U.S. GOVERNMENT PRINTING OFFICE

67–090 WASHINGTON : 2000

THE PRESENT AND FUTURE OF E-COMMERCE FOR

SMALL BUSINESSES IN THE PRIVATE SECTOR

AND WITH FEDERAL GOVERNMENT AGENCIES

HEARING

BEFORE THE

SUBCOMMITTEE ON GOVERNMENT PROGRAMS

AND OVERSIGHT

OF THE

COMMITTEE ON SMALL BUSINESS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

WASHINGTON, DC, APRIL 11, 2000

Serial No. 106–50

Printed for the use of the Committee on Small Business

(

(II)

COMMITTEE ON SMALL BUSINESS

JAMES M. TALENT, Missouri, Chairman

LARRY COMBEST, Texas

JOEL HEFLEY, Colorado

DONALD A. MANZULLO, Illinois

ROSCOE G. BARTLETT, Maryland

FRANK A. LOBIONDO, New Jersey

SUE W. KELLY, New York

STEVEN J. CHABOT, Ohio

PHIL ENGLISH, Pennsylvania

DAVID M. MCINTOSH, Indiana

RICK HILL, Montana

JOSEPH R. PITTS, Pennsylvania

JOHN E. SWEENEY, New York

PATRICK J. TOOMEY, Pennsylvania

JIM DEMINT, South Carolina

EDWARD PEASE, Indiana

JOHN THUNE, South Dakota

MARY BONO, California

NYDIA M. VELA ́ ZQUEZ, New York

JUANITA MILLENDER-MCDONALD,

California

DANNY K. DAVIS, Illinois

CAROLYN MCCARTHY, New York

BILL PASCRELL, New Jersey

RUBEN HINOJOSA, Texas

DONNA M. CHRISTIAN-CHRISTENSEN,

Virgin Islands

ROBERT A. BRADY, Pennsylvania

TOM UDALL, New Mexico

DENNIS MOORE, Kansas

STEPHANIE TUBBS JONES, Ohio

CHARLES A. GONZALEZ, Texas

DAVID D. PHELPS, Illinois

GRACE F. NAPOLITANO, California

BRIAN BAIRD, Washington

MARK UDALL, Colorado

SHELLEY BERKLEY, Nevada

HARRY KATRICHIS, Chief Counsel

MICHAEL DAY, Minority Staff Director

SUBCOMMITTEE ON GOVERNMENT PROGRAMS AND OVERSIGHT

ROSCOE G. BARTLETT, Maryland, Chairman

MARY BONO, California

PATRICK J. TOOMEY, Pennsylvania

RICK HILL, Montana

DANNY K. DAVIS, Illinois

RUBEN HINOJOSA, Texas

CHARLES A. GONZALEZ, Texas

NELSON CROWTHER, Counsel

(III)

C O N T E N T S

Page

Hearing held on April 11, 2000 .............................................................................. 1

WITNESSES

Lee, Deidre, Administrator, Office of Federal Procurement Policy ..................... 3

Summers, Max, State Director, Missouri Small Business Development Center 13

Knott, Scottie, Director, JECPO, Defense Logistics Agency ................................ 15

Clark, Major, Assistant Advocate, Office of Advocacy .......................................... 12

Bansal, Tony, President and CEO, Digital Commerce Corp ................................ 20

APPENDIX

Opening statements:

Bartlett, Hon. Roscoe G. .................................................................................. 31

Prepared statements:

Lee, Deidre ........................................................................................................ 34

Summers, Max .................................................................................................. 45

Knott, Scottie .................................................................................................... 50

Clark, Major ...................................................................................................... 60

Bansal, Tony ..................................................................................................... 70

(1)

ELECTRONIC COMMERCE

TUESDAY, APRIL 11, 2000

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON GOVERNMENT

PROGRAMS AND OVERSIGHT,

COMMITTEE ON SMALL BUSINESS,

Washington, DC.

The subcommittee met, pursuant to notice, at 10:07 a.m., in room

2360, Rayburn House Office Building, Hon. Roscoe Bartlett (chairman of the subcommittee) presiding.

Chairman BARTLETT. Good morning. Let me call our subcommittee to order.

Good morning and welcome to this hearing of the Subcommittee

on Government Programs and Oversight of the Committee on

Small Business. A special welcome to those who have come some

distance to participate.

We are here today to discuss the present progress and future potential of e-commerce and its impact on doing business in the private and public sectors. The dollar volume of business being conducted by means of e-commerce is increasing at an unprecedented

rate.

An article in the Wall Street Journal last Wednesday, April 5th,

quoted a source that estimated the volume of online sales as increasing by 53 percent this year to $23 billion, after doubling the

previous year to $15 billion. The same article quotes a trade association that estimates that there are 30,000 or more web sites on

the Internet selling merchandise to consumers.

In the midst of this electronic revolution in the way business is

done, it is imperative that we explore together today, in this hearing, the present state of e-commerce in the United States and its

future potential and direction.

Many businesses in the private sector are now relying upon the

Internet to buy goods and services which were previously acquired

through antiquated paper-based acquisition processes. The speed,

efficiency, and convenience with which transactions can be completed are distinct advantages that e-commerce has over paperbased systems.

The passage of the Federal Acquisition Streamlining Act of 1994

provided an impetus to Federal agencies to use the Internet as the

preferred method of procurement. The rush to the Internet by the

Federal Government has spawned these headlines in a well-known

Internet trade publication. The first one: ‘‘U.S. Moves to Online

Procurement.’’ A second headline: ‘‘Commerce Department to UtiVerDate 11-MAY-2000 07:50 Dec 06, 2000 Jkt 067090 PO 00000 Frm 00001 Fmt 6633 Sfmt 6633 E:\HR\OC\A090P2.XXX pfrm04 PsN: A090P2
2

lize E-Commerce, Go Paperless.’’ Third headline: ‘‘Defense Department Goes E-Commercial.’’

There are few, if any, major Federal agencies that do not acquire

a large dollar volume of goods and services through e-commerce

transactions. We hope at the hearing today to examine both the

commercial and Federal use of e-commerce technologies such as the

creation of electronic shopping malls, in the transition to largely

paperless transactions.

The hearing will also look at the training and acquisition assistance that small businesses need or are receiving to compete in ecommerce both in the commercial and Federal sectors.

We welcome your suggestions with respect to legislation or regulatory changes that may be needed to train small businesses in

electronic commerce and to provide more timely and complete Federal procurement information than is presently provided in the

Commerce Business Daily.

Lastly, in the hearing today we hope to have some answers to

the questions: Where are we going in e-commerce? And what are

the implications for doing business in the private and public sectors?

Again, thank you all for participating in this hearing, and thank

you in the audience for attending this hearing.

We are very pleased to be joined by our ranking member, Mr.

Danny Davis. Mr. Davis?

Mr. DAVIS. Thank you very much, Mr. Chairman.

First of all, let me just thank you for convening this hearing

today, and I also want to thank the witnesses for their attendance.

As the rapid growth of the Internet increases, so does the need

to conduct business on it, and, therefore, I think it is important

that we find out as much as we possibly can about it.

This past year electronic commerce has grown beyond expectations. Every day more people are finding new ways to provide innovative products and services electronically. The Internet is changing the way business is doing business, from the acquisition and

servicing of customers to the management of their relations with

suppliers.

However, as the Internet usage increases, the demand for online

services becomes increasingly important. As of today, the Government provides over 15 Internet sites dedicated to Federal procurement alone, the most popular being SBA’s PRO–Net,

CommerceNet, GSA’s Doing Business with GSA, and NASA’s Small

Business Programs site. In fact, the Small Business Committee has

taken the lead to help promote electronic commerce and Internet

usage through the Paperwork Elimination Act of 1997. Under the

Paperwork Elimination Act, Federal agencies are addressing issues

regarding electronic transactions within the Federal Government

and between the Federal Government and other parties through

the sponsorship and use of alternative information technologies.

However, is electronic commerce getting better or is it getting

worse? Well, that probably depends on who you talk to and when?

While some companies are doing business quite well online, their

successes could easily lead someone to assume that all small businesses are now ready to adopt electronic commerce as the new way

to conduct business. On the other hand, I have heard many reports

3

and complaints of the complex technical and legal issues facing

electronic commerce.

Today, it is my intent to try and help uncover and discuss some

of the barriers that inhibit our small businesses from taking advantage of the business opportunities electronic commerce encourages,

especially small businesses, sometimes businesses that are called

mom-and-pop businesses, businesses that in many instances are

getting started and in many instances have not had the capital to

address their own electronic needs.

So I would like to, again, Mr. Chairman, thank the panel for

their attendance and thank you for calling this hearing, and I look

forward to their testimony.

Chairman BARTLETT. Thank you, Mr. Davis.

In a former life, I was a small business person doing Federal

grant and contract work, and the difficulty of determining the opportunities available to you is absolutely enormous. I subscribed to

Commerce Business Daily and plowed through that every day, recognizing that that was a fairly limited listing of all of the opportunities that were available across all of the Government agencies. So

I look forward with anticipation today to the testimony. It opens

up to small business people all across the country the opportunities

for doing business with the Government.

We have two panels today. The first panel is the Honorable

Deidre Lee, Administrator, Office of Federal Procurement Policy.

Without objection, your full written testimony will be made a part

of the record, and you now can proceed any way you wish. Thank

you very much.

