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98–473 2016

SBA MANAGEMENT REVIEW: OFFICE OF 

GOVERNMENT CONTRACTS AND BUSINESS 

DEVELOPMENT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON CONTRACTING AND 

WORKFORCE 

OF THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

FEBRUARY 3, 2016 

Small Business Committee Document Number 114–040 

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. Mark Takai ..................................................................................................... 2 

WITNESS 

Mr. John Shoraka, Associate Administrator, Office of Government Contracts 

and Business Development, United States Small Business Administration, 

Washington, DC, accompanied by Mr. Eugene Cornelius, Deputy Associate 

Administrator for Field Operations, United States Small Business Administration, Washington, DC ...................................................................................... 3 

APPENDIX 

Prepared Statement: 

Mr. John Shoraka, Associate Administrator, Office of Government Contracts and Business Development, United States Small Business Administration, Washington, DC, accompanied by Mr. Eugene Cornelius, 

Deputy Associate Administrator for Field Operations, United States 

Small Business Administration, Washington, DC ..................................... 17 

Questions for the Record: 

None. 

Answers for the Record: 

None. 

Additional Material for the Record: 

None. 

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SBREP-219 with DISTILLER

(1) 

SBA MANAGEMENT REVIEW: OFFICE OF 

GOVERNMENT CONTRACTS AND BUSINESS 

DEVELOPMENT 

WEDNESDAY, FEBRUARY 3, 2016 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

SUBCOMMITTEE ON CONTRACTING AND WORKFORCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 3:00 p.m., in Room 

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

Present: Representatives Hanna, Hardy, Kelly, Takai, and 

Clarke. 

Chairman HANNA. I call this hearing to order. Thank you, everyone, for being here. 

The Small Business Committee has spent the past month conducting intensive oversight of the Small Business Administration. 

Today, this Subcommittee is going to examine the Office of Government Contracts and Business Development (GCBD), which faces 

similar challenges, as do other parts of the agency. Specifically 

within this program, SBA needs to do a better job with human capital management, information technology, and reducing organizational duplication. SBA’s untargeted use of voluntary early retirement authority and voluntary separation incentive payments appear to have left the GCBD without the personnel required to perform a statutory mission. It is unclear why the SBA offers buyouts 

to procurement center representatives (PCRs) knowing that under 

the current law they would only replace a fraction of the employees 

who just left. Likewise, why would the SBA buy out the individual 

responsible for drafting procurement regulations at the time when 

the SBA is not meeting its own statutory deadlines? Similarly, the 

Inspector General found that the GCBD’s attempt to implement a 

unified IT system to track HUBZone and 8(a) participants violated 

contract law and failed to meet the office’s requirements. The fact 

that a system designed to reduce fraud and implement program 

oversight has not yet been put into use is not acceptable. We can 

do better, and we will do better. Additionally, GCBD seems to have 

offices with duplicative and unclear missions, and too frequently relies on evaluated field staff. Given that in Fiscal Year 2014 nearly 

40 percent of all Federal contract dollars went to small business, 

taxpayers deserve an organization that can effectively manage 

prime contracting, subcontracting, 8(a) HUBZones, women-owned 

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businesses, and service-disabled veteran-owned businesses contracting programs. 

Indeed, GAO identified seven open recommendations with which 

the GCBD agreed but had not yet done anything towards implementation. Some of these requirements are simple to accomplish 

since they would only require that the SBA take actions already required by the law. These include submitting the annual bundling 

and consolidation reports or tracking post-completion success rates 

for participants in the mentor-protege relationships. I also hope 

today we will get an honest answer and candid answers from the 

SBA on what we need to do to fix these problems. 

With that, I yield to Ranking Member Takai for his opening remarks. 

Mr. TAKAI. Thank you, Mr. Chairman, and aloha. I know we 

were supposed to have this hearing last week. I was looking forward to it. I want to wish you a happy belated birthday. 

Chairman HANNA. You got snowed in in Hawaii? 

Mr. TAKAI. Yes. Last week, Monday was a very eventful day for 

many of us, but yeah, happy birthday, Chairman. 

The Federal Government is spending almost half a trillion dollars annually on the purchase of goods and services needed for its 

daily operations. As such, the U.S. Government remains a consistent and reliable client, yet the Federal marketplace is a hard 

space to break into. Recognizing the need for a diverse market, 

Congress included goals for small business participation in Federal 

procurement, and created a variety of contracting programs to help 

small firms compete in the marketplace. 

The SBA Office of Government Contracting and Business Development plays a vital role in this process. The GCBD Office works 

with agencies to help them meet the small business goals. It also 

implements and oversees programs used by many small firms to 

start contracting with the government, and they have been somewhat successful in these tasks. In Fiscal Year 2014, the government surpassed the small business goals, awarding $91 billion, or 

almost 25 percent of the dollars to small businesses. These awards 

allow the government to receive quality goods and services at competitive prices and strengthen its industrial base. However, as the 

Chairman noted, there is always room for improvement, and this 

office is no exception. The government as a whole and some agencies have failed to meet all of the small business participation 

prime and subcontracting goals. These failures deprive small business of billions in contracting dollars. 

Additionally, the Committee has seen a continued use of bundling and consolidation through the years. Contract values have 

risen so high that only a limited amount of businesses are able to 

bid, resulting in fewer large firms receiving contracts. It appears 

this trend has impacted the participants in the SBA contracting 

programs as the number of firms in these programs has also declined. 

The ability of small businesses to compete in the Federal marketplace has been adversely affected by the lack of staff in the GCBD 

office as it continues to be understaffed. There are currently only 

50 procurement center representatives and 30 commercial market 

representatives overseeing millions of contracting actions. Small 

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businesses cannot be adequately advocated for with such few numbers promoting their use and ensuring that agencies are following 

the small business set-aside procedures. 

