are supposed to comply (let alone understand them), are not monitoring 

their compliance against these requirements, and have no process 

to voluntarily disclose violations to the appropriate authorities. 

Although there are numerous federal government agencies, centers, and offices that work with small businesses engaged in federal 

contracting, DII has extensively searched and has not found government sources that provide guidance to small businesses to aid 

in the adoption of codes of conduct or the establishment of broader 

compliance and ethics programs. Some offices, like small business 

development centers, which are administered by the Small Business Administration, provide management assistance to current 

and prospective small business owners, but have been statutorily 

SBREP-219 with DISTILLER

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1The Small Business Act provides that ‘‘Services provided by small business development centers shall include, but shall not be limited to—(h) maintaining current information concerning 

Federal, State, and local regulations that affect small businesses and counsel small businesses 

on methods of compliance. Counseling and technology development shall be provided when necessary to help small businesses find solutions for complying with environmental, energy, health, 

safety, and other Federal, State, and local regulations.’’ 15 U.S.C. § 648(c)(3). 

tasked only in general terms with providing counseling and technology development for complying with environmental, energy, 

health, safety, and other federal, state, and local regulations. 15 

U.S.C. § 648(c)(3)(H).1 The statutes underlying other similar programs, like the Procurement Technical Assistance Centers and the 

Department of Defense ‘‘DoD’’ Office of Small Disadvantaged Business Utilization (also known as the DoD Office of Small Business 

Programs), do not speak to helping ensure small business compliance with laws at a high-level like this, let alone the establishment 

of ethics and compliance programs. 

DII’s Past and Current Outreach to Small Businesses 

Because federal resources for assisting small business with ethics 

and compliance programing appears to be woefully lacking, DII recently undertook several significant initiatives to provide ethics 

and compliance resources to small business contractors. In 2014, 

DII published a Model Code of Conduct for suppliers, which I have 

provided to the Subcommittee as Attachment C. DII learned from 

a 2013 survey of its Signatories that such a code would be a helpful 

resource when dealing with supply chain integrity issues. DII’s 

Model Code of Conduct includes such topics as compliance with 

laws, human rights, employment practices, anti-corruption, conflicts of interest, and information protection. For those already with 

a supplier code, this Code is a benchmarking tool. For Signatories 

as well as small suppliers without a code of conduct, the Code is 

capable of being adopted for use as-is or as a foundation to the creation of a new supplier code of conduct. Ideally, this Code will come 

to serve as common core code with company specific addenda and 

achieve the ultimate objective of limiting the number of codes 

flowed to common suppliers. 

DII also undertook in 2014 to provide a Supplier Toolkit. The 

Toolkit’s purpose is to provide helpful tips and guidance on how to 

put together an effective ethics and compliance program, support 

suppliers in becoming compliant with Federal Acquisition Regulation 52.203–13 Contractor Code of Business Ethics and Conduct requirements, engage the supplier community in the ethics discussion, and strengthen the defense industry. The Supplier Toolkit can 

be found on our website at www.dii.org. 

Following the publication of DII’s Model Code of Conduct and 

Supplier Toolkit, multiple suspension and debarment offices from 

agencies across the federal government invited DII to discuss difficulties faced by small businesses in understanding and complying 

with their obligations as federal contractors. As a result of these 

meetings, DII has committed to provide additional resources specifically developed with small businesses in mind. To that ed, DII 

has recently published a webinar on small business issues on its 

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website; I have also provided today as Attachment D to my testimony the slides for this webinar. 

Finally this spring, DII plans to launch a robust Small Business 

Toolkit, which will touch upon the following four features of a compliance program: 

• Structure and organization of a compliance program—DII 

will provide examples of various models that can be used in 

building a compliance program; 

• Code of conduct, policies & procedures—DII will develop 

models of the types of policies that small businesses which contract with the government should consider implementing; 

• Training and communications—DII will publish sample 

training videos and other communications; 

• Monitoring and auditing—DII will provide templates for 

small businesses to use to monitor the effectiveness of their 

compliance programs. 