STATEMENT OF DEIDRE A. LEE, ADMINISTRATOR FOR FEDERAL PROCUREMENT POLICY, OFFICE OF MANAGEMENT

AND BUDGET

Ms. LEE. Thank you very much, sir.

Chairman Bartlett, Congressman Davis, the subject of your hearing today, applications of electronic commerce—e-commerce—technologies to our buying process, is both timely and of particular interest to me. The rapid technological advance of the Internet is providing unprecedented opportunities to significantly improve how we

conduct procurement transactions. The potential to improve information flow from the way vendors learn about Federal contracting

opportunities, to the way Government buyers become informed

about vendors and the range of goods and services they offer to

meet the Government’s needs, makes application of e-commerce

technologies to the acquisition process a worthy priority for our

procurement agenda.

Today, I would like to share with the Subcommittee the key principles we are following and steps we are taking to seize upon this

potential. I would like to focus my attention, in particular, on the

Government’s efforts to create a single, government-wide point of

entry for electronic commerce and for accessing business opportunities. This initiative will serve as an illustration of how we are striving to take advantage of electronic tools to make interactions faster, easier, and less costly for both our buyers and our trading partners, small and large alike.

4

Two years ago, the administration issued a strategic plan which,

among other things, set forth policies to help agencies make and

successfully manage investments in e-commerce. Two of the principles, in particular, lie at the heart of our approach to e-commerce

acquisition initiatives.

One, follow the commercial lead: This is unusual for us in Government, because we sometimes want to create the new story. But

we strongly share your belief in your letter of invitation for today

that we can benefit from the private sector’s e-commerce experience.

Our strategic plan emphasizes the importance of Government reliance, wherever possible and cost-effective, on commercial products

and services so the Government can leverage the investment already made in the ever-growing commercial infrastructure and

benefit from the market-driven economies and innovation that commercial tools offer. We do not want to develop Government-unique

solutions.

Two, pursue e-commerce applications that offer opportunities to

reengineer the procurement process. The rapid technological advances can create temptations to buy intriguing technology simply

because it is available. We must instead ensure we are making the

right investments, looking for those that can streamline and eliminate transaction steps, minimize unnecessary paperwork, and facilitate access to resource information or information that people

need to know to do business with the Government. We want to improve buyer visibility into products and services, and we need to

provide the sellers with quick, easy access to the contracting opportunities.

We have numerous initiatives ongoing. You are going to hear

about more of them from the second panel. But let me just give you

a quick list. We are, of course, maximizing the use of purchase

cards. We are trying to improve the electronic payment process. We

have contract writing systems. We are trying to integrate backroom processes, a form of ERP for acquisition. We have distance

learning, online training. We have online reference and guidance,

and we are trying to improve data collection and reporting.

But our strategic plan also reminds agencies that they must remain attuned to the needs of both the buyers and sellers. High on

the list of sellers’ needs—and I think you referred to it, Chairman

Bartlett—including the small business community, is easy and

cost-effective access to information on contracting opportunities.

Where are they? What are they? When are they?

Prominent on the list of buyers’ needs is the ability to gain more

effective access to the marketplace. To address these needs, we are

emphasizing with our e-commerce initiatives improved access to

business opportunities. Our focus is on creating a government-wide

point of electronic entry, the so-called single point of entry—of

which we, give an acronym, SPE—for access to business opportunities on the Internet.

My written testimony outlines the progress we are making towards this single point of entry because, unfortunately, it is just

not as easy as we would all like it to be. Mr. Nelson Crowther

spent a day with us in January going through the issues and some

5

of the intricacies of how we can get there and ensure everyone is

included and can fairly participate.

As technology has blossomed, we have used FACNet and

CBDNet and DODBusOpps and an EPS pilot. We have GSA Advantage. We have electronic malls, web sites, and we are also looking at commercial solutions.

But as I meet with industry representatives and we discuss the

many advances in technology and the companion solutions for Government procurement, one constant remains: communication, timely information.

How can we simply and quickly, and at low cost, notify industry

of opportunities and inform the buyer of trading partners’ interest

and availability? I continually hear from small and large businesses that they simply cannot know of and respond to each agency’s individual web site, home page, and notification process.

A single face, or SPE, single point of entry, for industry is needed, a place where Federal contracting opportunities from synopsis

to the solicitation, to related procurement information, can be conveniently accessed.

We are currently evaluating SPE alternatives, keeping in mind

the principles of commercial lead and reengineering. Our intent is

to designate a system that is sufficiently versatile to enable agency

buyers to efficiently and effectively provide access at a single entry

point, and to allow sellers to reach the SPE through different commercial electronic means.

One area that is of paramount importance is the inclusion of

small business in the Federal procurement process. We are currently testing an SPE concept in the electronic posting system

where, in conjunction with SBA, we have linked the electronic posting system to PRO–Net so that small businesses are provided instant notice when opportunities are available. They go in, they register at PRO–Net. We haven’t fully rolled this out and announced

it yet, but it is hooked up. And they simply register once for business opportunities, when they are interested, on this particular system, which right now contains about 30 percent of our major activities. They receive an e-mail that says there is something you might

be interested in. They can then instantly go in and access the solicitation.

Our system does not want people sending them to a web site or

a home page where they have to search through and find it. It goes

instantly from the notice to the document itself, and it includes history, if there were comments or questions or previous discussions,

so they can see a whole package of what is going on in procurement. And that is what we are testing, and we are hooking it to

the small business systems so small businesses can see how that

works for them.

As we are moving to use the new technologies, we also have to

make some changes to fully enhance the possibilities. We have submitted proposed statutory language—it is in the DOD bill—that

hopes we can recognize some changes to take advantage of the wizardry of electronic commerce, and the fact that printed copy notifications may no longer be the benchmark for transaction time

frames. Instead, we propose to recognize electronic postings

through the single entry point so people know where it is as an efVerDate 11-MAY-2000 07:50 Dec 06, 2000 Jkt 067090 PO 00000 Frm 00005 Fmt 6633 Sfmt 6602 E:\HR\OC\A090P2.XXX pfrm04 PsN: A090P2
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fective communication strategy and wait times for solicitation release would be keyed from electronic posting.

We hope that you will favorably act on this proposal. Having the

requested framework in place will allow agencies and small and

large businesses to enjoy the efficiencies that e-commerce enables,

including a more immediate return on investment.

I know e-commerce offers many opportunities for improving acquisition through redesign of the buying process. I pledge to work

with my colleagues at SBA to ensure we address inclusion of small

business. We must continue to look for ways to use e-commerce to

strengthen the Government’s acquisition function so that we can

make our interactions easier, faster, and less costly, for both ourselves and our trading partners. Designating the SPE in the FAR

in tandem with a revised legislative framework that fully recognize

the benefits of the single point of entry are important steps in this

direction. I look forward to working with you to achieve this goal.

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

Chairman BARTLETT. Thank you very much.

We have been joined by Mr. Hinojosa. Let me turn now to my

colleagues for their questions first. Mr. Davis?

Mr. DAVIS. Well, thank you very much, Mr. Chairman.

Ms. Lee, let me just say that I certainly appreciate your testimony, and you paint a very positive picture, and it is something

I think all of us have to look forward to.

Let me just ask, do you believe that removing the 15-day advance notification for solicitations will help small businesses?

Ms. LEE. Yes, I do. We have done a little research on it, and

what we are proposing adjusts the time between notification and

solicitation. When we go back and find where the time requirement

came from, the best we can figure is it came from the mail process,

the physical Postal Service. The agency would put out a notice, and

then they would have to wait 15 days before they could release the

solicitation. The thought process was that if you released them simultaneously, the person that lived down the street could come

pick up a copy and they would have it well in advance of someone

who needed it mailed to them.

So the advanced notification was all about was leveling the playing field so people would receive a notice at approximately the

same time. Through electronic commerce, we think we can put the

notice out there and people could access the solicitation more rapidly. Small business can immediately look at and say, ‘‘Am I interested or not ?’’ rather than having to request and wait and get a

copy, put it in their bid pile, figure out if they are interested.

I think it is going to help small businesses, as well as large, more

readily in this fast-moving world know what is out there and what

their next steps are.

Mr. DAVIS. Well, what about those that might be in remote

places or who may not have access to the information? Would it

mean that they are suffering under an unfair disadvantage to

them, that others have the information and they really don’t?

Ms. LEE. Our current proposal is to continue to provide the information to the Government Printing Office so they can continue to

print a CBD. But as you know, the electronic notice does go up

faster than the Commerce Business Daily is printed.

7

What we are not proposing to shorten is the proposal preparation

time, which in most cases is 30 days, in some cases it is 45 or 60

days, or for huge procurements, even longer. So we are just proposing to shorten the notice to solicitation release time.

Mr. DAVIS. All right. So there would be equity, at least in terms

of the actual amount of time that companies or businesses would

have to respond to the notice.

Ms. LEE. Yes.

Mr. DAVIS. Let me ask you one other question. I know that now

we see computers at practically every desk within the Federal Government. Unfortunately, there are businesses, and especially small

businesses, who have not caught up with that phenomenon.

Is there any way to try and make sure that there is no punishment in a sense to these businesses because they have not reached

the level of sophistication that the Federal Government and other

businesses might be operating at?

