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39–791 PDF 2008

FULL COMMITTEE HEARING ON

ARE NEW PROCUREMENT METHODS

BENEFICIAL TO SMALL BUSINESS

CONTRACTORS?

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF 

REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

SECOND SESSION

MARCH 6, 2008

Serial Number 110-77

Printed for the use of the Committee on Small Business

(

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

HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

HEATH SHULER, North Carolina 

CHARLIE GONZA ́ LEZ, Texas 

RICK LARSEN, Washington 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

HENRY CUELLAR, Texas 

DAN LIPINSKI, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

BRUCE BRALEY, Iowa 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

BRIAN HIGGINS, New York 

MAZIE HIRONO, Hawaii 

STEVE CHABOT, Ohio, Ranking Member 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

STEVE KING, Iowa 

JEFF FORTENBERRY, Nebraska 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

DAVID DAVIS, Tennessee 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KEVIN FITZPATRICK, Minority Staff Director

STANDING SUBCOMMITTEES 

Subcommittee on Finance and Tax

MELISSA BEAN, Illinois, Chairwoman 

RAUL GRIJALVA, Arizona 

MICHAEL MICHAUD, Maine 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JOE SESTAK, Pennsylvania 

VERN BUCHANAN, Florida, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa

Subcommittee on Contracting and Technology

BRUCE BRALEY, IOWA, Chairman 

HENRY CUELLAR, Texas 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

JOE SESTAK, Pennsylvania 

DAVID DAVIS, Tennessee, Ranking 

ROSCOE BARTLETT, Maryland 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

MARY FALLIN, Oklahoma

(II) 

Subcommittee on Regulations, Health Care and Trade

CHARLES GONZA ́ LEZ, Texas, Chairman 

RICK LARSEN, Washington 

DAN LIPINSKI, Illinois 

MELISSA BEAN, Illinois 

GWEN MOORE, Wisconsin 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

LYNN WESTMORELAND, Georgia, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

MARILYN MUSGRAVE, Colorado 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida

Subcommittee on Urban and Rural Entrepreneurship

HEATH SHULER, North Carolina, Chairman 

RICK LARSEN, Washington 

MICHAEL MICHAUD, Maine 

GWEN MOORE, Wisconsin 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

HANK JOHNSON, Georgia 

JEFF FORTENBERRY, Nebraska, Ranking 

ROSCOE BARTLETT, Maryland 

MARILYN MUSGRAVE, Colorado 

DAVID DAVIS, Tennessee

Subcommittee on Investigations and Oversight

JASON ALTMIRE, PENNSYLVANIA, Chairman 

CHARLIE GONZA ́ LEZ, Texas 

RAUL GRIJALVA, Arizona 

MARY FALLIN, Oklahoma, Ranking 

LYNN WESTMORELAND, Georgia

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page

Vela ́zquez, Hon. Nydia M. ....................................................................................... 1

Chabot, Hon. Steve .................................................................................................. 2

WITNESSES

PANEL I: 

Denett. Honorable Paul, Administrator, Office of Federal Procurement Policy, 

Office of Management and Budget ..................................................................... 3

Williams, Jim, Commissioner, Federal Acquisition Services, General Services 

Administration ..................................................................................................... 5

Johnson, Ron, Deputy Commanding General, U.S. Army Corps of Engineers .. 7

PANEL II: 

Palatiello, John, Administrator, Council on Federal Procurement of Architectural and Engineering Services .......................................................................... 17

Zelenka, Anthony, President, Bertucci Contracting Corporation, on behalf 

of the Associated General Contractors ............................................................... 19

Salus, Arthur, President, Duluth Travel, on behalf of the Society of Government Travel Professionals ................................................................................... 21

Leazer, Mark, Director of Management Information Services, Forms & Supply, Inc., on behalf of the National Office Products Association ...................... 23

Spotila, John, Chief Executive Officer, R3i Solutions .......................................... 25

APPENDIX 

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 33

Chabot, Hon. Steve .................................................................................................. 35

Altmire, Hon. Jason ................................................................................................. 36

Denett. Honorable Paul, Administrator, Office of Federal Procurement Policy, 

Office of Management and Budget ..................................................................... 37

Williams, Jim, Commissioner, Federal Acquisition Services, General Services 

Administration ..................................................................................................... 48

Johnson, Ron, Deputy Commanding General, U.S. Army Corps of Engineers .. 55

Palatiello, John, Council on Federal Procurement of Architectural and Engineering Services ................................................................................................... 59

Zelenka, Anthony, President, Bertucci Contracting Corporation ........................ 79

Salus, Arthur, President, Duluth Travel, on behalf of the Society of Government Travel Professionals ................................................................................... 84

Leazer, Mark, Forms & Supply, Inc. ...................................................................... 91

Spotila, John, R3i Solutions .................................................................................... 126

Letter to Chairwoman Nydia Vela ́zquez from Honorable Paul Denett, Administrator, Office of Federal Procurement Policy, Office of Management and 

Budget ................................................................................................................... 126

(V) 

(1)

FULL COMMITTEE HEARING ON: ARE 

NEW PROCUREMENT METHODS 

BENEFICIAL TO SMALL CONTRACTORS? 

Thursday, March 6, 2008

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

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

2360 Rayburn House Office Building, Hon. Nydia Vela ́zquez [chairman of the Committee] presiding. 

Present: Representatives Vela ́zquez, Cuellar, Johnson, Chabot, 

and Gohmert. 

OPENING STATEMENT OF CHAIRWOMAN VELA ́ ZQUEZ 

Chairwoman VELA ́ ZQUEZ. I call this meeting to order. 

This morning the Committee will continue its examination of 

small business’ role in the federal marketplace. Today we will review the effect of emerging contracting methods which are being 

driven by the decline in the federal acquisition work force. 

Just 25 years ago, there were more than 135,000 contracting personnel. Now it has shrunk to only 85,000 staff, a decline of more 

than half. This has occurred while the dollar amount of contracts 

has increased by nearly $200 billion dollars. 

Clearly, something has to give, and unfortunately it is small 

businesses that are left out and suffer the most. The result of this 

dramatic shift has been more pressure on agencies to consolidate 

contracts and employ automatic IT driven procurement systems. 

People keep saying that this is easier, but for whom? Not small 

business; not easier for the taxpayer. It is just easier for the bureaucrat, and that should not be driving federal procurement policy. 

The truth is that we hear a lot about the problems of contract 

bundling, but the increased reliance of these new approaches is just 

as significant for small businesses. Many cannot even gain access 

to these systems, and when they do, they’re forced to compete with 

larger firms. 

Similar to the big box retailers rooting the local hardware stores 

out of businesses, these new methods are creating an uneven playing field for small businesses. Three of the major methods that 

have been growing in significance are GSA Schedules, reverse auctions, and the e-travel initiative. Some of them are unproven and 

may only be suitable for certain types of purchases. Others create 

2

administrative nightmares that cause small businesses to incur unnecessary costs. 

And some of these approaches may run counter to federal law 

and may be providing taxpayers with a bad deal. 

Taken together, these new processes are creating roadblocks for 

small firms as they try to navigate the federal procurement system. 

If left unchanged, this could lead to a marketplace without the contributions of small business ingenuity and innovation. This will result in a less diverse supplier base, leaving taxpayers to pay more 

for less. 

It is important that those small businesses are not being put at 

a competitive disadvantage simply because of the adoption of new 

systems. These practices must be modified to provide greater equity and fairness to small firms. This will help ensure that government is getting the best value. 

After all, what good is a one dollar hammer that falls apart after 

its first use and then you have to purchase another one? That is 

not the lowest cost, and it is not the best deal for the taxpayer. 

With this hearing, these new procurement methods will be examined in a more systematic manner than has been done before. Each 

new approach should be evaluated as is done with federal regulations. 

What is its impact on small businesses? How will their ability to 

compete be affected? Going forward these questions must be asked 

and the pros and cons weighed before any procurement method is 

implemented. 

Small businesses are the bedrock of the economy and must be 

given the opportunity to compete in the federal procurement marketplace. Methods that obstruct their participation would only 

serve to reduce the government access to innovative goods and 

services. 

I thank all of the witnesses for being here today, and I look forward to all of your testimony. 

I now recognize Mr. Chabot for his opening statement. 

OPENING STATEMENT OF MR. CHABOT 

Mr. CHABOT. Thank you, Madam Chair. 

Good morning, and thank you, Chairwoman, for holding this 

hearing on how well federal agencies’ acquisition strategies balance 

the need for quick and efficient contracting with the achievement 

of small business goals. 

The agencies must implement this balance in the face of a 

shrinking federal workforce and increased federal spending. 

I would like to extend a special thanks to our witnesses who 

have taken the time to provide this Committee with their testimony this morning. 

Small businesses have been long recognized as one of the nation’s 

most valuable economic resources and serve as seeds of innovation. 

Small businesses participate in all major industries and represent 

50 percent of all private sector workers. In addition, small businesses employ 39 percent of high tech workers, such as scientists, 

engineers, and computer workers. 

The federal government is the single largest buyer in the world, 

spending over $400 billion in 2006. 

3

Until the mid-1990s, procurement rules as implemented by the 

Federal Acquisition Regulation, were designed around two major 

procurement statutes. The Competition and Contracting Act of 

1984 established the rules for awards based on full and open competition, and two, the Truth in Negotiations Act of 1992 established 

rules for disclosure of cost information. 

