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REVITALIZING AMERICA’S MANUFACTURERS: SBA

BUSINESS AND ENTERPRISE DEVELOPMENT

PROGRAM

HEARING

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

WASHINGTON, DC, JUNE 11, 2003

Serial No. 108–18

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

COMMITTEE ON SMALL BUSINESS 

DONALD A. MANZULLO, Illinois, Chairman 

ROSCOE BARTLETT, Maryland, Vice 

Chairman 

SUE KELLY, New York 

STEVE CHABOT, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

JIM DEMINT, South Carolina 

SAM GRAVES, Missouri 

EDWARD SCHROCK, Virginia 

TODD AKIN, Missouri 

SHELLEY MOORE CAPITO, West Virginia 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

TRENT FRANKS, Arizona 

JIM GERLACH, Pennsylvania 

JEB BRADLEY, New Hampshire 

BOB BEAUPREZ, Colorado 

CHRIS CHOCOLA, Indiana 

STEVE KING, Iowa 

THADDEUS MCCOTTER, Michigan 

NYDIA VELA ́ ZQUEZ, New York 

JUANITA MILLENDER-MCDONALD, 

California 

TOM UDALL, New Mexico 

FRANK BALLANCE, North Carolina 

DONNA CHRISTENSEN, Virgin Islands 

DANNY DAVIS, Illinois 

CHARLES GONZALEZ, Texas 

GRACE NAPOLITANO, California 

ANI ́BAL ACEVEDO-VILA ́ , Puerto Rico 

ED CASE, Hawaii 

MADELEINE BORDALLO, Guam 

DENISE MAJETTE, Georgia 

JIM MARSHALL, Georgia 

MICHAEL MICHAUD, Maine 

LINDA SA ́ NCHEZ, California 

ENI FALEOMAVAEGA, American Samoa 

BRAD MILLER, North Carolina 

J. MATTHEW SZYMANSKI, Chief of Staff and Chief Counsel 

PHIL ESKELAND, Policy Director 

MICHAEL DAY, Minority Staff Director

(II) 

C O N T E N T S 

WITNESSES

Page 

Hairston, Daryl, Small Business Administration ................................................. 4

Robinson, Anthony W., Minority Business Enterprise Defense and Education 

Fund ...................................................................................................................... 6

Sanders, Lonnie, C&S Trading ............................................................................... 8

Aleman, Alba, Cairo Corp. ...................................................................................... 9

Street, Kaaren J., Small Business Administration ............................................... 31

Hostetter, Kersten, Microbusiness Development Corporation ............................. 34

Whitfield, Susan R., Small Business Development Center, McHenry County 

College ................................................................................................................... 36

Ratner, Hedy, Woman’s Business Development Center ....................................... 39

Smith, Lee J., BusinessLINC ................................................................................. 42

APPENDIX

Opening statements: 

Manzullo, Hon. Donald .................................................................................... 56

Bordallo, Hon. Madeleine ................................................................................. 58

Prepared statements: 

Hairston, Daryl ................................................................................................. 59

Robinson, Anthony W. ...................................................................................... 65

Sanders, Lonnie ................................................................................................ 69

Aleman, Alba .................................................................................................... 76

Street, Kaaren J. .............................................................................................. 80

Hostetter, Kersten ............................................................................................ 84

Whitfield, Susan R. .......................................................................................... 88

Ratner, Hedy ..................................................................................................... 96

Smith, Lee J. ..................................................................................................... 113

(III)

(1)

REVITALIZING AMERICA’S MANUFACTURERS: 

SBA BUSINESS ANDENTERPRISE DEVELOPMENT PROGRAM 

Wednesday, June 11, 2003

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS

Washington, D.C. 

The Committee met, pursuant to call, at 2:05 p.m. in Room 2360, 

Rayburn House Office Building, Hon. Donald A. Manzullo [chair of 

the Committee] presiding. 

Present: Manzullo, Velazquez, Toomey, Graves, Schrock, Akin, 

Beauprez, Millender-McDonald, Udall, Ballance, Napolitano, and 

Bordallo. 

Chariman MANZULLO [Presiding]. The hearing will come to order. 

Good afternoon. I would like to welcome everyone to the hearing 

on reauthorization of the SBA programs. Since our last hearing, 

fruitful discussions have taken place with the minority staff, administration and small business community. I look forward to continuing this dialogue and presenting to the House floor a reauthorization bill that rationalizes the management of the SBA and reorients many of its programs to help small manufacturers in the depressed economic communities in which they are located. 

The economic news concerning America’s manufacturers remains 

bad. Factory production contracts and manufacturing employment 

spirals downward. The 33-month downturn represents the longest 

such decline since the Great Depression. 

April saw another 53,000 jobs in manufacturing disappear. Every 

time I drive through my district I see the suffering of the families 

that used to rely on good paying manufacturing jobs are not struggling to make ends meet. Replacing these jobs with new service 

sector jobs will not help stabilize the American economy. 

According to a University of Michigan study, 6.5 spin-off jobs are 

created for every new job created in manufacturing. Service sector 

jobs simply cannot generate the type of economic activity, and the 

reason for this, manufacturing jobs typically pay $5 more per hour 

than service sector jobs. That works out to about $10,000 more per 

worker per year. The additional income would give families greater 

purchasing power to spend on consumer goods, travel, dining and 

investing for the future. With a revitalized manufacturing sector, 

depressed communities will rebound, creating opportunities for our 

children and grandchildren. Manufacturing then represents true 

economic security for America. 

2

America’s small manufacturers will be at the forefront of creating 

that economic security. The key question remains whether we in 

Congress and the government are doing enough to ensure the viability of America’s small manufacturers. If the SBA wants to have 

an impact on the American economy, then it must ensure that its 

programs provide the help required by America’s small manufacturers in economically depressed communities. 

Today’s hearing will examine how the SBA business and enterprise development programs can help America’s small manufacturers. These programs assist small businesses in obtaining Federal 

Government prime contracts. They also provide advice on a day-today management of small businesses from its initial creation to the 

development of sophisticated marketing plans. 

Do they provide the right type of assistance? Can they do more? 

If their programs are not helping small manufacturers, what 

changes need to be made? 

Let me make it clear that the Committee remains open to any 

suggestions that will help focus the SBA business and enterprise 

development programs on small manufacturers and their economically depressed communities. The actions that the Committee will 

take as it completes work in drafting reauthorization legislation 

may represent the most important legacy of this Committee. 

Now I will recognize the ranking member of the full Committee, 

the distinguished gentlelady from New York for her opening statement. 

Thank you. 

[Mr. Manzullo’s statement may be found in the appendix.] 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. 

Today, we are here to discuss the SBA’s government contracting 

and business development programs as we undertake the most 

comprehensive reauthorization of the agency in more than a decade. These programs are critical to our economy because they contribute a key ingredient to the entrepreneurial equation: opportunity. 

Whether it is 8(a) zone, BusinessLINC or the small business development centers, the SBA programs plant the seeds for business 

development and growth in this nation. They are the fuel that 

feeds our entrepreneurial spirit. They also provide the most bang 

for the buck, giving the Federal Government a return on its investment of nearly two to one. 

This morning some of my colleagues and I have the opportunity 

to hear exactly how the SBA programs change peoples’ lives. Entrepreneurs told us their amazing and inspirational stories. The SBA 

programs gave these entrepreneurs a chance and they turn it into 

a success. They are the real reason we are here today. 

And I would like to recognize Bob Salazar who is here. Bob, 

would you please stand up? 

Thank you for being here. 

Our Committee can also serve as another forum where entrepreneurs can tell us their stories. They show us just how great it 

is for these programs. Oftentimes in Washington the corporate giants get all the attention while small business owners, who make 

such a big contribution to this economy, are overlooked. But small 

businesses are the American economy. They create new jobs, make 

3

up half of our GDP and our responsible for the majority of new innovation. 

The SBA program fill an important gap by providing small businesses with management advice, technical expertise and assistance 

in accessing the federal marketplace. These programs give entrepreneurs the tool they need to grow and thrive. 

Take the SBA 8(a) program, the 8(a) program was created more 

than 30 years ago to help minorities gain access to the federal procurement arena. This program has helped almost 20,000 small 

firms with nearly $100 billion in federal contracting awards. Yet 

the SBA has allowed this critical program to fall into disrepair, 

calling only for cosmetic changes to it. Programs that are newer 

and more flexible are crowding the 8(a) program out, leaving many 

minority firms without work. This is unacceptable. 

I can tell you what the SBA needs to do. The agency needs to 

modernize the 8(a) program and bring it into the twenty-first century. The agency must focus on returning the 8(a) program to its 

core mission of minority business development using three key 

components: federal contracting opportunities, management and 

technical assistance, and access to capital. Right now the SBA is 

failing at all three. 

As many of you know, a big reason for the decline in contracting 

opportunities is contract bundling. President Bush said in his small 

business agenda last year that the administration was committed 

to breaking off large contracts, but today we have seen little action 

on that change. In fact, the Federal Government for the fourth 

straight year in a row has failed to meet any of its small business 

goals. 

The SBA needs to be a strong enforcer so that federal agencies 

meet their small business goals. Right now the SBA has little 

power when an agency cuts out small businesses. 

And to make matters worse, we have a legislative package from 

the SBA that fails any additional resources to help contract bundling. The agency’s front line defense against this damaging practice amounts to not even one SBA staffer per state. I assure you 

that if the SBA is not going to request the additional resources, 

then Congress will simply legislate them. Without resources this 

program cannot operate effectively. Then they fail to have the effect they should to make a real different, not just in peoples’ lives, 

but also in the larger American economy. 

For the millions of entrepreneurs in this country the SBA programs are the difference between success and failure. They provide 

opportunity and a chance to live the American dream. I think we 

owe it to small businesses to see to it that these programs are 

funded, staffed, and updated. Only then can SBA fully truly fulfill 

its mission of serving this nation’s 23 million small businesses, the 

true driver of our economy. 

Thank you, Mr. Chairman. 

Chairman MANZULLO. Thank you. I think the way that we are 

organized to proceed here is we are going to be taking five-minute 

statements from each of our four witnesses on the first panel, and 

then after that we will be proceeding to some questions for all four 

of you. 

4

And the first witness I would like to recognize would be Mr. 

Daryl Hairston. He is the Deputy Associated Deputy Administrator, Government Contracting and Business Development with 

the US SBA from Washington. 

Daryl, five minutes. Thank you. 

STATEMENT OF DARYL HAIRSTON, DEPUTY ASSOCIATE DEPUTY ADMINISTRATOR, OFFICE OF GOVERNMENT CONTRACTING AND BUSINESS DEVELOPMENT, U.S. SMALL BUSINESS ADMINISTRATION, WASHINGTON, DC 

Mr. HAIRSTON. Thank you, and good afternoon, Chairman Manzullo and Ranking Member Velazquez. Thank you for the opportunity to discuss the Office of Government Contracting and Business Development Programs. The U.S. Small Business Administration is committed to maximizing opportunity for all of the nation’s 

small businesses and the millions of people they employ. 

I would like to request that my written statement be submitted 

for the record. 

Government contracting and business development continues to 

use the best practices of the marketplace to improve and modernize 

our programs. Some of our current initiatives include: launching a 

nationwide matchmaking event to match small business capabilities with federal, state and local agencies, and federal prime contractors; implementing the President’s strategy to avoid unnecessary contract bundling; automating 8(a) applications, and centralizing annual reviews to streamline and simplify the process; simplifying the size standards to make them easier to use, and development a procurement academy to provide 7(j) eligible companies procurement training. 

When fully implemented, these initiatives will help to create an 

environment where small businesses will have better access to federal procurement opportunities. The reauthorization of government 

contracting and business development program will also help to ensure that small businesses receive their fair share of federal prime 

and subcontracting opportunities. 

These programs include: the Small Business Innovation Research; Rural Outreach Program, the Small Business Innovation 

Research Federal and State Technology or FAST Partnership program, the 7(j) Technical Assistance Program; the HUBZone Program, and the Procurement Marketing and Access Network, or 

PRO-Net. 

Through the government contracting prime and subcontracting 

programs, SBA provides policy direction and guidance to federal 

agencies and works with them to develop acquisition strategies 

that will help to increase opportunities for small businesses in federal procurement. We also leverage our PCR and CMR resources 

by working with the OSDBUs to reduce contract bundling and develop strategies that will provide maximum opportunities for small 

businesses. We will use technology to help provide broader coverage of our resources. 

The FAST and SBIR Rule Outreach Program are extensions of 

the SBIR program and the Small Business Technology Transfer or 

STTR Program. The SBA, in partnership with the FAST and Rural 

Outreach Program award recipients helps to create an increase the 

5

growth of each state small business population and provides states 

with grants to increase their participation levels. A list of the 

FAST and Rural Outreach Program awardees, along with examples 

of program success stories as reported by states, can be viewed on 

the SBA SBIR Web site at www.sba.gov/sbir. 

Through the FAST and Rural Outreach Program, state commercialization workshops deliver technology innovation and commercialization solutions directly to the small business owners. In addition, the FAST and Rural Outreach Program grantees are 

partnering with experienced mentors and manufacturers who will 

guide the small business owner through the commercialization 

process, serving as a resource for a full year following the workshops. 

Many of the FAST and Rural Outreach Program grantees have 

engaged with the Department of Commerce MEP centers within 

their respective states, establishing partnerships that can support 

the needs that those technology firms that require manufacturing 

services to get their technologies to the marketplace. 

Through the 8(a) Business Development Program, SBA provides 

business development opportunities, including federal contract opportunities and management and technical assistance to firms 

owned and controlled by socio- and economically disadvantaged individuals. The SBA encourages program participants to partner 

team a joint venture in support of their business development 

plans. 

Since 1968, there have been more than 600,000 contract actions 

worth about $94 billion, and 8(a) firms employed 172,000 people 

during fiscal year 2002. 

S.B.A. is proposing to change the name of the 8(a) Business Development Program to more accurately reflect its mission and 

goals. 

The 7(j) program is an important component of the business development portion of the 8(a) program. Through the 7(j) program 

we are developing a procurement academy that will provide on-line 

training to 7(j) eligible participants. 

The HUBZone Program promotes job growth and economic development through contract assistance to firms that locate in and hire 

residents from distressed urban and rural areas. Each dollar spent 

on the program yields a return of $288 in contract awards. Based 

on fiscal year 2001 data from the Federal Procurement Data System, the program helped to support 12,782 U.S. jobs, of which approximately 9,000 were located in distresses areas. 

PRO-Net is an Internet database for small firms seeking to do 

business with federal, state and local government and government 

prime contractors, and serves as a marketing vehicle for small 

businesses and a market research tool for the acquisition community. 

The system serves at the authoritative source of information on 

firms certified by SBA and 8(a) HUBZone and small disadvantaged 

businesses or SDB. 

On December 17, 2003, PRO-Net was integrated with the Department of Defense central contract registry, or CCR system to 

eliminate redundant small businesses data entry as part of the 

6

President’s electronic government initiative for an integrated acquisition environment. 

In conclusion, we look forward to working with you as we continue to integrate the design and delivery of government contracting and business development services to the nation’s small 

business community, and I will be pleased to respond to any questions you may have. 

Thank you. 

[Mr. Hairston’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank you Daryl. You had that timed 

pretty good. I think you were within five seconds or so. Thank you. 

Now, Mr. Anthony Robinson is President of Minority Business 

Enterprise Legal Defense and Education Fund. Boy, you guys have 

got some long titles. You are trying to stump the new chairman 

here today. And that is from Lanham, Maryland, I believe. Is that 

correct, Anthony? 

Mr. ROBINSON. The base of the organization, Mr. Chairman, is 

here in Washington, D.C. 

Chairman MANZULLO. Okay. 

Mr. ROBINSON. On New Jersey Avenue, 419 New Jersey Avenue. 

Chairman MANZULLO. Thank you. You can go ahead, proceed. 

Thank you, Anthony. 

STATEMENT OF ANTHONY W. ROBINSON, PRESIDENT, MINORITY BUSINESS ENTERPRISE LEGAL DEFENSE AND EDUCATION FUND, LANHAM, MD 

Mr. ROBINSON. Thank you, Mr. Chairman, Madam Ranking 

Member Ms. Velazquez. Thank you for the opportunity to come and 

speak to you all today. 

Over the past 23 years——. 

Chairman MANZULLO. Excuse me. Can I interrupt you? Would 

you just move your microphone a little bit closer? 

Mr. ROBINSON. Okay. 

Chairman MANZULLO. And then also, without objection, we will 

submit all of your statements for the record if you want to submit 

those. Okay? 

Mr. ROBINSON. Thank you very much. 

Over the past 23 years, MBELDEF, which we affectionately refer 

to the organization as, has monitored barriers to market entry and 

growth, which prevent talented small business owners to exist and 

thrive in the marketplace. MBELDEF serves as a national advocate and legal representative for the minority business community 

by promoting policies and practices that provide equitable and full 

participation on behalf of the minority business community. 

Mr. Chairman and Madam Velazquez, I would say that there is 

a major disconnect between the manufacturing industry sector and 

minority economic programs. Today, I would like to highlight about 

four to five different areas that I think adversely affect full minority participation in the economic sector of the economy. 

The first would have to do with one of the more regressive policies that exists not only within the 8(a) program but generally 

within minority procurement, and that is this notion of net worth. 

As you know as the program now exists, it requires a net worth 

below $250,000 for entry into the program. And if you ever exceed 

7

that $250,000 over the life of your tenure in the program, you 

would have to exist the program. This seems to penalize success. 