DII is also developing a mentor-prote ́ge ́ program for ethics and 

compliance issues that will provide names of companies and individuals that small contractors can contact as a resource. DII is taking these steps in furtherance of its mission to help improve the 

defense acquisition process through greater self-governance and 

will be analyzing how best to conduct outreach to make these resources more broadly available to non-Signatory small businesses. 

In Conclusion 

Given the scarcity of federal government resources dedicated to 

helping small businesses establish ethics and compliance programs, 

DII has committed to creating and making available resources to 

help small businesses understand and comply with federal contracting requirements. We are certainly hopeful that these education and training efforts can be done in coordination with our Department of Defense and Small Business Administration colleagues. The small business advocates can play an important role 

in helping to ensure that small businesses have ethics and compliance programs and provide guidance on the resources available to 

develop them. Together, the public and private sectors should ensure that small businesses have the resources and tools to wisely, 

legally and ethically perform contracts for the federal government. 

This concludes my prepared remarks. I am happy to answer any 

questions you may have. 

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STATEMENT OF 

DAVY LEGHORN, ASSISTANT DIRECTOR 

NATIONAL VETERANS EMPLOYMENT AND EDUCATION 

DIVISION 

THE AMERICAN LEGION 

BEFORE THE 

SUBCOMMITTEE ON CONTRACTING AND WORKFORCE 

OF THE COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF REPRESENTATIVES 

ON 

‘‘SUPPORTING SUCCESS: EMPOWERING SMALL 

BUSINESS ADVOCATES’’ 

December 9, 2015 

Good morning Chairman Hanna, Ranking Member Velazquez 

and members of the subcommittee. On behalf of our National Commander, Dale Barnett, and over 2 million members of The American Legion, we thank you for this opportunity to testify at this 

hearing on the challenges facing veteran owned small businesses 

seeking federal contracts. 

The American Legion identifies three issues that pose obstacles 

for veteran owned small businesses and service-disabled veterans 

seeking federal contracts: 

1) The Federal Strategic Sourcing Initiative; 

2) The Differences between Small Business Administration 

and Department of Veterans Affairs procurement policy standards; and 

3) The abuse and lack of accountability in purchase card. 

Federal Strategic Sourcing Initiative: 

The American Legion has never thought that the Federal Strategic Sourcing Initiative (FSSI) was good for small business. While 

this initiative was crafted around assisting federal agencies meet 

their small business goals faster, it is flawed, in that it drastically 

reduces competition for government spending. To a certain extent, 

we’ve internalized that the current generation of FSSI is here to 

stay. So rather than fight it, perhaps it’s time to see if we can work 

with this Committee to ensure that veterans small businesses can 

actually benefit. 

Starting with the procurement process itself, it takes two years 

and thousands of man hours to successfully submit a responsive 

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proposal which does not guarantee an award. This expenditure of 

company resources will only position a firm as a potential prime 

under the FSSI. The process of just getting in position to bid is a 

huge gamble, overly burdensome and cost prohibitive to the majority of small businesses. 

Another issue is that the agencies that committed to use this 

procurement vehicle prior to issuing the solicitation have failed to 

utilize the FSSI contract vehicle; therefore the few dozen small 

businesses that invested in the contract process have lost more 

money in comparison to firms that did not bother to bid and firms 

that bid, but did not receive awards. This is on account of the drastic measures a firm has to take to lower their prices in order to 

compete for an award, but after the award, not receiving the increase in volume the firm was promised prior to the bid. 

Nearly two years ago, the General Services Administration (GSA) promised to buy an estimated $20 million of their janitorial supplies through the FSSI. To the dismay of many small supply retailers that have positioned themselves to be primes under the FSSI, 

GSA has bought very little through their own FSSI contracting vehicle. Anecdotally, this is not an occurrence relegated to just the 

GSA and that this is happening within other agencies as well, because the agencies habitually use their preferred and trusted suppliers. 

Procurement Center Representatives: 

Procurement Center Representatives are supposed to be the 

small businesses’ advocates, they ensure a fair proportion of purchases, contracts & subcontracts are allocated to small business. 