Ms. LEE. There are several ways for a smaller business or someone who, for whatever reason, doesn’t want to be electronic. They

can, and many do, hire companies who search the CBD and sort

it for them and provide them information. So they could hire that

resource and have someone else do the searching and provide them

with the opportunities.

As the SBA is going to tell you, the resource centers in most

cases have the electronic connection, and they also provide updated

information. There are also a good number of trade publications,

particularly in the small business arena, that search through and

identify procurement opportunities.

One of the things we are working on that we need to do better

is improved forecasting so that there is even more notice. Now, of

course, our plans are to put the forecast online as well. But I think

any of these resources could identify opportunities earlier and still

provide the information.

Mr. DAVIS. So you are saying that we are going to continue to

do a number of other things to try and make sure that there is adequacy of information and opportunity.

Ms. LEE. Yes.

Mr. DAVIS. I tell you, it is kind of rewarding in a sense. I just

had opportunities—I was getting ready to do my income tax—to

need some information relative to my own taxes and interests

doing business with someone. And to my amazement, I mean, rather than having to wait for any length of time or whatever, I mean,

I just accessed the information and there it was. I didn’t have to

get anything in the mail, didn’t have to get anything back, and it

was just kind of pleasant to be able to do that and have instant

information, although it still raises some fears and concerns that

I might ultimately have in terms of the extent to which our employment opportunities will be able to keep up with the technology

that we seem to be developing.

So I thank you very much.

Ms. LEE. Congressman Davis, the small businesses that don’t

have access to technology can face a problem. But it is amazing,

how many of the small businesses are really up to speed. In fact,

a good many of them are in the IT industry and creating these very

systems. So people are coming along.

8

Mr. DAVIS. Thank you very much.

Ms. LEE. Thank you.

Chairman BARTLETT. Thank you, Mr. Davis.

Mr. Hinojosa.

Mr. HINOJOSA. Thank you, Ms. Lee, for coming to talk to us

about what the Small Business Administration is trying to do to

help small business firms.

I agree with the question that Congressman Davis asked about

how many small firms have a computer at the desk of those folks

who work with administration and finance of a small business. And

all three of us here on this panel have had experience with small

businesses, and we know that that is probably one of the weaknesses of so many of the small firms, especially if they are in manufacturing and they are going to try to bid on something for the

Department of Defense or some Federal agency.

We find that small businesses are started oftentimes because a

man or a woman was the one doing the production or overseeing

the production of a company, and they have decided to go off on

their own and do it themselves. So they have a lot of experience

in production and producing widgets, and they have a little bit of

experience on sales, and that is why they are delving into Federal

procurement opportunities. But the weakness always comes in administration and finance and business computer systems.

As a result of that weakness of the three components of a successful business, we find that as you are moving, the Federal Government is moving towards this paperless procurement, we are

quickly going to be left behind unless SBA, unless Department of

Commerce through MBDA steps in and fills that weakness and fills

that void that I just described.

How do you feel about the women’s business centers; MBDA offices throughout the country or schools of business of universities

stepping in and maybe assisting these businesses, small businesses, small business firms, bring in a consultant who could be a

graduate from the school of business with a bachelor’s or a graduate from the school of business with a master’s, and maybe work

for a day with each firm and helping them, you know, hold their

hand and taking them through the steps for a whole year, if necessary two years, so that they, too, can have a computer at the

desk of every one of these firms and that they know how to get

onto the suggestions that you all are using so that we don’t have

to go through, you know, the entire document to identify the opportunities that are for that company?

There seems to be a need for us to help those small business

firms strengthen the third component, administration, finance, and

business computer systems of every small firm.

Ms. LEE. I know when the small business comes up, they do. We

can tell you they have a wide variety of services that they offer at

the resource centers. I think more can always be done. Sometimes

we need to reach out to those small businesses and tell them the

resource center is available. How do we communicate that first

step?

I agree with you that small business needs everything from

training in the very fundamentals of using your system, choosing

your system, getting it set up and being ready to operate, to how

9

does that system provide you access to Federal procurement opportunities.

Unfortunately, our system is still not simple, even though we

have simplified acquisition and other initiatives. As you know, we

do require certain certifications, and we do have certain unique

clauses that people that trade with us need to understand what

they are doing and why. So absolutely there is an incredible opportunity for more learning.

SBA is also trying to provide more distance learning classes and

more of a resource center, just as Congressman Davis mentioned

in checking on his taxes. People that are now trying to access Federal procurement opportunities can go to a resource center and ask

a question: Tell me more about this clause or tell me more about

this program. And we’re trying to deliver that information in a

more user-friendly manner, but more can always be done.

Mr. HINOJOSA. You didn’t answer my question. Are you willing

to try to look into how to provide, at least one day a week, one of

these individuals who knows how to use the computers and know

how the business computer system should be set up for these small

businesses interested in doing Federal procurement to move into

the paperless program that you all are outlining? There needs to

be someone regularly going to that small business, once a week, at

least twice a month, whatever the business firm owner wants in

terms of help, even if they have to pay for it, but it would be cheaper than having to hire and pay a salary, annual salary, to someone

who has this kind of knowledge.

All I am saying is: Are you willing to explore that?

Ms. LEE. Oh, I would be happy to work with SBA and say how

do we do that. Where do we start? How do we test it? Where do

we go?

Mr. HINOJOSA. Good. Thank you.

Chairman BARTLETT. Thank you very much.

About a year ago, I wanted to build a small log cabin, and I got

the construction manual, and it said that I needed a 16-inch circular saw. Now, the usual circular saw is 71⁄4-inch; 16-inch is a big

circular saw. And the manual said that Mikita made one. So I

called the local Mikita dealer, and they searched their catalogues,

and they said there was no such saw available, that Mikita did not

make it.

So I went to my son, who was familiar with the Net, went on the

computer, and found a 16-inch saw. They asked us for our credit

card number, and there was some little delay while they said they

were trying to find a secure link so that our credit card number

would be secure, and they said they finally found that link. And

so within, oh, less than 5 minutes from the time we started, we

had ordered the saw and 2 days later it was delivered by UPS to

my door. I was impressed. The local Mikita dealer said Mikita

didn’t even make such a saw.

My question has to do with security and privacy. What we ask

of the Net is accessibility and ease of use, and these two requirements—confidentiality and security and accessibility and ease of

use—those two things are in tension. What kind of attention are

you paying to these security/privacy problems as these small companies are encouraged to do business by way of the Net?

10

Ms. LEE. Chairman Bartlett, as you know, there is a great deal

of concern about computer security generically. In fact, we have a

priority management objective at OMB that deals with computer

security and digital signatures.

You look at that overall, all-encompassing issue. Then you go to

the procurement standpoint, from this single point of entry, the information that we are posting there is public information. We want

it traded. So we are just going to announce and provide information. The next step is to receive back the proposals, and there are

some systems that currently do that. Right now different agencies

do it a little differently.

We are moving forward with digital signatures. We certainly are

going to have to accept them. And regarding your comment on security, from a procurement standpoint it is not only the security of

the transmittal, but it is the validation that you did, in fact, receive

the proposal from the company. So it is a validation issue.

We are actually working that in conjunction with the CIOs for

a government-wide solution. What we don’t want to do is step out

and address a procurement-unique solution that is then going to

require a different approach for other Government e-commerce

issues.

So as hard as it is for us to say. We are intentionally staying

kind of one step behind industry and following their lead on the

technology. What is the right answer for digital signatures? What

is the right answer for validation and verification? Ms. Knott will

be able to tell you a little bit more about what they are doing with

the Department of Defense consolidated contractor registration and

the security that they have there to ensure that the information is

valid from a contractor.

Once we get everyone comfortable with finding the opportunities

that way, how do we take the next step and start receiving back

and streamlining the process even further for all proposals. We receive some now, but not all.

Chairman BARTLETT. Thank you. As you know, this balance between accessibility and ease of use and privacy and security is one

of the biggest problems facing the use of the Net today. We want

the ultimate in privacy and security, and we also want the ultimate

in accessibility and ease of use. And those two requirements are obviously in tension, and right now everybody is struggling with what

is a reasonable accommodation between those two.

The single point of entry, we have a big, big Government and

there is going to be lots of information there. Are you developing

a new search engine to make sure that the user can find what he

wants? Or is one of the existing search engines adequate?

Ms. LEE. I am not the technical expert, but my experts explain

that we don’t want to create a Government-unique anything. And

the technology out there is moving so rapidly that there are currently available search engines that will do this job. But they are

also very carefully structuring this single point of entry in an open

architecture manner so that as new technology changes you can integrate it into that.

I have to have it explained to me very simply by my expert here,

Captain Carra. The single point of entry is like a parking lot. We

are going to park the data there. So it will be on some agency’s difVerDate 11-MAY-2000 07:50 Dec 06, 2000 Jkt 067090 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 E:\HR\OC\A090P2.XXX pfrm04 PsN: A090P2
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ferent servers, but it will be located in one location. And that allows you to access it so that we can upgrade the architecture and

the infrastructure as new things develop.

We also can put it there so that, as Mr. Hinojosa mentioned, if

service providers want to come and get the data and enhance it

and deliver it to the small businesses or to anyone else in the new

format, they can also access it. What we are trying to do is park

the data in an easily accessed, very open architecture manner that

we can keep refreshing and keep current.