Acquisition reform from the mid-1990s to present resulted in several changes to government-wide procurement practices. Legislative reform included the Federal Acquisition Streamlining Act of 

1994, FASA, that formalized the use of large, multi-agency, indefinite delivery, indefinite quantity, ID/IQ, order contract. FASA also 

encouraged the use of electronic tools, like government purchase 

cards to improve efficiency and to insure supplies and services were 

acquired at a competitive fair price with timely delivery. 

The Service Acquisition Reform Act of 2003, SARA, established 

an advisory panel to review and improve acquisition laws and regulations. The SARA panel published a final report on January 2007 

with 89 recommendations. 

We have excellent witnesses here today to provide us with insight into how well the federal agencies’ acquisition strategies are 

structured and how to balance the need for quick and efficient contracting with the achievement of small business goals. 

I want to again thank you, Madam Chairwoman, for holding this 

hearing. I know we look forward to hearing from both panels, and 

I yield back the balance of my time. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

And we are going to proceed with our first panel. I welcome all 

of you, and I thank you for your participation. 

Our first witness the Honorable Paul Denett. Mr. Denett is the 

Administrator for Federal Procurement Policy in the Office of Management and Budget. The Office of Federal Procurement Policy 

plays a central role in shaping the policies federal agencies use to 

acquire goods and services. 

You will have five minutes to make your presentation. 

STATEMENT OF THE HONORABLE PAUL DENETT, ADMINISTRATOR, OFFICE OF FEDERAL PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET 

Mr. DENETT. Thank you. 

Chairwoman Vela ́zquez, Ranking Member Chabot, and members 

of the Committee, I appreciate the opportunity to appear before you 

today to discuss small business contracting and the impact that 

emerging acquisition trends are having on small businesses. 

I have prepared written remarks that I would like the Committee to enter into the record and would like to briefly summarize 

them now. 

Chairwoman VELA ́ ZQUEZ. Without objection. 

Mr. DENETT. Thank you. 

Mr. DENETT. Let me say at the outset that the Office of Federal 

Procurement Policy is committed to providing maximum opportunities for small business in federal contracting and subcontracting. 

Increasing opportunities for small businesses has always been a 

priority for me. When I was the Senior Procurement Executive at 

the Department of Interior, I pursued a number of initiatives to 

4

create a small business friendly environment. Those efforts helped 

ensure Interior’s small business contracting awards were well 

above the government-wide goal. 

In fact, Chairwoman Vela ́zquez, I left in 2001, and I am proud 

that Interior is probably the only department that you ever gave 

an A rating to that year. So I am just letting you know I am a 

strong and consistent supporter of small business. 

Chairwoman VELA ́ ZQUEZ. I am waiting to do the same with the 

rest of all the federal agencies. 

Mr. DENETT. Okay. 

[Laughter.] 

Mr. DENETT. I am looking forward to teaming up with you to accomplish that. 

As OFPP Administrator, I have taken a number of actions to increase management attention government-wide on small business 

issues. Many of these actions have been taken in close partnership 

with SBA Administrator Steve Preston. 

In 2007, SBA and OFPP launched the small business procurement score card to hold agency leadership accountable for improving success in meeting small business goals. Our offices also 

worked together to increase the number of SBA’s Procurement Center Representatives and ensure agencies have access to the assistance they need to create and develop small business opportunities. 

At my request, the FAR Council established the small business 

regulatory team to improve communications between SBA and the 

drafters of the Federal Acquisition Regulation during the development of rules that have a bearing on the small business community. We are making sure our workforce is proficient in small business contracting. 

Last year agencies evaluated their competencies in small business contracting as part of the first ever acquisition workforce 

skills assessment survey conducted by the Federal Acquisition Institute in collaboration with OPM and my office. 

Based on the results of this survey, FAI is developing new online 

training courses to further increase awareness of small business 

program requirements and improve acquisition planning to promote small business participation. 

In terms of emerging trends, OFPP has paid especially close attention to task and delivery order contracting, which has increased 

dramatically since 1990. Our goal is to make sure task and delivery 

order contracting is used effectively and in an open and fair manner that facilitates small business participation. We are strengthening competition rules for orders placed under multiple award 

contracts by requiring both a clear explanation for the basis for 

evaluating offers and public notice of sole source orders. 

Agencies continue to provide significant opportunities for small 

businesses on the government’s most popular interagency task and 

delivery order contracts, the Multiple Award Schedules and the 

GWACs. I am pleased, for example, that GSA continues to manage 

a variety of GWACs set-aside exclusively for small businesses, including GWACs that are devoted to 8(a) contractors and veterans. 

We are making sure that efforts to leverage our purchasing 

power are pursued in coordination with our commitment to small 

businesses. In 2006, small businesses received more than $1.5 bilVerDate 0ct 09 2002 09:15 May 09, 2008 Jkt 033615 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\39791.TXT LEANN
5

lion from contracts that DoD set up under the Administration’s 

strategic sourcing initiative. This represents more than 41 percent 

of the dollars awarded by DoD under the strategic sourcing initiative that year. 

More recently, GSA awarded 13 blanket purchase agreements to 

facilitate strategic sourcing for office supplies. Eleven of the BPAs 

were awarded to small businesses, including 8(a) small businesses 

and women-owned and veteran-owned small businesses. 

Finally, we are recognizing exceptional achievements in our 

workforce, including efforts to facilitate access to small businesses. 

Last year Ms. Jean Todd of the Army Corps of Engineers was recognized under the SHINE Initiative for her best in class contracting to support Hurricane Katrina and Rita reconstruction efforts, which included nearly a billion dollars in subcontracts to 

small disadvantaged businesses and local small businesses. 

In short, the administration is working to ensure that the federal 

contracting environment allows small businesses to flourish and 

apply their talents to the many pressing demands facing our government. We look forward to working with this Committee in our 

continued pursuit of these efforts. 

This concludes my prepared remarks. I will be happy to answer 

any questions. 

[The prepared statement of Mr. Denett may be found in the Appendix on page 37.]

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Denett. 

Our next witness is Mr. James Williams. He is the Commissioner 

of the Federal Acquisition Service. This organization has responsibility for the GSA Schedules Program. 

Welcome. 

STATEMENT OF JAMES WILLIAMS, COMMISSIONER, GENERAL 

SERVICES ADMINISTRATION, FEDERAL ACQUISITION SERVICES 

Mr. WILLIAMS. Good morning, Chairman Vela ́zquez, Ranking 

Member Chabot, and members of the Committee. Thank you for inviting me here today to discuss how GSA’s Federal Acquisition 

Service and its electronic systems support small business. 

GSA has been and will continue to be a good friend to the small 

business community. I am pleased to report on GSA’s procurement 

methods and their positive impact on small business. My testimony 

will focus on how electronic, or e-systems, our processes, contract 

vehicles, and solutions have helped GSA strengthen the relationship with this community. 

Since 1995, GSA has been offering e-systems to help small businesses participate in GSA acquisition programs. E-systems increase 

accessibility and transparency and minimize cost to small businesses wanting to sell to the government. Simply put, GSA’s e-systems help small business do business with the federal government 

and facilitate the connections between agency customers and small 

businesses. 

The GSA Advantage! online shopping and ordering system provides access to thousands of contractors and millions of products 

and services and allows customers to tailor their searches specifiVerDate 0ct 09 2002 09:15 May 09, 2008 Jkt 033615 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 G:\CLERK SB-LD\HEARINGS\TRANSCRIPTS\39791.TXT LEANN
6

cally for products and services provided by small business. The 

total amount of sales that went to small business contractors using 

this system has steadily increased from 49.5 percent in fiscal year 

2001 to 76.5 percent in fiscal year 2007. 

GSA’s e-Buy is an electronic RFQ/RFP system for the millions of 

services and products offered through GSA Schedules and GWACs. 

Customers can request quotations specifically from disadvantaged, 

veteran, service-disabled veteran, women-owned, and other small 

businesses. 

E-offer is a tool to submit online contract offers and contract 

modification requests to GSA, and over the last five fiscal years, 

small businesses have accounted for about 95 percent of all electronically submitted offers. 

The Schedule Input Program, or SIP, assists small companies in 

loading their products electronically onto GSA systems such as Advantage! and e-Buy. It is free, and it requires only basic computing 

equipment to use. 

When small businesses are transacting with federal applications, 

they can avoid multiple identity credentials by using the E-Authentication system, which GSA operates as an e-Gov initiative. This 

system offers greater accessibility for small businesses by allowing 

the use of a single online security identity credential, which enables millions of safe online transactions while reducing their online identity management burden. 

Perhaps one of the most advantageous programs that the government manages that provides access for small business owners has 

been the GSA Multiple Award Schedule, or ′′Schedules′′ Program, which accounts for about $36 billion annually in sales. Eighty percent of the 17,000-plus scheduled contractors are small businesses, 

and they receive about 37 percent of the total dollars under the 

Schedules Program, well above the government goal of 23 percent. 

The Schedules Program is advantageous for small business because it provides them with training and access to the entire government marketplace, which has led to recent annual small business sales of over $13 billion a year. 

Given that the Schedules Program is how most small companies 

get their start in the federal marketplace, it allows them to have 

a single market access point to sell efficiently to all federal customers and to partner with large businesses. The Schedules Program has been the best friend of small businesses. 

GSA also offers greater accessibility for small businesses to sell 

to an expanded marketplace, reaching state and local customers at 

no additional cost under certain allowable regulations based in law. 