With SBA being underfunded, there are not enough Procurement 

Center Representatives (PCRs). In order to work expediently, they 

are not able to review every contract for compliance. Currently, 

PCRs do not review outgoing FSSI delivery orders with small business options already built in. However, the contracts that go out in 

the FSSI are so large that The American Legion believes that it 

will be to the small business community’s advantage if PCRs are 

required to review outward-bound FSSI contracts. 

The American Legion Recommends: 

1) Making FSSI bidding process easier and shorter for small 

business. 

2) Larger number of awards under FSSI. 

3) Restrict FSSI to small businesses. 

4) Increasing SBA budget for training and hiring more PCRs. 

5) PCRs to start reviewing FSSI contracts. 

Purchase Card Abuse: 

The American Legion believes VA, when they tell us that the 

money spent on the purchase cards were used to provide adequate 

medical care and services to veterans. We don’t’ question why VA 

spent the money, we are concerned with the problems that result 

from the way they decided to spend the money. 

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1 Jan Frye’s memorandum to Robert McDonald, Secretary of the U.S. Department of Veteran 

Affairs, March 2015, accessed December 3, 2015, http://files.ctctcdn.com/8daee019001/1db6a9ca27ae-4bcc-ab00-9ef060d9d2c2.pdf 2 U.S. Government Accountability Office, Governmentwide Purchase Cards: Actions Needed to 

Strengthen Internal Controls to Reduce Fraudulent, Improper, and Abusive Purchases, by Gregory D. Kutz, GAO-08-333. 2008 

This issue is of the utmost importance to The American Legion 

as it directly effects the care of our most vulnerable constituents. 

Federal contracts protect veteran patients with terms and conditions; contracts also hold the supplier or healthcare administrator 

accountable for defective equipment and mal-practice. None of 

these protections are in place when medical equipment and services are purchased on the fly without contracts. So never mind the 

fact that VA is probably being overcharged, because no effort has 

been made to compete for best prices, or that the abuse of purchase 

cards is unfair to small business, this is foremost a safety issue 

that absolutely has to be addressed. 

All purchases below the simplified acquisition threshold of 

$150,000 but not below $3500, are exclusively reserved for small 

businesses. VA’s use of the purchase card for medical services and 

devices took away money that should have been considered for 

small businesses. Furthermore, VA’s procurements made by the 

purchase cards were not factored into what was reported to the 

SBA for small business goal purposes. The percentage of the dollar 

amount that was reported set-aside for small business is flawed because an estimated $6 billion per year was not reported in Federal 

Procurement Data System according to the Jan Frye’s memorandum to Secretary McDonald.1

In the past, VA mentioned that they needed additional contracting staff to write and oversee contracts. According to the Frye 

Memo, the Bronx VA Medical Center spent $54 million on prosthetics paid with $24,999 increments on the purchase cards. The 

American Legion believes that VA contracting officials rely on purchase cards as procurement shortcuts like they did in this instance 

because of short staffing and a high workload. 

The American Legion also believes that purchase card abuse likely stems from bad training. Contracting personnel are trained and 

taught the same way, they know the small business rules and regulations. But anecdotally, when they get to the VAMCs, they are 

taught to take shortcuts because this is the way their supervisors 

have done it and their supervisors are sometimes unknowingly perpetuating an established culture of shortcuts. Which is why many 

employees who are abusing the purchase cards don’t even know 

that they are breaking the law or realize that there might not be 

a need to get around regular contracting vehicles. Sometimes, the 

shortcuts created are not any faster than expediting purchases 

through VA’s sole source authority under Title 38. 

Further, The American Legion believes that VA is not the only 

party that keeps purchase card expenses off of Federal Procurement Data System (FPDS). We’re confident other agencies are 

doing the same thing. A March 2008 GAO Report 2, lists several 

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tion Regulations and making noncompetitive procurements with 

purchase cards. 