Chairman BARTLETT. So that any of the existing search engines

could be used then to access?

Ms. LEE. I know they have one selected, and we think there are

numerous ones out there. They are big engines because it is a lot

of data, but we think there is a current commercial solution.

Chairman BARTLETT. Thank you.

You mentioned the electronic posting system and the single point

of entry. What is the relationship between those two?

Ms. LEE. The electronic posting system is like the pilot test.

NASA, GSA, Treasury and Interior have gotten together and are

currently using a single-point-of-entry-like process and testing it

and scaling it and learning things about it. They have learned

things. They had questionnaires for small businesses who used it

to reply and say how did they like it, what did they think about

it. And we are learning little nuances.

Right now you can search by SIC code, standard industrial code,

which we will soon change to NATE code. But you can search by

SIC. One of the things we have found from the small businesses

is that they would also like to have place of performance because

in some cases they really only want to work on a limited geographic area. And so that might be a capability that we need to

think about adding.

So, it truly is the test. Does this concept work? So far we have

had quite favorable results.

Chairman BARTLETT. So electronic posting system is a limited

demonstration——

Ms. LEE. Yes.

Chairman BARTLETT [continuing]. Of whether or not ultimately

we can get to a single point of entry for all Government transactions.

Ms. LEE. Correct. And we learned, again, from the single point

of entry, this is where the e-mailing concept came from. We heard

from primarily small businesses that said, gee, it would be helpful

if you pushed technology and you let me say I am interested in

Western Region SIC Code 7321, and any time anything that is published in that notice, it sends an e-mail to them so they are instantly notified. We learned that from them.

Chairman BARTLETT. In your oral testimony, you said that you

hoped that we would act on this proposal. It wasn’t clear to me

what the antecedent of ‘‘this’’ was when you went through your testimony.

Ms. LEE. The proposal is in the DOD proposal. It is simply the

removal of the waiting period because it is statutory. It is in Title

X. It is statutory that we have to have this 15-day wait. The removal of this wait would occur only when the single point of entry

12

is identified. It wouldn’t be effective until we identify the single

point of entry, which we are going to do through public notice, public comments, those kind of things. We want to make sure we get

that right.

But we think that the attendant release of time period will draw

more agencies and will make them want to use the system more

effectively. So that is the proposed change to the statute, to decrease that wait time.

Chairman BARTLETT. Okay. Thank you very much.

My final question has to do with an issue raised by both of my

colleagues. How many small businesses do you think, in terms of

percentage, are not now on the Net? I am just amazed at how rapidly this technology has spread and how many people, including 11-

year-olds, are conversant with it and very capable. What percent

of small businesses now are not on the Net? And how quickly will

this change until essentially none of them will not be there?

Ms. LEE. Chairman Bartlett, I simply don’t know. SBA can certainly tell you of the people that are in PRO–NET, how many of

them have an e-mail address versus how many of them don’t; how

many of them accept faxes versus e-mails. They can probably give

you a good feel for that. But I don’t know how many small businesses that want to do business with the Government are not registered with PRO–Net, and I think that would probably be the set

that we are talking about.

Chairman BARTLETT. Yes, I, too, am concerned that you shouldn’t

be left behind as a small business person simply because you don’t

choose to be conversant with the Net. But I understand from your

testimony that you have made adequate opportunities for these by

sending out Commerce Business Daily and they have the trade

journals and the small business centers and there are lots of alternative avenues that they can use until they are Net-friendly.

Ms. LEE. We have found in researching the Commerce Business

Daily, because we needed to know how many were published out

there, that from a high of about 55,000 copies a day, they now publish a little over 4,000. The majority of those go to libraries, and

so, you know, we are just kind of putting two and two together. We

think that the libraries are still—what we don’t know is what the

usage at the library is. Is it great or little? And as you all know,

most libraries now have Internet access, and so they can also get

to the onlines or a business could choose, if their library provides

that capability, to use it through that method.

Chairman BARTLETT. Thank you very much. Let me ask my colleagues if they have any additional questions or comments before

we excuse this panel and convene the next one.

Mr. DAVIS. Only one, Mr. Chairman. How did that log cabin?

[Laughter.]

Ms. LEE. We are all waiting.

Chairman BARTLETT. Well, that was a personal and very interesting experience. I have always wanted to build a log home, and

I had an opportunity to do that with this little log cabin. It is fine.

It is under a roof, not completely finished but out of the elements.

Thank you very much.

Mr. DAVIS. You are a man of many talents.

Mr. HINOJOSA. I have no questions.

13

Chairman BARTLETT. Thank you.

Ms. LEE. Thank you.

Chairman BARTLETT. Thank you very much, and we will excuse

this panel and convene the next one.

We welcome the members of our second panel. Again, your written testimony, without objection, will be made a part of the record.

We would encourage you to summarize your testimony. There will

be adequate time for expansion during the question and answer period that follows.

Mr. Max Summers, State Director, Missouri Small Business Centers, who is here today, I understand, representing all of the Small

Business Development Centers. Ms. Scottie Knott, Director,

JECPO, Defense Logistics Agency. Thank you for joining us. Mr.

Major Clark, Assistant Advocate, Office of Advocacy, who is here

representing the Office of Advocacy and my good friend Jere Glover. Thank you for joining us. And Mr. Tony Bansal, president and

CEO, Digital Commerce Corporation.

Welcome to all of you to our Committee, and we will begin with

Mr. Summers.

STATEMENT OF MAX E. SUMMERS, STATE DIRECTOR,

MISSOURI SMALL BUSINESS DEVELOPMENT CENTERS

Mr. SUMMERS. Thank you, Chairman Bartlett, and members of

this distinguished Committee. I am Max Summers, State Director

of the Missouri Small Business Development Centers, and I am

here today on behalf of the Association of Small Business Development Centers. My focus is on the training and acquisition assistance that businesses should receive or are receiving to compete not

only in the Federal procurement arena but in the whole arena of

Internet commerce.

The rules are changing in today’s small businesses. Buyers and

sellers can find one another without an intermediary. That is

bringing challenges to the role of the traditional middleman. The

retailer, wholesaler, banking, insurance, and publishing industries,

in addition to many others, are being affected.

Navigation, especially the ability to reach buyers and sellers, is

where the battle for competitive advantage will be won or lost.

Boundaries between many businesses are being weakened or eliminated, and price will take on a much higher value in consumer decisions because of the customer’s ability to compare compatible

products quickly via the online marketplace.

The majority of our Nation’s businesses, small businesses, have

not learned to effectively use the electronic arena to sell goods and

services via e-commerce. Today, the vast majority of businesses use

the Internet to find information or simply post a website. Many

small businesses are in a weaker position to embrace these new

technologies, but the real challenge is the education of the small

business owners regarding the huge structural shift we will experience in the global economy.

We must sound the alarm to small business owners regarding

these changes and provide assistance to them to adapt these rapidly changing conditions in our environment.

Although we cannot change the market forces, we can help these

businesses understand e-commerce and that it is likely to bring

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huge shifts in our economic structure, both in the U.S. and in the

global economy.

We must educate these companies to understand that e-commerce is poised to pull significant dollars from the traditional economy. It is expected that business-to-business trade will grow disproportionately, which is likely to displace many existing traditional small businesses. We cannot save their traditional business,

but we can help them understand what is on the horizon, we can

show them options, and we can help them adapt to this change.

Small businesses will require a support structure to help them

address these fundamental changes in the new world economy, especially in rural and hub zone areas. These rapid changes will require that businesses and their personnel redevelop skills through

systematic and focused learning. Technology is in the process of

revolutionizing business. We must now do the same thing for business learning.

This educational programming could include help for small businesses to deal with the major barriers to their success by developing and delivering: first, focused information and knowledge regarding what e-commerce is and how it impacts the business structure; second, developing and delivering processes for assessing ecommerce competitiveness and the associated business processes;

third, identify what is needed technically to implement e-commerce

and how implementation is likely to restructure that existing business; and, finally, how to perform transactions business-to-business

or business-to-Government.

Targeting clusters of relatively similar businesses with this programming would be most effective and would allow small businesses to make intelligent decisions about the suitability of e-commerce for their business. It would also enable many companies to

become better informed about electronic purchasing. This is especially true in the case of business-to-business transactions and Government contracting opportunities.

Through the SBDCs and the Procurement Assistance Centers

program, we could assist many of these thousands of businesses

that are unprepared to deal with e-commerce and Government procurement by the delivery of offerings via their programs and the

ASBDC Internet-based training program. In addition, both are well

positioned to customize that training through one-on-one assistance.

Together these programs have the procurement and the management expertise to facilitate positive outcomes for the Nation’s small

business, and we would encourage this Subcommittee and the entire House Small Business Committee to consider this a priority in

identifying and supporting mechanisms of assistance to the Nation’s small businesses.

[Mr. Summers’ statement may be found in appendix.]

Chairman BARTLETT. Thank you very much.

Ms. Scottie Knott.

15

STATEMENT OF CLAUDIA S. KNOTT, DIRECTOR, JOINT ELECTRONIC COMMERCE PROGRAM OFFICE, U.S. DEPARTMENT

OF DEFENSE

Ms. KNOTT. Good morning, Chairman Bartlett and Congressman Hinojosa. I appreciate the opportunity to appear before this Subcommittee and discuss the present and future of e-commerce and

its impact on small businesses doing business with the Department

of Defense. I believe the DoD story is a positive one and clearly

demonstrates the commitment of senior management within DoD

to its revolution in business affairs.