We would suggest that there may be some justification for a net 

worth cap on entry into the program, but certainly to have that net 

worth cap existing throughout your tenure in the program would 

seem to penalize success of those firms that are in the program. 

And certainly for industries, particularly for manufacturing, a net 

worth cap of $750,000, depending on which industry you are 

pursing, has no relevance whatsoever. 

So we would suggest to the Committee that Congress look at, to 

the degree that they deem a net worth necessary in the program, 

and I would argue it is not necessary, but to the degree that you 

deem it is necessary for the program, that would be put on the 

front end, and that you would index it to industries. So that depending on the industry that that particular entrepreneur was pursuing, you would look at the net worth cap in reference to a particular industry. 

The existing support systems for the manufacturing sector of 

economy, specifically MST and MEP program have done little or no 

outreach to the minority business community. I think the number 

of manufacturing concerns in the 8(a) program is less than six percent. And anecdotally we know from talking with many of these 

firms that there has been no outreach in reference to the program. 

Now, I appreciate that this is outside the jurisdiction of this 

Committee, but certainly something can be done from the perspective of SBA to assuring some greater collaboration between the 

support services for the manufacturing sector within the Department of Commerce and the SBA 8(a) program to collaborate a great 

deal more than what is happening right now. 

Another issue that I think adversely affects the manufacturing 

sector has been what I am calling an abdication of SBA’s business 

development agenda on behalf of minority enterprise programs. 

More recently, over the last several years, and for reasons that 

were understandable, the SBA has been in the process of delegating to agencies the responsibility for engaging procurement on 

behalf of minority enterprise programs. 

Public Law 95–507 envisioned a different kind of role for the 

SBA; that the SBA would be a great deal more proactive in identifying contracts on behalf of 8(a) companies which would better fulfill its business development function, and would also by it being 

the party that contracted with the federal agency could stand in 

the breach of protecting those minority firms should they come up 

against some program in the execution of their contract with particular agencies. 

We have gotten so engaged in a numbers game as it relates to 

minority business programs, whether or not we meet some statistical goal, that we have lost sight of the true, at least Congress’s 

real intent for these program, and that was to build capacity within 

the minority business programs so they could be competitive in the 

marketplace. And I think by the delegation of responsibility, engaging in this numbers game as opposed to addressing real business 

development features that once existed to support capacity building 

in these programs no long exists. 

So I end with that. It seems that my time is short 

8

[Mr. Robinson’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank you very much. I appreciate your 

comments, and in keeping on the clock here pretty well. 

Mr. Lonnie Sanders is next. You are the President of C&S Trading from Washington, D.C. as well. Is that correct, Lonnie? 

Mr. SANDERS. Yes, sir. 

Chairman MANZULLO. Pleasure to have you. Please proceed. 

STATEMENT OF LONNIE SANDERS, PRESIDENT, C&S TRADING, 

LLC, WASHINGTON, DC 

Mr. SANDERS. Mr. Chairman, Committee Members, my name is 

Lonnie Sanders. I am President of C&S Trading, LLC, in Washington, D.C. 

We are a certified HUBZone business located here in Washington. Our primary business is the exporting of commodities internationally. 

My purpose today is to bring to the Committee’s attention a provision in the statute that precludes any HUBZone supplier from 

doing business with the Department of Agriculture’s bulk grain 

program. 

The statute states in essence, the prime contractor cannot purchase the commodity through a subcontract in substantially its 

final form and supply it to the government. 

We believe there may have been serious violations of the Administrative Procedures Act as it relates to this matter. If this statute 

is left to stand as it, there will be no HUBZone suppliers eligible 

to do business with USDA’s bulk grain program. 

The USDA interpreted the statute to preclude HUBZones from 

purchasing bulk grain commodities by stating ‘‘Any such program 

constitutes subcontracting.’’ That interpretation of subcontracting 

goes too far. Using the USDA’s interpretation, every bulk grain 

supplier engages in some form of subcontracting, unless the supplier is the farmer. We should all play by the same rules. 

We submitted our application for approval in USDA’s bulk grain 

program in September 2000. The statutory language I mentioned 

earlier was inserted in the HUBZone legislation in December of 

2000. We were finally allowed to participate in early April 2002, 

and submitted our first offer the same month. 

After several submissions and not being successful, we applied 

for HUBZone certification with the Small Business Administration, 

and became a HUBZone business in September 2002. 

We informed USDA about our certification and were told that we 

could not participate because of the non-manufacturing rule. That 

rule states a small business concern must be the manufacturer of 

the end item or qualify as a small business non-manufacturer. 

The SBA held that the non-manufacturing rule does not apply to 

firms supplying raw agricultural products. Therefore, we qualified 

as a small business non-manufacturer. 

Again, we informed USDA. They told us that two additional requirements were needed: 

One, an increase of our guarantee from 15 to 30 percent of the 

contract price on all contracts that exceeded $550,000; and two, a 

letter from our subcontractor stating that we had use of an approved export facility. 

9

These requirements were not in existence prior to our becoming 

a HUBZone business. 

We have submitted our HUBZone offer January 7, 2003, and 

awarded a contract the next day, January 8. 

After we submitted our offer and guarantee to USDA and purchased the grain from USDA, to be sold rather to USDA, USDA 

canceled our contract for the convenience of the government. 

The most disturbing part about the whole process is the fact that 

USDA mentioned for the first time the word ‘‘subcontracting’’ in 

their December 2002 letter, after we had received our HUBZone 

certification. They then turned around and used the same subcontract wording, the language that was inserted in the HUBZone 

legislation in December 200, to cancel our contract. 

C&S Trading is the only HUBZone qualified to do business with 

USDA’s bulk grain program. Why would USDA approve us in 2002 

when they knew in 2001 that they would not allow C&S Trading 

HUBZone participation? 

We have worked with two of the largest and most recognized food 

and grain companies in the world, ADM and Cargill. We bid using 

Cargill’s export facilities and purchased wheat from ADM. After 

USDA cancelled our contract, we had to sell our wheat back to 

ADM at a loss. 

Our question is: Why the resistance from USDA? 

We do not think that Congress intended to penalize HUBZone 

businesses by precluding them from participating in the competitive marketplace in the same manner as any other business. 

In closing, let me demonstrate what this law really says. This 

apple is a commodity. Substantial means more than 50 percent. 

USDA is saying do something more than 50 percent to this apple 

or commodity and make it still look like an apple. Then we will do 

business with you. 

Thank you. 

[Mr. Sanders’ statement may be found in the appendix.] 

Chairman MANZULLO. Thank you very much for your comments, 

Lonnie, and we will go ahead and move to our fourth panelist in 

Panel 1, and that is Ms. Alba—is it Aleman? 

Ms. ALEMAN. Aleman. 

Chairman MANZULLO. Aleman. And you are the President of 

Cairo Corporation from Manassas, Virginia; is that correct? 

Ms. ALEMAN. Yes. 

Chairman MANZULLO. I thought Lonnie did so well. Maybe he 

had some St. Louis background, but maybe that was just my memory slipping or something. 

Mr. SANDERS. You are stating your age. 

[Laughter.] 

Chairman MANZULLO. Please proceed. 

STATEMENT OF ALBA ALEMAN, PRESIDENT, CAIRO CORP., 

MANASSAS, VA 

Ms. ALEMAN. Thank you, Mr. Chairman, Ranking Member and 

Committee Members. 

Cairo Corporation is an 8(a) SDB woman-owned business. The 

company was started in April of 1999 by myself and my business 

partner, Raymond Roberts. The combination of my business partVerDate 0ct 09 2002 16:12 Mar 19, 2004 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 G:\HEARINGS\92600.TXT NANCY
10

ner’s passion for business and my passion for excellence differentiates Cairo from most small businesses. 

With as much as I knew about the 8(a) program prior to starting 

the company, there was still a lot that I did not know. I had no 

idea that the application process would be so onerous and so 

invasive. I also had no idea that the annual recertification process 

would be as paper-intensive as it is. I also never imagined that it 

would take us over two years to land our very first 8(a) contract. Our vision is to be a $100 million company by 2010. There is no 

lack of effort, will or sacrifices that we are willing to commit in 

order to get there. We have grown over 7,000 percent since inception, and over 90 percent last year. 

We have had 15 profitable quarters in a row and aggressively reinvest the profits of the company back into the organization. 

With as competent as we are and as successful as we have been, 

we are still small and still very fragile. We are typically the first 

ones that large primes cut loose when budgets are cut, and always 

the last ones to be called upon to staff a program that we have won 

alongside them. It is not unusual or unexpected to receive the 

hard-to-fill slots on a contract, or the low-end labor categories and 

rates even when our core competencies suggest otherwise. 

We therefore need and rely on a certain percentage of prime contracts to ensure our long-term growth and survival. 

The 8(a) program gives competent minority and disadvantages 

owned organization, such as ours, the opportunity and the protection that we need in our early years of development to be successful. I often regret certifying as early as I did considering the 

amount of time it took us to obtain our first 8(a) contract. Even 

when I found folks that wanted us to work with them for compelling business reasons, they refused to go the 8(a) route: too difficult, too time consuming and so on. 

With respect to the personal net worth issue, I feel strongly that 

we must raise the cap on economic disadvantaged into the program 

on entry, and eliminate the recertification cap altogether. The 

entry level cap should minimally be raised with inflation and cost 

of living for the last 15 years. Additionally, we need to eliminate 

the income cap for 8(a) business owners. 

Business owners make incredible personal and financial sacrifices to start their businesses. In our case, we went without income for 14 months. We cashed in all of our assets, put the dream 

of home ownership on the back burner, mortgaged my family’s 

home, consumed every last penny in our savings accounts, and juggled credit card balances from one bank to another. It was clear 

that we were financially disadvantaged upon entry into the program. 

What value does it provide the program on requiring us to remain disadvantaged year after year for an additional nine years? 

Artificially keeping a business owner weak financially during the 

program works against the purpose of the program. 8(a) companies 

need to be bankable during their tenure in the program in order 

to have access to capital for growth. This fact, coupled with the 

lack of parity and imposition of these same restrictions on all other 

SBA programs, such as the HUBZone program, make these caps 

unjust, unfair and counterproductive. 

11

With respect to the HUBZone program, it concerns me gravely 

that we continue to water down the strength of the 8(a) program 

by layering and prioritizing other programs in its stead. The 

HUBZone program is a resource-intense program to administer 

that requires constant monitoring in order to ensure compliance. 

The continued drain on the SBA’s resources is hurting the 8(a) 

program. We have already experienced considerable drops in 8(a) 

procurement dollars since 1995 despite the fact that federal procurement dollars have increased steadily since that time. 

The HUBZone program preferences certain types of businesses 

and is most appropriate for certain NAICS codes. We need to look 

at the pay grades and more closely scrutinize the variables that 

lead to community development. It is critical to analyze the types 

of jobs that are HUBZone business is offering and the true impact 

of that business’s employment in a HUBZone community. 

The 8(a) program is critical to the development and survival of 

small minority-owned businesses. Our economy needs us and companies like to be successful. We, in turn, need you to support the 

program and strengthen its objectives. We need to streamline the 

process of certification and governance. We need to eliminate caps 

that weaken a business owner’s financial viability. And we need to 

more carefully consider the negative impact of other programs such 

as the HUBZone program that they are having in the 8(a) program. 

And most importantly, we need to significantly increase federal 

procurement dollars for qualified 8(a) firms. 

Thank you very much. 

[Ms. Aleman’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank you very much for your testimony, 

Alba. 

We are going to go ahead now to some questions, and I think I 

am going to start off here with a question for each of you. I will 

try to keep it a fairly short question. 

And that is, there are probably in your minds a number of things 

that you might like to see us do or change, places where we could 

make some improvement. I am interested in your number one top 

choice. If you could change one thing, today you had that magic 

wand and you could change one thing about the way the programs 

are set up, what would be your number one priority? 

A number of you, Anthony, you listed about four number of 

things, and Alba, you also mentioned a couple of things. I would 

like to know just number one priority. Let’s just go in the same 

order of the witnesses. Go ahead, Daryl. 

Mr. HAIRSTON. Well, I could say that we fully support the administration’s budget request for fiscal year 2004 for the programs that 

are in consideration for reauthorization. 

Chairman MANZULLO. So your priority would be to make sure 

you get the funding so you can do your job? 

Mr. HAIRSTON. We would support the administration’s budget request for those programs, yes, sir. 

Chairman MANZULLO. That was pretty well restated. Okay, 

thank you very much. 

Next, Anthony. 

Mr. ROBINSON. Compliance is important, and the administration 

certainly has not requested sufficient resources in order to make 

12

compliance real, and I think that a great deal more could be done 

with existing situations where there is sufficient resources at SBA 

to make compliance real. So I would have to, with great reluctance, 

list that as my number one. 

Chairman MANZULLO. So let me see if I understand what you are 

saying. What you are saying is there are certain agencies in the 

Federal Government that probably—I’m just guessing—probably 

from a convenience point of view than anything else bundle a 

whole lot of stuff together and ship it out because it is less paperwork and less hassle to do. 

And you are saying if those large bundled types of contracts were 

broken down and were really given as possibilities for small businesses to compete for some of that business, that would, first of all, 

comply with the law; but second of all, would be the thing that 

would be the most helpful. 

Am I understanding what you are saying? 

Mr. ROBINSON. Yes, that plus other compliance issues that that 

infrastructure is designed to facilitate, yes. 

Chairman MANZULLO. Can you give me an example of that, 

please? 

Mr. ROBINSON. I spoke relative to, you now, the PCRs, for example, and the multiple functions that PCRs are required relative to 

the identification of procurement opportunities, et cetera, on behalf 

of those companies, including the bundle situations that we are 

talking about. And my point relative to what SBA and what Mr. 

Hairston has indicated is that the administration’s budget to carry 

out that compliance function in all of its areas is not sufficient in 

order to make that happen. 

Chairman MANZULLO. How much bigger would it have to be? 

Mr. ROBINSON. I am not prepared to state that at this point. Certainly you have better than 40 percent of the budget that is not 

scrutinized by that process at present, and under the administration’s budget. So whatever would be sufficient in order to have a 

greater percentage of the procurement process, oversight on that 

procurement process under review. 

Chairman MANZULLO. Thank you. Thank you very much. 

Lonnie. 

Mr. SANDERS. We would like to operate like every other business. 

What the statute that was inserted in the legislation did was to 

separate a HUBZone contractor and put him in a category that is 

impossible. 

I will go back to my illustration. This is a commodity. 

Chairman MANZULLO. All right. 

Mr. SANDERS. What they are asking us to do is do something 

more than 50 percent to this apple, and still make it look like an 

apple, and then we will do business with you. That is impossible 

to do. That is the manufacturing business. 

We are in the supplying business. No other business in bulk 

grain does that. They do not operate that way. Your major companies do not. They buy from farmers. They buy off the commodity 

exchange, they buy from each other. As a matter of fact, the agricultural program has a program that they sell some of the commodities that we store and we swap. If we bought from them, we would 

13

be ineligible based upon the way the statute was written to participate in the program. 

So the only thing we are asking is treat us like everyone else 

that is operating in the grain business, and that is it. 

Chairman MANZULLO. Thank you. That seems fair. It would be 

innovative to see what they are going to do to the apple, change 

it 50 percent and still make it an apple. 

Mr. SANDERS. And any other commodity. 

Chairman MANZULLO. For that matter, yes. Right. 

Alba. 

Ms. ALEMAN. Thank you, Mr. Chairman. 

In sticking with your request to give you only one, I would have 

to say that statutory changes relative to 8(a) participation and percentages, both the agency’s compliance and the compliance of large 

prime contractors. 

I met with someone just recently, an appointed official that 

seemed to feel that statutory changes were not necessary because 

people should just do the right thing. But in my experience, doing 

the right thing is a very subjective thing, and unless there are incentives and legislative requirements the right thing becomes a 

very nebulous thing. 

Chairman MANZULLO. How complicated do you think it would be 

to try to—I think what I am hearing you say is that you have to 

put more teeth in the law. 

Ms. ALEMAN. Yes, sir. 

Chairman MANZULLO. Okay. And how much additional complexity is that going to generate in the process of doing that? 

Ms. ALEMAN. Of changing the law or governance to——. 

Chairman MANZULLO. Well, I am more concerned with after 

those changes were made. Let us just sort of say now everybody 

has just got to comply, and you have got to prove this, this and 

this. How much more paperwork and bureaucracy do we create if 

we try to do that? 

Ms. ALEMAN. Well, I am not sure it is additional, but annually, 

for instance, large primes are expected to report on their compliance. But the problem comes not in the reporting, but there are no 

disincentives, they do not lose their contracts if they do not comply 

year after year for five, six, ten years at times. There is no real reason for them to comply unless they wish to. 

Chairman MANZULLO. Thank you very much. 

Ms. ALEMAN. Thank you. 

Chairman MANZULLO. I would love to ask some more questions 

but I want to be fair to the other members of the Committee. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. 

Mr. Hairston, why did you change the name of the memorandum 

of understanding used to delegate procurement functions to agencies to partnership agreements? 

Mr. HAIRSTON. If I recall correctly, I believe we changed the 

name because partnership agreement, in terms of our view of a 

partnership agreement, was more indicative of the relationship 

that we viewed that we were having between the agency and then 

the procuring agency with which we were entering an agreement. 

14

Ms. VELAZQUEZ. Have you issued any policy notices providing 

guidance or procedures or clarification to the district offices in 

order to support these partnership agreements? 

Mr. HAIRSTON. I think we did originally. I do not recall that we 

have done one recently. 