There seems to be a recurring theme with the need for additional 

personnel to write, oversee and monitor contracts. Whether they 

are contracting specialists, contracting officers or PCRs, much of 

the problems our constituents have had with FSSI and purchase 

card abuse all stem from a lack of well-trained contracting employees. The contract bundling through FSSI, reverse auctions and 

large Indefinite Delivery, Indefinite Quantity contracts (IDIQs) 

were all aimed in part to alleviate the workload of contracting employees, but clearly it’s not working because they are still looking 

for shortcuts and workarounds. 

The American Legion Recommends: 

1) Hiring more contracting staff. 

2) Ensure that agencies must train and re-train contracting 

employees. 

3) Agency must account for purchase card expenditures and 

start reporting it to FDPS. 

4) GAO report on whether purchase card abuse is agencywide and what is so onerous about small business rules that 

they seek shortcuts or why there is such an appeal for cardholders to make noncompetitive procurements with purchase 

cards. 

Department of Veterans Affairs Verification: 

Recently, the Center for Veterans Verification and Evaluation 

(CVE) has implemented a pilot verification process, which includes 

the assignment of a case manager to each case and provides counseling to the applicant prior to adjudication. The American Legion 

applauds VA efforts in engaging the applicant prior to the final adjudication. In 2013, The American Legion testified that there needs 

to be a human element in the pre-verification process to help an 

applicant understand why more documentation was warranted as 

opposed to just denying an application based off of insufficient evidence to establish ownership and/or control. In providing pre-adjudication emails regarding missing information and now incorporating counseling services to applicants, we see that VA has been 

responsive to our previous testimony. 

Over the last two years, VA has made tremendous steps in improving the verification process. The American Legion would be remiss if we did not mention that CVE has significantly cut down the 

time it takes for a small business owner to receive an initial decision to less than 30 days. This is a stark contrast to 2012, when 

it took approximately 85 days for CVE to make a determination on 

an initial application. 

However, there are several items left that CVE cannot address 

without legislative action and The American Legion believes that 

HR 3945, Improving Opportunities for Service-Disabled VeteranOwned Small Businesses Act of 2015 introduced by Representative 

Mike Coffman, a veteran himself, would tie up the remaining loose 

ends with this program. 

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3 U.S. Government Accountability Office, Veteran-Owned Small Businesses: Preliminary Observations on Verification Program Progress and Challenges, by William B. Shear GAO-16-179T, 

2015. http://www.gao.gov/assets/680/;673511.pdf (accessed December 3, 2015). 

HR 3945 would align the definitions of VOSB and SDVOSB, ensuring that differences between the Small Business Act and the 

Vets First Program are consistent. Furthermore, this bill requires 

the VA to follow the Small Business Administration regulations 

when verifying size and control standards of an applicant’s company. Last and most importantly, this bill creates an independent 

appeals process for SDVOSBs to challenge the agency’s denials. 

Aside from the fact that SBA’s Office of Hearings and Appeals 

has the legal expertise in determining size and control, the intention of this move is to incentivize VA to improve their verification 

process in order to minimize the cases that are appealed. Under 

the proposed funding mechanism, VA would pay SBA by the case 

load; therefore, VA could potentially stop paying when VOSB and 

SDVOSB firms no longer have reasons to appeal. 

The American Legion impresses upon the Committee that (1) including SBA in the appellate process would ensure more consistency in the final decisions being made and ensure impartiality in 

not having the agency of original adjudication review their previously denied claim and (2) the intention of moving appeals to 

SBA has nothing to do with an attempt to create a new preference 

group within the existing federal small business set-aside programs. 

The American Legion believes that Rep. Coffman’s bill addresses 

some of the shortcomings brought to light by GAO’s November 

2015 testimony before the Committee on Small Business’ Subcommittee on Contracting and the Workforce and the Committee 

on Veterans’ Affairs’ Subcommittee on Oversight and Investigations.3

This bill addresses the three major concerns the veterans’ community had regarding the verification process as outlined by our 

previous testimony in 2013. Compared to issues elsewhere in VA, 

CVE and the verification process has been a low hanging fruit for 

improvement. With this legislative change, this is an instance, 

when the stakeholders can potentially claim VA’s improvements 

since 2013 as a marked victory. 