These federal, state and local customers also have access to all of 

our e-systems, which allows them greater efficiencies, market access to, and tailored searches for small businesses and their procurements. 

In addition to electronic tools, GSA provides customers with a 

wide range of governmentwide acquisition vehicles, some specifically designed to provide opportunities to the small business community, including the 8(a) STARS contract vehicle, the Alliant 

Small Business GWAC and the VETS GWAC. 

In closing, we are very proud of the great results small businesses have achieved using the GSA systems and processes that 

7

maximize their opportunities and minimize their costs. However, 

we will continue to aggressively seek ways to build upon this successful foundation. 

Again, thank you for inviting me here today, and I will be glad 

to answer any questions you may have. 

[The prepared statement of Mr. Williams may be found in the 

Appendix on page 48.]

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Williams. 

Our next witness is Major General Ronald L. Johnson. Major 

General Johnson is the Deputy Commanding General of the U.S. 

Army Corps of Engineers. He directs the management of 181 Army 

installations and a budget exceeding $8 billion. 

Welcome. 

STATEMENT OF MAJOR GENERAL RONALD L. JOHNSON, DEPUTY COMMANDING GENERAL, U.S. ARMY CORPS OF ENGINEERS 

General JOHNSON. Madam Chairwoman and members of the 

Committee, thank you for the opportunity to testify before you concerning the impact of the emerging procurement methods on small 

business contractors. 

Your staff has asked that you would like me to address one particular emerging procurement method that falls under the genre of 

e-systems, and I am going to talk about that one particular method, reverse auction. 

In 2004, the Army Corps of Engineers completed a pilot study on 

a specific procurement method called reverse auction. In 2002 in 

the Defense Appropriations Act, Congress provided $1.4 million to 

FreeMarkets, Incorporated, an e-sourcing contractor to explore reverse auctions. 

In conjunction with this appropriation and direction, the Corps 

of Engineers received the funds from the Department of Defense to 

analyze online markets, and we did four particular things. 

We conducted the pilot study to test online e-sourcing, specifically full service reverse auctioning for use by the Corps and its industry partners. 

We encouraged activities within the Corps to explore the potential of online reverse auctioning. 

We conducted training in the use of the new and emerging acquisition tool. 

And finally, we determined the appropriateness of augmenting 

our acquisition strategies and processes with reverse auctioning to 

improve efficiency of the acquisition process. 

So in 2003, we conducted the pilot program to evaluate the use 

of e-sourcing and see how it would apply in the complex mission 

of the Corps. The Corps contracted with FreeMarkets to provide reverse auction software technology and training to eight separate 

Corps districts, to provide two different forms of reverse auction 

technology training and to provide their expertise, assistance, and 

advice to the reverse auction process. 

FreeMarkets introduced a concept of reverse auctioning to the 

Corps and its reverse auction software tool to our pilot sites. Four 

8

contracting officers used the reverse auction process on nine individual projects, the majority of which were construction projects. 

We received protests on two of these projects, and one of the protests was sustained due to a problem with the reverse auction software. Through the pilot study, we found no basis for the claim that 

reverse auctioning provided any significant or marginal savings 

over the traditional contracting process for construction or construction services. 

Reverse auctioning has a chance to provide benefit when the 

commodities or manufactured goods procured possess a controlled 

and consistent nature with little or no variability. Construction and 

construction services are, by their nature, variable. Therefore, the 

reverse auction functionality that allows a comparison of past 

projects does not provide usable results for contracting officers of 

our construction projects. 

Our study also found that there is considerably more time involved in the preparation and execution of reverse auctions which 

increases the level of labor and project costs associated with the 

procurement. Labor costs are an important aspect of our project 

cost, and we strive to insure that they’re controlled to the extent 

possible and appropriate. 

In summary, the Corps was not able to support the potential 

benefits of reverse auction for our construction program. While this 

tool may be appropriate and beneficial in more repetitive types of 

acquisition, we did not find it to be a useful tool for our construction program and do not utilize it today. 

I would like to briefly mention one other program where the 

Corps is utilizing lessons learned from recent experience and specifically targeting small businesses to meet our needs. The Corps 

under the National Response Plan Emergency Support Function 

number three for public works and engineering, is responsible for 

providing power and temporary roofing, debris removal and reduction. We have some set-aside contracts that are awarded in advance to support potential responses to future natural or manmade 

disasters. 

We recently awarded 12 contracts for temporary roofing. Of these 

12 contracts, seven were awarded to 8(a) small, disadvantaged 

businesses, one to a HUBZone business, and one to a service disabled veteran-owned small business. 

If and when the services are required, we have nine small businesses to whom we can immediately turn for assistance. We are 

looking forward to awarding similar contracts to other small businesses. 

Before closing, let me update you on the Corps’ Small Business 

Program for the last two fiscal years. The Corps has long considered the small business community an important partner in the 

success of its mission. Historically, the Corps has been, and continues to be, one of Department of the Army’s strongest small business supporters. 

However, we know that we must always strive to improve, and 

as such, as an agency, we have a very aggressive small business 

goal, including the overall small business goal which is almost 

twice the statutory goal. 

9

Our continued commitment to successful small business partnerships will help to insure that a vibrant and robust cadre of small 

businesses is available and utilized in performing our mission. 

That concludes my opening statement. I will be happy to answer 

any questions you or members of your Committee have today. 

[The prepared statement of Major General Johnson may be found 

in the Appendix on page 55.]

Chairwoman VELA ́ ZQUEZ. Thank you, sir. 

Mr. Denett, I would like to address my first question to you. In 

2003 during Small Business Week, President Bush, in announcing 

his commitment to the small business agenda, said, and I quote, 

‘‘Wherever possible, we are going to break down large federal contracts so that small business owners get a fair shot at serving the 

needs of the nation.’’ That was in 2003. 

In 2005, OMB sent a memo to all the federal agencies asking 

them to implement strategic sourcing. My question to you is: if the 

President said that we are supposed to break up large contracts, 

isn’t strategic sourcing counter to that directive? 

Mr. DENETT. I do not believe so. In fact, the thing we put out on 

strategic sourcing, we have as one of the criteria that people look 

at when they pursue strategic sourcing is to see the impact on 

small business. In fact, we want them to look at what portion of 

the dollars currently go to small business, and then when they do 

a strategic sourcing initiative, that the percentage will stay the 

same or improve, not go down. 

Thus far we have been very successful in strategic sourcing. The 

ones that we have initially done, in fact, have increased small business. So as long as we keep reminding people of the importance of 

that and that strategic sourcing is not to hurt small business, the 

early data that I am getting from different departments is, in fact, 

the small business numbers have gone up. 

So we are just going to have to keep reminding them of that. 

Chairwoman VELA ́ ZQUEZ. I am sorry. Who is telling you that the 

small business contracts—

Mr. DENETT. On strategic sourcing? 

Chairwoman VELA ́ ZQUEZ. Yes. 

Mr. DENETT. Well, you know, for example we did office supply 

strategic sourcing. 

Chairwoman VELA ́ ZQUEZ. Okay. So you are telling me that strategic sourcing does not prevent more small businesses getting a 

higher number of federal contracts, and that is why every year, including last fiscal year when we release our score card regarding 

federal procurement practices, it shows that the federal government has not accomplished small business contracting goals of 23 

percent. 

So you are telling me that the fact that the federal government 

has not reached the contracting goal of 23 percent has nothing to 

do with strategic sourcing. 

Mr. DENETT. I am saying strategic sourcing in most instances 

has helped small business. 

Chairwoman VELA ́ ZQUEZ. Are you telling me the number of contracts awarded to small businesses is not going down while the 

amount of money spent in federal contracting dollars is going up? 

10

Mr. DENETT. In the strategic sourcing area, we can say that. 

Overall, I mean, Administrator Preston I know is working real 

hard to try to increase the number of dollars that are going to 

small business. He is utilizing a score card system which is holding 

agencies more accountable, to put more pressure on them to find 

more opportunities for small businesses. 

Chairwoman VELA ́ ZQUEZ. This is after the Inspector General of the SBA came out with a report that showed that $12 billion that 

were intending to go to small businesses went to large firms, what 

we call miscoded. Were you aware of that? 

Mr. DENETT. I am aware that there was a coding problem and 

that Administrator Preston worked very aggressively with the departments to have them cull through their data, correct any errors 

that they made, so that we could have correct numbers. 

Chairwoman VELA ́ ZQUEZ. Okay. Thank you. 

In your testimony, you mentioned that you worked with the SBA 

Administrator to increase the number of SBA Procurement Center 

Representatives, PCRs. 

The SBA budget imposed a cap of 60 PCRs. In 1993 when the 

federal marketplace was half the size it is now, there were 68. 

Is the SBA ignoring the recommendations of OFPP? 

Mr. DENETT. No, they are not. I asked them to increase, and that 

was this past year. They were going down as you have already 

stated, and I was concerned by that. So I pressed them to increase 

the number, and I am told that they, in fact, have increased the 

number. 

It is still not as large as the reference year that you were using, 

but they did increase it by three or four after I urged them to do 

so. 

Chairwoman VELA ́ ZQUEZ. Can you tell us if you recommended a 

figure, a number? 

Mr. DENETT. I did not. I just said that it seemed to me that using 

the logic that you had just described, the dollars had gone up. They 

serve a very useful purpose. Can we not have more of them? 