Ms. VELAZQUEZ. My understanding is that you have not. 

Mr. HAIRSTON. I think we did when we first issued——. 

Ms. VELAZQUEZ. Will you submit to this Committee a copy of one 

of those notices? 

Some people contend that those partnership agreements have 

been the ones that caused the SBA to lose control over what 8(a) 

firms are doing, thereby reenforcing the perception that the 8(a) 

program is contracting program rather than a business development program. 

How do you respond to that? 

Mr. HAIRSTON. Under the partnership agreement, essentially 

what we are doing is delegating the authority that we once undertook under what we referred to as a tripartite agreement, which 

when we entered into a contract with a procuring activity we would 

sign that contract and at the same time have the firm sign that 

contract as a subcontracting action. 

Ms. VELAZQUEZ. The 8(a) program, is it a business development 

program? 

Mr. HAIRSTON. Well, it is a business development program. 

Ms. VELAZQUEZ. Okay. How did these partnership agreements 

ensure disadvantaged businesses receive maximum practicable opportunity to participate in the fair marketplace and enhance the 

competitive viability of 8(a) firms, which is clearly the congressional intent? 

Mr. HAIRSTON. What this partnership agreement does is it 

streamlines the execution process of a contract. It does not take the 

place of the business development assistance that we provide 

through our district office employees at SBA. We still provide those 

same services that we provided before we entered into those partnership agreements. We still advocate for contracting opportunities. We still will help negotiate on their behalf. 

Ms. VELAZQUEZ. Okay, you said to me before that the 8(a) program is a business development program. So can you tell me what 

kind of business development is currently being provided to the 

8(a) firms? 

Mr. HAIRSTON. Well, we provide business development through 

our 7(j) program. We provide business development through our resources under our entrepreneur development program, through 

program SCOREs, Small Business Development Centers. 

Ms. VELAZQUEZ. What about matching events? 

Mr. HAIRSTON. Well, we provide that through match making. As 

a matter of fact, most of our matchmaking events, we have had 

large representation of 8(a) firms at our matchmaking events. 

Ms. VELAZQUEZ. But I am asking specifically about the 8(a) program, not the 7(j)? 

Mr. HAIRSTON. No, I said most of our matchmaking events, we 

have had large representation from our 8(a) community at all of 

those events. 

15

Ms. VELAZQUEZ. Can you tell me what follow up was done to 

evaluate the effectiveness of this training? And does the SBA keep 

record of all of the business development assistance provide to 8(a) 

firms? 

Mr. HAIRSTON. We keep track of the assistance provided to our 

8(a) firms. Those programs that are provided under our entrepreneur development programs are tracked in their information 

system. Under 7——. 

Ms. VELAZQUEZ. Have you evaluated those? 

Mr. HAIRSTON. I cannot think of an evaluation that has taken 

place in the last year. 

Ms. VELAZQUEZ. Ms. Aleman, what kind of business development 

assistance have your firm received through the 8(a) program? 

Ms. ALEMAN. Business development assistance as in helping us? 

I would have to say that we have aggressively attended a lot of the 

training session from the Small Business Development Centers if 

that is what you are referring to. 

Ms. VELAZQUEZ. No, I am not. 

Mr. Hairston here is telling us that they are providing to the 8(a) 

firms business development assistance. I am asking you if you have 

ever received any type of business development assistance that has 

been provided by the SBA. 

Ms. ALEMAN. Not if you are talking about something outside of 

the training. I am not familiar with something else that might be 

considered business—other than the training session. 

Ms. VELAZQUEZ. Well, he talked about matching events and some 

other——. 

Mr. HAIRSTON. We also consider training as part of our business 

development assistance. 

Ms. VELAZQUEZ. Have you ever received any training? 

Ms. ALEMAN. I have attended a lot of the training for the Small 

Business Development Centers that are provided in our area. 

Ms. VELAZQUEZ. Provided by SBA through the 8(a) program. 

Ms. ALEMAN. I have, but what is not clear here is even when it 

comes to matchmaking events and the training sessions, they are 

very basic, the ones that the SBA provides. I went to one session 

at the SBA when I first was accepted into the program where they 

just talked about the program generally. 

If anything, I actually serve as a resource for the SBA to come 

and do training, and mentoring, and I mentor a lot of other businesses that are even smaller than my own. But even the matchmaking events, it is a far cry from attending a matchmaking event 

to an actual real contract. 

And maybe what we need to be measuring is contracts in hand. 

And if we can tie back a contract that came out of a matchmaking 

event, then that is really the goal. To just have an event where 

small business officers show up and attend, and I have got to tell 

you, depending on how many resources you have, it may or may 

not be valuable. 

Ms. VELAZQUEZ. Mr. Hairston, my concern is that the 8(a) program has been stagnant for the past 15 years. No statutory 

changes have been done to this program. The SBA has not changed 

the way the program has operated since the implementation of proVerDate 0ct 09 2002 16:12 Mar 19, 2004 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 G:\HEARINGS\92600.TXT NANCY
16

curement reform in 1994, except to delegate contract functions to 

agencies that Mr. Robinson made reference to. 

And yet given the opportunity to at minimum increase the 8(a) net worth beyond the $250,000 that has been since 1998, you have 

chosen to make only cosmetic changes to the program this year. 

And the cosmetic change you propose to make is to take the word 

‘‘minority’’ out of the program. Would you please explain why the 

SBA is allowing the 8(a) program to fail? 

Mr. HAIRSTON. Well, what I can explain is that we have undertaken a project to look at ways to modernize the 8(a) program. As 

I mentioned earlier, we are in the process of developing an electronic application process. We are centralizing our annual review 

process to reduce the paperwork and to make that an automated 

process. And we are also evaluating the program from an internal 

standpoint to develop methods that we can deliver a program. 

Ms. VELAZQUEZ. Mr. Hairston, when I asked you if you have 

done anything to evaluate the effectiveness of the training that you 

provide, you said that you have done none. 

Mr. HAIRSTON. Not specifically at the training that has been recorded in our database. No, we have not looked at that. 

What I am saying is that we are taking an overall look at the 

program, to evaluate the program to determine if we are delivering 

it in the most effective manner. 

Ms. VELAZQUEZ. So you will do some changes to it that are substantive, that will respond to the issues and concerns that have 

been raised here beyond taking out the minority word of the 8(a) 

program. 

Mr. HAIRSTON. Yes, we will continue to evaluate the program, 

and we will develop recommendations in terms of what would be 

appropriate in terms of delivering a program in the future. 

Ms. VELAZQUEZ. Well, you have been there for awhile, and nothing has happened. I can promise you that if you do not act, we will 

act. 

Let us talk about the PCRs and people mentioned here, the procurement center representatives. We have only 47, not even one 

per state. 

Ms. Angela Stiles, director of the OMB’s Office of Fair Procurement Policy, in testimony before this Committee expressed concern 

regarding the lack of resources devoted to the President’s bundling 

plan when I questioned her about the fact that President Bush last 

year in March announced his small business agenda, and in the top 

of that agenda was contract bundling; that they will be breaking 

up. And nothing has happened. 

And when I questioned her why, she said that she does not have 

the—that they do not have the resources. 

In her testimony on May 7 before this Committee, Ms. Stiles 

said, and I am quoting, ‘‘I will certainly ask you to talk to SBA as 

well on their allocation of resources for PCRs.’’

Can you please tell me why is it that your office has not requested additional PCRs? 

Mr. HAIRSTON. Based on our assessment of the circumstances at 

this time, we, and I think Mr. Robinson mentioned this, we presently cover 200, the top 200 buying activities in the country. We 

cover about 60 percent of the total federal expenditures with our 

17

existing PCR workforce. And we believe, with the implementation 

of the contract bundling report with the accountability being placed 

on agencies for meeting the goals, for the commitments that we are 

receiving from the agencies to achieve their goals, and with the 

education and training that we will provide to contracting officers, 

that we will see a greater—we will create an environment to create 

better opportunities——. 

Ms. VELAZQUEZ. Do not continue. Do not continue. Look, were 

you listening to my opening statement? 

Mr. HAIRSTON. Yes, I was. 

Ms. VELAZQUEZ. I said that again this year we are going to issue 

a report that is going to show how the Federal Government failed 

to achieve small business goal, minority goals, and women business 

goal. 

And when I questioned Ms. Stiles about the fact that nothing 

had happened since the President announced his small business 

agenda, she said that there is a lack of resources, and that an important component to that is PCRs. 

And you can come here with a straight face and say that the 

President’s budget request is sufficient. 

Mr. HAIRSTON. Well, I had not gotten to that point. What I was 

going to say was that, as we go forward implementing the strategy 

we will reassess the application of our resources. 

Ms. VELAZQUEZ. What strategy? A year later, sir? The President 

made this announcement last year. You know, small businesses are 

suffering in our nation. We can lecture and we can go and campaign and say how wonderful they are. They are the backbone of 

our economy. And then listen to all these small businesses who are 

suffering, and nothing is being done. 

What about the Women’s Business Center? You do not mention 

the Women’s Business Center. 

Mr. HAIRSTON. That does not fall under my program areas, 

ma’am. 

Ms. VELAZQUEZ. The women procurement program. We passed 

the legislation two years ago. When are you going to come before 

this Committee and inform us about the study for the study of the 

study? 

Mr. HAIRSTON. Well, we have——. 

Ms. VELAZQUEZ. When? 

Mr. HAIRSTON. We have issued a contract with the National 

Academy of Sciences to undertake the study that we believe we 

need. 

Ms. VELAZQUEZ. The study that was conducted already. 

Mr. HAIRSTON. Right. 

Ms. VELAZQUEZ. And now you hire—you gave a contract for a 

firm to study the study. 

Mr. HAIRSTON. That is correct, yes, to take a look at the methodologies and the approaches——. 

Ms. VELAZQUEZ. God bless America. 

Thank you, Mr. Chairman. 

Chairman MANZULLO. We will proceed to other questions in the 

order as the members came. I think, just from a timing point of 

view, if we could I would like to see if we can keep this fairly close 

to—cut it off fairly close to maybe at the most a quarter past or 

18

so, because we have a whole second panel of witnesses. So if we 

could keep the questions sort of in the five-minute range, it would 

be great. 

Mr. Udall, you were next in line, I think. 

Mr. UDALL. Mr. Hairston, when you talk about modernization in 

the 8(a) program, is part of that modernization effort raising the 

personal net worth restriction? Is that something that this administration supports? And where do you think it should be? 

Mr. HAIRSTON. The immediate task that we are undertaking is 

the simplifying of the application which was mentioned earlier as 

being onerous. The paper-intensive annual review process, we are 

taking an effort to try and automate that to the extent that we can. 

As far as the overall assessment of the program in terms of looking at how it is delivered, is it being delivered effectively, I think 

many of the issues that have been raised here today are being considered in that process. 

Mr. UDALL. But you do not have a position today on——

Mr. HAIRSTON. Not today, no. 

Mr. UDALL [continuing]. Raising the personal net worth restriction? 

Mr. HAIRSTON. No, no, I do not have a position on that today. 

Mr. UDALL. The HUBZone program does not have that personal 

worth restriction. Are you looking at that as part of it also, as to 

whether or not those should be equalized in any way? 

Mr. HAIRSTON. Well, the net worth restriction on the 8(a) is 

based on the original statute that requires that the individuals who 

own and operate an 8(a) must be determined to be socially and economically disadvantaged. 

One of the factors that is required in the economic disadvantaged 

determination is a look at the individual’s personal net worth. 

The HUBZone program is a geographic-based program, places no 

restrictions on the well being of the individual. Only requires that 

the firm be located in a designated HUBZone area, that the individual be a U.S. citizen, and that they employ 35 percent of those 

employees who are residents of a HUBZone, but there are no specific requirements for the individual eligibility other than their citizenship, sir. 

Mr. UDALL. Do you think that that would open that up to abuse 

in terms of a HUBZone business, somebody moving in and just setting something up if they did not have this personal net worth restriction? 

Mr. HAIRSTON. You mean in terms of HUBZones? 

Mr. UDALL. Yes. Yes. 

Mr. HAIRSTON. The HUBZone program does not have a personal 

net worth restriction. 

Mr. UDALL. That is right. 

Mr. HAIRSTON. The 8(a) does. 

Mr. UDALL. No, I understand that. 

Mr. HAIRSTON. Are you asking if we require an economic? 

Mr. UDALL. Well, I am asking if it is not required in a HUBZone 

and the purpose there is to try and get businesses operating, small 

businesses——

Mr. HAIRSTON. Right. 

19

Mr. UDALL [continuing]. With no personal net worth restriction, 

could you not have larger businesses set up and do things that 

would really be undermining the whole small business premise? 

Mr. HAIRSTON. Well, if that were to occur, and we were not able 

to detect it, it would certainly be a violation of our rules, particularly our affiliation rules that would govern the size of a firm. We 

require that those firms be small businesses, and that they remain 

small businesses as long as they are in fact in the HUBZone program. 

Mr. UDALL. Asking the other witnesses, I mean, do any of you 

have an opinion on this personal net worth restriction and whether 

or not it should apply to HUBZone and should it be raised up in 

the 8(a) program? 

Ms. ALEMAN. Well, if we are going to——. 

Mr. UDALL. Ms. Aleman. 

Ms. ALEMAN. If we are going to give parity to HUBZone program 

with the 8(a) program, my only question would be how would we 

feel about it if Bill Gates started a HUBZone. He is definitely a 

much more financially bankable individual than myself and probably most of the folks here on this panel. And how fair is it to protect and provide these organizations with protected competition 

when they are not expected or required to do the same things, or 

go through the same hoops that we are? 

So that is my concern. If we are going to give parity to these programs, and we need to be careful because there is a damaging impact if I am forced to be disadvantaged, but those that we are giving parity to have no disadvantage requirements. So it is just an 

issue of how we are going to view the programs in general. 

Mr. ROBINSON. I would have a similar concern. If this Committee 

recalls in a recent hearing relative to large businesses and their involvement in the small business program. But absent some cap, if 

you will, relative to net worth and issues of that, you know, you 

stand to reason to invite that kind of continued abuse in these programs as well. 

So I would be also for some kind of net worth restriction and on 

the front end. It certainly do not make sense to me over the tenure 

of your life of the program that you would penalize success. But 

being that the policy is based on your entry into the program of 

being disadvantaged, it would seem to make sense on that, but 

again, geared toward some industry standard. 

Mr. SANDERS. We have been, C&S Trading, we have been very 

blessed to have been able to work with two of the largest grain 

companies in the world, Cargill and ADM. It took a tremendous effort on our part to make that happen. 

Our biggest problem right now is the legislation that has been 

inserted in the HUBZone provision that does not allow us to do 

business like everyone else. As a matter of fact, it does not allow 

us to do business at all with the HUBZones. 

So I would really hope the Committee would take a look at that 

legislation and give us the same opportunity as anyone else, to execute, not undermine the program, and that is essentially what this 

legislation has done, undermining the HUBZone program. 

Mr. UDALL. I thank the panelists, and yield back to the Chairman. 

20

Chairman MANZULLO. Thank you, Mr. Udall. 

And let me—I have our list here. Mr. Ballance, I think, was next. 

Mr. BALLANCE. Mr. Chairman, thank you. I am going to be brief. 

I heard the last two witnesses and a part of Mr. Robinson’s, and 

I did not hear Mr. Hairston’s testimony. 

Mr. Hairston, I am very disturbed by what Mr. Robinson had to 

say—Mr. Sanders had to say, Lonnie Sanders. 

Do you have any jurisdiction in that area? 

Mr. HAIRSTON. The provision in the statute referred to by Mr. 

Sanders is actually a provision that was inserted in SBA’s 2000 reauthorization bill. 

Mr. BALLANCE. I understand that, but do you have any jurisdiction in that area? 

Mr. HAIRSTON. In terms of—yes, in terms of the regulatory process as it relates to——. 

Mr. BALLANCE. That is a pre-question. My question is, if you do 

have jurisdiction, and you heard his testimony, are you prepared 

to recommend to us that we make a change? 

Mr. HAIRSTON. Well, I think Mr. Sanders characterized it very 

well. SBA, when we got involved in that particular——. 

Mr. BALLANCE. Mr. Chairman, I am a lawyer. I am going to have 

to ask him to answer this question. 

Are you prepared, are you prepared—now your title is—I saw it 

somewhere. 

Chairman MANZULLO. It is complicated. It is a very long title. 

Mr. BALLANCE. Deputy Associate Deputy Administrator. 

Mr. HAIRSTON. Right. 

Mr. BALLANCE. Are you prepared to make a recommendation to 

this Committee based on what you heard today or what you already know? 

Mr. HAIRSTON. I would have to go back and look at that provision 

before I could give you any idea of what a good recommendation 

would be. 

Mr. BALLANCE. You are not as outraged as I am about his testimony? 

Mr. HAIRSTON. Well, I certainly think that that is certainly a 

hindrance to him doing business. 

Mr. SANDERS. No, no, it is not a hindrance. It is a block. 

Mr. HAIRSTON. A block. 

Mr. SANDERS. You cannot take this apple——. 

Mr. BALLANCE. I yield him 30 seconds, Mr. Chairman. 

[Laughter.] 

Mr. SANDERS. You cannot take this apple and substantially 

change it 50 percent and still have it look like an apple. That is 

exactly what the legislation says, and we cannot, you cannot, no 

one can do that. That is impossible. 

Now, how can you sit there and say you would not help us? That 

is ridiculous. 

Mr. HAIRSTON. No, no. What I am saying is that I need to look 

at the provision. 