American Legion Recommends: 

Support for H.R. 3945 Improving Opportunities for Service-Disabled Veteran-Owned Small Businesses Act of 2015 and establish 

the formal appeals process under SBA OHA. 

Conclusion: 

As always, The American Legion thanks this committee for the 

opportunity to explain the position of the over 2 million members 

of this organization. Questions concerning this testimony can be directed to Matthew J. Shuman, Assistant Director in The American 

Legion’s Legislative Division at (202) 861–2700, or 

mshuman@legion.org 

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TESTIMONY FOR THE HOUSE SMALL BUSINESS COMMITTEE 

‘‘Supporting Success: Empowering Small Business Advocates’’ 

Wednesday, December 9, 2015 

ML Mackey, CEO & Co-Founder, Beacon Interactive Systems 

Legislative Affairs & Policy Committee Chair, NDIA Small Business Division 

Good morning Chairman Hanna, Ranking Member Vela ́zquez 

and Members of the Subcommittee. My name is ML Mackey. I am 

the CEO of Beacon Interactive Systems, a Small Business with offices located in Waltham, MA and Norfolk, VA. I am also the Legislative Affairs & Policy Committee Chair for the Small Business Division of the National Defense Industrial Association, NDIA. With 

each of these roles, my motivation is the same; to utilize Small 

Business effectively to increase innovation, cost savings, and competition in the Federal acquisition ecosystem. 

NDIA membership is composed of nearly 90,000 individuals and 

more than 1,600 companies, over half of which are Small Businesses. Beacon Interactive Systems is one of those Small Businesses. For the past 11 years Beacon has delivered innovative, cost 

effective, and highly competitive systems to improve the U.S. 

Navy’s situational awareness and operator performance. 

Chairman Hanna, Ranking Member Takai, I appreciate your 

leadership and the efforts of your Subcommittee, taking the form 

of your obvious interest in and commitment to leveling the playing 

field for Small Businesses to compete in the Federal marketplace, 

and the many pieces of legislation you have authored and passed 

to that end. My role at NDIA places me in regular discussions of 

Small Business legislation. The overwhelming response of my colleagues to your efforts and your Committee’s efforts is sincere appreciation. So please let me begin by saying thank you. 

As I said, this Subcommittee has demonstrated a deep commitment to leveling the playing field for Small Business. This concept 

is important to today’s discussion because if one accepts that Small 

Businesses have a lot to offer, and that in many cases Small Businesses are where innovation occurs, what we are all fighting for 

makes sense—this level playing field. Your efforts make it possible 

for the best—not just the biggest—to rise to the top. 

The goal of your efforts is not to make it easy on Small Business—and it’s not—but rather to ensure that we have a diverse industry that supplies the government with the very best goods and 

services possible at the best possible price. Unfortunately, the level 

playing field is as difficult to create as it is important to maintain 

for the well-being of the government contracting ecosystem. 

Fortunately for those of us that advocate for Small Business interests, we have strong advocates like this Committee. Your efforts 

in the recent legislation regarding Small Business Federal Contracting in the Fiscal Year 2016 National Defense Authorization 

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Act demonstrates once again that Small Businesses can depend on 

Congress to work for a fair and healthy acquisition system. 

Of course, new legislation is just the beginning of the process. 

Each one of your provisions must be written into clear regulations 

and policies that each Agency can implement. Next, the Congress, 

the Small Business Administration, and each Agency must oversee 

the implementation of those regulations and policies to be sure 

they are being followed. 

With that in mind, what I can offer today is some feedback from 

experience with my own company as well as some of my NDIA colleagues’ experiences with their Small Businesses. 

I make five recommendations in my prepared testimony, but the 

interest of time, I will read two of them today and submit the others for the record. 

Lack of PCR involvement on Consolidated Contracts 

Problem: Lack of PCR review on consolidated contracts limits 

Small Business participation. 