And I am told we, in fact, do now have more of them. 

Chairwoman VELA ́ ZQUEZ. So you are telling me that the cap that 

they imposed of 60 is no longer in place; that they are going to increase that number? 

Mr. DENETT. No, I am not saying that. I am saying that they increased the number over what they had the previous year, in part, 

from my urging. 

Chairwoman VELA ́ ZQUEZ. I want to see that. 

In your testimony you also mentioned that you launched the 

small business procurement score card in partnership with the 

SBA and formed a small business team within the FAR Council. 

Three of the agencies on the FAR Council small business team 

received red small business scores on the procurement score card, 

the lowest score, which can be interpreted as a failing grade. 

Do you find it ironic that the team that is supposed to help small 

business is not receiving a passing grade? 

Mr. DENETT. Do you mean members of that team? 

Chairwoman VELA ́ ZQUEZ. Yes. The agency, that part of—

Mr. DENETT. I would hope that they are just more motivated, 

having gotten a failing grade. Working with us on regulations, they 

11

can help come out with regulations that will foster an atmosphere 

to assist small business quicker. 

Chairwoman VELA ́ ZQUEZ. Sir, it is not for you to come here and 

say that you hope that they are doing, that they will do much better. 

Mr. DENETT. Well, they will do better, but the fact that—

Chairwoman VELA ́ ZQUEZ. Because there are small businesses 

that are suffering due to the fact that the federal government is 

failing them at a time when the economy is in bad shape. We have 

to get the federal agencies to do better. 

So to issue press releases saying we are going to assemble a federal agency team to increase contracting opportunities and help 

small businesses, and then when I ask you about how the team 

that is charged with accomplishing this is composed, all of those 

federal agencies are getting a red score. We need some oversight 

from the federal government. 

Mr. DENETT. I will give it oversight. I am looking at what the 

team’s results are, I am told that we are now moving things that 

help small business faster as a result of this team. Certainly, some 

of the members are going to come from departments that have not 

had good scores, but the whole aggregate of the team, they have 

been given clear orders to do what they can to help small business, 

and that is what they are going to do. 

Chairwoman VELA ́ ZQUEZ. Thank you for that. Thank you. 

Mr. Williams, GSA claims that e-Travel help small businesses 

because more small firms are eligible for contracts. In 2004, before 

e-Travel, only 13 small businesses were eligible, and that has now 

increased to 34. 

However, an increase in the potential bidders has not correlated 

to an increase in business, which is the true measure of whether 

or not this works for small firms. 

In 2006, small travel agents received less than one percent of the 

dollar awarded on the e-Travel TSS schedule. So can you tell me 

how this demonstrates fair opportunity? 

Mr. WILLIAMS. Yes, Madam Chairwoman. In 2004, those 13 firms 

that received the travel agency contracts received sales of about 

$26 million. That was in 2004. 

In 2006, the 16 companies that now receive dollars under travel agency business get about $80 million. It is true what you said 

under the travel services schedule, the TSS, that those companies 

are not getting a lot of business. It is as you said. However, the $80 million that they are getting is under our eTravel initiative. They are getting that in a subcontract role primarily. So they are getting dollars. We would like to see small 

businesses get more direct prime contracts from the federal government, and that is why we have the TSS schedule. 

Chairwoman VELA ́ ZQUEZ. So in conclusion, and I am going to recognize Mr Chabot, you are telling me that you are proud of the fact 

that 98.9 of the dollars went to six large corporation. 

Mr. WILLIAMS. No, we are not. 

Chairwoman VELA ́ ZQUEZ. Okay. Thank you. 

Mr. WILLIAMS. You are welcome. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Chabot. 

12

Mr. CHABOT. Thank you, Madam Chair. 

Maybe I will start at this end, Major General, if that is okay. 

How does reverse auctioning affect small business concerns’ opportunities to do business with the federal government? 

General JOHNSON. I think it does based upon my dialogue with 

small business owners and working with them over time; I think 

the way it impacts them is, you know, reverse auctioning, you 

think of eBay. It is the opposite of eBay. With reverse auctioning, 

no construction contractor is going to give the government the best 

price the first time. It requires an immediate response. You have 

to be there, right there at the screen. Small businesses really cannot afford to do that, nor do they have the wherewithal to allocate 

resources for someone to sit at a screen, make an immediate assessment whether it is affordable for them to make this or go into 

this business decision as a big business could. 

I do not think big businesses could do this either. 

Mr. CHABOT. Thank you very much. 

Mr. Williams, GSA sent a letter to VA dated January 4, 2008, 

that addressed the possibility of VA implementing corrective action 

to a VA Office of Inspector General report that would prohibit the 

eligibility of a category of large and small business dealers from 

being placed on the VA schedule. 

The letter stated that the terms of delegation of authority from 

GSA to VA to operate the schedule program indicate that the method of supply would be governed by criteria established under GSA 

regulations. It further states that the issuance of procurement policies and methods necessary to implement the VA delegation are 

understood to be under GSA control. 

Is this still GSA’s position? And if you know, what is the current 

status and when do you think that it will be resolved? 

Mr. WILLIAMS. Congressman, I just became familiar with this 

issue. The letter was sent by our Chief Acquisition Officer to the 

VA, telling the VA that under the delegation that we gave to the 

VA to do certain Schedules, the authority to set policy resides with 

GSA. What their IG, as I understand it, was recommending to the 

VA Acquisition Office was that when they enter into contracts with 

resellers, they could ask the reseller for information from the manufacturer in order to establish a fair and reasonable price. 

However, once you enter into that contract, trying to track those 

sales by requiring information from the manufacturer, we actually 

do not have privity of contract with that manufacturer, and we are 

afraid, first of all, that if we required that to happen, frankly, it 

would violate the way we should be doing business with the private 

sector. 

But more so, it would take small businesses who would not have 

access to that information and take them out of the reseller marketplace. So we will continue to work with the VA and with the VA 

IG on that. We are trying to help small business, but also to make 

sure as we delegate the authority for VA to do those Schedules that 

they do not do anything that we think violates sound Schedules 

policy. 

Mr. CHABOT. Thank you. 

And, Mr. Denett, please explain how the strategic sourcing established by your office in 2005 insures small business participation. 

13

Mr. DENETT. One of the criteria that we gave to everybody is 

their culling through all of the money that they spend and trying 

to see where it might make sense to save money for taxpayers if 

we buy things strategically, is they give full consideration to the 

impact on small business. In other words, we do not want them 

doing it if the net effect is negative on small business. 

So they do market research. They see how many companies are 

out there, if there is an adequate number of small businesses that 

can participate, and like I said, the early results are quite favorable. You know, on the GSA area, 11 of 13 office supply companies 

were, in fact, small businesses. Some of the early data we are getting that is some of the Defense ones that they did had 41 percent 

small businesses. 

So I am encouraged, and we have it as one of the five criteria 

that they have to look at before they make a decision to use strategic sourcing. 

Mr. CHABOT. And, finally, how does technology enable agencies 

to increase small business concerns’ opportunities to do business 

with the federal government? 

Mr. DENETT. Well, electronically they can check all of the opportunities that are listed. I think it saves them the trouble of having 

to go and visit every procurement office. They can get access to 

things online. Big companies can afford to have hundreds of sales 

forces going around and beat the bushes and knock on doors. A lot 

of small businesses cannot. Most of them can get access to a computer, and through Schedules and a variety of other means, it 

opens up doors for them in a way that is not as labor intensive. 

So I think that is a plus for them. 

Mr. CHABOT. Thank you very much. 

I yield back the balance of my time, Madam Chair. 

Chairwoman VELA ́ ZQUEZ. Mr. Cuellar. How much time? 

Mr. CUELLAR. I think we have about eight short minutes. 

Let me just ask one short question, a general question. And, first 

of all, we appreciate what you all are doing. I know it is a difficult 

task, but one of the things I have seen is when I talk to the small 

business in, let’s say, the border community, south Texas, there 

seems to be a disconnect. In other words, we get testimony up here 

saying it is working, but then when you talk to the small businesses we get a very different picture saying that it is still very different for them to do business with you all, and it is just a very 

different picture. 

Why do you think here is such a stark difference in what you all 

tell us and what we actually hear in our districts? 

Mr. WILLIAMS. I would be glad to start. I think sometimes there 

are misperceptions and a lack of understanding about how to do 

business with the federal government, and as I said before, the 

Schedules Program is usually the first entry place into the federal 

marketplace. 

What we provide to small businesses is training, free training. 

We call it Pathways to Success, not only how to get on the GSA 

schedule, which then really gives you a license to sell anywhere in 

the federal government, and in some cases selling to state and local 

governments, too. 

14

And in providing that training, we not only tell them how to get 

onto the schedule, how to fill out the application form and the process we go through, we also try to tell them how to market to the 

federal government so that once they get that license to sell, they 

can be a success. 

I think the federal government can be somewhat of a hard market to understand if you have never dealt with it, and we try to 

ease and mitigate that burden by providing this free training and 

doing numerous, as everybody does, numerous outreach events to 

small business. 

We love having a very broad and diverse industrial base in GSA. 

We consider it is part of our mission to make sure that agencies, 

on one hand, trying to do business with the private sector can do 

business in an efficient way, but can have access to small business, 

women-owned, HUBZone, service-disabled veterans, veteran-owned 

businesses, and we provide that entry point and provide it in a low 

cost way to small business and also train them on how to get in 

that door. 