Mr. SANDERS. What you are saying is nothing. What you are saying is a lot of legalese. 

Mr. BALLANCE. Excuse my——. 

Mr. SANDERS. We need some help. 

21

Mr. HAIRSTON. If I could answer the question, I would be happy 

to answer the question. 

Mr. BALLANCE. I want to know if you are going to make that recommendation. 

Mr. HAIRSTON. Well, I would be happy to answer the question 

now. It could be a situation that can be addressed through the regulatory process. I do not know that until I look at the statute. It 

may not be able—the statute may be written in such a manner 

that we cannot address it through the regulatory process. 

Mr. BALLANCE. Well, I will yield back——. 

Mr. SANDERS. The statute was inserted, I think, if I am not mistaken, in violation of the Administrative Procurement Act, which 

did not follow the procedure as it relates to being asserted in the 

business. 

So you are saying you are going to look at something that did 

not occur, if I am not mistaken. 

Mr. HAIRSTON. No, sir, I am saying that if it was inserted in our 

statute, it was done so by Congress. And in order for us to determine whether it is something that we can address from a regulatory process or whether it would require statutory change, we 

would need to review that. 

Chairman MANZULLO. I appreciate the line of questioning. Perhaps we can kind of cut through this though. 

Mr. Hairston, could you look into that and report back to the 

Committee whether this is a rules and regs deal, or whether it is 

a statutory thing? 

If it is a statutory thing, I think we are going to want to revisit 

that question, and perhaps you would want to look at it the same 

way if it a rules and regs. 

Do you have the authority to change that rules and regs-wise? 

Mr. HAIRSTON. When the statute is written, we interpret the 

statute. 

Chairman MANZULLO. I understand that. 

Mr. HAIRSTON. I need to look at it to see if we can interpret it 

in a manner that we can address that from a regulatory perspective. 

Chairman MANZULLO. Then you have the authority to change it. 

Ms. VELAZQUEZ. Mr. Chairman, may I——. 

Chairman MANZULLO. Yes, I yield; yes. 

Ms. VELAZQUEZ. It is their interpretation. This is not a statute. 

It is a rule. 

Mr. HAIRSTON. No, it is a statute. It was in our Reauthorization 

Act. It was Section 612 of the Reauthorization Act of 2000. 

Chairman MANZULLO. Let us look into it and see if we cannot at 

least take care of one—get one blow for freedom in here today. 

We have got next, I think, Mr. Schrock. Were you going to make 

a—it is either questions or answers. I think this is answers time. 

Mr. SCHROCK. Well, I am not going to ask a question, I do not 

expect an answer, but I am going to make a comment. 

I was not here to hear the testimony of the four individuals here, 

but let me guess what happened. The government agency came in, 

and I am not trying to pick on you, Mr. Hairston, but the government agency came here and said what wonderful things they are 

doing for small business. And Mr. Robinson, Mr. Sanders and Ms. 

22

Aleman said, no, they are not. And we hear this time and time and 

time again. 

I share Ms. Velazquez’s frustration. We study things to death up 

here, and I am sick of it. I am sick of agencies answering a question by saying we are studying it. We have got to stop that because 

these people out here a dying on the vine, and the backbone of this 

country is small business, and we are killing them with our regulations. 

And you know, bundling, I heard—the minute I walked in here 

I heard bundling, and my back got up, because that is a huge issue 

in the district I represent in Virginia. We have got to get these people to respond. They can come and testify week in, week out, 

month in, month out, but if they do not take action and help these 

people. 

I am glad to hear what Mr. Sanders said. I almost applauded but 

we are not allowed to do that. But I think you are absolutely right 

what you said. We have got to get government off these peoples’ 

back. And if they are regulations that are supposed to help these 

people, then we need to put their feet to the fire, and Democrats 

and Republicans need to holler at them until they get it down. 

And I am not a lawyer, Mr. Ballance, but you know, I think I 

can understand what I am being hood wigged. 

Now that is not saying anything derogatory about you, Mr. Hairston, but we have heard this time and time again, just the names 

and the people—just the names have changed. Every time we have 

a hearing this goes on. Ms. Velazquez is sick of it. And I think—

I think she is anyhow. And I think I am too. We have simply got 

to do something about it. 

Chairman MANZULLO. She was about as eloquent as you are. 

Mr. SCHROCK. Well, thank you. Thank you. We will make a good 

team. 

Thank you, Mr. Chairman. 

Chairman MANZULLO. I thought I was going to have to try and 

get law and order in here. 

[Laughter.] 

Chairman MANZULLO. Thank you, Mr. Schrock. 

And let us see, yes, Ms. Napolitano. All right. 

Ms. NAPOLITANO. Thank you, Mr. Chairman. I associate with the 

comments on both sides. 

We have been battling for a long time trying to get some relief 

and some assistance to the small businesses in my area who are 

losing literally their businesses because they cannot get assistance 

or they are not able to compete in the situations that have been 

covered before. 

Ms. Aleman, your comment in your testimony regarding what 

you would have to do to qualify for the HUBZone was interesting. 

Basically, you would have to get rid of 35 percent of your employees and move to a low income area; am I correct? 

Ms. ALEMAN. Yes, ma’am. 

Ms. NAPOLITANO. What impact would this have on your ability 

to compete for federal contracts? 

Ms. ALEMAN. Well, relocating is not the worst of our problems, 

you know. We understand that training our folks is expensive as 

it is, and we have already got a core team of folks. But more imporVerDate 0ct 09 2002 16:12 Mar 19, 2004 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 G:\HEARINGS\92600.TXT NANCY
23

tantly, we provide high-end technology services to the government. 

These types of services that have serious requirements both educational and years of experience, and folks that qualify for these 

particular types of labor categories and rates and the services we 

provide, I have not found any living in a HUBZone yet. 

But if I were to train someone, we would never be able to qualify 

for the years of experience that is required, and what it would 

mean is I would have to drastically change my business model, 

change the services that we are providing in order to comply, truly 

comply with the intent of the program. 

Ms. NAPOLITANO. What kind of impact would this have on your 

firm if we were to include a new program for service disabled veterans that had priority over your 8(a) firm? 

Ms. ALEMAN. We would continue to water down the resources, 

the limited resources as you hear Mr. Hairston saying. They are already limited in the number of resources they have. It has been 

said over and over again. And if we continue to layer in programs 

that take precedence over the 8(a) program, and yet do not have 

the restrictions, do not have the restrictions, then that just makes 

it more difficult for us. 

Ms. NAPOLITANO. Mr. Robinson, any comments? 

Mr. ROBINSON. Oh, I would absolutely agree. What you have is 

a continuing dilution of benefits to program participants. The more 

and more you add new folk, and it is not to say that people are 

not worthy, but it is the resources necessary to deliver. The benefits of these programs are just not there. 

Ms. NAPOLITANO. Mr. Hairston, I understand the SBA has decided to put the SBA exchange project on hold. Is this correct? 

Mr. HAIRSTON. That is correct. 

Ms. NAPOLITANO. Was there any notice put out on this decision? 

Mr. HAIRSTON. Yes, there was. We noticed—at the time we made 

the decision to put it on hold we notified the small business community that in fact we were putting it on hold. We explained the 

reason we were putting it on hold. 

Ms. NAPOLITANO. Excuse me. What business community? How 

did you outreach to them? How did you get that information to 

them? 

Mr. HAIRSTON. Well, we put a notice on our Web site first, and 

the firms that had already signed up to participate in the SBA exchange were notified in writing. Each firm was notified in writing. 

Ms. NAPOLITANO. Any media coverage? Any newspaper articles? 

Mr. HAIRSTON. Yes, there was. 

Ms. NAPOLITANO. Any magazine outreach to be able to reach 

those firms? 

Mr. HAIRSTON. Yes, there were a number of media interviews 

and inquiries about the status of SBA exchange at that time. 

Ms. NAPOLITANO. But you really did not do any great outreach. 

You just put it out in the Web site and——. 

Mr. HAIRSTON. And contacted the firms that had in fact already——. 

Ms. NAPOLITANO. How many of them? Do you have any idea, 

ballpark? 

Mr. HAIRSTON. It was in the neighborhood of probably about 500 

companies in all at that time. 

24

Ms. NAPOLITANO. Were those companies refunding their $1500, 

what do they call it, the registration cost? 

Mr. HAIRSTON. At this point I do not know that any firm has actually received a refund. We have had some inquiries regarding the 

refunds, and of course, we have gotten inquiries as well as the SBA 

exchange contractor has gotten inquiries regarding refund. 

And what we have indicated to them is that as it stands right 

now we have a project on hold. The project is being reviewed by 

OMB to make certain that it is consistent with the integrated acquisition environment mission and direction and goal, and that we 

intend to go forward with the project in the very near future, and 

we are asking them to be patient. 

But I do not know that there has actually been any refunds given 

to this point. 

Ms. NAPOLITANO. How long ago was the decision made and when 

did you notify these businesses, roughly? Months? 

Mr. HAIRSTON. It has been several, it has been at least two 

months I know. 

Ms. NAPOLITANO. Will you be paying them interest? 

Mr. HAIRSTON. We have not made any decisions regarding refunds at this point. 

Ms. NAPOLITANO. Well, sir, if I were in business, and I am, a 

micro business, I would certainly be able to use that money or put 

it in the bank and get some interest on it, or at least use it to expand my business, or hire an employee or do other things with it. 

So my suggestion is that SBA be able to get on the ball and either refund the money, keep those people on a list, at a later time, 

unless you are going to pay them interest on that, sir, because if 

I had it in a bank, I would get interest. 

So it is quite a bundle. It is pretty close to a million dollars that 

you are holding onto peoples’ money. 

Mr. HAIRSTON. Well, we do not actually have the money, ma’am. 

We entered into a no-cost agreement with the SBA exchange provider. We received no funds, and we provided no funds. 

Ms. NAPOLITANO. Who has the money? 

Mr. HAIRSTON. The SBA exchange contractor would have any deposits that were made or any monies that were paid. 

Ms. NAPOLITANO. Is that a private contractor? 

Mr. HAIRSTON. That is a private contractor. 

Ms. NAPOLITANO. They have $750,000 worth of business money, 

and I suggest somebody tell them either they are going to pay interest or maybe we will look at it legislatively and make sure that 

they do get refunded one way or another. 

Mr. HAIRSTON. Yes, ma’am. 

Ms. NAPOLITANO. Thank you. 

There are several other things I would like to, but I yield to my 

colleagues since Mr. Manzullo has come in. 

Chairman MANZULLO. Thank you very much, Ms. Napolitano, 

and we have another gentleman who has joined us here in the far 

right, the Chairman’s far right. 

Chairman MANZULLO. I am sorry I was not here. We were on the 

floor. 

25

You are telling me the SBA hired a private company to do a government function at no cost, and charged 500 small business people 

$1500 a piece. Yes or no? 

Mr. HAIRSTON. Yes, we entered into a no-cost——. 

Chairman MANZULLO. What is the name of the company? 

Mr. HAIRSTON. Nexgen. 

Chairman MANZULLO. Could you spell that for me? 

Mr. HAIRSTON. N-E-X-G-E-N. 

Chairman MANZULLO. And they have done no work? 

Mr. HAIRSTON. They have done some work, yes, sir. 

Chairman MANZULLO. Some work? I want to tell you right now 

I want that money returned in 30 days. We are writing the reauthorization. I am going to put it in there or I will take it out of 

your budget. 

Do you understand that? 

Mr. HAIRSTON. Yes, sir. 

Chairman MANZULLO. Repeat to me what I just said. 

Mr. HAIRSTON. You indicated that you would——. 

Chairman MANZULLO. I did not indicate. 

Mr. HAIRSTON. I am sorry. You stated that you would like for the 

money to be refunded. 

Chairman MANZULLO. I did not state that. I did not say ‘‘I liked.’’ 

I want you to understand what I just said. Please repeat it for the 

record. 

Mr. HAIRSTON. You stated that you wanted the money refunded 

within 30 days. 

Chairman MANZULLO. The money shall be refunded within 30 

days. Do you understand that? 

Mr. HAIRSTON. Yes, sir. 

Chairman MANZULLO. Or I will have an oversight hearing. When 

is the next hearing we are having here? Who has got the book? 

Next week. When is it? Next Wednesday. I want you to be in this 

room next Wednesday at two p.m. with a document stating, and a 

copy of a letter going to every person, every small business that the 

money is going to be returned. 

Mr. HAIRSTON. Yes, sir. 

Chairman MANZULLO. You will be here. 

Mr. HAIRSTON. Yes. 

Chairman MANZULLO. No excuses. I want it done. 

Who was it that came up with this program? 

Mr. HAIRSTON. This program was—the actual concept was started, I think, in 1998 or 1999. 

Chairman MANZULLO. Okay. 

Mr. HAIRSTON. When the original contract was entered into, the 

original no-cost agreement. 

Chairman MANZULLO. Just a second. No cost to whom? 

Mr. HAIRSTON. There is no cost to the government. 

Chairman MANZULLO. No cost to the government. 

What is your budget for the SBA? 

Mr. HAIRSTON. Our budget request for this year is in the neighborhood of 800 million. 

Chairman MANZULLO. Well, that is correct. So do not tell me it 

is no cost. Those small businesses are paying taxes that pay to 

26

keep this thing going. And you are telling us that the SBA is 

charging $1500 to do a government function——. 

Mr. HAIRSTON. No, sir. 

Chairman MANZULLO. That is not a government function to make 

matches? 

Mr. HAIRSTON. No, sir. We are not charging $1500. That was a 

price that the contractor was charging. 

Chairman MANZULLO. That is bureaucratic gobbledygook. That is 

what makes small businesses irate around here. I mean, you confirmed 500 small businesses have paid $1500 a piece for a government function. You should be doing that for them free. 

Do you agree with that? 

Mr. HAIRSTON. Well, the purpose of the contract was for the contractor to develop the system, and the cost associated with developing the system basically relates to the fees that they charge. 

Chairman MANZULLO. It takes $1500 to develop a system to 

make matches? Have you no idea that you already have a matchmaking system, and that in the middle of June the SBA had a 

matchmaking seminar in Chicago, a copy of it was done in Orlando, 

and going to seven cities across the nation for matchmaking purposes? Are you not aware of that? 

Mr. HAIRSTON. Yes, I am. The e-commerce system, SBA exchange 

is a much more sophisticated, it is a transaction-based system 

serve the entire government, make the federal procurement process 

totally paperless. It is a little bit more sophisticated than the 

matchmaking——. 

Chairman MANZULLO. Well, I want to tell you something. It is 

becoming unsophisticated. That already exists. I think I need something stronger than coffee. Thank you. That already exists. 

Mr. HAIRSTON. It is not a duplication of any existing systems in 

the government at this time. 

Chairman MANZULLO. You had better be prepared to defend that 

program Wednesday at two o’clock, and I am very serious. I will 

keep you here in this room as long as it takes next week until 

those people are assured that they are getting back their money, 

and you are going to have to break that contract with that company that has done very little 

Was that contract competitively bid? 

Mr. HAIRSTON. No, it was——. 

Chairman MANZULLO. Oh, it was not? 

Mr. HAIRSTON. No, it was not. 

Chairman MANZULLO. It was not competitively bid. 

Mr. HAIRSTON. No, it was an 8(a) sole source contract. 

Chairman MANZULLO. It was an 8(a) sole source program. Is that 

what it was? 

Mr. HAIRSTON. It was an 8(a)——. 

Chairman MANZULLO. There was no competition at all on this 

thing? 

Mr. HAIRSTON. No. 

Chairman MANZULLO. What is the background of this company? 

Mr. HAIRSTON. It is an e-commerce company. It has been in the 

IT business for several years; had developed the prototype of the 

system, and at that time the individuals who were evaluating the 

system saw great potential and what it could do. 

27

And as I said, as I indicated, the system is now being currently—

it is being currently reviewed by the integrated acquisition environment, and it is part of the overall——. 

Chairman MANZULLO. Well, you can just tell them to stop it. If 

you want to keep that going, you pay it out of your own budget. 

Those small business people have been screwed, and I want them 

to get their money back. That is an embarrassment for the small 

business community in this country into the SBA to have such an 

outrageous thing like that. 

I mean do you know how many free programs there are out there 

offered by the government for match making, for international 

trade, for all types of—I mean, we have a PTAC. Do you know 

what a PTAC is? 

Mr. HAIRSTON. Yes, sir. 

Chairman MANZULLO. Procurement Technical Assistance Center. 

Mr. HAIRSTON. Yes. 

Chairman MANZULLO. Jonathan Jackomo in Rockford, Illinois; 

one of 91 PTEC offices was named number one in procurement 

technical assistance. We had people come out from DoD. Deidra 

Lee came herself, 254 people showed up for purposes of match 

making. We have had the Department of Commerce come out. We 

have had conference after conference after conference of government agencies willingly offering matchmaking programs. Not one 

has ever charged anything except the SBA to these people. That is 

a disgrace. 

I will see you Wednesday at two o’clock with that document. 

Ms. VELAZQUEZ. Mr. Chairman. 

Chairman MANZULLO. I will yield. 

Ms. VELAZQUEZ. Yes, please. Thank you. 

I just would like to make a clarification here because I am a little 

bit confused. I do not think the issue here is the contract, but the 

fact that SBA—it is not that the contractor did not fulfill its obligation; it is the fact that SBA put it on hold that contract, is it not? 

Mr. HAIRSTON. That is correct. 

Ms. VELAZQUEZ. And it is SBA who is not allowing for the contractor to fulfill its obligation? 