The Joint Electronic Commerce Program Office, or JECPO, serves as the DoD executive agent for accelerating the application

of electronic business practices and associated information technologies to improve DoD acquisition processes and other Department business operations. Our efforts unit three communities that

benefit from the use of electronic commerce: first, the DoD

warfighter—the sailor, soldier, airman, and marine—that uses the

products and services of commercial industries; second, the thousands of large, small, and medium-size businesses that conduct

business with DoD; and, third, the DoD acquisition community. The progress that DoD has made in fielding, actually using our electronic business initiatives is in stark contrast with the old way

that we did business. The old way was serial processed, paperbased, extremely labor-intensive, and very time-consuming, and

generally resulted in frustrated trading partners, both industry

and Government. Today, DoD is pursuing paperless processing— keeping pace with industry in the use of Internet-based commercial

technologies while ensuring secure transactions and authorized access based on, again, commercially available security solutions.

All of the initiatives that I will discuss today can be accessed by

any authorized user, Government or industry, large or small,

through commercial Internet access. The ease of entry into the DoD

market space is really equivalent to an annual subscription service

on the Internet.

The first initiative I would like to address is the Central Contractor Registry (CCR). It provides vendors with an unprecedented

method of marketing themselves and their products to all potential

buyers within the Department of Defense. Now any business can

register in one easy place on the Internet, and their information is

available to all 800 contracting offices as well as their supporting

finance centers.

Contractors register in the database one time, with subsequent

annual renewals, and their information is available to all of these

contracting and payment offices. As a result of the information

available in the CCR, 80 percent of the contract payments within

DoD are able to be done using electronic funds transfer.

The second initiative is the DoD Business Opportunities Website,

developed specifically to easily interface within a Federal single

point of entry. It provides a single search mechanism for vendors

to locate and access DoD online solicitations. Through the DoD

Business Opportunities Website, users can also link to the appropriate DoD components—the Army, Navy, Air Force, Marine Corps,

and defense agency sites—to actually make offers on these specific

solicitations. This centralized and coordinated approach allows a

16

single view of all DoD business opportunities while maintaining

flexibility at the local level within all of our components within

DoD to their initiatives and the increasing use of electronic commerce and paperless operations.

The next initiative is Wide Area Workflow, which has made it

easier for industry to get paid for the work performed or for goods

delivered through the use of what we call a virtual payment folder.

In DoD, we require that three key documents line up together

before a vendor can get paid: the original contract, the invoice, and

the receiving report, or the document that demonstrates that the

goods and services were actually received and accepted.

The process of contract award and payment involves some 800

geographically dispersed Government offices, and then many more

locations that receive the products and services. Without new initiatives using electronic commerce, this process of trying to get together these three documents for all of the myriad of transactions

that we do within the Department of Defense could take up to 6

weeks.

At one of our payment centers, this process alone had created 15

linear miles of files. So you can see the administrative burden associated with this paper-based process.

In response to this, DoD has developed an Internet application

that allows the Government to process these three documents online. By storing these documents on the Web, we have begun to

turn the paper off that is actually going to some of our finance centers to decrease that 15 linear miles of files that we created.

Another initiative, the DoD EMALL, also demonstrates our commitment to making it easier and faster to find and acquire commercial items of supply that are needed by DoD. The DoD EMALL provides ‘‘point, click, and ship’’ shopping for over 3 million commercially available items. It is comparable to Amazon.com, CD Now,

and multiple other types of commercial electronic catalogues for online shopping.

But what the DoD EMALL additionally does, it also provides assurance of buying against long-term Government contracts in

which all of the Federal procurement rules and regulations have already been addressed as part of the award process before coming

on to the mall. The DoD EMALL also facilitates the use of the Government Purchase Card, allowing our vendors to be paid in the

same way as their commercial credit card payments. Additionally,

there are no unique programming requirements necessary to be a

vendor on the DoD EMALL.

In all of the electronic business initiatives that I have presented,

we have worked to use commercial technology to establish a single

view or access to processes within the Department of Defense. This

has made it easier to do business with DoD and allows DoD to take

advantage of the best commercial business practices used by our

industry partners. With electronic business, we have created a

seamless business process where the flow of electrons allows

streamlined interface between DoD and industry to expedite the

delivery of the right information, to the right place, at the right

time.

Thank you very much.

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

17

Chairman BARTLETT. Thank you.

Mr. Clark.

STATEMENT OF MAJOR CLARK, ASSISTANT ADVOCATE, OFFICE OF ADVOCACY, U.S. SMALL BUSINESS ADMINISTRATION

Mr. CLARK. Good morning, Mr. Chairman and members of the

Subcommittee. As you stated earlier, Mr. Glover, who is chief counsel for the Office of Advocacy, is unable to be here today. He sends

his regrets. But you know quite well his commitment to small business. He has asked that I present part of his testimony. The full

testimony will be, as you stated, submitted for the record.

If I appear to be a little bit nervous, it is probably because I am,

seeing that some few years ago I had I guess what is considered

to be the pleasure to be chief of staff of this very Committee, and

many times looked out from where Mr. Crowther is looking now at

the audience and the witnesses and wanted to know why were they

so nervous. Now I understand why they were nervous, so please

bear with me. [Laughter.]

The views expressed here are the views of Mr. Glover and do not

necessarily reflect the views of the Administration or the SBA Administrator.

Congress has struggled for years to determine how to address the

problem of regulatory burdens on small business, how to make

agencies consider the value of small businesses to the economy.

Government procurement has been a particularly challenging

issue. Congress has been rightly concerned that the Federal tax

dollars be used to get the best buy, that Government manage the

procurement process efficiently—meaning at the lowest possible operating cost—and that at the same time be assured that tax dollars

do not promote industrial concentration, that they do, in fact, promote competition to ensure lowest costs in the long run. And safeguards were instituted to ensure against abuse such as favoritism

in the award of contracts, failure on the part of contracting officers

to shop the marketplace, et cetera. Mandates were also established

to ensure that small businesses would have some viable access to

Federal contracting opportunities.

Congressional reforms created a single acquisition regulation,

what is called the Federal Acquisition Regulation. Other legislation—the Prompt Payment Act, the Equal Access to Justice Act,

and the Competition in Contracting Act—were all enacted in the

name of reform, with a view toward ensuring fairness and small

business access to Government contracting.

I guess as a sidebar, many of these initiatives were enacted during the period of the 1980s in which I served as chief of staff, so

to some extent, they are very dear to me. But at the same time,

with the passing of the decade, we recognize that the entire procurement process has come under criticism for being inefficient, too

bureaucratic, too costly from an agency operating cost perspective.

And in response, Congress has rightly enacted the Federal Streamlining Act, the Federal Acquisition Reform Act, and other reforms.

However, in pushing for streamlining, which Advocacy largely

supported, Advocacy nevertheless remained concerned that enough

safeguards were not built into the reforms. The safeguards we beVerDate 11-MAY-2000 07:50 Dec 06, 2000 Jkt 067090 PO 00000 Frm 00017 Fmt 6633 Sfmt 6602 E:\HR\OC\A090P2.XXX pfrm04 PsN: A090P2
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lieved were needed were those that would ensure the Government

continuously shop for the best buy—found most often in the small

business sector.

We remained concerned that reforms advanced in the name of efficiency would result in more bundling of contracts into larger contracts on which small businesses could not bid. We were also concerned that contracting officers, being given more discretion in selecting contractors at the same time that the number of contracting

positions was being reduced, would not have the right incentives to

reach out to small businesses on contracts and purchases where

small businesses were truly competitive.

Computer technology and the Internet provided an option to help

implement operating efficiencies while providing important information on small business capabilities. To reduce search costs, contracting officers needed a service, properly designed, that would

make it easy for them to find qualified small businesses. Thus,

PRO–Net was developed by the Office of Advocacy. It is a database

that profiles small businesses, providing information on what services and products they offer, their history, and other conditions related to their ability to perform. It has as its long-term goal to be

a one-stop information portal on small business which all contracting officers, public and private, could consult to find qualified

small business vendors. It was a major step toward making it easy

for small businesses to do business with all Federal agencies and

to have the database linked to other Federal programs then under

development to increase the efficiency of contract management.

But this new Internet-based service could not and was never intended to address all the concerns Advocacy had about the most recent reforms. Mr. Chairman, more than 5 years has now elapsed

since the 1994 Federal Acquisition Streamlining Act. We are now

beginning to document what has happened. Advocacy has contracted for several studies: one on contract bundling, one on credit

card purchasing, and one on Federal Procurement Center data.

Some of these studies have already been presented to the committee, and I will not go into them in detail. But what is important

is that the contract bundling report indicates that between fiscal

years 1989 and 1997, only 8.9 percent of all Federal procurement

contracts were bundled, and that seems like a small number, except when one considers that the dollar value of those contracts

represented 56.6 percent of all Federal prime contracts. The small

business share of all Federal contracts shrank 1.43 percent between 1996 and 1998.

In the area of credit cards, we have contracted with Eagle Eye

Publishers to examine data from the Federal Procurement Data

Center to see if determinations can be made as to the number and

amount of credit card purchases made with small firms. Preliminary data does show that credit card purchases have increased dramatically, as expected. The total value of purchases made by credit

card in fiscal year 1999 was $10 billion. If small business’ share remained constant, that would mean $4 billion would have been

spent with small business. Whether or not this is happening is

what remains to be documented.