Mr. DENETT. I think expectations are high when they get Schedules. They think, ‘‘Oh, boy, I am going to get government business.’’ 

That just gives them the license. They have not actually won any 

business yet. 

The same across the board, not limited to Schedules. Small businesses see all of the money the federal government is spending. 

They want in on the activity. We want them in on the activity because they are the backbone of our country. They get all excited. 

They put in proposals. 

Well, you know, for every one that wins one, there are two or 

three that do not. Those are the ones that I would suspect you hear 

from with some regularity, the disappointment, all of the effort 

they put into it and not getting some immediate government business. 

On job fairs, we heard that loud and clear, that a lot of small 

businesses would come. They would participate. They would be all 

excited, and then they would come away with contacts and cards, 

but not any actual business. So we encourage agencies now to bring 

live requirements with them to give opportunities. In some instances, small businesses actually leave the market fairs with orders, which had never been done before. 

So we need to push more of that. 

General JOHNSON. I think one of the things we could do better 

is establish relationships and develop some trust. I think small 

businesses generally do not trust the federal government. They perceive that we are too bureaucratic, and we are. We have laws to 

follow. Unfortunately, perceptions are always true. 

So we have to work at that each and every day. I think you will 

hear some examples from some of our partners that will testify in 

a panel after we do and hopefully they will substantiate that we 

have tried to do the best we can in bringing in small businesses. 

The best small business example there is in the world is something 

that used to be called the Army Air Corps, now called the United 

States Army, not the United States Air Force. So they should still 

be a small business. 

I think if you look at our—

15

Chairwoman VELA ́ ZQUEZ. I am sorry, but I need to interrupt 

things. We have to go to the floor to vote. 

The Committee will stand in recess for about 20 minutes. 

[Recess.] 

Chairwoman VELA ́ ZQUEZ. The Committee is called back to order. 

Mr. Denett, the SARA panel recommended that OFPP develop 

best practices and strategies to unbundle contracts. That is consistent with what the General Accounting Office recommended as 

well. Unfortunately, this has been under review for over a year, 

while 34 of 51 recommendations to OFPP have already been implemented or are in the process of being implemented. 

Why is this one still under review? 

Mr. DENETT. Well, we had 60 of the 89 recommendations from 

the SARA panel that were directed to us. So there are a lot of 

them. We have a staff of about 12 people. We were fortunate that 

we hired Laura Auletta, who was one of the managing people supporting Marcia Madsen on the SARA panel, who headed up the 

SARA panel. She is working very diligently. 

Chairwoman VELA ́ ZQUEZ. I understand that. My issue with the 

question is that the most critical, important issue for small businesses is precisely this one, and so my question is: why is it when 

we heard President Bush in 2003, who spoke about it, you are still 

dragging your feet on this issue? 

Mr. DENETT. Well, we have good people working on it. It is a 

complex issue. We want to make sure we get the right results. We 

want input from industry and all of the government agencies. 

Chairwoman VELA ́ ZQUEZ. When do you think it is going to be implemented? 

Mr. DENETT. I hope to have a recommendation to me within the 

next 60 days. 

Chairwoman VELA ́ ZQUEZ. And you will be submitting it to the 

Committee in writing? 

Mr. DENETT. We will be glad to share with you the results. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Denett, the SARA panel recommended that bid protests be 

allowed for task and delivered orders in excess of $5 million. The 

GAO reports that OFPP disagreed with this recommendation and 

felt that the bid protest threshold should be higher. Why is this? 

Mr. DENETT. On task and delivery orders, we—

Chairwoman VELA ́ ZQUEZ. In excess of five million. 

Mr. DENETT. In excess of five million, yes. Well, we think that 

task and delivery orders have already gone through competition 

earlier when they are setting up the original contracts. When they 

place individual orders afterwards, we don’t want to slow the process down. We want to keep it quick. We think when people have 

objections they should place them in the beginning when contracts 

are initially being awarded, not on individual task and delivery orders. 

Chairwoman VELA ́ ZQUEZ. Sir, aren’t the legal fees that the small 

business will have to pay and the 20 percent success rate enough 

to discourage frivolous protests so that they do not slow down the 

process? 

Mr. DENETT. It certainly would be a factor you would hope that 

would cause people not to. Unfortunately, some people still when 

16

they do not win a particular piece of business feel that in order to 

protect themselves that they want to file protests and go through 

a long, rigorous process that slows everything down and usually 

does not help anybody. 

Chairwoman VELA ́ ZQUEZ. If ID/IQ contracts are increasing and 

small businesses continue to receive small contracts, shouldn’t they 

have an opportunity for a fair chance? 

Mr. DENETT. Of course, small businesses should be given an opportunity. 

Chairwoman VELA ́ ZQUEZ. Major General Johnson, in a study of 

reverse auctions, what did the Corps find in terms of acquisition 

workforce issues? And will reverse auctions save on manpower? 

General JOHNSON. Madam Chairwoman, in a word, no, it will 

not. What we found was you need to have some contracting officer 

readily available to kind of, if you would, watch the screen, as well 

as the guy providing the service on the other side because this goes 

pretty quick. 

One of the other issues we found was the standardization of the 

timing of the reverse auction. The one protest we had had to do 

with whether the auction had ended or not. The clock on the computer at that end said it had not. The provider of the software said 

it had, and that is why that protest was substantiated. 

Chairwoman VELA ́ ZQUEZ. Mr. Denett, do you have any comments 

on the finding of Major General Johnson’s study? 

Mr. DENETT. I think it has a lot of merit, that there are certain 

commodities where reverse auctions probably will not be—

Chairwoman VELA ́ ZQUEZ. Make money? 

Mr. DENETT. —they will not be beneficial and save money. Again, 

we have a work group working on that. I have told them to make 

sure that they keep in mind not to harm small business. I am looking forward to the results of that work group. 

Chairwoman VELA ́ ZQUEZ. Can you give us some examples? 

Mr. DENETT. Well, the one that he already gave of construction, 

I think, is a—

Chairwoman VELA ́ ZQUEZ. But do you have one that is different 

than the one that he has given us? 

Mr. DENETT. Anywhere where the requirement is not well defined. I mean, if you are buying something, you know, a pen or a 

supply that is well defined, we all know what it is. That is a commodity that people can reverse auction on, one would think. Anything where there is uncertainty so that there is not a level playing 

field, people are not bidding the same thing, that is likely to be 

more problematic. 

But, again, I am going to wait and see what the experts say. We 

have gathered a group of people that have been using reverse auctions, that have a lot of knowledge of it. Some are proponents of 

it; some do not like it, and they are working together to make a 

recommendation on what is the best way to implement reverse auctioning. 

Chairwoman VELA ́ ZQUEZ. Mr. Denett, the Brooks Act requires 

that more than just the price is considered when procuring architectural and engineering services. Will OFPP specifically reference 

the Brooks Act when it releases its findings on reverse auctions? 

17

Mr. DENETT. I do not know that. I am going to wait and see what 

is recommended, but certainly price is just one factor, especially 

when you are doing things such as architect and engineering. That 

is a longstanding principle that we adhere to. 

Chairwoman VELA ́ ZQUEZ. I will recognize Mr. Chabot. 

Mr. CHABOT. Madam Chair, I have no additional questions. I 

would be happy to get to the next panel. 

Chairwoman VELA ́ ZQUEZ. Okay. Thank you very much. This 

panel is dismissed. 

Mr. DENETT. Thank you. 

Mr. WILLIAMS. Thank you. 

General JOHNSON. Thank you. 

Mr. CHABOT. Thank you. 

Chairwoman VELA ́ ZQUEZ. Do we still have any staff from OMB? 

Right here, good. And GSA? And our Army Corps is here. 

Thank you for staying here. I just forgot to ask them to provide 

the names of the staff that will be staying with us. 

I welcome the second panel, and our first witness is Mr. John 

Palatiello. John Palatiello is the Administrator of the Council of 

Federal Procurement of Architectural and Engineering Services. 

The council represents companies in the architectural, engineering, 

and mapping industries. 

Welcome, sir, and you will have five minutes to make your presentation. 

STATEMENT OF JOHN PALATIELLO, ADMINISTRATOR, COUNCIL ON FEDERAL PROCUREMENT OF ARCHITECTURAL AND 

ENGINEERING SERVICES 

Mr. PALATIELLO. Thank you, Madam Chairman. Thank you for 

the invitation. I congratulate you on the very correct pronunciation 

of my name. It is not often that people do that. It took me four 

years to learn how to pronounce it. So I congratulate you. 

COFPAES is made up of the American Congress on Surveying 

and Mapping, the American Institute of Architects, the American 

Society of Civil Engineers, MAPPS, and the National Society of 

Professional Engineers. We have been the organization that has 

strongly supported the Brooks Act, which you mentioned in a question to the earlier panel, which provides for a qualifications based 

selection, or QBS, process for the selection of architect-engineer 

services. 

A&E services amount to about one-tenth of one percent of the life 

cycle costs of a project or a program, but the quality of the A&E 

service determines the price and the efficiency of the other 99.9 

percent of what government does. That is why Congress enacted 

the Brooks Act in 1972, to promote competition and quality in contracting of A&E services. 

The Brooks Act predated the introduction of concepts that Mr. 

Chabot mentioned in his statement of best value and past performance in a lot of the procurement legislation that was passed in the 

’80s and ’90s, and we like to say that we were for best value and 

past performance before it was cool to be for those things. 