Mr. HAIRSTON. That is correct. 

Ms. VELAZQUEZ. Why not? 

Mr. HAIRSTON. Well, as I indicated, the Office of Management 

and Budget, the integrated acquisition environment is reviewing 

this system for inclusion in the overall integrated acquisition environment e-government procurement process, and they are looking 

at it to make certain that it is consistent with the mission and objectives of the e-government initiative in terms of single point of 

entry, simplifying acquisition opportunities for all federal agencies. 

This system will allow for on-line transactions to take place. It 

is not really a matchmaking system. It is a system that will allow 

federal procurement officers to simplify their buying. They go on 

line. They make a purchase on line. They actually pay their bills 

on line, and it will allow small businesses a greater access to more 

federal procurement opportunity with a focus on procurement particularly under $2500. 

We are losing about $14 billion a year to credit card purchases 

where there is no control. This system gives agencies the ability to 

28

control those purchases. That is what was being looked at for the 

purposes of this system. 

Ms. VELAZQUEZ. Is the contractor under the impression that SBA 

will not continue with this program? 

Mr. HAIRSTON. No, he is not. 

Chairman MANZULLO. I would just say that the charging of these 

people by the Small Business Administration is incompatible with 

the administration’s belief and with that of the marvelous Administrator Mr. Barreto. He understands small business people. He was 

out of my district and the Speaker’s district for two entire days 

traveling all over the place. And this is the type of thing that I am 

sure that he does not want to take place. 

Mr. HAIRSTON. Well, one of the things that is being evaluated in 

this process at this time is the cost model, and we do expect to see 

a change in the pricing structure. 

Chairman MANZULLO. Well, there will not be any price at all. I 

am telling you I do not want those guys charged, period. Do you 

understand that? 

Mr. HAIRSTON. Yes. 

Chairman MANZULLO. Thank you, Mr. Chairman, and we also 

have Ms. Millender-McDonald. Do you have a questions or an answer? 

Ms. MILLENDER-MCDONALD Question. An answer? SBA does not 

have answers. Why would you think that I have any answers here 

this evening? 

Chairman MANZULLO. Well, it seems some other people have 

been sharing some. 

Ms. MILLENDER-MCDONALD No, really. I thank you, Mr. Chairman, and it is good to see our Chair Chairman here today. I follow 

your lead in terms of saying that small businesses have been, and 

then the blank, you fill in the blank of what you said. 

We have got to really revitalize America if we are going to really 

get down to the crux of what really moves the engine of this economy, which is small business. Then, you know, we are sitting here 

talking to a man who says he is going to look into everything. So 

clearly, to me, we do not have the person who should be at this 

table. It should be your boss, Mr. Fred Amedeous, or it should be 

the man who the buck stops at, and that is Mr. Barreto. 

Mr. Chairman, I suggest that we call all of these folks in here, 

and talk with them because we are failing in doing our due diligence on small businesses, and there is no point in my sitting here 

when we know that your personal net worth of 8(a) owners is 

$250,000, when you do not have a limit on the HUBZone. 

So I mean there is a disparity here, and it is even more so with 

minority businesses. So I do not see beating up on you, Mr. Hairston, because the buck does not stop with you. We need to call the 

guy who is your boss or the guy who is the boss of that boss, and 

all of them to sit in this table here and talk. And until we do that, 

I am not going to waste anymore time talking with the gentleman 

who is going to look into the issues. 

I yield back my time, and I have a statement for the record. 

Chairman MANZULLO. With no objection. 

Chairman MANZULLO. Let us see, and Ms. Bordallo. 

Ms. BORDALLO. Thank you, Mr. Chairman. 

29

I have a question for Mr. Hairston. The unemployment, this has 

to do with my territory of Guam, the unemployment rate on Guam 

is double the national average. Yet only selected areas have been 

designated HUBZones by SBA. 

If I understand correctly, Guam is only 212 square miles in total 

land mass. Why is the entire island not designated as a HUBZone? 

Mr. HAIRSTON. The determinations for actual areas that are designated by HUBZones is done by the Census Bureau. We take that 

data and it is based on a formula that they use, and we translate 

that data to those designated census tracts and areas by 

HUBZones. So it would be predicated on their analysis of the economic data related to those particular areas. 

Ms. BORDALLO. So you are saying population? 

Mr. HAIRSTON. It would be the income, unemployment. 

Ms. BORDALLO. Economic stats, right? 

Mr. HAIRSTON. Right. 

Ms. BORDALLO. All right, thank you. 

Thank you, Mr. Chairman. 

Chairman MANZULLO. Thank you, and no questions from Mr. 

Toomey. 

Okay, this concludes the first panel hearing. 

[Recess.] 

Chairman MANZULLO. [Presiding] The hearing will come to order. 

Congressman Jim Colby from Arizona is going to be introduced, 

and thank you for joining our panel. Glad to have you hear, Jim. 

Mr. COLBY. Thank you. 

Chairman MANZULLO. Do you want to go ahead and introduce 

your witness? 

Mr. COLBY. Well, thank you very much, Mr. Chairman. I am delighted to introduce one of the very distinguished panel of witnesses that you have here, and hopefully we can set them all at 

ease. I understand they said that they thought that it was the last 

part of your hearing was a little rough, that you were a little tough 

on the people testifying, so I said you will not be nearly as tough 

with the private sector ones. 

We have only just begun. Okay, that should set them well at 

ease. 

[Laughter.] 

Mr. COLBY. Mr. Chairman, I am delighted to have the opportunity to introduce the—it looks like the male member of the panel 

that is up here today—Lee Smith who is the program manager for 

Southern Arizona Business, what is called the BusinessLINC program. And he is going to be talking about this program and its national validity. He is going to describe the funding, the grant funding for BusinessLINC and how it has become really an investment 

in new domestic, and I might add, for southern Arizona international commerce. 

It is a combination of the interactive vendor database and the 

staff outreach has become really a very highly productive tool to 

encourage mentor and protegee interaction. 

BusinessLINC has been uniquely productive, over $54 million in 

new regional contracts, $2.7 in new international contracts, and 

that is just in the initial 18 months that this program has been in 

place. It has generated an estimated 680 new and retained jobs, 28 

30

mentor protegee projects, already has 1600 business profiles in its 

database, and new tax revenues are estimated to be about $3.1 million in the southern Arizona area. 

So it has prompted the Arizona Department of Commerce to use 

the program as a model for the statewide expansion of 

BusinessLINC, which is what I hope you are going to hear about 

today. We think it is enjoying widespread interest and support 

from all aspects of the Arizona business community, and we are delighted to be able to share this with you here today,and I am delighted to have Mr. Smith, who is so well known, prominently 

known in our Tucson community, here to talk about this problem. 

Thank you very much, Mr. Chairman, for this chance to give you 

this brief introduction to this program. 

Chairman MANZULLO. Well, thank you, Mr. Colby. Normally I 

would start with the administration witness. If you wanted to stick 

around and ask questions of your constituent, I could have him go 

first. 

Mr. COLBY. That is alright. Please go ahead. No, go ahead in regular order. I will have to leave anyhow because of some other business. 

Chairman MANZULLO. Okay. Thank you, Congressman Colby. 

Our first witness will be Kaaren Street, Associate Deputy Administrator, U.S. Small Business Administration, Office of Entrepreneurial Development. We welcome your testimony. 

Let me just say, once in awhile I get excited in Committee here. 

Today is the day. You are fine. But you know, notice how few people are left in here which gives you an indication as to how many 

from the agency were here. And Hector Barreto has done a tremendous job at the SBA. I spent two whole days with him, and traveling the nation. He has gone all over the place for the purpose of 

encouraging small business people to get engaged, and to go to 

these seven—now there are six regional conferences of actual 

match making taking place. 

And I guess what really got me upset about this so-called program on hold, $750,000 to develop something you do not need, is 

that with the small businesses who go to these matchmaking, it is 

two and a half days of concentrated—there are about it—it is a 

concentrated study, so the small business people can get involved 

in procurement and also in selling to larger companies that are involved in selling to the government for the purpose of fulfilling the 

small business set asides, and also for the purpose of allowing 

small business to get involved in the procurement. 

There are 80 agencies and businesses, many with contracts in 

hand, that will come to the seminar. The total cost of the seminar 

is $125 with scholarships available, and that includes all the materials and the food. I mean, it is a marvelous program, and it is 

state-of-the-art computerized matchmaking taking place with 

NAICS numbers. 

And as people call in or go to the Web site, they can register, 

they can put in their NAICS numbers. They can set up their own 

appointments with government people or the people at the SBA 

will provide the matchmaking. And so when the small businesses 

show up you will have what happened in Orlando, Florida, where 

people came from 18 states, $2 billion worth of government proVerDate 0ct 09 2002 16:12 Mar 19, 2004 Jkt 000000 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 G:\HEARINGS\92600.TXT NANCY
31

curement and private contract dollars, 2500 actual interviews were 

done face to face for the purpose of fulfilling the mission of the 

SBA. 

I mean that is tremendous testimony to the job that Hector 

Barreto is doing. And I just cannot be that Hector even knew about 

500 people paying $1500 a piece to get onto a computer program 

that does not exist. 

After that introduction, Ms. Street, I just want to let you know 

I am not that bad. 

Ms. STREET. Okay. I am shaking over here. I am a little nervous. 

Chairman MANZULLO. And we look forward to your testimony. 

Thank you. 

STATEMENT OF KAAREN J. STREET, ASSOCIATE DEPUTY ADMINISTRATOR, U.S. SMALL BUSINESS ADMINISTRATION, OFFICE OF ENTREPRENEURIAL DEVELOPMENT, WASHINGTON, 

DC 

Ms. STREET. Chairman Manzullo, Ranking Member Velazquez, 

and Members of the Committee. 

Chairman MANZULLO. I’m sorry. Could you move the microphone 

closer? Thank you. 

Ms. STREET. Sure. Is that better. 

Chairman Manzullo, Ranking Member Velazquez, and Members 

of the Committee, thank you for inviting me here today to discuss 

the reauthorization package for the U.S. Small Business Administration for fiscal year 2004. 

The SBA is committed to serving America’s small business men 

and women as an effective and efficient twenty-first century organization. SBA is reforming its programs and management to be dynamic and responsive, and to aggressively reach out to those entrepreneurs who needs its services. SBA particularly seeks to expand 

its reach into emerging markets. Above all, SBA is working hard 

in the Office of Entrepreneurial Development to integrate its services and programs into a client-based organization that answers 

the needs of entrepreneurs whether they come to SCORE, Small 

Business Developments Centers, our Women’S Business Centers, 

our Native American program or any other SBA program. 

An example of an innovative and adaptive program is SCORE. 

SCORE operates in a dynamic, innovative fashion and leverages its 

grant funding with strategic alliances and seasoned small business 

volunteers. These volunteers annually donate more than a million 

hours of hands-on, real-life experience to the pre-venture and startup entrepreneurial market. SCORE works aggressively to deliver 

its services to entrepreneurs wherever they may be. In fact, 

SCORE pioneered small business e-mail counseling in 1997, which 

now accounts for 25 percent of SCORE’s total counseling. 

Innovation requires flexibility, and many ED programs simply do 

not have the flexibility they need to improve efficiency, institute 

new ideas, and reach out to emerging markets. One example, in 

particular, is the Women’s Business Center Program, and its sustainability pilot, which is about to expire. 

The Women’s Business Program provides valuable services to an 

underserved community, but its cost per client makes it one of our 

most expensive programs within the ED structure. 

32

Currently, there are 52 centers receiving Women’s Business Center grants. The sustainability pilot requires SBA to spend 30.2 percent of the program budget, which equates to $3.6 million 2003, on 

WBCs that have already graduated from the original five-year program. 

Under this formula SBA is awarding grants to 81 centers leaving 

little or no budget resources available for new centers, innovation, 

marketing, or outreach. As a result, SBA will be unable to fund 

new WBCs in some of our largest urban areas which are not now 

being served; including Cleveland, Miami, Los Angeles, San Diego, 

Pittsburgh, Tampa, Little Rock, Minneapolis, Las Vegas, and many 

more. By redirecting the 30.2 percent allocated to the sustainability 

pilot, SBA could instead offer grants to a number of new centers. 

Unfortunately, with the sustainability pilot in place, the budget 

will be entire accounted for. There will be no expansion into larger 

markets like Los Angeles and Miami and elsewhere. All WBC funding will be concentrated on simply maintaining the status quo. SBA 

is requesting that this pilot program be allowed to expire. Our goal 

is not to close or hinder existing centers, but to encourage growth 

and innovation in the current program. 

Another important ED program is the Small Business Development Center program. The SBDC program is the largest non-credit 

program at SBA, and provides a wide array of information and 

services to new and existing entrepreneurs, counseling hundreds of 

thousands of small businesses and start-ups every year. 

Like the WBC, however, SBA believes that the SBDC program 

could benefit from a new sense of innovation. The agency proposes 

a competitive grant process to select the lead center in each state 

on a five-year basis. This competition would affect only the lead 

center. It does not threaten the networks of individual centers 

themselves. 

Current lead centers would, for the first time, be asked to find 

new and better ways of serving small businesses, or face the possibility of being replaced. The resulting competition would ensure dynamic administration of the program at the critical lead center 

level, and result in better service to our clients, America’s entrepreneurs. 

The SBA’s proposal does not mandate change in lead center administration; rather, it introduces the potential for competitive 

leadership concepts. Competition is the backbone of American society, and leads to efficiency and innovation. This process will not result in a wholesale turnover of lead centers despite the dire predictions of certain groups. Lead centers that perform well will continue to be successful and continue to be part of the network. 

Finally, I want to bring you up to date on our recent activities 

within SBA’s Office of Native American Affairs. SBA appointed 

Thelma Siffarm to head this office and lead our Native American 

initiative. Thelma has over 30 years experience working with tribes 

and Indian organization, and is a former elected official to her tribal council of the Fort Bellnet Indian Reservation. 

Recently, the agency received approval from the Committee on 

Appropriations on its proposal for allocating the $2 million received 

in fiscal year 2003 for the Native American initiative. To develop 

this initiative, SBA gathered input and support from tribal leaders, 

33

and is currently working with the Bureau of Indian Affairs and 

other government and tribal agencies to maximize its effectiveness. 

The initiative is not based on any one office, building, or organization. Instead, SBA will reach underserved communities using all 

possible means: tribal colleges, correspondence courses using e-mail 

or CD–ROM, collaboration with tribal and private organization, egovernment initiatives, and more. 

The goal is not merely to deliver government funds to Indian 

country. The initiative is to bring new investment, jobs, and skills 

to Native American entrepreneurs—building economic growth within the Indian community. A dynamic, innovative approach will be 

the rule in the new Office of Native American Affairs. 

To conclude, small businesses create over two-thirds of all new 

jobs in the American economy. That is what the President’s management agenda is all about—creating jobs and growth for the 

American people, while protecting the assets of hard working taxpayers. 

The changes we propose to Congress in this reauthorization 

share a common goal: success through innovation. To achieve innovation, SBA must be able to invest in the marketplace of new 

ideas, and the agency asks for your support in this effort. 

Thank you for your leadership and support in the small business 

community. SBA looks forward to continuing to working together. 

Thank you. I would be happy to answer any questions at the appropriate time. 

[Ms. Street’s statement may be found in the appendix.] 

Chairman MANZULLO. Really appreciate it. 

We are going to have a vote here in a few minutes. 

Mr. Beauprez, you have a witness here, constituent here, do you 

not? 

Mr. BEAUPREZ. I have both, Mr. Chairman. Thank you. 

Chairman MANZULLO. Why do you not go ahead and introduce 

your constituent and then we will continue our testimony and see 

how far we get. 

Mr. BEAUPREZ. Thank you, Mr. Chairman. 

It is a real pleasure today to introduce Kersten Hostetter, both 

a friend and a constituent of mine. Having managed several small 

businesses, Kersten Hostetter was asked to serve as the executive 

director of the MicroBusiness Development Corporation. 

Since the merger between Colorado Capital Initiatives, Pace 

Works, and Colorado MicroCredit, the new organization has rapidly 

become one of the premier microenterprise agencies in the country. 

Kersten brings the force of her considerable skill in business and 

even greater vision, and energy to an agency dedicated to creating 

opportunities for success in microenterprise clients throughout the 

state. Because of the scope and effectiveness of the MBD’s various 

programs, she has achieved national recognition for her work in 

her field. 

Kersten is striving beyond her commitment to financial opportunity throughout Colorado. She is also a champion for the financially disenfranchised throughout the nation. In addition to serving 

as chairperson of the board of directors for the Colorado Alliance 

of Microenterprise Initiatives, she also sits on the board of the national association, the Association of Enterprise opportunities. 

34

Her goal is economic justice through community involvement for 

all people, and under her leadership MicroBusiness Development 

Corporation is meeting that goal on a larger scale every year. 

Mr. Chairman, we are also joined today by Roberto Salazar. Roberto Salazar, and you can hold your hand up. Bob is the founder 

of a company called Safety Support Systems in Colorado, and is a 

user of the vary programs that we are conducing this hearing about 

today. And I had a chance to visit with him this morning; very 

proud of what he has accomplished, and living testimony to what 

these programs are all about. 

Lastly, Mr. Chairman, I would point out that it was a woman, 

a Mary Madison, who was running an SBDC office in one of the 

toughest parts of Denver in the Five Points area, that showed me 

around that neighborhood a few years ago, and ended up being a 

cause for the company I used to run, opening a bank in a very, very 

underserved community, and collaborating with Kersten and others 

in seeing the credit needs of microbusiness entrepreneurs as well 

as other small business people were met in a community that previously were going very underserved. 