You are familiar with the Federal Procurement Data Center

study that was done in fiscal year 1999, which basically docuVerDate 11-MAY-2000 07:50 Dec 06, 2000 Jkt 067090 PO 00000 Frm 00018 Fmt 6633 Sfmt 6602 E:\HR\OC\A090P2.XXX pfrm04 PsN: A090P2
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mented the amount of contracts being spent with small businesses

by each Federal Procurement Center, approximately 2,000 Federal

Procurement Centers.

Mr. Chairman, the data does tell us that something is wrong. It

does not, however, tell us how to fix the problems. Advocacy makes

no claim to hands-on experience with procurement processes. Nor

does it have working knowledge of the day-to-day management of

Federal contracting. Thus, as is our practice, we convened a meeting of private sector individuals who are conversant with the procurement processes and with the world of small businesses trying

to do business with the Government. This meeting included such

individuals of distinction as Dr. Steven Kelman, the former Administrator of the Office of Management and Budget Office of Federal

Procurement Policy, who, as you know, has returned to Harvard

University after his stint with OFPP.

Several areas were found to be wrong with the Federal procurement system as it relates to small business. Streamlining rules

that give contracting officers significant discretion to deal with

large firms, without any built-in small business safeguards and

Government-Wide Agency Contracts that bundle for ease of contract administration were just two of the areas that this informal

group looked at.

They came out with corrective steps: developing GWACs, Government-Wide Agency Contracts, on which only small businesses can

bid and establish such vehicles for small business goals for each

agency.

This group also had a recommendation of making PRO–Net the

central registration for small business, expand mandatory use of

and reliance on PRO–Net to overcome contracting officer inertia in

searching for small business.

These recommendations have been forwarded to the Office of

Federal Procurement Policy and SBA, and I am pleased to report,

as Ms. Lee stated earlier, some steps have been taken to bring this

more into light of reality. But more needs to be done.

Now, what does all this have to do with e-commerce and small

business? Let me share with you what we do know. Procurement

reforms have led to Federal agencies posting business opportunities

on the Internet. All Federal contractors are now required to transmit invoices electronically. Many Federal contractors are also being

required to accept contract payments by credit card. The question

these changes pose is: How is this affecting small business?

An Advocacy study published in 1999 showed that over 4.5 million small employers used computer equipment in their business in

1998. The percentage of small businesses with access to the Internet nearly doubled from 1996 to 1998 from 21.5 percent to 41.2

percent, respectively. However—and this is significant—only 1.4

percent of Internet use among small businesses is directed to ecommerce sales.

In addition, this report identified several obstacles facing small

business and e-commerce. Costs, security concerns, technical expertise, and customer service were the major roadblocks to greater

small business participation in e-commerce. Cost was singled out

as the most common and greatest impediment to expanding e-commerce.

20

The three basic concerns identified by respondents were: lack of

funds for up-front implementation costs; lack of monthly cash flow

to maintain their sites; and the probability that there would not be

a real return on their investment.

All of these taken together leads us to the conclusion that without managerial systems in place, or accountability measures that

provide incentives for agencies to do business with small business,

or services that make it easy for contracting officers to find small

business, the benefits of e-commerce as used by the Federal procurement system will not redound to small business. Moreover,

without such changes, small businesses will not have the incentive

to increase its use of the Internet. There will grow and remain a

digital divide—a divide that will be caused in large part by the failure of Federal policies to ensure small business access to Federal

procurement opportunities. E-commerce and the Internet are but

tools that without the right building blocks can be used to bypass

small business.

The building blocks on which the use of technology is ground are

what concerns us. Ensuring that the Government does business

with small business is not dependent on technology, but it is dependent on policies and mandates. And it is important to remember that doing business with small business is not social welfare.

It is good Government and good business. To prove this point, I

defy anyone to find a $700 toilet seat sold by a small business.

Mr. Chairman, e-commerce is at the center of efficiency reforms

in the Federal Government. It requires businesses to be computer

oriented. But none of this addresses the rules by which contracting

officers are to make decisions. Without such rules, small business’

share of Federal procurement dollars will continue to decline. Mr.

Chairman, in conclusion, that is our concern.

Thank you.

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

Mr. BARTLETT. Thank you very much.

Now, Mr. Bansal.

STATEMENT OF TONY BANSAL, PRESIDENT AND CEO, DIGITAL

COMMERCE CORPORATION

Mr. BANSAL. Good morning, Chairman Bartlett and Congressman Hinojosa. My name is Tony Bansal, and I am the president

and CEO of a privately held small business in Reston, Virginia.

Our flagship product, FedCenter.com, is a Government-focused

electronic commerce-enabled mall with over 5 million line items

and over 600 Government vendors.

I thank you for giving me this opportunity to present my views

here. Like all of the other esteemed witnesses here, I, too, am engaged in the process of bringing efficiency to Government e-procurement. But unlike them, I have invested personal savings to

this end. Like my grandfather once remarked over a breakfast of

bacon and eggs, he said, ‘‘Son, it is important to be committed.

Look at this breakfast here. We all know that the chicken is involved, but the pig is committed.’’ [Laughter.]

‘‘And that is why it is called bacon and eggs.’’

Well, I am here to tell you that Digital Commerce is committed

to this process. We are a local small business. We have invested

21

millions of dollars in creating a Government-focused procurement

utility, an electronic mall, if you will, in which Federal Government

buyers can come and compare products from several different vendors and make best-value decisions.

We thought that if the law of the land, look at the Federal Acquisition Streamlining Act, you look at the Paperwork Reduction Act,

you look at all of the other executive orders, if the law of the land

requires that the Government must sell electronically, it just

makes sense that the vendors must be able to sell electronically.

So by creating a clearinghouse, if you will, in which Government

buyers can come buy electronically and sellers can sell electronically, we believe we have created an efficient way of meeting legislative mandates without the use of taxpayers’ money, and we have

leveled the playing field for small businesses.

Small businesses need help in this new Internet economy. The

Web is now an essential cost of doing business. In addition to

bricks and mortar, small businesses must understand and invest in

Web-enabled machines and networks. Small businesses need to migrate to the Web, but do they have the resources to evolve, market

and maintain a Web presence. In my opinion, they do not have the

resources to create the technical infrastructure or have the marketing muscle to be able to sell to the Government effectively.

FedCenter.com helps by providing small businesses with their

own website on fast servers. It helps them with hosting and maintaining their Government catalogues, their pricing; it helps them

with making them e-commerce-enabled; it helps them with education, training and outreach; it helps them with marketing; it

helps them with access to not only Federal contracts, but State and

local contracts.

I know Congressman Hinojosa, you had earlier made a comment

with the previous panel that these businesses do not have the

wherewithal sometimes to either have the e-commerce capability or

just understand how the process works. We provide that. And so

essentially all of the basic infrastructure that a small business

needs to transact and work with the Government, we provide. And

above all, this entire infrastructure, FedCenter.com, was built

without any taxpayers’ dollars and is provided free to the Government.

And the Government has several other advantages that arise

from here; one, it makes it unnecessary for the Government to

spend money in building this infrastructure, which will allow the

Government to allocate their taxpayers’ dollars and other Federal

resources not on establishing capabilities that are already in the

private sector. It also allows the Government to focus on functions

that I believe are more inherently governance; i.e., creating rules,

and guidance, and certifications on how to do business in these

malls. It also allows the Government to focus on meeting the purchasing needs from small businesses.

How can the Federal agencies help? I believe the Federal agencies can help by not allocating their dollars in building these systems, these malls. They are already built in the private sector. An

analogy that comes to mind, which may not be very perfect, but is

close, which is, should the SEC be building stock exchanges? They

don’t. They guide and go on and set the rules of how the stock exVerDate 11-MAY-2000 07:50 Dec 06, 2000 Jkt 067090 PO 00000 Frm 00021 Fmt 6633 Sfmt 6602 E:\HR\OC\A090P2.XXX pfrm04 PsN: A090P2
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changes work. I think that is what Government needs. It does not

need to build these malls. They exist.

All of these resources that are being spent on building these

malls should be spent on helping small businesses settle in these

malls, help them with things they need to take advantage. The

Government is doing a tremendous job, in terms of letting out

these contracts, the multiple awards schedules, the GWACs and

others. That is what they should be focusing on.

Some of the things that Ms. Knott, here, presented earlier in

terms of the initiatives that the Government is taking, in terms of

helping the businesses with the electronic invoicing and quicker

payment, those are the things that the Government must be involved with. That is where you can help the Government.

If I had a dollar to spend and if I were the Government, would

I spend that dollar on building a mall or would I spend that dollar

on helping a small business? My vote every time would be to use

that dollar in helping a small business go to malls, Government

malls, that already exist. The Government should focus on, I believe, Governmentwide guidelines on how these malls should operate and certifications, if necessary, helping small business settle in.

I don’t think the Government should be a mall builder, but should

be a subscriber of these malls. Private capital is efficient. Private

capital goes to places where the risk reward is inequitable. I don’t

think that the Government should use taxpayers’ dollars to take

risks that are in the private sector.