QBS is simple. Agencies publicly announce their requirements 

for A&E services. Firms submit their qualifications, resumes of 

18

personnel, and their past projects that demonstrate their competence and qualifications for a project. 

The agency reviews and evaluates and interviews the firms, and 

then selects the firm it deems most qualified, and there is then a 

negotiation of a price that is fair and reasonable to the government. And as the law says, the price must be fair and reasonable 

to the government. 

And if agreement cannot be reached, the agency then moves on 

to a negotiation with the next ranked firm. 

In your letter of invitation, you asked that we comment on 

whether new procurement methods are beneficial to small business 

contractors. I believe in the old adage that if it ain’t broke, don’t 

fix it. The QBS process has stood the test of time. It has not only 

been federal law for 35 years, but it is in the American Bar Association model procurement code for state and local government, and 

over 35 states have enacted mini-Brooks Acts. It has enjoyed bipartisan support in Congress for decades. 

So if it ain’t broke, why are agencies trying to fix it? In my written statement I have detailed several administrative threats to the 

Brooks Act that we believe have been not advantageous to architects, engineers, surveyors, and mapping professionals, and particularly small business. Let me highlight those concerns. 

First is the Office of Federal Procurement Policy and the FAR 

Council has for more than ten years failed to write regulations that 

accurately reflect the intent of Congress and the legislative history, 

and the body of state law which governs architecture, engineering, 

surveying and mapping. 

We actually went to federal district court to finally try to force 

proper rulemaking, but we were unfortunately denied based on 

standing. 

Secondly, the GSA supply schedules program for services has 

been a disaster for small A&E firms. I would remind you that GSA 

implemented its schedule contracts for A&E services without any 

consultation with our community. They did this unilaterally. We 

believe the schedules are in direct violation with the Brooks Act. 

As I outlined before, the Brooks Act is a qualification based selection process. The schedules process is a price based schedule. They 

are inherently incompatible, but for reasons I do not know, GSA 

will not modify the schedules based on about ten years of us asking 

them to do so. 

Madam Chairman, I have been around this community long 

enough to have worked with Congressman Jack Brooks on these 

issues. One of the overriding reasons why he wrote the Brooks Act 

was that he believed in competition. He believed that federal A&E 

contracts should not go to the biggest firms with the slickest brochures and the most effective lobbyists. 

Rather, there should be competition, particularly by small business. The GSA Schedule has gone back to exactly what Mr. Brooks 

feared: the biggest firms get on the Schedule, and as Mr. Williams 

said, it is then a license to sell. 

I would use a little different word as to what it is a license to 

do, but it is a license that very much disadvantages small business. 

Third, it has been ten years now since Congress enacted legislation authorizing the design-build process for federal construction 

19

projects. That is a project delivery method by which an agency can 

contract with one entity to perform both the A&E services and the 

construction services. 

Design-build was never intended to supplant the Brooks Act. We 

supported the legislation. It was intended to work with the Brooks 

Act. We believe now that there is a ten-year history it is time for 

Congress to evaluate whether design-build, in fact, has been a success. Is it permitting the independent oversight on the part of the 

designer? Is it saving time, money, and upholding quality? And is 

it having a negative impact on small businesses not only as prime 

contractors, but for specialty subcontractors, such as geotechnical 

engineers, land surveyors, topographic mapping firms or landscape 

architects who are relegated down to third or fourth tier subcontractors. 

Chairwoman VELA ́ ZQUEZ. Mr. Palatiello, how are you doing on 

time? 

Mr. PALATIELLO. Okay. I am sorry. Let me take 30 seconds if I 

may and just say that you hit the nail on the head in your opening 

statement, Madam Chairman. These are all symptoms of a larger 

problem, and that is the declining acquisition workforce, particularly in the A&E field. As you said, you have got more and more 

work going out with fewer and fewer contracting officers, and so 

they are being forced to try to implement these other methods, but 

we do not think the result has been good for the taxpayer. 

Thank you very much. 

[The prepared statement of Mr. Palatiello may be found in the 

Appendix on page 59.]

Chairwoman VELA ́ ZQUEZ. Thank you very much, Mr. Palatiello. 

Our next witness is Mr. Anthony Zelenka. He is the President of 

Bertucci Contracting Corporation in New Orleans. Bertucci works 

on flood control and coastal restoration projects along the Gulf 

Coast. He is testifying on behalf of the Associated General Contractors. AGC is the largest and oldest national construction trade association. 

Welcome. 

STATEMENT OF ANTHONY ZELENKA, PRESIDENT, BERTUCCI 

CONTRACTING CORPORATION, ON BEHALF OF ASSOCIATED 

GENERAL CONTRACTORS 

Mr. ZELENKA. Thank you, Chairwoman Vela ́zquez, Ranking 

Member Chabot, and the distinguished members of the Committee 

for this opportunity to testify on AGC’s documented concerns and 

experience with the procurement method known as reverse auctions. 

AGC strongly supports full and open competition for the many 

contracts necessary to construct improvements to real property. As 

the Committee considers the changing federal procurement landscape, AGC offers the following points for consideration during 

your evaluation of reverse auctions. 

Reverse auctions do not provide substantial benefits for procuring construction services. Vendors promoting reverse auctions 

have yet to present persuasive evidence that reverse auctions will 

generate savings in the procurement of construction services or will 

20

provide benefits of best value comparable to currently recognized 

selection procedures for construction contractors. 

Manufactured goods are subject to little or no variability or 

change in manufacture or application. Construction projects, on the 

other hand, are inherently variable and present immeasurable risk 

to contractors. We do not manufacture buildings, highways or other 

facilities. In fact, the construction process is fundamentally different from the manufacturing process and cannot be compared 

with the purchase of commodities. 

Reverse auctions do not guarantee lowest price. In the context of 

construction, AGC believes that most of the claims of savings are 

unproven, and that reverse auction processes may not lower the ultimate cost. A bidder has little incentive to offer his best price and 

subsequently may never offer his best price. 

Reverse auctions may encourage imprudent bidding. Reverse 

auctions create an environment in which bid discipline is critical, 

yet difficult to maintain. If competitors act rashly and bid imprudently, the results may be detrimental to everyone, including the 

owner, in this case the federal government. 

Consequently, imprudent bidding may lead to performance and 

financial problems for owners and successful bidders, which may 

have the effect of increasing the ultimate cost of construction, as 

well as the cost of operating and maintaining the structure. 

Negotiated procurements allow thorough evaluations of value. 

Over the past few years, owners, particular in the federal government, have recognized the value and quality of project relationships and other factors that promote greater collaboration among 

the owner and project team members. 

Reverse auctions, on the other hand, do no promote collaboration, 

much less communication between the owners and bidders. Rather, 

they have a negative effect on the relationship between buyer and 

seller. 

Sealed bidding assures that the successful bidder is responsive 

and responsible. Where prices is the sole determinate, the sealed 

bid procurement process was established to insure integrity in the 

award of construction contracts. 

Reverse auctions ignore the protections of the sealed bid procurement laws, regulations and user precedent that address these critical factors and insure the integrity of the process. 

Reverse auctions may contravene federal procurement laws. The 

Federal Acquisition Regulation and current procurement statutes 

reflect a clear policy of not disclosing contractor price information. 

Given these restrictions on contractor price disclosure in the U.S. 

Code and the FAR, it is unclear that any authority truly exists for 

the federal government to conduct reverse auction on fixed price 

type contracts or that current law can be interpreted to permit the 

practice of reverse auctions. 

AGC strongly recommends that the Committee encourage OMB, 

OFPP, and the FAR Council to closely examine the finding of the 

congressionally mandated reverse auction pilot program the Army 

Corps of Engineers issued in 2004, as was discussed earlier. The 

findings of the report clearly state that reverse auctions are an inappropriate tool to procure construction and construction related 

services. 

21

To sum up, AGC believes that where reverse auctions for construction have been studied, they have failed to provide savings. 

They are an unproven method for selection of construction contractors, specialty contractors, subcontractors, and suppliers. 

At best, reverse auctions raise significant issues for owners and 

construction team members for the following reasons. They do not 

guarantee the lowest price. They may encourage imprudent bidding. Negotiated procurements allow a more thorough evaluation of 

best value. Sealed bidding assures that the successful bidder is responsive and responsible, and reverse auctions may contravene federal procurement laws. 

Additionally, AGC is supportive SBA’s regulatory recommendations to address the impact of reverse auctions on small business 

and to offer retainage relief for small A&E firms. 

Thank you for this opportunity to comment. I look forward to 

working with the Committee, and I will be happy to answer any 

questions. 

[The prepared statement of Mr. Zelenka may be found in the Appendix on page 79.]

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Zelenka. 

And how I recognize Mr. Johnson for the purpose of introducing 

our next witness. 

Mr. JOHNSON OF GEORGIA. Thank you, Madam Chair. 

I am proud to introduce today a fellow Georgian, Mr. Arthur 

Salus. Mr. Salus founded Duluth Travel, a service disabled, veteran-owned business, in 1993, and in the last 15 years, Duluth 

Travel has become a leading travel management company. In 2005 

and 2006, it was named the travel agency of the year in government travel. 

In addition to being a successful business owner, Mr. Salus has 

been a strong advocate for expanded veterans opportunities in federal procurement. He is a member of the National Veteran-owned 

Business Association and is a small subcommittee chairman of the 

Society of Government Travel Professionals. 