Lastly, SBA has been slow to implement changes made by this 

Committee to SBA’s contracting programs. These changes have 

been aimed at increasing participation by small businesses and removing barriers these firms face in competing for contracts. This 

inaction has caused confusion among firms and contracting personnel. Therefore, I am particularly interested in what the GCBD 

office is doing to make sure these changes are made quickly so that 

small businesses can start taking advantage of these changes. 

Mr. Chairman, we are seeing small businesses leave the marketplace at high rates. As such, this hearing is critical to determine 

what can be improved upon at the SBA to ensure that these firms 

have equal access to contract opportunities. I look forward to hearing from Mr. Shoraka about how SBA plans to address some of 

these issues and determine how this Committee can work with the 

SBA to see what can be done to ensure that small businesses have 

access to the Federal marketplace. 

Thank you, Mr. Chairman, and I yield back. 

Chairman HANNA. Thank you. 

I will not bother to explain the timing. You have been here many 

times. 

Our first witness today is Mr. John Shoraka, the Associate Administrator for the Government Contracts and Business Development. He has been in this role since December of 2011, and of 

course, has testified before this Committee before. 

Welcome back, and you may begin. 

STATEMENT OF JOHN SHORAKA, ASSOCIATE ADMINISTRATOR, OFFICE OF GOVERNMENT CONTRACTS AND BUSINESS DEVELOPMENT, SMALL BUSINESS ADMINISTRATION 

Mr. SHORAKA. Thank you, Chairman Hanna, Ranking Member 

Takai, and members of the Subcommittee. Thank you for having 

me and giving me the opportunity to testify here today. 

Small businesses are agile, innovative, and affordable partners 

for the Federal Government. Through small business contracting, 

the Federal Government acts as a catalyst for small business 

growth and innovation while supporting economic security for the 

nation. Over the past 7 years, the administration, Congress, SBA, 

and Federal agencies have been focused on increasing small business contracting opportunities across the Federal Government. This 

increased focus has resulted in over $550 billion in Federal contracting dollars being awarded to small businesses from Fiscal 

Year 2009 to 2014. Of that, $91.7 billion was awarded in Fiscal 

Year 2014, which represents an incredible impact to the American 

economy, that drives innovation, growth, job creation, and supports 

over 550,000 jobs across the nation. 

In Fiscal Year 2013 and 2014, the Federal Government exceeded 

the 23 percent goal, representing 2 consecutive years of this 

achievement for the first time since 2005. Current year-to-date performance for Fiscal Year 2015 demonstrates that the Federal Government should again exceed the 23 percent goal, along with three 

of the four socioeconomic categories. If achieved, this would be the 

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first time since the program’s inception that the women-owned 

small business goal of 5 percent has been met. It would also be the 

21st consecutive time the small disadvantaged business goal has 

exceeded, and the fourth consecutive year for achieving the small 

disadvantaged service-disabled veteran-owned small business goal. 

These achievements are the result of the dedicated and focused efforts of the Small Business Administration and Federal agencies to 

support small businesses as they play a critical role in building and 

sustaining the nation’s industrial base and strengthening our economy. 

Over the last few years, the SBA’s Office of Government Contracting and Business Development has begun a variety of streamlining efforts to enhance and improve customer service, create efficiencies, and reduce administrative burden on small businesses. 

These efforts include significant improvements in processing of 

HUBZone, 8(a), and Mentor-Protege applications, and finalization 

of the HUBZone, 8(a), and WOSB standard operating procedures. 

In addition, GCBD initiated efforts to invest in IT solutions, which 

will provide efficiencies for our interactions with our small business 

customers. Furthermore, as we continue to support small business 

contracting opportunities, Administrator Contreras-Sweet authorized the hiring of 10 additional PCRs (procurement center representatives) for oversight of Federal buying activities. 

Of great importance, SBA implemented over 25 provisions found 

in the Small Business Jobs Act of 2010 and subsequent National 

Defense Authorization Act and is making great progress on the remaining statutes. Provisions implemented include the WOSB Industry Study; the WOSB Sole Source Rule; accountability of senior 

executives; total and partial set-asides and reserves under multiple 

award contracts; revisions to the reporting structure of the Offices 

of Small and Disadvantaged Business Utilization; including of overseas contracting in the Fiscal Year 2016 goaling base; and increased training and certification for our staff. We are also making 

significant progress on implementing the Mentor-Protege Program 

to offer an expanded program to all small businesses and have 

issued an Advanced Notice of Proposed Rulemaking for the certification of women-owned small business firms. 

While we continue to support and improve contract opportunities 

for small businesses, there are always opportunities to build upon 

our strengths and improve in certain areas. We acknowledge the 

recommendations from the General Accountability Office and Inspector General that remain open and need to be closed with urgency. Closure of open recommendations is one of my highest priorities, and we are actively working with the IG and the GAO to 

come to meaningful resolutions that will benefit small businesses 

through improved SBA policies and programs. We initiated and 

scheduled regular face-to-face meetings with GAO and IG leaders, 

resulting in the closure of nine GAO and three IG recommendations within the past 12 months. The recently closed recommendations include improving monitoring of and procedures used in assessing the continuing eligibility of 8(a) firms and assessing resource allocation of PCRs and commercial market representatives 

to successfully carry out our duties. We take the remaining open 

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GAO and IG recommendations seriously and are committed to resolve all of them. 

In closing, I would like to recognize the commitment to small 

business from Congress; in particular, from the House Small Business Committee. I would also like to acknowledge the commitment 

from the administration, our Federal agencies which have recognized the value of small business, and remain committed to providing meaningful contracting opportunities. Led by Administrator 

Contreras-Sweet, we will continue to fight for small business, to 

improve participation for firms to compete for and successfully win 

contracting opportunities. Thank you. 

Chairman HANNA. Thank you. 

Are you saying there is nothing wrong and that you are on 

schedule and that you agree with everything that was alleged to 

be wrong or incomplete? You still have final rules from 2013, 2014, 

and 2015. So why are we here? I know why we are here, but what 

I hear you saying is that you are on schedule. Do you agree with 

GAO? 

Mr. SHORAKA. Sure. 