I encourage all of you to log onto FedCenter.com today and see

for yourself what we have built. And thank you, once again, for giving me this opportunity.

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

Chairman BARTLETT. Thank you very much for your testimony.

I want to thank all of the witnesses for their testimony. Some of

the questions and concerns raised in the first panel have been addressed by this second panel. Thank you very much.

Let me turn now to Mr. Hinojosa for his comments and questions.

Mr. HINOJOSA. Thank you, Chairman Bartlett.

It was interesting to hear each one of you because I could identify with your presentation, and I don’t know that I have questions

for each one of you, but I will say that the comments that Mr.

Bansal made at the end, that if you had the money, you would invest it in training the small business firms instead of building the

malls has a lot of merit.

The comments that Major Clark made at the end of his presentation that talk about how e-commerce in the Federal procurement

program will continue to decline with small businesses because of

what we don’t have, and that is the infrastructure and the knowhow to be able to use it, addresses the concerns that I posed to the

first presenter. Scottie, the presentation you made gives me a lot

of encouragement that there are a lot of opportunities for the small

businesses to be able to identify contracts where they could sell to

the Federal Government. I happen to come from the era of the

1980s, where we started selling to the Federal Government as an

8A contractor. And the first year we were able to sell about

$300,000 of hamburger meat to the Department of Agriculture

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under the National Lunch Program. It was very difficult. We

couldn’t understand the specifications. We really needed someone

to hold our hand and take us through this land mine.

I was able to get a technical assistance grant, under the 7J program of SBA, and they sent me to a Swift plant in Dallas that was

making a product, a ham, for the Department of Defense to supply

our troops. The gentleman who owned that plant told me that it

was very difficult, that he was the first 8A contractor to ever get

a meat contract, and he went on to explain how difficult it was to

understand specifications and all that was required.

Well, now, with what is being done here under e-commerce, it

just continues, and bundling, which was addressed also by Major

Clark, is just a continuation of making it more difficult and putting

more obstacles for women and minorities to get into these contracts. I have been out of the food processing business now for 4

years. And the number of family-owned businesses that used to be

in that industry have diminished by more than half.

And where we used to have approximately 38 little business

firms competing under the 8A program for meat products, you are

down to one-third; and under the bundling, you have probably lost

80 percent. I think that we need to sort of put the brakes on this

fast technology that we are doing under e-commerce, and as we

pause, that possibly Mr. Summers, through your association, could

come up with something that would be quick to bring all of these

small firms under all industries and occupations, under all of the

SIC codes, up to par to be able to utilize this paperless procurement program that the Federal Government is wanting to do.

There is no doubt, there is no doubt in my mind, that the big, large

firms are the ones who are benefitting from this. And I have had

constituents come to talk to me and say how we, as Small Business

Administration or Small Business Committee members are turning

a blind eye to what is occurring to them.

Mr. Summers, I heard somebody say you had the answer to a

question that I was asking the first presenter.

Mr. SUMMERS. Well, I don’t know whether that was accurate.

You asked the question about the possibility of using students to

the first presenter?

Mr. HINOJOSA. Graduates.

Mr. SUMMERS. Graduate students?

Mr. HINOJOSA. Not a student, but somebody who has graduated

with a bachelor’s degree out of the School of Business, to team up

with some of our small business firms to help them set up and use

the equipment and participate.

Mr. SUMMERS. This could be done without a great deal of difficulty. Many SBDCs are housed on university campuses. I don’t

know the exact number of campuses we are on, but we have a

thousand centers. Probably that represents 5 or 600 universities

across this country, and that enables us to be a good facilitator to

identify students who would be qualified to assist and match that

assistance to the local business. DLA’s Procurement Assistance

Centers can bring the procurement expertise that is needed with

that.

So if you link those together, we could quickly and simply solve

the one problem that you are addressing. Just a thought.

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Mr. HINOJOSA. Chairman Bartlett, I can’t help but think that

that is a good idea for the consideration of our committee, and see

how we could work with the agencies that are responsible for funding those small business components, either through SBA or Department of Commerce. I know that both of them have them under

the MBDC and SBA agencies.

But, again, how fast can this be done?

Mr. SUMMERS. The charge of SBDCs is to provide management

assistance. This is a component. Assisting with issues of administration, finance and computer systems are all under the umbrella

that we would see as our charge today. How quickly can we facilitate the students? That is the hard part of the equation. But we

are well positioned to do that.

I don’t know that I can put a time frame to it today, but we are

positioned to make this happen fairly quickly. If we could get the

components and figure out how to really approach this, we would

like to have more student involvement. And if this were a mandate

for us, I think that is something we would take on. I can’t speak

for the DLA Procurement Assistance Program, but they have a representative on this panel, so they can speak for themselves.

Mr. HINOJOSA. Major, I want to say that your studies that you

identified are very accurate and that as a member of this committee, I would like very much to somehow get more communication and dialogue with your component of the SBA and see how we

could maybe think this out as to how we can utilize Mr. Summer’s

recommendation and move in that direction because this booming

economy is leaving out some of our small business firms if we don’t

respond.

And I, Mr. Chairman, would like to say that I would love the opportunity to work with you in finding a solution to leapfrog, not go

at a turtle’s pace to make it happen. That is why I was asking the

question how soon can we get it done so that we can help our small

business firms be a part of this e-commerce business-to-business

boom that is before us.

Mr. BARTLETT. I thank the gentleman very much for his concerns

and his questions.

Several members of the Small Business Committee were small

business people before we came here. And you can tell by Mr.

Hinojosa’s questions that he is very familiar with the concerns of

small business. What we need, Mr. Hinojosa, I think is the equivalent of SCORE. SCORE are retired executives, probably not as familiar with computers and the Net as younger people, but we need

the equivalent of that made up of younger people who are available

too. SCORE does a fantastic job of interfacing with small business

in the management business plan aspect of it. We need that kind

of capability at this technical front now to help our small businesses become more familiar and more expert in using the Net.

Consistent with your concerns, let me ask Scottie Knott, what

percentage of the businesses in your DoD EMALL, which I gather

Mr. Bansal says you don’t need to make because he has already

done it.

Ms. KNOTT. He is a participant on the EMALL.

Chairman BARTLETT. Oh, he is a participant. What percentage of

your businesses in your DoD EMALL are small businesses?

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Ms. KNOTT. Right now, of the vendor catalogues, I would say

about 40 percent of them are small businesses.

Let me just comment, though, on what my colleague had to say

about that. One of the things that you mentioned, in terms of looking for solicitation and the small business vendor not wanting to

go to multiple websites, and having to look here, and then look

here, and then look here in different website, in the same way our

DoD customers, the people that need these commercial goods and

services, don’t want to have to go to multiple different websites in

order to find all of the different chain saws, for example, that may

be out there in the marketplace.

So what the DoD EMALL does is uses available commercial catalogues, as the FedCenter, and brings them together for a single

view of all of those commercial sites, as well as DoD inventory to

our DoD customers. So we are not building a unique capability

for—we are not building our own malls. All we are doing is we are

bringing together all of the different catalogues and malls that are

available from commercial industry, as well as our Government,

visibility of our products in the warehouses, and providing that to

our DoD customers. So I just wanted to make that distinction in

that regard.

But the DoD EMALL is available to any vendor within DoD who

has a Government contract. We want to put on the mall contracts

that are available for ordering because what we are doing is we are

presenting this information to the person who is the orderer, not

the person who is the procurement professional putting together

the procurement. That has already been done for them. So we are

going directly to the customer who is ordering this product.

Chairman BARTLETT. Forty percent of your businesses in your

mall are small businesses. What percent of the dollar awards are

small business?

Ms. KNOTT. In the mall?

Chairman BARTLETT. Just what percentage of the money spent

by DoD is spent on small business? If 40 percent of your potential

contractors are small business, what percent of the dollars do they

get?

Ms. KNOTT. I don’t know what the total percentage is for all of

DoD in terms of all of DoD procurement. I am not specifically in

that particular business. But there is no distinction made between

the vendor who is a large business or a vendor who is a small business in any of our e-commerce initiatives. They are available to all

on the same playing field.

Chairman BARTLETT. Thank you.

Several of you have mentioned legislative actions that might be

desirable for the Committee to make. One of the first of those—— Mr. HINOJOSA. May I interrupt you, Mr. Chairman?

Chairman BARTLETT. Yes, sir. Please do.

Mr. HINOJOSA. Before you get off of the percentages, you said 40

percent were using computers. In the study that was presented by

Major Clark on page 9, there is a paragraph that is alarming and

should be alarming to us in our Committee, which says, ‘‘However—and this is significant—only 1.4 percent of Internet use

among small businesses is directed to e-commerce sales.’’ That is

alarming.

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And there is no doubt that what Scottie is talking about, the opportunities and all of that, are tremendous. But unless we address

the reasons, it says, ‘‘The three basic cost concerns identified were

lack of funds for up-front implementation costs; number two, lack

of monthly cash flows to maintain their site; and, three, the probability that there would not be a return on their investment,’’ at

least that is the perception.

Unless we address this, I don’t think we are going to see a big

improvement in small business firms taking advantage of businessto-business e-commerce. I think the Government is just going to be

patted on the back by the big companies and thanked for getting

rid of all of the small business firms that used to compete with

them so that they can up the prices so that we can have the $700

toilets.

Mr. BANSAL. Can I make a comment?