Mr. Salus is also a member of Operation One Voice, which supports special operation forces by providing transportation and funding of wounded veterans and their families to and from rehabilitation facilities. He has testified on the Hill for veterans rights before 

the Veterans Affairs and Small Business Committees, and he is 

known in the local and national media as the Travelmaster, and 

I am pleased that he is here to share his expertise on federal procurement with the Small Business Committee today. 

Thank you. 

Chairwoman VELA ́ ZQUEZ. Welcome, sir. 

STATEMENT OF ARTHUR SALUS, PRESIDENT, DULUTH TRAVEL, ON BEHALF OF THE SOCIETY OF GOVERNMENT TRAVEL 

PROFESSIONALS 

Mr. SALUS. Thank you, Congressman, and hooray for Georgians, 

right? 

Good morning, Madam Chairwoman, Ranking Member Chabot, 

and the Committee. My name is Arthur Salus, and I am pleased 

22

to talk about the impact of emerging procurement methods and 

small business. 

I am president of Duluth Travel, a small, service disabled, veteran-owned travel agency. My company is located in Atlanta, Georgia, and we have 26 employees. We have been providing travel 

services to state and local government agencies, corporations, and 

leisure travelers since 1993. 

I am an active member of the American Society of Travel Agents, 

the Society of Government Travel Professionals, and the National 

Veteran-owned Business Association. 

I have been competing for federal contracts since 2003 when I 

was approved by GSA, and I believe I am well qualified to testify 

on how government procurement methods affect small business 

travel agencies. 

The federal government has been competitively procuring travel 

services from the private sector since 1989. On the civilian side, 

federal agencies may procure travel services directly by their own 

efforts or use contracting vehicles designed by the General Services 

Administration. 

At one time GSA did design set-aside opportunities exclusively 

for small businesses. These opportunities were either federal agencies with relatively small travel budgets or were or were discrete 

geographical areas around the country where federal agencies had 

offices. Any small business who qualified for these opportunities received a copy of any travel request. There were multiple travel opportunities and multiple small businesses being awarded travel 

contracts around the country. 

This changes in 2003 when GSA implemented two new travel 

programs, one, the e-Travel Government, and one is the Travel 

Services Solutions Schedule. 

The e-Travel Services contract was awarded to three large corporations, ETS, Northrup Grumman, and Carlson Wagonlit Travel, 

to provide end-to-end travel systems to the federal agencies other 

than DoD. These three large corporations no only provide the technology, but provide the end-to-end services, but also can provide 

one stop shopping to include all services used in travel agencies 

and subcontractors. 

These three large corporations use both large and small travel 

agencies and subcontractors, known as imbedded travel. I receive 

business through a subcontractor relationship with ETS to date, 

but have not received any business from the other two ETS vendors. 

That means despite my track record of excellent past performance, I am locked out of over 66 percent of the civilian travel government business. In fact, I am here to tell you that I am unhappy 

to report that one of the ETS vendors refuses to answer any of my 

calls or e-mails. 

The GSA has stated that more small business are eligible to federal business contracting before ETS and TSS that includes 53 

travel agencies of which 30 are small businesses. I first want to 

commend Tim Burke and his staff at e-Travel, GSA, for their continued efforts to bring e-Travel to the 21st Century. 

However, according to the information on GSA’s own Web site, 

only ten of these small agencies reported any sales. This is less 

23

than one percent of the total sales, as, Madam Chairwoman, you 

quoted, going to small business travel agencies. I am probably that 

one percent. 

I believe GSA has a special role to insure small business a meaningful opportunity to compete for travel contracts. Although I am 

listed with two on the TSS schedule, I have not received any business from it. I was awarded a contract directly by the Department 

of Veterans Affairs and it is a competitive set-aside for small, service disabled veterans. 

The fact is that most small business travel agencies have received less business than they did before the two programs were 

created. Why has this occurred? Unlike prior GSO programs, the 

TSS schedule itself does not include any small business set-asides. 

The TSS schedule is merely a listing of travel agencies that has 

been pre-qualified by GSA much like the Yellow Pages. 

While many small businesses are listed, few are chosen as there 

is no requirement from a federal agency to offer each of the vendors an opportunity to bid. Without discrete set-aside opportunities, small businesses receive less consideration and less business. 

GSA is urged to include set-asides in the schedules for travel 

services. We are only asking that we have direct and meaningful 

opportunities to compete. 

To sum up my testimony, I would like to recommend the following: that GSA implement acquisition alternatives for small business set-asides; and, number two, create a voluntary, independent, 

my suggestion, panel made up of persons from each of the following 

agencies: GSA, GAO, SBA and OMB, a staff member from this 

Committee, and members of the small business sector. 

This panel could also look outside the federal government at 

those large corporations who have government contracts who do 

not use small business in their work. 

Please let me go back and spread the word from the Committee 

saying that you understand the plight of small businesses. 

I appreciate your time this morning, and I will be glad to answer 

any questions. 

[The prepared statement of Mr. Salus may be found in the Appendix on page 84.]

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Salus. 

Our next witness is Mr. Mark Leazer. He is the President of 

Forms & Supply, Inc., based in Charlotte, North Carolina. He is 

testifying on behalf of the National Office Products Alliance. 

The National Office Products Alliance represents companies in 

the office products industry. 

Welcome. 

STATEMENT OF MARK LEAZER, FORMS & SUPPLY, INC., ON 

BEHALF OF THE NATIONAL OFFICE PRODUCTS ALLIANCE 

Mr. LEAZER. Thank you, Madam Chairwoman and Ranking 

Member Chabot and members of the Committee. 

My name is Mark Leazer. I am the Director of Sales Technology 

for Forms & Supply, Incorporated, an independent, woman-owned 

small business, office products, and furniture dealer located in 

24

Charlotte, North Carolina. I would like to thank you all for the opportunity to testify today. 

Testifying today on behalf of NOPA, the National Office Products 

Alliance, a not-for-profit trade association established in 1904, 

NOPA represents and serves more than 700 small independent 

dealers nationwide, along with their key suppliers. 

NOPA appreciates the opportunity to speak to the committee 

about a serious growing problem facing small office products dealers who have government business small business fronts, also 

known as pass-throughs. 

What are small business fronts? Today I would like to concentrate on the small business pass-through problem which we feel 

requires focused legislative and regulatory remedies to be addressed effectively. 

Just what are these pass-throughs or small business fronts? In 

the simplest terms, these are situations in which a large national 

company approaches a small business and proposes to create a 

partnership for the sole purpose of gaining improper access to contracts set aside for small business. It is, in effect, a small business 

being able to sell their socioeconomic status. 

Let me emphasize that these fronts are not the same thing as 

legitimate small business mentoring program relationships. In that 

case, the small firm plays a commercially useful and much larger 

subcontracting role. NOPA is fully in support of legitimate small 

business mentoring relationships. 

The abuses highlighted in Appendix 1 to my prepared remarks 

which lead to small business fronts usually occur when, number 

one, the small business has little or no prior experience as a reseller of office products, particularly to government customers and 

little or no ability to itself support such business. 

Two, the large company performs most or all of the selling, order 

management, customer service, product delivery and invoice and 

payments processing behind the scenes on behalf of the passthrough dealer partner. 

Three, the small business performs few, if any, commercially useful functions once the contract award is made beyond providing an 

entry point through its Web site to the full operating infrastructure 

of the large corporation. 

And, fourth, the small business typically receives a commission 

for its willingness to serve as the front for this business, which is 

passed through to the large corporation. 

Let’s now look at the negative impact of fronts on small business 

and government. The known direct loss of federal business experienced by legitimate small, independent dealers already totals tens 

of millions of dollars annually, and these losses are growing. Conservatively, these losses have reached more than $100 million per 

year on a national basis, including federal and state government 

contracts. 

Government also is harmed as competition declines when independent dealers are excluded and large national chains and their 

small business fronts are awarded the business under false pretenses. 

GSA and many federal agencies are working to help legitimate 

small businesses expand business with them, and we heard that 

25

from the testimony earlier today from Panel 1. The inclusion of 

small dealers in the Army blanket purchase agreement for office 

products in a recent 19-agency strategic sourcing contract award 

that includes small businesses are positive signals, and we appreciate that. 

But even those contract awards appear to include some potential 

small business pass-throughs as well as legitimate independent 

small businesses. We encourage the Committee to review recent 

state contracting developments as outlined in our prepared statement. They are enlightening to many of the harmful practices that 

are occurring. 

What do we as NOPA feel should be done to address this situation? We feel that federal legislation is essential to end small business fronts. NOPA and its members greatly appreciate the exceptional efforts of this Committee to assist small businesses in our industry and others, but more focused legislation is needed to address the small business fronts problem. 

Specifically NOPA asks this Committee to work with us to develop legislation to, number one, establish stricter bid evaluation 

criteria to insure that federal contracts set aside for small businesses are not awarded to companies that play only minimal roles 

in servicing such contracts. 

Two, require federal agencies to insure that all bidders on small 

business set-aside contracts fully disclose and certify the functional 

roles they will play in contract fulfillment. 

Three, require each federal agency to report annually to the appropriate Committees of jurisdiction in the House and Senate regarding their implementation of these provisions to end the use of 

small business fronts in federal contracting. 

Four, establish meaningful penalties for companies found in violation of the proposed new legislative and FAR provisions aimed at 

elimination of fronts. 