Chairman HANNA. So do you agree with them completely? 

Mr. SHORAKA. I think on their recommendations, we have 

agreed to implement them. I do want to point out that a lot of 

those recommendations that are still outstanding are from before 

the time that I was with the SBA. 

Chairman HANNA. But would not that mean that would be the 

first thing you did when you got there, not the last thing? 

Mr. SHORAKA. I think we want to make sure that we prioritize 

in a way that achieves our objectives. In other words, we prioritize 

in a way where we expand participation of small businesses in the 

procurement world, and we achieve our goals. I think indicated by 

our progress against the goals, we have been pretty successful. And 

as I said, that is not to say that there is not additional recommendations necessary to be implemented, and we certainly, as 

I mentioned in the last 12 months, have been successful in sitting 

down face-to-face with the IG and GAO, and we are certainly committed, as our administrator said, to work through the remaining 

IG and GAO recommendations. 

Chairman HANNA. So to read between the lines, are you saying 

that the timing and the order of the recommendations, just because 

some are older, some are newer, that you have prioritized them in 

a way that makes them logical and concurrent? 

Mr. SHORAKA. I think that is fair to say. I think it is fair to 

say that as we look at these couple of things. One is you mentioned 

the rulemaking process and reaction to the statutes, and I want to 

clearly acknowledge that working with this Committee and working with the Hill, there is a lot of statutes and provisions in statutes that has helped level the playing field for small businesses to 

participate in Federal contracting, and we have worked diligently 

to implement a lot of those provisions. 

Chairman HANNA. Can you explain why you are buying people 

out and then hiring new people at the same time to do the same 

job? 

Mr. SHORAKA. Yes. So obviously, as you know, the agency went 

through a VERA/VSIP program. I am not the head of our HR and 

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I certainly do not want to comment on that topic, which is something that our human resources office is responsible for, but what 

I will say is the mention that you make with respect to PCRs, we 

have done a significant analysis of where PCRs should be located 

based on buying activity small business opportunities and based on 

some of the folks that have retired have reramped up in areas that 

were not previously covered. So as you mentioned previously, obviously we have thousands of buying activities to cover with limited 

resources. It is important for us to analyze buying activities and 

the small business opportunity that resides at the different types 

of buying activities and readjust our coverage to make sure that we 

are hitting the most opportune centers. 

Chairman HANNA. So what you are really saying is that the 

people who retired were not relevant to the workload geographically? 

Mr. SHORAKA. No. I think what I am saying is that it gave us 

an opportunity to identify places where we might make a significantly bigger impact. 

Chairman HANNA. And presumably you bought people out rather than ask them to move? 

Mr. SHORAKA. No. Again, I would not tie the VERA/ VSIP directly to the reassignment of PCRs. The VERA/VSIP decision is a 

decision that was made by HR and the agency. What I am saying 

is that in staffing back up with respect to PCRs, we have had the 

opportunity to actually analyze where the greatest buying activities 

are. 

Chairman HANNA. I can appreciate that, but did their job descriptions not allow you to move them around? 

Mr. SHORAKA. Certainly. 

Chairman HANNA. So again, the same question, why are we laying them off? 

Mr. SHORAKA. Right. I would have to get back to you, but 

again—— 

Chairman HANNA. Can you do that for this Committee? I mean, 

it is a legitimate question, especially when you are going to go out 

and hire 10 more people, which you said—— 

Mr. SHORAKA. Sure. Happy to do that. 

Chairman HANNA. Thank you very much. 

Mr. Takai? 

Mr. TAKAI. Thank you, Mr. Chair. 

Last year I introduced legislation that was included in the Fiscal 

Year 2016 NDAA, which allowed the Native Hawaiian organizations to qualify for the HUBZone program. Understand, this is my 

second year, but I understand this has been many years in the 

making. Can you give me a timeline as to when SBA will be able 

to release the corresponding regulations for this particular change? 

Mr. SHORAKA. Sure. I have been here now for 4 years, but I 

come from the private sector, and coming to this side of the fence, 

it is awakening a little bit with respect to the rulemaking process. 

Not only do we have to draft the rule internally and get it cleared 

through our building and through our general counsel’s office, but 

then it has to get interagency clearance throughout all Federal 

agencies, right? Because our rules oftentimes have an impact upon 

our sister agencies. Interagency review period on a proposed rule 

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oftentimes is 90 days. Then we get it back and we make adjustments, but then I think it is important, and I think you would all 

agree, that we have a public comment period. Because when we 

make rules, we want to make sure that our constituents understand the impact with how it is going to impact their business. And 

not only that, we want to make sure that we gather their comments and incorporate that in. So that is another 90 days. So that 

is two 3-month periods, so that is a total of 6 months right off the 

back, and that is not even the rulemaking process. Drafting, right? 

Once we have incorporated the comments from the public, we will 

go out for a final 90 day period for our interagency, our sister agencies to comment. That is a total of 9 months, not including any 

drafting of rules in that respect. 

I will add that with respect to provisions where the intent of 

Congress is very clear, as an example, the women-owned small 

business sole sourcing provision or removal of the caps in the 

Women-Owned Small Business program, we were able to work 

with our sister agencies with OMB, to issue an interim final rule 

to go out relatively quickly in a matter of 6 months. What we are 

doing right now with respect to the NHO provisions and the 

HUBZone provisions is trying to determine if we can move in an 

interim final rule process or do we need to go through the entire 

rulemaking process. 

Mr. TAKAI. Okay. So notwithstanding the 9 months that you 

mentioned, and this amendment also included disaster zones and 

BRACs, so there are three components, I am assuming you are 

going to move them altogether? 

Mr. SHORAKA. Yes. 

Mr. TAKAI. How much time is it going to take for your office to 

get up to the 90 days? I am sorry, the 9 months? 