So my compliments, and thank you for yielding to me, Mr. Chairman. 

Chairman MANZULLO. Well, that is quite a introduction. After 

that, Kersten, we expect some great testimony. I am sure it is 

going to come. 

Ms. Hostetter, we will start with you and see how far we get before these bells of tyranny come into disrupt our hearing. Look forward to your testimony. 

The lights there, green is go, yellow is you have got one minute, 

and red is put the brakes on. 

Ms. HOSTETTER. You have got it. 

Chairman MANZULLO. So we appreciate it. Look forward to your 

testimony. 

STATEMENT OF KERSTEN HOSTETTER, EXECUTIVE DIRECTOR, MICROBUSINESS DEVELOPMENT CORPORATION, DENVER, CO 

Ms. HOSTETTER. Thank you, Mr. Chairman, Ranking Member 

Velazquez, and Members of the Committee, especially Representative Bob Beauprez, for the opportunity to testify before you today. 

My name is Kersten Hostetter, and I am the Executive Director 

of the MicroBusiness Development Corporation, a microenterprise 

development organization Colorado, as well as the Director of the 

Association for Enterprise Opportunity, the national association of 

microenterprise development organization. 

I am here to testify today on the Program for Investment in 

Microentrepreneurs, known as PRIME, and in support of the Women’s Business Centers program. Before I discuss those programs 

specifically, I would like to tell you a little bit about microenterprises and their important role in the U.S. economy. 

Americans have always cherished the idea that they can build 

better lives for themselves and their children through hard work 

and sacrifice. Many people are trying to achieve this ideal by starting their own microbusinesses. These microbusinesses are small 

businesses with five or fewer employees and initial capital needs of 

35

$35,000 or less. They are located in both urban and rural communities. Many of these microentrepreneurs are low income, women, 

minorities, or disabled individuals. 

Unfortunately, hard work and sacrifice is not always enough. 

Two of the biggest obstacles these individuals face are lack of capital and the need of technical assistance. With capital and technical 

assistance, microentrepreneurs can grow their businesses, increase 

their personal income and support economic revitalization by providing job and commerce in economically distressed communities. 

In Colorado, there are more than 412,000 microenterprises—providing nearly one-fifth of the state’s total employment. In some 

rural communities these entrepreneurs create over 40 percent of 

the total employment. In other states, these figures are even higher. 

Locally-based microenterprise development programs provide access to credit, training, and technical assistance. Clients receive assistance in business plan development, market analysis, financial 

management, business assessments and other support services 

working with a provider for 10 or more hours of service in a given 

year. Microenterprise development programs are able to provide 

these services due in large part to several federally funded programs, including the Office of Women’s Business Ownership and 

PRIME. 

The SBA’s Office of Women’s Business Ownership is the only federal office that specifically targets women business owners. Its 

Women’s Business Centers provide training and technical assistance to women starting or expanding businesses. The centers are 

required to target services to economically and socially disadvantaged women, some of whom are microentrepreneurs. Last year 

alone, Women’s Business Centers provided consulting, training, 

and technical assistance to more than 80,000 women. The Women’s 

Business Centers are one of AEO’s top priorities. We echo the testimony of the Association of Women’s Business Centers, particularly 

on the issue of sustainability grants. 

The PRIME program was developed in concert with the microenterprise development industry, which saw the incredible unmet 

demand for services among very low-populations and the impact 

these services had on them. PRIME is unique among federal programs in that it specifically targets the needs of very low-income 

clients who may not need or want to borrow funds, but require a 

longer time frame for assistance. 

The PRIME program, along with private matching dollars, supports the work of MicroBusiness Development Corporation. 

Through the program, we were able to develop a business assessment tool that provides the small business owner with a clear technical assistance strategy to meet both short and medium range 

goals. 

We then work with the client over an 18-month period to review 

the use of recommendations, set new goals, develop and implement 

an action plan. 

Like you, the microenterprise industry believes in demonstrable 

outcomes for federal programs. In the first 17 months of the 

PRIME program, MBD has served 168 clients, using less than $700 

of federal funds per client. Eighty-eight percent of clients are low 

36

income, 50 percent are women, 51 percent are minority, and 18 

percent come from the rural communities of Colorado. The PRIME program is currently authorized to receive $15 mil- lion per year—this needs to be increased. Last year’s $5 million appropriation underfunded the program. The budget request to eliminate the program would have dire consequences for real businesses 

in Colorado and throughout the United States. 

Demand for microenterprise business is on the rise as many 

more families are turning to business ownership. Without your 

support, organizations like mine will have to reduce services to 

rural entrepreneurs like Roberto, who with time and consistent 

business development will change an industry, save lives and support his family and his community through a microenterprise. 

Chairman MANZULLO. How are you doing on time? We have got 

a vote coming up on my amendment. 

Ms. HOSTETTER. I was just about to say thank you very much for 

this opportunity. 

Chairman MANZULLO. Thank you. 

Ms. HOSTETTER. And I will be happy to answer any questions at 

the appropriate time. 

[Ms. Hostetter’s statement may be found in the appendix.] 

Chairman MANZULLO. This hearing is in recess for about a half 

an hour. 

[Recess.] 

Chairman MANZULLO. The Small Business Committee will come 

to order. 

Our next witness is Sue Whitfield who is my constituent. Sue 

has been the Director of the Small Business Development Center 

in care of the Entrepreneurship Department at McHenry County 

College since February of 1994. She has counseled over 1900 business owners entrepreneurs. She holds a professional certificate as 

one of three certified business consultants in the State of Illinois, 

recognized by the Illinois Small Business Development Association, 

and she is also one of their certified business specialists. 

We look forwards to your testimony. 

STATEMENT OF SUSAN R. WHITFIELD, DIRECTOR, MCHENRY 

COUNTY COLLEGE SMALL BUSINESS DEVELOPMENT CENTER, CRYSTAL LAKE, IL 

Ms. WHITFIELD. Thank you. Chairman Manzullo, Ranking Member Velazquez, and Members of the House Committee on Small 

Business, I am Susan Whitfield, Director of the Small Business Development Center at McHenry County College in Crystal Lake, Illinois. 

Thank you for the opportunity to share the critically strategic 

role of SBDCs in renewing our country’s economy, particularly 

manufacturing. 

The Committee suggested that I present a typical day within 

SBDC, to describe some of the services that SBDCs provide to manufacturer. I assure you that there is a real constituent behind each 

example that I present. 

The day begins at 7:30 a.m. with a meeting at the local chamber 

of commerce. The SBDS director requests the city staff refer a restaurant building purchaser to the SBDC for help with their busiVerDate 0ct 09 2002 16:12 Mar 19, 2004 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 G:\HEARINGS\92600.TXT NANCY
37

ness plan and loan proposal, gets an industrial part layout sheet 

from a developer for a client that is looking for a new location, and 

is pleased to find out that a local bank is adding a commercial loan 

officer to their branch expansion. This is a good start to the day. 

At the office, today’s e-mail list is long, and the phones start 

ringing with existing clients and new referrals from the SBA Web 

site, our congressional representatives, state representatives, 

banks, the county clerk’s office, chambers, the counseling center, 

and wildly advertised book on free government services. Callers 

frequently act surprised to be talking to a real, live person. 

Our office provides free counseling to approximately 250 clients 

per year. About half of our clients are already in business and are 

usually contacting us for assistance with expansions, loans, and 

marketing. 

Our phone call and e-mails deal with questions about I am starting a business and do not know where to start. Do you have any 

seminars or classes, Women’s Business Center PRIDE certification, 

Minority Business Enterprise, Small Business Innovation Research 

grants, and how do I get a government grant or loan for my small 

business? 

Our office tracks over 40 programs at the federal, state and local 

level. These programs are constantly changing their size, qualifications, purposes, missions, and how to be contacted. 

Seminars, entrepreneurship courses, Web sites and books are 

suggested, and if needed, appointments for counseling are made. 

Today we are called about a manufacturing client that is within 

30 days of becoming insolvent. After analysis of her situation, we 

suggested that she should instead, rather than getting a loan, try 

to renegotiate the terms of purchase with the original owner of the 

company. This strategy worked, and she avoided additional debt. 

This same business owner was afraid that a disgruntled employee might call OSHA. We recommended the free OSHA consultation available from the state that allows sufficient time to 

make improvements without penalties. 

We fit our context around our counseling session. Our morning 

client is in the electronic component industry. He wants to take advantage of the currently low interest rates to purchase his building, 

and he is writing a loan proposal that we will review. Our close relationship with the SBA 504 Certified Development Corporation 

will link him with a bank that is aggressively pursuing commercial 

loans. 

In addition, he needs to expand his sales, and we find out that 

he has done work for a government research lab in the past. We 

immediately call our procurement technical assistance center director to arrange an appointment to get him on the government bid 

lists. We also urge the client to attend the SBA business matchmaking event in Chicago this month. 

In the case of manufacturers, we try to visit their facilities, so 

let us go on a site visit. Our afternoon visit is to a metal fabricator 

that has the opposite problem of our morning client. This company 

recently won some defense government contracts and is also producing a component destined for export. Their manufacturing floor 

is so crowded that it is obvious that they need to expand their facilities. 

38

We work on a financing strategy to expand their current facility 

that may include an industrial revenue bond, the SBA, and a local 

revolving loan fund. Our host institution can also assist them with 

international trade, ISO certification and noncredit employee training. 

We end the day with an evenings ‘‘Starting a Business’’ seminar. 

This director enjoys doing the start-up presentation for two reasons: It provides us the opportunity to urge clients to use the resources of the SBDC, SBA, State of Illinois, and our host institution. We know that long-term SBDC clients create ten times the 

number of jobs, grow four times faster, and is twice as likely to survive five years than non-SBDC businesses. 

The SBDCs create more revenue than they cost the taxpayer, generating $2.09 in tax revenues for every dollar spent on the program. 

Second, the seminar reconnects us to the real reasons why 

SBDCs exist. As with our clients who are already in business, I see 

both the fear and excitement in the eyes of these potential small 

business owners. As a small business owner myself, I have been in 

their shoes as were my immigrant grandparents. 

These seminar attendees are on the verge of making a life-changing decision, to achieve one of the great American dreams, the 

dream of owning their own business. 

It is the role of the SBDC to support their efforts so that their 

business will be successful. 

I close this presentation to you in the same manner that I always 

close the seminar. We consider it to be our great privilege and our 

great pleasure to work with you who seeks success in small business. 

Thank you. 

[Ms. Whitfield’s statement may be found in the appendix.] 

Chairman MANZULLO. Well, thank you very much. 

Our next witness is Hedy Ratner, co-founder and President and 

co-president of the Women’s Business Development Center in Chicago, the largest and oldest, 18 years of most comprehensive women’s business assistance center in the United States. 

I have had the opportunity to visit the center. And Hedy, during 

the course of your testimony, have not had a chance to read it, but 

why do you not bring forth what you are doing for the people who 

are working to get off government assistance, and that Internet 

program—not the Internet—the——. 

Ms. RATNER. BusinessLINC? 

Chairman MANZULLO. Whatever that program is where you are 

teaching them and training them to be home care providers for 

children. 

Ms. RATNER. It will be my pleasure. 

Chairman MANZULLO. Thank you. 

Ms. RATNER. Before I start, I am trying to sweeten up the Committee. 

Chairman MANZULLO. What have you got there? 

Ms. RATNER. I want to sweeten up the Committee. 

Chairman MANZULLO. I should really give this——. 

Ms. RATNER. It is from Chicago. 

Chairman MANZULLO. I really should give this to Daryl Hairston. 

39

[Laughter.] 

Chairman MANZULLO. I am serious, because I am going to call 

and apologize profusely for taking out a bad program on him. He 

has done a marvelous job at the SBA, and the poor guy just happened to be sitting in the wrong seat at the wrong particular time. 

Sometimes, Hedy, as you know, I get very passionate about small 

business. 

Ms. RATNER. That is why we love you. 

Chairman MANZULLO. Well, yes, but there was no reason for me 

to take out my anger on him. I should have taken it out on the program. 

And Tee, did you call him and tell him I will be calling him to 

apologize? 

Mr. TEE. Yes, sir. He will be in until six. 

Chairman MANZULLO. Okay, I appreciate that. Thank you very 

much. 

Well, that is quite an introduction, and this has never happened 

before, and it does violate the gift ban. 

Ms. RATNER. No, it does not. No, no, I did not think so. 

Chairman MANZULLO. Hedy, we look forward to your testimony. 

STATEMENT OF HEDY M. RATNER, CO-PRESIDENT, WOMEN’S 

BUSINESS DEVELOPMENT CENTER, CHICAGO, IL 

Ms. RATNER. Thank you, Chairman Manzullo, the distinguished 

legislator from my home state of Illinois, and esteemed Members 

of the Small Business Committee who were here before. 

My name is Hedy Ratner. I am the co-founder and co-president 

of the Women’s Business Development Center in Chicago. The 

Women’s Business Development Center since 1986. 

Chairman MANZULLO. Hedy, could you move the microphone 

back just a little? 

Ms. RATNER. Oh, yes. 

Chairman MANZULLO. Not closer. 

Ms. RATNER. Oh, farther away. 

Chairman MANZULLO. Yes, just a little. 

Ms. RATNER. I have no voice. 

Chairman MANZULLO. That is okay. We are hearing you. 

Ms. RATNER. Is that better? 

Chairman MANZULLO. We are getting a little bit of a feedback. 

Ms. RATNER. Good. 

Chairman MANZULLO. Please. 

Ms. RATNER. Better? Yes. Okay. 

We provide business—I need another minute, you know. 

[Laughter.] 

Ms. RATNER. Okay, all right. 

Chairman MANZULLO. Let us restart the clock. 

Ms. RATNER. Good. 

Chairman MANZULLO. You do not miss anything either. 

Ms. RATNER. No. Since 1986, we provide business assistance to 

women and men in English and Spanish in the metropolitan area 

of Chicago and in the collar counties of northern Illinois. 

I am also representing the Association of Women’s Business Centers as a founding member, and a member of the Association for 

Economic Opportunity and supportive of their recommendations. 

40

Special thanks, Chairman Manzullo, for your interest in our 

Women’s Business Development Center. 

Chairman MANZULLO. Hedy, Manzullo was the alderman for—— . Ms. RATNER. Manzullo, Manzullo. 

Chairman MANZULLO. Manzullo was——. 

Ms. RATNER. Leader Manzullo, you are absolutely right. 

Chairman MANZULLO. This is a bad point, but we will restart the 

clock. No, you go ahead, please. 

[Laughter.] 

Ms. RATNER. I said Manzullo. Oh, dear. Only this time. It tells 

you how old I am, you know, and he is long gone. All right. 

[Laughter.] 

Ms. RATNER. I would also like to thank the Ranking Member of 

the Committee, Congresswoman Velazquez, for her tremendous efforts on support of Women’s Business Centers. 

The Association of Women’s Business Centers founded in 1996 

represent women business centers and the women business owners 

they serve. But let me cite a few pertinent statistics in order to 

provide the context for my testimony, and to support my entreaties 

to this distinguished Committee. 

Women-owned businesses are increasingly recognized as an important economic force. We number 6.2 million, employ 9.2 million, 

and generate $1.15 trillion in sales nationwide. In 1973, before the 

Women’s Business Centers existed, only five percent of all businesses were run by women. It is now over 28 percent. 

There are over 1.2 million women-owned firms, one in five, the 

fastest growing trend, that are minority-owned businesses, minority women-owned businesses. 1.4 percent of women-owned businesses, 1.4 have over 100 employees. The revenues of womenowned-and-run businesses is only four percent of majority-owned 

firms. But recent statistics indicate that 35 percent of all womenowned businesses still earn less than $10,000. But 113,000 majority-owned, privately-held women-owned businesses have revenues 

over a million, but that is only 1.8 percent. 

Although we are the fastest growing segment of the economy, we 

are earning nothing compared to male-owned businesses. We need 

your help to grow, to be successful, to thrive, to create jobs, to stimulate the economy. 

Many, many, many of these women business owners have received and continue to need information, guidance and training 

from the country’s Women’s Business Centers. Struggle they do, 

but empowered they become in child care, construction, technology, 

design, retailing, manufacturing, finance, agriculture and a multitude of service businesses. 

I am here today to talk about the future of the Women’s Business 

Center program. This 15-year-old-program has provided business 

training and counseling to tens of thousands of women in rural, 

urban and suburban communities throughout the U.S. In Illinois 

alone, our Women’s Business Development Center served over 

35,000 women and men—we do not discriminate—since our inception. 

There are now centers in 48 states that receive funding from the 

SBA Office of Women’s Business Ownership at a time when women 

41

are starting businesses at twice the rate of their male counterparts, 

women who are losing jobs and starting microenterprises to support their family, minority women and low-income women who are 

establishing businesses in order to sustain their families. 

We believe that the contributions of the Women Business Centers has been significant and are potential to make an even greater 

contribution to this entrepreneurial economy even more promising. 

Today, I want to address an important issue which to me is the 

burning issues facing our Women’s Business Centers, and that is 

sustainability, sustainability. 

As you can see by the sheer weight of numbers, demand for the 

services of the Women’s Business Centers has never been higher 

than it is now. In fact, in the past six months women’s participation in the Women’s Business Development Centers programs has 

doubled, doubled, doubled. But we, the supporters of women’s business assistance and directors of these successful programs are 

gravely concerned about the long-term viability of this program and 

our ability to continue to serve this dynamic, growing, demanding, 

and needy population of women entrepreneurs. 