Suggestion: Clarify that PCRs should actively advise on consolidated contracts. Inviting PCRs to advise on the consolidated acquisition strategy will help better identify those requirements where 

small businesses can best perform and help structure the solicitation such that more small businesses can compete. Over the recent 

decade, the federal government has seen widespread and far-reaching changes in the way it procures services and technology. There 

has been significant growth of consolidated contracts. Although this 

has helped the government cope with the reduction in the acquisition workforce through fewer contracts, it tends to bundle requirements that are out of reach of most small businesses. For example, 

technology contracts are generally the result of consolidating multiple disciplines and requirements into a single solicitation for large 

business team competition. Empowering PCRs to advise on consolidated contracts will help to ensure that the requirements are within the reach of small business. 

Impact: Increased Small Business participation and competition 

resulting in more cost-effective and innovative solutions for our 

warfighters. 

Post Award Compliance 

Problem: The government has created barriers to entry into the 

Federal market and thus is not getting all the companies participating that it would like to have. Many entrepreneurial Small 

Business owners do not want to deal with the compliance, headache and risk of engaging with the Federal government. To be 

clear, Beacon became a Federal government contractor when, after 

ten years of running a successful private sector software company, 

and in the wake of the tech bubble burst, our market dried up. We 

engaged with the Navy SBIR’s Program to accomplish this pivot 

into the Federal market. Once we got through the initial burden 

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pany and our Federal customers. But overcoming the barriers was 

really hard at first. Honestly, it still is at times now. 

Suggestion: Develop paths and provide resources for non-traditional, entrepreneurial Small Businesses to drive the innovation, 

cost-effectiveness, and improved competition so desperately needed 

in Federal procurement. 

Impact: Increased Small Business participation and improved 

quality across the board; not just in the high quality of what these 

entrepreneurial Small Businesses will directly provide but also by 

the competition they will incite across the government supplier 

base. 

Job Descriptions 

Problem: Small Business advocates in government may not always understand the specific challenges that Small Business contractors are facing at any given time, and how to effectively advocate in the Agencies to overcome those challenges. 

Suggestion: I would encourage the SBA and Small Business liaisons in the Agencies to continue to meet with Industry Associations 

like NDIA to get real world feedback about the current challenges 

and issues surrounding Small Business Federal Contracting. Solicit 

input from those of us in the trenches about how to bet address 

these challenges. One of the things I find fascinating about my conversations at the NDIA Small Business Division meetings is the 

breadth of experience across our Small Business, Large Business 

and Government members. I find that outcome of these discussions 

usually quite practical as they are informed with more than one 

stakeholder perspective. But I would also offer this word of caution 

from my experience of managing employees: please legislate rather 

than regulate the content of the job descriptions—give SBA the parameters but let them fill in the details. While we should encourage a common understanding of the role and responsibilities of 

these Small Business Advocates in government, each advocate will 

do best when he or she is allowed to determine how best to specifically achieve a commonly understood set of objectives and goals. 

We need to create and protect a nimble and responsive SBA workforce. 

Impact: Stakeholders in Federal Acquisition processes will more 

effectively cross-communicate to resolve challenges. This will increase both Small Business participation and the efficiency of 

Small Business contracting; something that can be a painful, long 

and drawn out process. 

SBIR Transitions 

Problem: Lack of understanding and low willingness to fully utilize SBIR authorities for Small Businesses during the acquisition 

process, especially due to concerns around legislated preference and 

sole source contract awards. 

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edge and remain current on any changes in legislation and regulation. Ensure that PCRs understand the capability and importance 

for using sole source contracts for follow-on work begun with SBIR 

investments. As Small Businesses that have won SBIR awards 

have already met a highly competitive threshold in the initial 

phases of the SBIR Program, PCRs should strongly encourage follow-on work, or closely related work, for the same Small Business 

that initiated the work. Train the PCRs to explain the relevant provisions of the FAR to Program Managers and Contracting Officers 

to reduce their fears and concerns over using the authority, which 

might seem risky but is really an innovative acquisition approach. 

Address the fact that follow-on work to the SBIR companies is not 

risky and actually meets congressional intent. 

Impact: Increased Small business participation and insertion of 

cost-effective, competitively successful, innovative capabilities for 

our warfighters as well as increased ROI of Federal SBIR investments. 