Mr. SHORAKA. We work closely with our Office of General 

Counsel. As was mentioned earlier, we have a number of provisions 

that we are working to finalize, including the mentor-protege rule, 

limitations on subcontracting, et cetera. I think we can work, you 

know, I do not want to commit to a timeframe, but I think relatively speaking, 3 months, 4 months to draft something that could 

go out for interagency comment is reasonable. 

Mr. TAKAI. Okay. Great. Thank you. 

Over the past few years we have seen the average dollar value 

of small business contracts go up and fewer small firms participating in the marketplace. This is especially true with some of the 

SBA programs in which we have seen the number of participants 

actually decline. Why do you think this trend is occurring, and 

what actions is the SBA taking to reverse it? 

Mr. SHORAKA. Thank you. Thank you for that question. I think 

that is a really important question in the sense that the Federal 

Government, as we all know, has to buy smarter. We need to figure 

out how to reduce budgets and buy smarter. Sometimes, what that 

has looked like, is consolidation of requirements into larger requirements and more complex requirements. What happens then is 

you have a more complex and larger requirement that sometimes 

a small business cannot pursue. We have been working closely with 

the Office of Federal Procurement Policy and GSA to make sure 

that when that happens, when a requirement comes out that is 

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consolidated or more complex, two things. One is we received authority from Congress to allow for better teaming for small businesses. In other words, opportunities for small businesses to team 

up and jointly go after these larger and more complex projects. 

That is one that we are working on and hope to have finalized 

shortly. The other is if we are setting up vehicles that are multiyear and very broad, are we casting a broad enough net to bring 

in small businesses to participate? And do we have on and off 

ramps? In other words, if a limited number of small businesses are 

participating and we are hitting our small business goal, that is a 

good thing, right? But we want more small businesses to participate. So do we have on and off ramps to allow new small businesses to come on to do the work while the ones that have grown 

can graduate from that particular vehicle? So there are certain 

things that we are trying to implement in this environment to ensure that small businesses play a fair share in the marketplace. 

Mr. TAKAI. Thank you. 

Thank you, Chairman. 

Chairman HANNA. Mr. Hardy? 

Mr. HARDY. Thank you, Mr. Chairman. 

You know, as I sit here, I truly believe that the SBA is doing 

some great work, but there are some major deficiencies that I have 

concerns about. The GAO highlighted some specific things that 

were to happen. I would just like to read a few of these highlighted 

spots. It says, ‘‘Provide clear and complete guidance to PCRs and 

CMRs.’’ That was a 2011 report. Also 2011, ‘‘Require monthly 

GCAR data are verified.’’ The 2013 report, ‘‘While SBA agreed that 

the recommendation had not been complied with at the time of the 

management report prompting GAO to again recommend that the 

SBA file the required reports.’’ Then we go back here to the 2011 

report again. It talks about, ‘‘There was little or no tracking of the 

prodigy firms to see if the programs produced lasting benefits.’’ 

Now, as a former small business owner myself, I just want to explain this is really frustrating to me how this could happen because 

it is not like we are short of manpower or like there is not an obligation. I know it is a different type of business, but it is still a 

business the way things operate. I had a construction business, I 

had a concrete and aggregate business, I had a golf course, and I 

had a restaurant. None of them hardly fit in most cases together. 

But through that process—I will just give you an example, my construction firm. Within less than 3 years, I knew exactly, to the 

penny almost, what it was going to cost me to lay a piece of pipe 

in the ground, what size pipe, the depth. Every foot that I put in, 

I knew what the cost was going to be. Just using that as an example. I knew the difference between soil types, what it was costing 

me. I knew which different teams were better at putting certain 

things in the ground, and so we tracked that. That is what the private sector does. In the restaurant business, you know, when you 

are losing on something, you track it and find out why certain 

things are not moving. You have to be flexible and move and you 

have to respond. In the concrete and aggregate business, we have 

to make sure that materials that we spend we do not lose money 

on. And it is tracked. The private sector does that in-house with 

their foreman, with whatever, people that are already hired to 

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make that happen. This is the frustration in me. Why is this not 

happening at the SBA level in whatever tracking is getting done? 

Mr. SHORAKA. Thank you, Congressman. 

I think that it is happening in a lot of instances. Again, I do not 

want to discount the fact that we have, through our staff, through 

the very people that work in these offices, have been able to, for 

the first time in a long time, met the goals with respect to the statutory requirements. I will say that with respect to the GAO recommendations, there are a lot of the recommendations where we 

have actually submitted material to the GAO and are waiting for 

a response with respect to the acceptability of have we met the requirements of that recommendation. 

Mr. HARDY. I just want to follow up. This Mentor-Protege Program, as we know, 64 percent of this nation was employed by small 

businesses, and now it is beyond decline. It is collapsing. I think 

your program, this Mentor-Protege Program, it is very important 

that we track that to find out which businesses are succeeding and 

why, and how can we help, or where are we getting in the way. 

I want to make sure that those small businesses are successful, 

and I think that is what your job is, to make sure that we get those 

reports so we can do our job here. 

So my frustration is, and only being here a year I cannot really 

be too angry, but it cannot go on longer. We have got to make sure 

what we can do to help those small businesses succeed, find out 

why they are failing, so we can move in a different direction to help 

those situations, and I think we will see an economy grow again 

and move again. That is why the SBA is so important to me. 

Mr. SHORAKA. Thank you. Just one last comment on that. We 

also feel, with the authority given with respect to expanding the 

Mentor-Protege Program, not just in the 8(a) program but to all 

small businesses, is an excellent vehicle for helping small businesses grow and become acclimated with the Federal procurement 

process. We are looking to implement that program over the summer. 

Mr. HARDY. Well, you know, in my area there are still the small 

businesses and the chambers and folks that still meet with me and 

have frustration. We have about $260 million worth of military 

projects that go on out in our area with Nellis and Creech out 

there. Very little of that goes to the small businesses. It ends up 

being so convoluted and being involved that it is very challenging 

for them to get some of those projects. We need to maybe look at 

different avenues, how we can team these small businesses together to make them maybe a big business that have the opportunity to have some of the same successes. So just an idea. Thank 

you for your time. 