As you asked, the Women’s Business Development Center was 

founded in 1986. We have served 35,000 women from those seeking 

to start small businesses as a means to transition off of welfare to 

those who are launching or expanding high-growth businesses. 

All our programs are taught in English and in Spanish in our 

downtown Chicago and neighborhood and suburban satellite sites. 

Fifty-five——. 

Chairman MANZULLO. You are over by about a minute. Are you 

about ready to close? 

Ms. RATNER. Oh, no, I cannot. 

Chairman MANZULLO. Yes. 

Ms. RATNER. Oh, God. Well, no, you gave me an extra minute. 

Chairman MANZULLO. No, what I will do is part of my questions 

I will ask you that question. Okay? 

Ms. RATNER. Yes, but can I finish? 

Chairman MANZULLO. How much time is it going to take? 

Ms. RATNER. I want to make some recommendations and then I 

will end. I promise. 

Chairman MANZULLO. I will let you make recommendations on 

my time. 

Ms. RATNER. Your time. 

Chairman MANZULLO. Right. All right. Okay, there will come a 

question time. 

Ms. RATNER. Can I conclude at least? 

Chairman MANZULLO. Yes. 

Ms. RATNER. Oh, good. 

Chairman MANZULLO. All right. 

Ms. RATNER. A fast conclusion. 

Chairman MANZULLO. Go ahead. 

Ms. RATNER. I want to thank you for providing us this opportunity to share our passion and our concerns for the future of the 

program. If we are to succeed in our joint mission to serve and prepare women business owners to run successful businesses, we need 

your support for sustainability. Give us the resources, let us work 

together to build on the program’s successes, and wisely protect the 

42

investment. To do otherwise is to standby and helplessly watch a 

great economic trend reversed. Please be that champion for us. 

Thank you. 

Chairman MANZULLO. Thank you. 

Ms. RATNER. You promise I can still give you the recommendations? 

Chairman MANZULLO. You bet. 

Ms. RATNER. Okay. 

[Ms. Ratner’s statement may be found in the appendix.] 

Chairman MANZULLO. Let me explain something to the witnesses 

here. Members of Congress come and go from these hearings. We 

are on multiple Committees. The testimony here goes up on the 

Internet, up on our Web site, is that right, Barry? And your testimony also filters through a live Internet system that has been 

accessed across the country, gosh, including my remarks. That 

must have been great. 

[Laughter.] 

Chairman MANZULLO. It is good it wasn’t televised. 

Ms. WHITFIELD. Springfield is listening. 

Chairman MANZULLO. What is that? 

Ms. WHITFIELD. Springfield is listening. 

Chairman MANZULLO. Oh, okay. But I do not want you to be disappointed that there are not a lot of members of Congress here because that testimony, a lot of the testimony is to build support for 

your programs with the general public, and then it comes back to 

us again in terms of people contacting the members of Congress, 

and you know, we have heard this, we have read this information, 

et cetera, on it. Okay? 

Our next witness is Lee Smith. Mr. Smith, you have already 

been introduced by your congressman. We look forward to your testimony. 

STATEMENT OF LEE SMITH, PROGRAM DIRECTOR, SOUTHERN 

ARIZONA BUSINESSLINC, TUCSON, AZ 

Mr. SMITH. Okay, thank you very much for the opportunity. I am 

excited and honored to have the opportunity to share my experience and some of my perceptions regarding the SBA BusinessLINC 

program. 

I brought some visuals because I think it is important to recognize what we have done with our—at least with our program and 

the difference between other programs that may exist in the SBA. 

Identifying and applying best practice methodology generally improves business operational efficiencies, and in most cases result in 

a more competitive posture in the marketplace. Facilitating the exchange of knowledge and expertise between large and small manufacturers is in itself a worthy goal of the SBA BusinessLINC program. 

Without question, market competitiveness is a key element of 

business success. However, many small business owners face other 

equally important challenges such as advertising, marketing and 

sales. In most cases, we know that small businesses tend to focus 

critical internal resources on delivery of products and services, and 

really lack the expertise and the resources to move beyond that. 

43

And what we are saying is in this part of the program the mentor protegee, which again several other programs that are represented today do a terrific job in helping businesses become educated about better practices and how to implement those practices, 

but we thought, at least in our area, that was not enough for what 

our small business community was indicating to us where their 

need went. 

To more efficiently respond to the unique needs of and issues of 

southern Arizona’s manufacturing associated businesses, we expanded our BusinessLINC program focus, and we will show that on 

the next chart, to include and encompass all areas of business operation. Our goal was to maximize small business retention and expansion impact to the region through the leveraging of collective 

local, state and federal economic development resources, and the 

utilization of public and private sector expertise to work in concert 

with us with this effort. 

We prioritized areas of program focus and identified tasks and 

associated resources in our community that could support each of 

those areas of focus. We also at the same time developed an overall 

program coordination and accountability system that included 

tracking and reporting of field staff activity and deliverables. And 

we used this information for continuous improvement and evaluation, and also for our investment for our partners’ consideration. 

We engaged southern Arizona economic development community 

organizations to enlist program support and participation, and we 

have been very, very successful at doing that. 

The areas of focus are, of course, mentor protegee, and our goal 

there was to identify and apply best practices. Our methodology 

there was to facilitate access to existing resources that could provide that sort off support, and we certainly have parallel working 

relationships with our local SCORE, SBDCs, Women Business Centers, and a number of economic development organizations as well 

as community volunteers. 

The second issue which we think is the most important of where 

we were going is we wanted to maximize product and service 

awareness of our local resources, and we did that by creating a 

database at the grass roots level that is much more than a yellow 

pages directory. We wanted an interactive database that buyers 

could quickly go in. They could quickly screen on all sorts of levels 

and only get the pertinent companies that they are looking for. And 

instead of looking for 50 machine shops on a return, you would get 

I want woman-owned, I want ISO certified, I want—our database 

is up and running and we are very proud of that. 

We currently have over 1500 companies listed in our database, 

and please understand that our program started 18 months ago 

from scratch. We developed this database. We implemented the 

field staff to promote companies coming in through partnerships 

throughout the region. 

A very important element of what we do is identify needs, and 

we do that with our field staff that aggressively engages in our big 

business communities with Mexico, looking at products and services that we can sell in Mexico, and the success of that is the engagement of our staff in those levels of community. 

44

So once we identify those needs, we also want to know why people are making the decision to buy outside of our area, and so that 

is where we have put a lot of our focus. 

I hope that my testimony today has provided you cause to consider larger possibilities for the BusinessLINC program through 

what we have done in a short amount of time. I urge you to continue funding for the program. It means a lot to our small business 

community. 

Thank you. 

[Mr. Smith’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank you very much. 

Mr. Smith, this database that you developed, could you explain 

how you developed it and how people access it? 

Mr. SMITH. I would be proud to. 

I have been in the business for about 2,000 years, both on the 

government side and the private sector side, and we are very integrated into our small business community in southwest Arizona. 

We represent five counties in the area in our program. 

What I felt was imperative was to be able to create a database 

that not only we could coach companies to totally profile their capabilities, their products and services, their capacities, all the things 

that a buyer would be interested in knowing about a company before he made contact, he or she made contact with the company. 

There is a lot of—it is kind of counterproductive in the procurement areas. All small businesses want access to buyers. Buyers are 

overwhelmed with people wanting to get in and do that. And so 

they sort of shut down when it comes to that interaction. 

What we have tried to do through this database is to—we actually go out and train procurement offices how to use that database, 

how to effectively use it, that it exists. We also provide assistance 

with staff members to work with procurement people if they do not 

find those resources to again network in the community. So we actually from scratch developed a database that has—you can search 

by word capability, you can search by products and services. We 

have made it very easy for anyone to go in and search and look for 

products and services that exist. 

Chairman MANZULLO. So you get the companies that want to 

buy. You have about 1500 companies? 

Mr. SMITH. That want to sell. 

Chairman MANZULLO. I am sorry. That want to sell. 

Mr. SMITH. The ones on the database is the sellers. 

Chairman MANZULLO. Are those government agencies also or just 

private companies? 

Mr. SMITH. Most of what we, and I will be frank with you, we 

have several large defense companies in our area. 

Chairman MANZULLO. That is okay. They buy. 

Mr. SMITH. They are tough to work with. They are very tough 

to work with, and where we are finding our success is small businesses collaborating with other small businesses or selling to other 

small businesses. That is the backbone of our program. 

What we have done through the database is provided a central 

place where people can look locally and find opportunities there. 

Chairman MANZULLO. And they can be accessed at their home or 

business? 

45

Mr. SMITH. Anywhere. 

Chairman MANZULLO. So they just key into it, and is it done according to NAICS numbers? 

Mr. SMITH. We decided not to do that, and I will tell you, and 

we have had the—the state has been so excited about our model, 

they want to now move it statewide. We decided to get it to its simplest form so that small—most small businesses cannot tell you 

what their codes are. 

Chairman MANZULLO. What the number is. Go ahead. 

Mr. SMITH. Most buyers do not buy by code. Most buyers will go 

in and say I am looking for machine services. I am looking for plastic injection molding. They do not use the code. 

So what we did is tried to take it to the simplest interactive understandable database, and we think we have done a terrific job in 

doing that. But now the state is coming in and say, well, we need 

those kind of codes primarily for documenting information on who 

is using what codes and so forth; not so much what buyers are telling us. 

We developed this working with small businesses and working 

with buyers in concert to bring together something that made sense 

to everybody. 

Chairman MANZULLO. The success of the database, in how many 

months, how many months has it been up? 

Mr. SMITH. Eighteen months from scratch. 

Chairman MANZULLO. The success of it, how many hits, how 

many times——. 

Mr. SMITH. We average 20,000 hits a month. 

Chairman MANZULLO. Okay. 

Mr. SMITH. We average 1500 visits, and the visits are what are 

really the key number, because those are folks looking for something. 

Chairman MANZULLO. And how about completed contracts, actual 

contracts? 

Mr. SMITH. We have had—in 18 months we have had over, a 

total of about $57 million in new contracts to small businesses. 

Chairman MANZULLO. And how many contracts would that be? 

Mr. SMITH. We are looking at in excess of 70 companies, 70 contracts that make up those. The majority of those—we had one large 

defense contractor that came into southern Arizona that was typically buying, and this is probably not good in commerce, but Congressman Colby has been a good mentor for me this, typically came 

from California because of competitive pricing perception in Arizona, but they continue to buy products and services out of California and offshore. 

And what we were able to do through the BusinessLINC program, we go in and work directly with procurement agencies and 

officers. We do not represent any individual company. We represent 

whatever is in that database. And what we do is open doors. We 

want to know why you are not buying it; going back to our small 

businesses and saying here is some hurtles. 

Chairman MANZULLO. So when a small business attempts to get 

a contract and is rejected, then you can tell them why that happened. 

46

Mr. SMITH. I absolutely go in. I talk the language of procurement. 

Chairman MANZULLO. Does anybody else have a computer like 

this? Hedy? 

Ms. RATNER. We have a BusinessLINC project in Illinois with 

SBA funding. 

Chairman MANZULLO. Is it similar to his? 

Ms. RATNER. I am not sure if the exact system is similar. But the 

way the system works, yes. But ours is targeted only to minority 

and women-owned business, so that is all certified women and minority-owned businesses that are certified in any capacity, either 

private sector or government sector. 

Our program has about 600 minority and women-owned businesses that are registered with a full profile. It is a very, very detailed profile. And our corporations, and we work with corporations 

as well as local government agencies, so we now have six corporations that we train, and we train their buyers, so we train individual buyers of products and services that minorities and women 

can provide. 

And then we are——. 

Chairman MANZULLO. You train the buyers? 

Ms. RATNER. Pardon? We train the buyers. 

Chairman MANZULLO. You do too? 

Ms. RATNER. Yes, we do to. 

Mr. SMITH. We absolutely. For example, we have spent, I have 

a staff person through the funding we have been able to acquire. 

Thank you for your investment. And we have leveraged that. I 

have a full-time person, for example, that literally moves throughout Sonora, Mexico, going to the large manufacturing companies, 

sitting down with their staff, making them aware that the database 

exists, and working to close deals in terms of introductions between 

our small businesses and their needs. 

Chairman MANZULLO. You have the same thing, Hedy? 

Ms. RATNER. We do exactly the same thing, but not just corporations. What we work with is major corporations, with their purchasing departments, but with their specific buyers, but we also 

work with small—with the City of Chicago, Chicago Housing Authority, Chicago Park District, Chicago Public Schools. 

Chairman MANZULLO. Government buyers. 

Ms. RATNER. Smaller—yes, the government buyers from the various government agencies who have a commitment to do a certain 

percentage of their business with minorities and women, and are 

not reaching their goals. 

Chairman MANZULLO. Okay. And then the cost, Mr. Smith? 

Mr. SMITH. There is no cost to either participate in the database 

and there is no cost to use the database to search. 

Ms. RATNER. Same thing with us. 

Chairman MANZULLO. May have a job for you. 

[Laughter.] 

Chairman MANZULLO. An additional job. 

The cost to set up the system? 

Mr. SMITH. We have an investment to date of about, and this 

would be the—well, we have a two-year approval of about $250,000 

each year of federal funding, and we have equally matched that, 

47

and this is significant. The State of Arizona is not rich, and MEPs, 

for example, have not been able to get one dime out of the state 

to support an MEP program. We were able to acquire matching 

funding to the tune of $50,000 each year because of leveraging 

what you have. 

As a matter of fact, this year, as of March, the state has appropriated $200,000 to the City of Tucson to consult with them again 

to open this database up statewide. 

A key that I think we have is we do not focus on government 

work. Maybe we should. But right now we focus on—our community is saying we need new revenue opportunities regardless where 

they come from, and we focus on just matching those opportunities. 

We work very closely with the U.S. Department of Commerce 

Trade Office and they give us international leads, and we also work 

with the Arizona Department of Commerce, their international department. 

One thing that Congressman Colby has indicated, would it not 

be wonderful to expand our program to export our products and 

services, and one small example, we had Bombardier, Ireland, 

which is an aircraft manufacturer, send out a national seeking for 

aircraft parts and components. We, in conjunction with their team, 

had two Tucson companies qualify for those parts. One of those 

companies was less than 25 employees and was woman-owned. 

This program is huge. It is baby steps, but I think it is taking 

us in the direction where we are delivering, through BusinessLINC 

we are delivering what the small business community needs. They 

need training. They need information, but they need opportunity. 

And I think the City of Tucson, our government, the state, the feds, 

it carries clout when we go in with a program. 

I have in your package, you will see a letter from the 

machiladores in Mexico saying this is a great program because they 

are losing trade to China. We are in there trying to bring business 

solutions at the small business level which requires a lot of collaboration. I have never seen in my tenure with public service so many 

communities coming together with the same goal as what can we 

do to get in the next level of manufacturing supplier development. 

More so the governor of the State of Arizona, this is one of their 

top three initiative, is supply chain development based on what we 

have built in the BusinessLINC program. 

Chairman MANZULLO. Next time you are in town I would like to 

sit down and have coffee with you and discuss further. 

Mr. SMITH. It has been 30 years, sir, since I have been in Washington. 

Chairman MANZULLO. I will be Strom Thurmond’s——. 

Mr. SMITH. But I will come anytime. This program has merit. 

Chairman MANZULLO. It is great. 

Mr. SMITH. And I am available. 

Chairman MANZULLO. We will talk to you later on. Thank you. 

Ms. Velazquez. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman, and I guess I am 

going to borrow a page from the other side of the aisle just for two 

seconds. But it seems to me that the bureaucrats here in Washington do not understand the importance and the rule that 

48

BusinessLINC and microenterprise programs are doing for small 

businesses in America. 

How could you explain with the success that Mr. Lee is explaining to us, that this program is not even mentioned in the legislative package that was submitted by the administration. 

So, Mr. Chairman, it is really nice to say you are doing a wonderful thing, but it is another to make sure that this program is put 

back into the legislative package; that we provide the necessary 

funding to make sure that it works. 

Chairman MANZULLO. If you would prepare a letter to that effect, 

I would be glad to sign onto it to help restore the funding on that. 

Ms. VELAZQUEZ. All we need to do, Mr. Chairman, is to put it in 

that reauthorization. They did not include it. We are going to send 

a message back. 

Chairman MANZULLO. We will do it. 

Ms. VELAZQUEZ. Okay, thank you. 

You see, we solved one of your problems today. 

Mr. SMITH. Thank you very much. 

Ms. RATNER. Ours too. 

Ms. VELAZQUEZ. Okay. But we have some people here from the 

administration, especially from SBA, so Ms. Johnson, you are in 

the hot seat today. I am sorry. Kaaren? 

Ms. STREET. Street. 

Ms. VELAZQUEZ. Oh, yes, okay. I am sorry. 

Ms. STREET. That is okay. 

Ms. VELAZQUEZ. Ms. Street, in your testimony you talk about the 

numerous achievements of the entrepreneurs development programs, and we all, the members of this Committee, we all recognize 

that many of these SBA programs have been extremely successful, 

especially in a district like the one that I represent. 

However, as I mentioned before, the legislative package submitted by the administration sends a very different message. The 

package called for nearly flat funding for all ED programs over the 

next six years. 

Do you recall believe that this program will be able to continue 

operating effectively if they are continually flat funded, which is effectively a cut with inflation? 