Lack of Regulatory Action 

Problem: Some regulation has been slow in coming to implement 

new laws authored by this Committee. The uncertainty of what the 

rules actually guide the market to do can cause businesses to stagnate, hire and fire personnel in a haphazard fashion in anticipation 

of or reaction to unpredictable rule-makings, and can limit which 

companies will participate. While no business likes uncertainty, it 

is especially onerous for Small Businesses that typically do not 

have the deep pockets to hold up through uncertain market fluctuations. 

Suggestion: Provide a level of resources to Agencies that can accommodate the writing of regulation at the same rate as new legislative changes are made. Congress must match the resources it 

provides to Agencies to the requirements it places on those Agencies. 

Impact: A more stable, predictable business environment enables 

better planning and a more efficient, cost-effective federal acquisition ecosystem. 

Mr. Chairman, on behalf of both the National Defense Industrial 

Association and myself, I hope that these suggestions will be useful 

in your ongoing work. I would like to thank you and the Committee 

for your leadership. We appreciate your efforts to increase the utilization of Small Business to drive innovation, cost savings and increased competition within Federal Procurement. 

Thank you for your tine and attention to these matters. And I 

would be pleased to respond to any of your questions. 

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Good Morning Chairman Hanna, Ranking Member Velazquez, 

and members of the Subcommittee on Contracting and Workforce 

of the Committee on Small Business. Thank you for this opportunity to provide testimony regarding my personal experiences as 

a woman-owned small business owner who has graduated from the 

SBA 8(a) program and is now an approved SBA Mentor. 

My name is Tracy Balazs. I am the Founder, President and Chief 

Executive Officer of Federal Staffing Resources, LLC, also known 

as FSR. I am also a retired Registered Nurse. I am testifying today 

on behalf of FSR regarding the advocacy and support from the 

Small Business Representatives from the following departments in 

which I have had experience: 8(a) Business Development ProgramBusiness Opportunity Specialists (BOS), the Procurement Center 

Representatives (PCRs), and the Office of Small and Disadvantaged 

Small Business Utilization (OSDBU). 

As a member of US Pan Asian American Chamber of Commerce 

(USPAACC), an organization whose mission is to be the gateway 

to corporate and government contracts, while opening doors and 

making connections for Asian Americans, minority businesses and 

their partners on all levels, I am grateful for their recommendation 

that FSR should provide testimony today. 

Federal Staffing Resources is a successful business with 250 employees due in large part to the programs, guidance, and support 

provided by the SBA. 

FSR has been a federal contractor since its inception in February 

2004. Our core competency has been in support of those who have 

sacrificed for our freedoms: the active duty men and women and 

veterans of the U.S. Armed Forces, by providing the best in class 

healthcare personnel and program management expertise to the 

Department of Defense and the Veterans Health Administration. 

We strongly believe that the SBA has given FSR the opportunity 

to provide these services to the best of our ability by giving us the 

support we needed. 

The 8(a) program was crucial to our early survival as a business. 

Within the first 6 months of starting FSR, I engaged in extensive 

research on the SBA 8(a) program for government contractors. I 

immediately applied for this program and was granted certification 

through a waiver in October of that same year. My experiences 

have been extremely positive, and FSR has benefited greatly from 

the 8(a) certification. It has not been without challenges however, 

since the compliance requirements of 8(a) certified companies are 

rigorous. 

The government contracting process is complex and confusing. 

Most small businesses do not have the time or the money it takes 

to fully understand how to succeed as a government contractor. 

The SBA provides essential guidance for business owners. To better 

understand the complexities of government contracting, resources 

available to those who seek them out. Hard work and focus is required of the leadership and their team. To be fortunate enough to 

have been a certified 8(a) company and to do work under the aegis 

of a federal agency, FSR recognizes that as a federal contractor and 

as a mentor to other small businesses, a duty is impressed upon 

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us to respect the terms of our contracts and adhere to their terms. 