Chairman HANNA. Ms. Clarke? 

Ms. CLARKE. Thank you very much, Mr. Chairman, and to our 

ranking member. And, of course, to Mr. Shoraka, thank you so 

much for coming and briefing us, bringing us up to speed with 

where you are with respect to all the recommendations that have 

been before you and your agency. 

I wanted to just comment that through your testimony, you indicated that you have closed nine GAO recommendations and three 

Inspector General recommendations in the last 12 months. That is 

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great. That is really good. I commend that effort that you have put 

into addressing the list of recommendations. What would you say 

are your next most pressing recommendations that you are working 

on closing, and how much time do you expect that those recommendations would take? And then finally, can you just update 

us a bit more on the progress that you have made in expanding 

and implementing the Mentor-Protege Program? 

Mr. SHORAKA. Sure. 

Ms. CLARKE. Thank you. 

Mr. SHORAKA. Thank you, Congresswoman. 

I think one of the areas where we are looking to finalize some 

of the recommendations, and they touch on multiple recommendations, both from the GAO and the IG, is the finalization of our 

SOPs, our standard operating procedures, around the 8(a) program, 

around the HUBZone program, and around the Women-Owned 

Small Business program. I think that is important for our sister 

agencies, our contracting community to understand how the programs work. It is important for our field, and it is important for 

our own staff. So we are looking to finalize those SOPs within the 

next 6 months. 

With respect to the Mentor-Protege Program, we had the roll out 

last year for public comment. We received significant public comments on the Mentor-Protege Program and wanted to make sure 

that we incorporated industry’s concerns in finalizing a program. 

We think it is important to make sure that we get it right. We 

think it is going to be a very useful program. We have heard from 

industry about how soon can we get involved in this Mentor-Protege Program, and we think it is going to be very useful, but we 

wanted to make sure we got it correct. The rule should be out in 

the final interagency review process by the end of this month. That 

will take 3 months in the interagency review process, so sometime 

over the summer the rule should be published as a final rule. 

But we did not stop there. We have had a parallel working group 

for institutionalizing the programs. So we did not say, let us wait 

until the rule is finalized and then we will figure out how to institutionalize this program; we have actually had a working group engaged from our field staff, engagement from our general counsel’s 

office, because it affects everybody, right? To make sure that as we 

roll this out, as we institutionalized it, we could dedicate the necessary resources and that we had the processes, the workflow processes, the approval processes, and I think something that was mentioned before, the tracking processes. As we roll this out, do we 

have a way to track what is the impact with respect to the program? And not only the mentor-protege relationship with the benefits flowing from the mentor to the protege, but also the joint ventures that happen under that Mentor-Protege Program. Is the protege getting their fair share of that contract? We want to make 

sure the systems are there to be able to track that. But we hope, 

and are planning, to have the program itself up and running in a 

limited fashion by the end of the summer as well. 

Ms. CLARKE. Are you looking at particular, I guess, sort of regions in which you think that you can get it up and running 

quicker and that you could sort of do a test trial, if you will? Have 

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you thought about that? What conditions would be the best to really be able to drill down on the effectiveness of it? 

Mr. SHORAKA. The proposed rule when it went out, it actually 

asked some questions around how do we create a—I do not want 

to say pilot, but a limited roll out? And there were questions about 

maybe focusing on areas where our goals had not been met, like 

the women-owned small business or the HUBZone. But the predominant feedback that we got is that there is a lot of industry 

waiting for this to happen, and they felt it unfair if we focused on 

one area rather than the other. We are going to roll it out in some 

fashion at the end of the summer, and we will see what the impact 

is to our resources to determine how do we become gatekeepers to 

not overwhelm the staff that we have. 

Chairman HANNA. Thank you. 

Mr. Kelly? 

Mr. KELLY. Thank you, Mr. Chairman, and thank you, Ranking 

Member Takai. I thank the witness for being here. 

Over 3 years ago, as part of the 2013 National Defense Authorization Act, Congress changed the process by which SBA is to set 

size standards. On January 26, 2016, your office published a final 

rule establishing size standards for industries with employee-based 

size standards not part of manufacturing, wholesale trade, or retail 

trade. In that rule, your office stated that it was going to continue 

limiting the number of size standards to anchor standards even 

though the 2013 National Defense Authorization Act said SBA may 

not limit the number of size standards. While I maintain that this 

latest rulemaking violated the Small Business Act, I was particularly surprised to read in the rule that, I quote, ‘‘As part of the 

preparation for the next round of size standards review as required 

by the’’—and this is mine, 2010 Jobs Act, ‘‘SBA is currently reviewing and updating its current size standards methodology white 

paper to incorporate the provisions of the 2013 National Defense 

Authorization Act to the extent possible.’’ This suggests that SBA 

believes it is acceptable to pick and choose provisions of the NDAA 

so as not to upset its white paper. Is your position, or is it the position of the Small Business Administration that you think that a 

white paper trumps a statute passed by Congress? 

Mr. SHORAKA. No. 

Mr. KELLY. Well, please explain why this is contrary to that 

then. 

Mr. SHORAKA. Sure. The Small Business Jobs Act of 2010 required the Small Business Administration to do a comprehensive 

study on all of its size standards every 5 years. In moving forward 

with that review—and it had not been done for decades—in moving 

forward with that review, we went through a public comment period with respect to our white paper. So we drafted a methodology 

that we thought was responsive to the Small Business Jobs Act of 

2010, and we put it out for public comment because, obviously, it 

is going to affect our constituents. It is going to affect our small 

businesses. We wanted to make sure it reflected their input as 

well. That methodology, that white paper, was used for the full 

cycle of the reviews based on the 2010 Small Business Jobs Act. We 

thought it was not necessarily appropriate to change the rules of 

the game in the middle of the game. What we wanted to do was 

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make sure that we did the entire 5-year review process, and in fact, 

with these last three rules, we did come in exactly on target with 

respect to doing a comprehensive review in 5 years. And the rule 

actually said, the Small Business Jobs Act of 2010, said once you 

are done you are going to have to keep doing it over and over again 

every 5 years. That is why we are going out with a white paper, 

incorporating the provisions of NDAA 13, and going to public comment to make sure we are getting it correct in the next full comprehensive revisions. 