Ms. STREET. I think the funds that we have put in the budget 

for the 2004 budget is adequate in order to meet the needs of the 

requirements. We have—this year’s funding, we have reached 1.5 

million small businesses or new pre-start-ups, and that is with the 

current funding, and that is an increase of about at least over 

200,000. 

Ms. VELAZQUEZ. When was the legislative package submitted to 

us? 

Ms. STREET. The 2004 legislative package? 

Ms. VELAZQUEZ. Yes. 

Ms. STREET. I am not sure. 

Ms. VELAZQUEZ. When was it submitted? 

Ms. STREET. February. February. 

Ms. VELAZQUEZ. Okay. Even factoring September 11, the economic recession, unemployment rate, you come here and you tell us 

that that is sufficient. 

49

Ms. STREET. Yes, because what we have done, even with all that 

you just mentioned, we were able to increase our numbers with the 

flat level funding for the previous year. So we are assuming that 

with flat level funding, and with more technology, using more of 

the Internet, that we will be able to reach far more than even the 

1.5 million with the current existing budget. 

Ms. VELAZQUEZ. Ms. Ratner, would you comment on that? 

Ms. RATNER. Yes. Is this the time that I can give my recommendations? 

Ms. VELAZQUEZ. No, this is on my time. 

Ms. RATNER. Oh, sorry. 

Ms. VELAZQUEZ. You can give it on his time. 

Ms. RATNER. No. Because of the changes in the priorities and the 

various initiatives, it would be very difficult. Our organization has 

been in existence for 18 years. The federal funding that we have, 

for instance, our BusinessLINC project, and Office of Women’s 

Business Ownership is critical to sustain our program, and to continue our program. 

We serve thousands and thousands of minorities and women, especially helping women off of welfare, working with low-income 

people. No, we could not continue our programs. 

Ms. VELAZQUEZ. Thank you. 

Ms. Hostetter, in your testimony you discussed the success of 

PRIME in serving low-income entrepreneurs in Colorado. As you 

know, the administration has again requested zero authorization 

for the PRIME program. 

Can you please tell the Committee what will happen to the 

MicroBusiness Development Corporation services if PRIME Is not 

funded again? 

Ms. HOSTETTER. Absolutely. Our microbusiness assessment program would not be available for any rural microenterprises in Colorado, and we would have to cut at least in half the businesses that 

we are serving in the urban area of Denver metro. 

Ms. VELAZQUEZ. What would you say to those program critics 

that say that PRIME is duplicative of exiting services available to 

low-income entrepreneurs? 

Ms. HOSTETTER. I would say that the SBDC programs are important and they are wonderful, but they do not reach microentrepreneurs. Microentrepreneurs have very specific needs and challenges, and need programs that are within their community to 

serve them. 

The PRIME program very specifically targets microentrepreneurs, women, minority-owned businesses, low-income entrepreneurs. And without PRIME, there are microbusinesses all over 

the country who would not receive very specific individualized services for their business to help them grow and flourish. 

Ms. VELAZQUEZ. Thank you. Ms. Street, in your testimony you 

stated that the Women’s Business Center has generated the least 

revenue per dollar spent in comparison to other entrepreneurial development programs. This seems to suggest that the administration 

believes that the nature of this program is being called into question. 

Can you please clarify your statement for this Committee? 

50

Ms. STREET. Sure. I mentioned that the Women’s Business Centers cost per client was higher than other programs within ED; not 

that they were not doing their—providing the services. They do an 

excellent job. They have been—in fact, trained and counseled more 

than 85,000 women-owned businesses. So we are very happy with 

the Women’s Business Program. 

We think it is a great program, and certainly reaches the market 

that is not being reached by other programs. So we are not proposing an end to this program. We think the program——. 

Ms. VELAZQUEZ. I hope you are not. 

Ms. STREET. No, no, absolutely not. I would not be commit doing 

it, that is for sure, but that is not our intention at all. Our intention is to expand this service throughout the country. We have so 

many organizations around the country who want to be part of this 

network, and to provide those services, and that is what we are 

looking to do in the reauthorization. 

Ms. VELAZQUEZ. The administration has taken the position that 

sustainability pilot for the Women’s Business Centers should be allowed to expire. This could mean that those centers who focus on 

serving low income and minority populations could be shut down. 

While the clients are plentiful in this area, it can often be difficult 

to raise dollars in this area that are necessary to become self-sufficient. 

In your testimony you rationalize this cut by claiming that dollars need to be used to set up new centers. My question is, at what 

cost will these new centers come? Would you agree that if we increase the overall funding that would meet two goals—continuing 

to serve low-income areas where the program has been successful, 

as well as expanding the program to serve new areas? 

Ms. STREET. We could also reach those same goals by those centers who can sustain themselves beyond. It is not that proven that 

because sustainability expired that all the centers would close. We 

do not even know if any of them will close. We have not had that 

experience yet. However, with the $3.6 million, which is part of the funding, we 

could open 24 new centers with those dollars. I am not saying 

that—I am sorry? 

Ms. VELAZQUEZ. How are we going to serve in low-income communities those minority, low-income people who have been on welfare, get off welfare, and raise the money to run the center? How 

do you think they could achieve that? 

Ms. STREET. Well, hopefully, the 24 that would be coming in, 

there would be also adding more minority and low-income people 

to those rolls. It is not that there are going to be 24 new centers 

going into high-income areas. Those areas would also be serving 

minority that are not being served currently. 

Ms. VELAZQUEZ. When we look at the numbers, and we show you 

the numbers of the clients that come to those centers——

Ms. STREET. Right. 

Ms. VELAZQUEZ [continuing]. We know because the numbers are 

telling us that some of these centers are—for the most part these 

centers are not reaching out to minority women. So if we have 

those centers that are reaching out and serving that population 

that has been neglected, now you are going to tell me that we are 

51

not going to provide the resources for those centers to continue to 

do their job. 

Ms. STREET. Well, no, that is not what I am saying. What I am 

saying is that with the opportunity to open new centers, you certainly expand the base for minority and women and low-income 

women to provide that service. 

We are not saying that because we are not——. 

Ms. VELAZQUEZ. If they are unable to raise the money and they 

do not get the sustainability grants, how do you think they will 

continue to operate? 

So you are going to open 24 to serve other people. 

Ms. STREET. Okay. The congressional intent was for the Women’s 

Business Centers to be able to sustain themselves over a period 

after the five-year period was up in the first phase. Many of those 

centers are now in the seventh and eighth year, and part of their 

agreement with us was that they were supposed to be able to selfsustaining, that the sustainability pilot was just that, a pilot. It is 

not written into law that it is a continual, and that is what is on 

the table now——

Ms. VELAZQUEZ. Okay. 

Ms. ALEMAN [coninuing]. In terms of for you all to decide. 

Ms. VELAZQUEZ. We will decide here. 

Chairman MANZULLO. Mr. Beauprez. 

Ms. VELAZQUEZ. Thank you. 

Mr. BEAUPREZ. Thank you, Mr. Chairman. This has been a good 

hearing. I am glad I could attend. 

From my personal perspective, I want to pursue another, I think, 

part of the issue, and Ms. Whitfield, I think you brought it up, 

bank referrals. And I know there is a perception out there, at least 

by some, that banks do not like to make loans. I would just state 

for the record that banks are in the lending business. Banks have 

another obligation. They are not loaning their own money. They 

are actually loaning the public’s money. The public thinks they 

ought to get that back, so banks tend to like to reduce risk of that. 

Sometimes that means that good credits, good characters, good 

ideas that lack either the historical track record, ability to repay 

or perhaps collateralization in some cases are not ‘‘bankable’’ but 

banks nonetheless see them as credit worthy. 

I know from my own experience we made a number of referrals 

to the SBA or appropriate microcredit agency. We worked with 

Kersten. 

I would invite you, Ms. Whitfield, Kersten, Hedy, whomever, to 

respond to that, and I am wondering if there is anything that 

maybe this Committee, the network could do to further enhance 

that relationship, because working the other way too. Banks always like to see more credit worthy borrowers, and there has been 

a good exchange at least, I think in Colorado, Kersten, of kind of 

migrating people through that. And Mr. Smith, you spoke of it, 

growing the business to the next level, where do you go from here. 

So can you respond? Is there anything really that we could be 

doing to improve that whole network arrangement of finding people, and putting people in the right place at the right time? 

Ms. WHITFIELD. One of the things that we do, because we are frequently approached by businesses who are in the process of trying 

52

to get a loan, so we develop a comprehensive financial strategy. It 

is not just let us go to the bank and get an SBA loan. We take a 

look at all of the possible resources that are available in structuring that loan. 

We assist in writing that business plan and reviewing it, and 

this really assists the bankers because they get a much better prepared client, a client who is more likely to be successful. It makes 

them a better customer, a better repeat customer as that business 

continues to grow and to go on. 

That is the resources that we offer. One of our challenges is getting that detailed financial analysis. As long as they have got to 

bring in their existing financials, we could be doing very detailed 

ratio analysis for them. We have computer-assisted software that 

we could use if we have the time and the personnel to provide that 

service. 

We are working at absolute capacity at this time. We can help 

them with break-even analysis, decisions as far as how they are 

supposed to be pricing their product, but we do not have that ability because of lack of resources. 

Mr. BEAUPREZ. Yes, let me pursue that just a little bit if I can. 

Chairman MANZULLO. Mr. Beauprez, could I interrupt you a second? Could you mind chairing the rest of the meeting? I have to 

be at a manufacturing meeting at five o’clock. 

Mr. BEAUPREZ. Be glad to. 

Chairman MANZULLO. To finish up with the rest of the questions, 

a couple of suggestions from Ms. Ratner. Do you want to come 

around here and take this? And I have to leave. 

Mr. BEAUPREZ. [Presiding] Thank you, and if I can, I will continue my questioning. I was hoping you would not take this, Mr. 

Chairman. 

[Laughter.] 

Mr. BEAUPREZ. That is really the only reason I came up here. 

[Laughter.] 

Mr. BEAUPREZ. One of, again, my personal observations is that 

many credits come in my case to the bank that are a great idea, 

maybe they have even initiated their own business. They know how 

to make a product or provide the service. Sometimes they get very 

intent on that because they know it, they love it, they do it well. 

They kind of, you know, bend over, all you see is elbows and the 

producing, and some of them work themselves literally to the bone 

almost to the point of death, and then they raise up some day and 

say, I have been working very hard but the harder I work, the 

behinder I get, that phrase. 

Talk to me about what you can provide or ought to be providing 

that somehow is not being done. 

Mr. Smith, I was very intrigued by what you are doing with your 

database, but I think that there is elements even beyond that. I 

like the mentoring idea. I love that word at least. 

And let me start with Ms. Hostetter and then anybody else who 

maybe wants to jump in because I think the assistance that we 

need to be providing, and I want to make sure we are in this program, goes far beyond just the credit necessary. Ms. Hostetter. 

Ms. HOSTETTER. Thank you. 

53

Through the PRIME program we were able to create a program 

called the microbusiness assessment, which is a business assessment tool unique and individualized for each one of the businesses 

that we serve. It looks at nine fundamental elements of business 

ranging from market plan and sales development, all the way 

through human resources. There is two hours spent on the site 

with the business owner, with the business consultant, and a tool 

that we had developed through PRIME for the business consultant 

to use while interviewing the client. 

After the business consultant meets with the client, they then 

meet with a group of seven to nine other consultants and staff 

members from MBA who review the report, review all the materials from the client, and then develop a report to the client specifically looking at the weaknesses and the strengths of the business, 

looking at the goals of the business owner, and how the business 

owner can get to their stated goals. 

We primarily have developed the program not to receive credit, 

but to grow business. That is why we developed the program. 

PRIME asked us to be innovative and to create something that 

could be replicable throughout the country, and that is what we 

did, and it is very, very specific to the business owners, and it specifically looks at those stumbling blocks, those barriers that the 

business owner has created or are happening in the particular sector. But because the business owner is wearing all of the hats of 

a microentrepreneur, they cannot see. And so it allows them to 

have an outside view, and it is something that big businesses get 

often, but they do it for thousands and thousands of dollars. These 

are low-income individuals who cannot afford that. 

So the PRIME program has enabled us to develop this unique 

program for business owners, and then we track that. We get in 

touch with them within two weeks after receiving their report to 

make sure that they have understood it, and that they agree with 

it, and that they know what their next steps are. And then six 

months, 12 months and 18 months, we continue to get together 

with the business owner, review the report, and make sure that 

they are implementing the plan. 

Mr. BEAUPREZ. I think that is critically important, and I applaud 

you for that, and I think it important that we got it in the record, 

because that is part of the resources that are being expended in 

this program that I think bear good fruit. It goes well beyond, 

again, just the credit part. 

Mr. Smith? 

Mr. SMITH. May I give an example of how our program works in 

concert with these type of programs, exactly this type of thing? 

We had a local company that was in the recycling business. Their 

product was taking plastics, believe it or not, plastics and sawdust, 

recycling that, and turning it out in products. They needed to buy 

a large piece of equipment that could greatly improve their efficiency to do that, and of course we’re looking for where do we go 

to find loans, where do we go to find grants. 

BusinessLINC is not so much in that area of where we direct our 

attention. We are more in the area of can we deliver commerce for 

your company. But in working with this company and finding other 

resources, as a matter of fact we found companies that were taking 

54

sawdust to our city landfills, and they were paying to do that. And 

we networked them with this company that was looking for that 

raw material, and so now they are not paying, he is not buying raw 

material. 

We have large pecan orchards south of our city. They heard 

about the program, and said how can we get rid of all of our shells. 

They indicated, the guy that does the environmental stuff said, 

hey, let us try it, and it actually made the new product look like 

wood, red. So now he gets free there. 

He builds components. We built is revenue up. The pecan orchard is now buying containers of this new environmental material 

to ship their product, and we have helped direct them to a PRIME 

organization now because they have the revenue, now because they 

have potential sales, it looks like they are going to be able to get 

loans for that equipment. 

So that is a great example of how the programs that you see do 

work in concert when I think they are done well, when we do not 

try to duplicate what we are doing. And I think each of us on the 

panel would agree, we work very hard to make sure that we are 

not duplicating because it is everything in terms of funding consideration. It is everything in terms of investors looking at us and saying, well, why should we pay three places for the same thing. 

Mr. BEAUPREZ. Well said, sir. 

Mr. SMITH. So there is an example for that. 

Mr. BEAUPREZ. Ms. Ratner, memory serves me that you had 

some recommendations you wanted to enter into the record. 

Ms. RATNER. Yes, I do. Yes, exactly. 

Mr. BEAUPREZ. This would be a good time. 

Ms. RATNER. Thank you very much. I appreciate that. 

Mr. BEAUPREZ. You can call me Manzullo or whatever you want 

to call me. 

Ms. RATNER. I would also like to just comment on something that 

Congressman Velazquez said, and some estimate of numbers of 

programs that would not continue if they were not continually 

funded. 

We are estimating that approximately 50 to 75 percent of all 

Women’s Business Centers would close or severely curtail their operations if the SBA in its business centers grants were eliminated, 

50 to 75 percent. 

And without the strong network of experienced sites, we are 

doomed to repeat old mistakes. The centers that have been funded 

under the sustainability grants pilot project have developed the resources, contacts, relationships, and support systems to sustain the 

women business owners. 

Some of the newer centers that will be developed and the ones 

that have been developed will have a very difficult time being able 

to provide the services and programs that the existing centers currently have. 

So my recommendations are that the sustainability program be 

made permanent, and allow all compliant Women’s Business Centers to be evaluated for federal funding every five years. 

The second recommendation would be what seemed to us in the 

testimony that sustainability was obviously not a priority, but to 

make sustainability a priority for the Women’s Business Center 

55

program and a plan for the program’s future. Sustainability grants 

support Women’s Business Centers with a demonstrated capacity 

to meet the goals of the Women’s Business Center program. 

Some of the comments you were saying about how do we have 

bankable businesses, that is what we are about. We are here to 

build the capacity of microenterprises, small minority and womenowned businesses to be able to be bankable, and we provide the 

technical assistance to build their capacity so that they are, and we 

develop partnerships with banks to do just that. 

We can do that because we have been in business a long time. 

Some of the smaller centers that are just getting started cannot 

build those relationships because they have not established their 

credibility. 

There are currently Women’s Business Centers in 48 states. We 

urge, the Association of Women Business Centers, Congress to invest in what it has already created. In fiscal year 2004, when the 

25 Women’s Business Centers funded in 1999 are eligible for sustainability grants, the funds allocated under this program will not 

be adequate. Experienced programs with capacity will not be funded. This does not make good business sense. 

My third and last recommendation is to increase the authorized funding levels for the Women’s Business Center program to $14.5 

million for fiscal year 2004, $16 million in 2005, $17.5 million in 

2006. 

Over the past 15 years, Congress and the SBA and the Federal 

Government have invested in the development of an infrastructure 

for Women’s Business Centers. It now provides essential training 

and technical assistance. The fiscal years 2003 appropriation for 

the program stands at 12.5. It is inadequate if the program is to 

cover the country. 

Thank you. Thank you very much. 

Mr. BEAUPREZ. Thank you, Ms. Ratner. 

This has been an exceptionally good hearing. I thank all of the 

witnesses that have come. Thank you for your patience with bells 

of tyranny that we had to deal with in the middle, and I especially 

appreciate your testimony. It has been most helpful and I look forward to a good appropriations season, and certainly this Committee 

will be advocating on your behalf. 

Thank you all very much. 

Ms. RATNER. Thank you. 

Mr. BEAUPREZ. This hearing is adjourned. 

[Whereupon, at 5:34 p.m., the Committee was adjourned.]

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