Mr. HINOJOSA. Sure.

Mr. BANSAL. We have addressed at least two of those three concerns that was in that report you just read out. We do, for small

businesses, we do bring them into an e-commerce world, so we do

do a set-up for them. We do maintain it monthly for them, and we

do get them transactions, so they can bill electronically.

I think the point that I did not make very emphatically is, really,

the Government can help by encouraging the use of these solutions

to send business to small businesses. And I think the e-mall has

taken the lead in the sense that we are in partnership with them

so that they have the ability, if they want it today, to do that. And

we are free to the Government. We don’t charge the Government

for use, but we do charge businesses. But what we charge to small

businesses is so low, so compelling, that we have not had problems

from getting them to participate. And in some cases, we have even

waived that fee because we truly believe that there are hundreds

of thousands of vendors that have prenegotiated contracts with the

Government that most of them need to be in malls like this for the

Government to succeed.

Mr. HINOJOSA. Mr. Chairman, I agree with Mr. Bansal that what

his company and his group have is applicable to the solution that

I am looking for. But before we commit to the legislation changes

that you were about to talk about when I interrupted, I hope that

we would make that conditional on the Federal agencies who can

help implement the solution that I am asking for, that if we are

to make legislative changes like removing the 15–day waiting period and other things that were requested earlier, that all of that

be conditional on there being, I guess, a huge effort in human resources and monies for technical assistance to address what I want,

and that is that small businesses have a human being who can

help them utilize this opportunity of business-to-business e-commerce.

Chairman BARTLETT. Thank you. Thank you very much. Your

concerns I think are the concerns of the Office of Advocacy. And I

would hope that in any legislation that we are working on that we

would work closely with them because they are out there every day

working with small businesses and know the problems and the concerns that they have.

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I was mentioning the suggestions that you all have made for

committee action. Mr. Summers made one of those first suggestions. And what I would like you to do is to make sure that our

staff has those because we will be looking at them. This is such a

rapidly changing field that a 4-year-old bill is probably now obsolete, isn’t it, for many of the needs and concerns of small business.

So we do need to update this, and I appreciate your suggestions for

changes.

And, Mr. Summers, if you would make sure that the committee

actions that you would like to see us make are clearly spelled out

for our staff people.

Scottie Knott, you mentioned the virtual payment folder.

Ms. KNOTT. Yes, sir.

Chairman BARTLETT. Government has a great reputation for

being a very poor payer, slow. By poor, I mean slow payer. Does

this new technology help us move a little faster, so that we won’t

continue to have that reputation?

Ms. KNOTT. Yes, sir. I believe so. The vendor can actually submit

their invoice electronically. And built into that process are some

validations so that the invoice that they submit is correct; in other

words, it has all of the required information.

As you know, under the Prompt Payment Act, and we have some

cash management requirements associated with paying vendors.

And in order for the clock to start ticking on the payment, you have

to be in receipt of a valid invoice, and it has to be correct. So this

helps the business entity submit the invoice and make sure that

all of that information is correct.

Additionally, it marries up those other two documents that I told

you are necessary, the receiving report, as well as the contract, and

it makes it available to any payment official within the DoD community online, so they don’t have to wait for the mail, they don’t

have to wait for somebody to file it and put it in the right folder,

they don’t have to wait for that to actually appear on their desk.

So it is instantaneous access to information the minute it is available or actually created, when all three of these documents are created. So it should speed that particular process up.

Chairman BARTLETT. We hope so. One of the major complaints

of people doing business with the Government is that they are so

slow paying. As a matter of fact, I know of some small businesses

that do not contract with the Government simply because they do

not have the financial resources to wait 90 or more days for payment.

Ms. KNOTT. Yes, sir.

Chairman BARTLETT. So, hopefully, this new technology will

speed that up, which I think will be very beneficial to the taxpayer

because we are going to have small businesses, who will be even

more competitive, becoming involved when they have finally

learned that they will get paid on some timely basis.

Major Clark, you mentioned that Mr. Glover’s views are not necessarily the views of the administration. Jere Glover is typical of

a number of people, not enough, but a number of people in the Government who when they tell the person they are conversing with

that, ‘‘I am from the Government and I am here to help you,’’ the

person doesn’t start laughing, which is the usual response when

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somebody from the Government says, ‘‘I am from the Government

and I am here to help you.’’

Your organization, particularly Jere Glover, really is there to

help, and I am pleased that an increasing number of people, particularly those who are interfacing with the small business community, have the kind of attitude that Mr. Glover has. When he gives

a talk and he says, ‘‘us,’’ he is talking about small business, and

when he says ‘‘them,’’ he is talking about the Government bureaucrats. And we need more of our people to use that kind of vocabulary when they are interfacing with the public, particularly with

the small business community.

You mentioned the $700 toilet seat. Whose fault is that? We have

$200 hammers and $700 toilet seats. Whose fault is that? How

much of that fault is the fault of Government procurement policies

and how much of it is the fault of the business? You said that small

business was never there, that when that sort of thing came up it

was always large business. Whose fault is that? How much of that

fault is our procurement policy and how much of that fault is the

business?

Mr. CLARK. Mr. Chairman, if I may go back in time just a little

bit, the toilet seat issue came up, at least came to our attention

back in the 1980s, and at that time it was at least the belief of

staff, looking at various documents, that fault, if there is fault to

be placed, was part placed on the system itself, in terms of how it

encouraged, how it allowed for this type of situation to occur. And

in many situations, and in most situations, small businesses simply

were not available to participate at that level of play and, therefore, small businesses were not selling the $700 toilet seat to Defense or the $250 hammer, whatever the case may be.

But in many situations because of the system, while we saw the

$700 toilet seat as being ridiculous, the system itself saw the $700

toilet seat as being just a very small part of a larger mission that

had to be accomplished, and that mission was to make sure the

fighters were able to fight, and we were able to conduct the type

of war that was necessary.

So, to a very large extent, the procurement regulations at that

point in time allowed for this to occur, and that is, to some extent,

why we, at least the staff level, recommended to the members, and

they took the recommendations and moved forward with legislation, in terms of correcting some of those deficiencies.

Chairman BARTLETT. I appreciate your answer.

Most frequently when this is mentioned, it is mentioned in the

context of greedy, inept businesses who are just finding opportunities to gouge the Government and the taxpayer. I appreciate your

answer very much because I think that most of the blame there lay

at the regulations, which didn’t only permit, but in some ways of

looking at them, almost required this kind of thing. And I appreciate your concern about changing these so that that wouldn’t happen again. There is no big business that wants this kind of a thing

to come out in the press about their contract with the Government.

That doesn’t help anybody, the Government or the business.

You also mentioned contract bundling. Relevant to that, there is

another concern that a number of small businesses have come to

us with, and that is bid shopping. Is that problem finally corrected?

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Bid shopping is where a prime goes out and gets a bunch of subs

to team with them in bidding. And then the prime gets the contract, and he comes back to the subs, and he says, ‘‘Well, now I

have got the contract. I am going to rebid these subs. How much

lower can you make your bid cost on that?’’

And frequently the subs that were a part of the bid and maybe

part of the reason that the award was made to the prime are not

involved at all in the performance of the contract because the

prime has now gone out and done what is called bid shopping.

They have shopped it around. They have gotten other small bidders

who would do it for lesser dollars. Had they been on the team,

originally, they might not even have gotten the contract because

the Government buyer might not have seen that as a responsible

team.

The difference in dollars is just put in the pocket of the prime.

It is called ‘‘bid shopping.’’ Have we found a way to correct that

abuse?

Mr. CLARK. Mr. Chairman, we have not looked at bid shopping

as a study, at this particular point. We do, however, know that

from anecdotal information that has been brought to our attention,

that it is occurring. So, therefore, we have not moved forward with

any type of recommendation as to how to curtail it simply because

we have not studied the problem in its totality.

It does exist, and it is unfortunate that the small business owner

is, in most situations, the victim of this particular process. It is

something that we will be looking at in the very near future, but

we have not yet been able to fully document the magnitude of it.

Again, bid shopping, in past legislation, there has been attempts

to correct this. There are some laws in place now which can address this if they are properly implemented.

Chairman BARTLETT. I think in terms of fairness, almost everybody would like to see the team that won the contract be the team

that performs on the contract. And if legislation is needed to make

that happen, please let us know. If administratively, the Government procuring agencies can make that happen, that is okay. But

if you need legislative support to do that, please let us know.

Mr. Bansal mentioned the relationship of the chicken and the pig

to your breakfast ham and eggs. For the chicken, that’s a one-day

effort, for the pig, that is pretty much a total commitment, isn’t it.

Mr. BANSAL. Sure.

Chairman BARTLETT. And there are many small businesses who

feel more like the pig than the chicken—— Mr. BANSAL. Absolutely.

Chairman BARTLETT. When they are dealing with the Government.

I want to thank all of you very much for your testimony. This

is a rapidly growing technology. It is very difficult to keep up with

it, particularly difficult for our small businesses. The most relevant

legislation is now 4 years old. And I think very clearly since it is

3 or 4 years old, that we need a new look at legislation. Appreciate

your suggestions for what this legislation might include.

And, again, thank you very much for your participation in today’s hearing.

Our Subcommittee is now adjourned.

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[Whereupon, at 11:55 a.m., the Subcommittee was adjourned.]

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