Mr. KELLY. I would just, as a lawyer by trade, I would tell you 

that law changes all the time, and as a former district attorney, I 

could not rely on a 2010 law when a 2013 law superseded it. So 

you have to agree with the most current law, whether you want to 

or not. The most current, even if they conflict, you go with the most 

current that the ruling body has. 

My next question is in your testimony you talk about the percentage of small business eligible dollars that went to small businesses. From the staff, I understand that about 19 percent of all 

Federal contract dollars are excluded from these goals, but the SBA 

does not consider these small business eligible. However, I understand that the 2013 National Defense Authorization Act required 

that SBA revise and publish its goaling guidelines by June of 2013 

and that the new guidelines required to eliminate most of these exclusions. Why has the SBA not done this yet? 

Mr. SHORAKA. We did revise the goaling base in 2014. We did 

an analysis. After the National Defense Authorization Act of 2013, 

we actually had our Office of General Counsel conduct an analysis 

of what is excluded and what is not excluded, and do we have any 

justification for excluding anything. Based on that analysis, there 

were revisions to the goaling base in 2014, and then the one major 

change, which would have a significant impact on agencies, particularly with agencies doing work overseas, was overseas contracts, contracts performed overseas. That change in inclusion of 

the overseas goaling base will be effective in 2016, but we wanted 

to make sure we engaged our sister agencies because of the impact 

it is going to have on the procurement workforce, and we spent the 

better part of the latter half of 2014 and 2015 working with the 

procurement workforce to make sure we got it right. 

Mr. KELLY. I thank you for your testimony. Mr. Chairman, I 

yield back. 

Chairman HANNA. I will ask another question if no one minds. 

We will be called for votes very soon. 

One of the issues with all of this is the time it takes to get things 

done, right? You know that. That is part of why you are here today. 

This Committee wants to help. We are all in the same place here 

in terms of our desire to help small businesses. But what are you 

doing? The time it takes for small business rules to get through the 

FAR Council, and you mentioned that you expect some final rules 

to be issued soon on 2013, and we know that once these rules are 

written, it can take more years, maybe even 2 or 3 more years. So 

that is partially a statement but partially I want to ask you how 

can this Committee help you change that? Because that is really 

a lot of why we have these hearings is complaints over performance 

implying that you are not doing your job. You think you are. We 

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13 

are saying, ‘‘Okay, but.’’ My question to you is, are there things we 

can do to help you get this done assuming everyone is in earnest 

in terms of their desire to finish what they start? 

Mr. SHORAKA. I think you mentioned the FAR Council. I think 

the FAR Council has competing priorities, right? So they are responsible for Federal acquisition, not only just small business acquisition and the Federal acquisition rulemaking process. If there 

is a clearer or cleaner way with the administrator working with the 

FAR Council might be something that would be helpful. 

Chairman HANNA. Are you prepared to write something and tell 

us what that would look like? 

Mr. SHORAKA. Certainly. I would be happy to consider that and 

come back with some recommendations. 

The other point that, you know, obviously, we have touched on 

today, there are always competing priorities within the agency with 

respect to what is most important? What can have the most significant impact for our small business constituents? We feel they are 

our customers, as I am sure you do. So what do we focus on? And 

quite frankly, some of the times it can be a resource question because we have limited resources, so we are going to focus on the 

things that we feel are going to have the biggest impact with respect to small business participation in the Federal marketplace. 

Chairman HANNA. So you can get back to us and let us know? 

Mr. SHORAKA. Sure. 

Chairman HANNA. I realize you have to speak to, perhaps, Ms. 

Sweet. 

Mr. SHORAKA. Of course. 

Chairman HANNA. Is there anyone else who would like to ask 

additional questions? 

Mr. Takai? Go ahead. Votes have not been called yet, so if you 

are here, we would just as soon keep going. 

Mr. TAKAI. Thank you, Mr. Chairman. 

The 8(a) program is the main vehicle in which minority-owned 

businesses enter the Federal marketplace. However, there have 

been a number of cases that have challenged the constitutionality 

of the 8(a) contracting program, and some such as the Roth case 

have been successful. What steps is the SBA taking to protect this 

important program from constitutional challenges? 

Mr. SHORAKA. Thank you. Our Office of General Counsel is 

very much involved with the Department of Justice, as well as 

Commerce. We worked closely with Commerce. We worked very 

closely with some very well-known and nationally-recognized statisticians to defend the program with respect to how the program 

works to serve an underserved community and what the disparity 

is with respect to the underserved community actually participating in the Federal marketplace. We are absolutely committed in 

making sure that this program benefits the underserved community. We are absolutely committed in defending the program, and 

we have worked very closely with Commerce, as well as the Department of Justice to make sure that the program is protected. I 

will add that when we did the Women-owned Small Business Study 

with respect to industries where women-owned small businesses 

are underrepresented, we used the same methodology that proved 

to be very successful in the Rothe case, to make sure that our 

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study in underrepresentation in the Women-Owned Small Business 

program was similar to how the 8(a) program was defended. 

Mr. TAKAI. Okay. And a follow-up. Is the SBA currently collecting on circumstances in which non-8(a) businesses have claimed 

that they have been discriminated against? 

Mr. SHORAKA. I could not answer that off the top of my head, 

but I am happy to get back. Not that I am aware of, but happy to 

get back on that. 

Mr. TAKAI. Okay. Thank you. 

In October 2014, a report on the Women-Owned Small Business 

program, the GAO has previously recommended that the SBA 

should establish and implement comprehensive procedures to monitor and assess performance of third-party certifiers in the women’s 

procurement program. What is the progress that you have made in 

implementing this recommendation? 