This duty has required substantial time and investments on the 

part of leadership and its team to ensure such compliance. My relationship with by BOS when I was in the 8(a) program was based 

on trust that FSR could and would be able to do the work that we 

were granted through a sole source contract. The SBA acts a guarantor. They must approve the award and are essentially confirming 

that the contractor is capable of doing work as awarded. Our BOS 

was our greatest advocate during the 9 year certification term. 

One issue that I encountered when I was working with the SBA 

is the interpretation and implementation of the standardized policies and procedures. They are handed down from Headquarters to 

the regional offices and in turn, to the local district offices, and finally, to the individual SBA representative. Even within the same 

office, but mostly across state lines and districts, interpretations of 

the policies may differ. I have had conflicting experiences regarding 

how the SBA reviews financial eligibility and size standards and 

how it applies these criteria to award or deny contracts. Some guidance are misleading, conflicting, or misinterpreted which can result 

in inappropriate actions, such as improper awards. Increased training for the representatives as well inviting industry to offer their 

experiences may help mitigate the confusion and ensure uniform 

compliance. Since the number SBA representatives is limited and 

the workload is increasing, the SBA has done an excellent job in 

updating their website. The website is much more robust than it 

was during the early years of my 8(a) term, and I use the site often 

as a resource. 

Non-compliance and lack of attention to the rules may be potentially fatal for a small business. Even from the beginning, I knew 

that the relevant statutes and regulations must be respected and 

never ignored. We take compliance very seriously, so much so that 

FSR has a Director of Compliance. I have met many leaders of 

small organizations with a laissez-faire attitude regarding compliance. The choice to ignore can result in suspension or disbarment. 

Since the 8(a) program is highly regimented, certified 8(a) contractors are under greater scrutiny for compliance than any other small 

businesses that do not have a certifying body mandating an annual 

update of their business or financials. FSR is a Mentor in the 8(a) 

Mentor-Prote ́ge ́ program. Part of our duties is to educate our 

Prote ́ge ́ and make them aware of the pitfalls of non-compliance. We 

work with our Prote ́ge ́-leadership and team to ensure that they understand the relevant statutes, as an example, the Service Contract 

Act, and regulations thereunder; know the available resources to 

answer their questions; and to be available for guidance. 

The SBA helped us grow our business pipeline and our business 

network. The OSDBUs and PCRs were essential to creating opportunities over the past decade. The OSDBUs work closely with the 

SBA and small businesses to ensure that they are aware of the federal opportunities and know the governing statutes and regulations. As a small business, we make it a point to meet with as 

many OSDBUs as we can to let them know of our capabilities as 

a prime or a potential subcontractor. The PCRs work with the federal agencies and contracting officials in many areas. Two areas 

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58 

that the PCR would have direct impact for small businesses is to 

make recommendations for small business set-asides and also to review the small business subcontracting plans and goals of large 

businesses for full and open requirements. 

The monitoring of the small business subcontracting plans may 

merit review. The concern is that large businesses are not being 

fully assessed for compliance in their percentage of small business 

utilization as specified in their contract. I understand from speaking with both the OSDBUs and PCRs, that large businesses are expected to meet their small business subcontracting goals, however, 

due to insufficient number of government personnel, they are unable to ‘‘police’’ all of the plans. Therefore, these percentages are reported only by the large businesses without verification from the 

subcontractor small businesses. The government’s receiving the report of subcontracting revenue directly from the small businesses 

themselves may verify that this objective has been met. 

In closing, I would like to acknowledge the SBA programs and 

their personnel for their assistance in helping me achieve business 

success and on behalf of thousands of other small business owners 

say—keep up the good work. 

Chairman Hanna, Ranking member Velazquez, and members of 

the Subcommittee on Contracting and Workforce of the Committee 

on Small Business, thank you for asking for testimony from small 

businesses that currently work with the federal government. FSR 

appreciates that our contributions and personal experiences may 

impact the way the SBA interacts with small businesses, monitor 

and educate to ensure more compliance. As a minority womenowned small business, I have tremendous gratitude for the SBA’s 

support while I was in the 8(a) program. FSR would not have 

grown as quickly had we not been certified. 

Thank you for you very much for this opportunity. I am available 

for any questions. 

Æ 

SBREP-219 with DISTILLER