Mr. SHORAKA. Thank you. We actually conducted—we do reviews of women-owned small business firms in the WOSB repository, and this past year we implemented the reviews of the thirdparty certifiers. And as I mentioned earlier, we are in the process 

of finalizing our standard operating procedures around the WomenOwned Small Business program, and those standard operating procedures will have incorporated in them the review of the thirdparty certifiers. So we have conducted one review already this past 

year, and moving forward we intend to conduct them on a regular 

basis. 

Mr. TAKAI. Okay, thank you. And then one last question, Mr. 

Chairman. 

You had mentioned including overseas contracts in the near future as part of its baseline use to rate small business goaling at 

each agency. I am just curious to find out what outreach has been 

made to other agencies to alert them of this change and what steps 

they can do to increase the small business participation in this effort. 

Mr. SHORAKA. Yes, thank you. That is one of the reasons when 

we talk about the National Defense Authorization Act of 2013 and 

the effective date with respect to increasing overseas contracts in 

2016. One of the things that we have done over the last couple of 

years is engage the agencies most affected by this. And as you can 

imagine, Department of Defense is one of them, State is one of 

them, and USAID, U.S. Agency for International Development is 

the other. We have been working very closely with their Office of 

Small and Disadvantaged Business Utilization, with their chief acquisition officers, to make sure that they understand this impact. 

As we establish their goals for 2016, their goals reflected the impact. State, for example, when we include overseas performance, 

they have a significant reduction in performance when it comes to 

small business procurement. So, of course, we want to give them 

a stretch goal, but we do not want to give them a goal that is not 

reasonable. We have worked with them very closely in establishing 

a goal. Same with Department of Defense and USAID. 

Mr. TAKAI. Okay, thank you. Thank you, Mr. Chairman. 

Chairman HANNA. Mr. Hardy? 

Mr. HARDY. Thank you, Mr. Chairman. 

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Last year, the GAO recommended that the SBA take better steps 

to better ensure that firms are notified of the changes in HUBZone 

1 designations that may affect their participation in the program. 

However, the mapping tools on the SBA website appear to be outof-date and hard to use. I guess I would like to know what the SBA 

is doing to improve those for the next round of redesignation. 

Mr. SHORAKA. As part of our overall government contracting IT 

solutions, the mapping solution is one of the areas we will be focused on. But in the interim, we have implemented a lower tech 

way of informing all our firms with respect to redesignation. So on 

an ongoing basis, we send out emails to our firms to make sure 

that they are aware of any redesignations, and even though you 

mentioned that the maps could potentially be out-of-date from time 

to time, we also have spreadsheets of all the zip codes that include 

the designation areas. But this will be part of the IT solution package for government contracting and business development that we 

are speaking of. 

Mr. HARDY. Thank you. What is the status of the one track system SBA purchased several years ago to track participants in the 

8(a) and the HUBZone 1 program, and why did the IG and the 

GAO object to the procurement of what SBA is doing to ensure that 

there is no solid monitoring system for these firms? 

Mr. SHORAKA. So with respect to the systems that exist, there 

are legacy systems that exist that monitor both the 8(a) program 

and the HUBZone program. The one track system, which went 

through the development process of identifying requirements, both 

in the 8(a) and the HUBZone program, was a system that did not 

necessarily meet all of the requirements as had been identified. 

What happened with those requirements is that that is what has 

been rolled up into the new IT for SBA, or we call SBA-1 for government contracting. So those requirements that were identified 

through that process are being implemented through the SBA-1 

initiative. What I would say is that, you know, I cannot speak obviously to our acquisition team at the SBA and some of the findings 

form the OIG with respect to the acquisition process, but what I 

would say is that as we move forward with this project, the IT improvement or SBA-1, we have engaged the White House’s Digital 

Services team to make sure that we do a solid roadmap, and we 

have engaged a small business firm to implement it in what they 

call ‘‘agile development.’’ I am not an IT person, but I have been 

briefed on what that means, but it means that we get a deliverable 

or something to test every 2 to 3 weeks, and we have seen that 

working already around the Women-Owned Small Business program. So we are encouraged with the progress so far, and that is 

a system that will be rolled out to the 8(a) and the HUBZone programs as well. 

Mr. HARDY. Thank you. I would just like to make a statement. 

You know, I truly believe some of the economic values that have 

happened in the recent year or so has come from the SBA and 

some of its improvements that it has done. I believe this program 

is vital to small businesses, which is vital to our economy, so I believe that you guys are a vital asset that needs to continue to 

evolve and become more efficient, more effective, which will again 

help in some avenues with the growth of our economy. So please 

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continue to try to be innovative and help us help you whatever we 

can. So that is a statement I truly believe or I would not say it. 

Mr. SHORAKA. Thank you, sir. 

Chairman HANNA. Thank you. 

Of course, we are aware that 2016, the National Defense Authorization Act has a whole new package of things for you to deal with, 

right? 

Mr. SHORAKA. Absolutely. 

Chairman HANNA. We have not finished 2013. We are piling on 

again. What we would like to do is not see it take 3, then 2 or 3 

more years, 6 or 7 years to implement this. Anything we can do 

to help you to that end. I learned that your HR person—I was 

going to ask you to go back and you why they were buying people 

out and hiring people when they can move them around. I learned 

that whoever that person was works for the Department of Homeland Security now. And I would ask you to get back to us with any 

recommendations. 

Mr. SHORAKA. Absolutely. 

Chairman HANNA. Like Mr. Hardy said clearly, we are here to 

help. 

Mr. SHORAKA. Thank you. 

Chairman HANNA. If there are on further questions for our witness, I would like to thank you for your time and testimony. As I 

have said before, given the hundreds of billions of dollars in Federal contracts that are at stake each year, ensuring small businesses have the opportunity to compete for Federal, prime, and 

subcontracting is very important. This will not happen without 

properly structured staffing of the GCBD. I am glad that H.R. 

4341, which this Committee has successfully marked up in this 

past month, I would ask that the GAO do a deeper dive, take a 

look at this, get back to us, and let us know how we can help organizationally and going forward because as Mr. Hardy said, it is 

critical, and I run into people every day in my private life that take 

advantage of the services the SBA provides. 

I would ask unanimous consent that every member has 5 legislative days to submit statements and supporting material or the 

record. Without objection, this hearing is closed. Thank you. 

[Whereupon, at 3:56 p.m., the subcommittee was adjourned.] 

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A P P E N D I X 

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Insert offset folio 17 here 98473.001
18 

To Chairman Hanna, Ranking Member Takai, and members of 

the Subcommittee, [to Chairman Chabot, Ranking Member Velazquez, and member of the full committee present] thank you for the 

opportunity to testify. 

Small businesses are agile, innovative, and affordable partners 

for the federal government. Through small business contracting, 

the federal government acts as a catalyst for small business growth 

and innovation, while supporting the economic security of the nation. Over the past seven (7) years, the Administration, Congress, 

SBA, and federal agencies have been focused on increasing small 

business contracting opportunities across the federal government. 

This increased focus has resulted in over $550.7 billion in federal 

contracting dollars being awarded to small businesses from Fiscal 

Year (FY) 2009–2014, with $91.7 billion of small business eligible 

contracting dollars being awarded in FY 2014. The $91.7 billion in 

small business contracts represents an incredible impact to the 

American economy that drives innovation, growth, job creation, and 

support for over 550,000 jobs across the Nation. 

In FY 2013 and 2014, the federal government exceeded the 23 

percent small business prime contracting procurement goal, representing two (2) consecutive years of this achievement for the first 

time since FY 2005. Current year-to-date performance for FY 2015, 

demonstrates that the federal government should again exceed the 

23 percent goal, along with three (3) of the four (4) socio-economic 

goals—Women Owned Small Business (WOSB), Service Disabled 

Veteran Owned Small Business (SDVOSB), and Small Disadvantaged Business (SDB). If achieved, this would be the first time 

since the program’s inception that the WOSB goal of 5 percent has 

been met. It would also mark the 21st consecutive time the SDB 

contracting goal is exceeded and the 4th consecutive year of achieving the SDVOSB contracting goal. The past and expected achievements for FY 2015 are the result of the dedicated and focused efforts by the SBA and federal agencies to support small businesses, 

as they play a critical role in building and sustaining the nation’s 

industrial base and strengthening the economy. 

Over the last few years, the SBA Office of Government Contracting and Business Development (GCBD) has begun a variety of 

programmatic streamlining and process improvements efforts to 

enhance and improve customer service, create efficiencies, and reduce the administrative burdens on small business firms. These ongoing efforts include, but are not limited to, significant improvements in processing both HUBZone and 8(a) Program applications, 

reduced timelines for 8(a) Mentor Prote ́ge ́ agreements, and finalization of the HUBZone, 8(a), and WOSB programs’ Standard Operating Procedures, which are nearing final agency approval. In addition, GCBD initiated efforts to invest in technological solutions, 

which will provide efficiencies for our interactions with small businesses. Furthermore, as we continue to support of small businesses 

contracting opportunities, Administrator Contreras-Sweet authorized the hiring of 10 additional Procurement Center Representatives (PCRs), to support oversight of federal buying center activities 

to ensure compliance with small business regulations. 

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Of great importance, SBA has implemented over twenty-five provisions from the Small Business Jobs Act of 2010 and the National 

Defense Authorization Acts (NDAAs) of 2013, 2014 and 2015, and 

is making great progress on all other remaining statutes. Provisions implemented to date include completion of the WOSB Industry study, finalization of the WOSB sole source rule, accountability 

of senior executives, total and partial set-asides and reserves under 

multiple award contracts, revisions to the reporting structure of Office of Small Disadvantaged Business Utilization (OSDBU), inclusion of overseas contracting in the FY16 goaling base, and increased training and certification for staff. Also, we have been making significant progress on implementing the Mentor Prote ́ge ́ Program (MPP) to offer an expanded program to all small businesses, 

and issued an advanced notice of proposed rulemaking for certification of WOSB firms. 

While we continue to work to support and improve contracting 

opportunities for small businesses, there are always opportunities 

to build upon our strengths and improve in certain areas. We acknowledged the recommendations from the Government Accountability Office (GAO) and Inspector General (IG) that remain open 

and need to be closed with urgency. Closure of open recommendations is one of my highest priorities and we are actively working 

with the IG and GAO to come to meaningful resolutions that will 

benefit small businesses through improved SBA policies and practices. We have initiated and scheduled regular face-to-face meetings with GAO and IG leaders resulting in closure of nine (9) GAO 

recommendations and three (3) IG Recommendations within the 

last 12 months. The recently closed recommendations include improving monitoring of and procedures used in assessing the continuing eligibility of 8(a) firms and assessing resources allocated for 

PCR and Commercial Center Representatives (CMRs) to successfully carry out their duties. We take the remaining open GAO and 

IG recommendations seriously and are committed to resolving 

them. 

Additionally, we are highly committed to implementing any remaining statutes and programmatic improvements to reduce unnecessary burdens placed on small businesses in SBA’s processes 

and procedures. We are working intensely to incorporate the remaining statutes from past NDAAs into approved policies and regulations intended to allow an even playing field for small businesses. We expect many of the remaining statutes to be finalized 

in 2016, including the WOSB certification rule, teaming and joint 

venture rules, and the final MPP rule, along with a functioning 

MPP program. Further, we will review program processes, including the 8(a) annual review, and the HUBZone and WOSB Programs. 

In closing, I would like to recognize the commitment to small 

businesses from the Congress, in particular, the House Small Business Committee. I also acknowledge the commitment from the Administration and federal agencies, which have recognized the value 

of small businesses, and remained committed to providing meaningful contracting opportunities. Led by Administrator ContrerasSweet, we will continue to fight for small businesses to improve 

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participation for firms to compete and successfully win federal contracting opportunities. 

Æ 

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