On behalf of NOPA, I thank you for the opportunity to testify before this Committee today about one of the most damaging and unfair contracting practices that often prevents independent office 

products small dealers from competing on a level playing field for 

federal government business. 

I will be happy to answer any questions that the Committee may 

have. 

[The prepared statement of Mr. Leazer may be found in the Appendix on page 91.]

Chairwoman VELA ́ ZQUEZ. Thank you very much, Mr. Leazer. 

Our next witness is Mr. John Spotila. He is the Chief Executive 

Officer and President of R3i Solutions, LLC, a management consulting firm in Fairfax, Virginia. He also serves as Administrator 

of the Office of Information and Regulatory Affairs within the Office of Management and Budget. 

Welcome. 

STATEMENT OF JOHN SPOTILA, CHIEF EXECUTIVE OFFICER, 

R3i SOLUTIONS 

Mr. SPOTILA. Thank you. 

26

Chairwoman Vela ́zquez and Ranking Member Chabot and members of the Committee, for all of us who know that small business 

is the engine that drives our economy, getting federal procurement 

to help small business deserves attention. I understand the good 

intentions and logic of those who helped create procurement reform. Unfortunately, that reform has not been sensitive enough to 

small business needs. Nor has the government done enough to 

make its procurement system efficient and transparent. 

For many small business owners, federal procurement is a very 

difficult environment. Reform led to staff reductions that have left 

offices with too few people to do the work. Much of that staff is inexperienced and poorly trained. Procedures are complex and not 

well understood. Decisions take too long and are communicated in 

documents filled with boilerplate and legalese. The small business 

owner feels like an inconvenience at best. 

With reduced staffing, most procurement offices focus on fighting 

off alligators, not draining the swamp. Too often they do not fix 

their processes, and they do not try to communicate clearly. Large 

firms that assign people to work with the procurement offices full 

time navigate the maze better than small firms that cannot afford 

such full-time help. 

So the lack of streamlining and clear communication becomes a 

competitive advantage for larger firms. There are other problems 

as well. Agencies combine a wide range of minimally related tasks 

into larger contracts to get more dollars out the door with a single 

action. This makes it harder for small firms to demonstrate broad 

enough capability to qualify as primes for the large awards. They 

do not have the diverse capability that only a large firm would 

have. 

I understand why procurement offices do what they do in this regard. I am just concerned about the unintended consequences. I 

doubt very much that we can reverse this trend towards aggregated contracts. It is worth trying, but any victories will probably 

be on the margins. 

We can do something else positive, however. We can turn procurement offices into centers of process improvement and plain language communication. If we streamline the way procurement offices operate and get them to communicate clearly, small firms will 

benefit tremendously. Plain language communication is the place to 

start. It is cost effective, achievable, and of real value to small contractors. 

In the procurement area, legalese and obscure language are dead 

weights that drag small firms down. They cannot afford expensive 

advisors to reinterpret confusing government communication. They 

need to be able to understand things the first time they read them. 

Congressman Braley from this Committee has introduced a bill, 

H.R. 3548, the Plain Language in Government Communications 

Act, that would require federal agencies to use plain language in 

any new or revised documents relating to benefits or services. 

If it becomes law, it will make the procurement world much more 

understandable to small contractors. Procurement forms will become less obscure, procurement procedures more transparent. This 

will not fix all that is wrong with our procurement system, but it 

27

is not a bad place to start, and I commend Congressman Braley for 

his vision in introducing this bill. 

Plain language is language the intended reader can understand 

and use on one reading. It is audience focused. The most important 

rule in plain language, indeed, perhaps the only rule, is to be clear 

to your intended reader. 

You did not mention, but when I was General Counsel at the 

SBA in the mid-’90s, I led a ten month effort in which career employees rewrote all of SBA’s regulations in plain language. It was 

a tremendous success. 

In the White House, I helped implement President Clinton’s executive memorandum on plain language, making OMB review part 

of the solution rather than part of the problem. 

Plain language works whenever and wherever we try it, and with 

Congressman Braley’s bill, perhaps the government will try it in 

more places. 

Process improvement is the second step we should take. Streamlining how procurement offices operate would pay large dividends 

for small business. When the government cut back on its procurement staff, it failed to reexamine how procurement offices should 

run their operations. Instead of applying best practices in process 

transformation and project management, agencies largely left their 

procurement offices to flounder. 

Now they struggle with cumbersome processes, useless complexity, poor training, inefficient use of resources, and understandably poor morale. No wonder decisions take forever and small businesses fall victim. 

It does not have to be this way. Our career government employees are a terrific resource. They just need leadership and support. 

We know how to fix sad sack offices. There are a host of examples 

where the government has improved its processes and delivered 

better results for less money. If we do the same with procurement, 

the effort will more than pay for itself and both small contractors 

and the American taxpayer will benefit tremendously from the result. 

Madam Chairwoman and Ranking Member Chabot, I commend 

you and the Committee for shining a light on this topic. You are 

absolutely right that government can do a better job in this area. 

It just needs a Congressional push now and then to get back on 

track. 

Thank you, and I would be happy to answer any questions you 

may have. 

[The prepared statement of Mr. Spotila may be found in the Appendix on page 126.]

Chairwoman VELA ́ ZQUEZ. Thank you very much, Mr. Spotila. 

Mr. Zelenka, I would like to address my first question to you. I 

understand that the Army Corps has been increasing its use of indefinite delivery, indefinite quality, or ID/IQ, contracts rather than 

traditional sealed bids for construction work. How does this affect 

the construction industry, particularly small companies? 

Mr. ZELENKA. The biggest problem that I face with an ID/IQ contract is you just do not know how much work you are ultimately 

going to get. So as a small business, you have a very set amount 

28

of resources, and you have to set them aside so in case you get the 

call to start performing, and it makes it difficult to go out and procure other contracts during that duration. 

The second big problem is the bonding. You post a bond, and 

sometimes they want the bond for the full amount, and most small 

businesses have limited bonding ability. So it ties up your capacity 

that way, both equipment that you have to have at the ready and 

bonding that gets tied up for work that you may never do. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Salus, GSA says that small businesses can participate in eTravel by being listed on the TSS Schedule. What is the process 

for getting onto the Schedule, and do small businesses have the resources? 

Mr. SALUS. Madam Chairwoman, yes, the resources are there. 

Small business can do the business, can do the e-Travel work. 

However, in our case, we only have two ways of doing travel for 

the government. One is either using one of the three large corporations, and if you remember my testimony I said that I am doing 

work with one of them. So therefore, 66 percent of my business is 

not there. I am losing that business. 

And remember when I am talking about myself, I am talking 

about other small travel agencies, too. 

But to be on the TSS Schedule, it is a listing to be on the TSS 

Schedule. The GSA schedule is a little bit more involved. You have 

to be approved by GSA, but even though you are approved by GSA 

does not guarantee you any work. 

And I just want to mention something else to add to that. The 

federal agencies, when I said I went directly with the VA, and VA 

has been really gracious in working with a small service company, 

and we actually took it away from a large business, but I have in 

my hand here 40 letters that I wrote to the federal agencies, and 

out of the 40 agency letters that I sent, only four replies, and that 

is shameful, and I believe that the contracting officers of these 

agencies, there is not enough teeth. There is not responsibility. 

There are no consequences in their actions. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Spotila, you said in your testimony that it is unlikely that 

we can stop contract bundling, but that we can try to restructure 

procurement offices. How would this help address the same problems as the unbundling of contracts? 

Mr. SPOTILA. I think in part the reason that contracts are being 

bundled and aggregated is that procurement offices are left with a 

work load that they cannot handle, and they are afraid that they 

will not get the contracting dollars out the door, and they will be 

criticized for that. 

If we improve their processes so that procurement offices are 

more productive, then less bundling would happen. It takes some 

of the pressure off of procurement officers who may, in fact, have 

good intentions. Then when they are pushed to try to create more 

small business opportunities, they will have some capability of 

doing so. 

Now, additional staffing would help as well. Better training 

would help. Anything that improves productivity would help, because I think the reason that it is so difficult to stop bundling is 

29

that in these offices where people make the actual specific decisions, they are just overwhelmed, and they are just trying to survive. 

Chairwoman VELA ́ ZQUEZ. So given the fact that the Small Business Administration budget has been consistently cut and the fact 

that they impose a cap of 60 contracting officers, procurement officers, does not help. 

Mr. SPOTILA. Well, those are negative steps clearly, and I think 

that we have to make certain that our actions align with our 

words. It is not enough to say ′′we believe,′′ ′′the SBA believes,′′

′′government believes′′ that small business procurement needs 

should be addressed. We actually have to do something about that, 

and I think that there has been a disconnect at times. 

Chairwoman VELA ́ ZQUEZ. Mr. Leazer, the office products industries are having a problem with small business pass-throughs as 

you mentioned in your testimony, and so I would like to ask you 

are there any current cases where these types of relationships have 

been investigated? 

Mr. LEAZER. Yes, Madam Chair, there are. There is one particular case that we have documented in our Appendix 2, a company headquartered in Colorado called Faison that was judged by 

an SBA ruling out in California to be other than small. So that 

case is documented. 

Chairwoman VELA ́ ZQUEZ. I will recognize now Mr. Chabot, and 

I will come back and ask some more questions. 

Mr. CHABOT. Thank you. 

Mr. Palatiello, how can the federal government improve its process for the acquisition of architectural and engineering services? 

What suggestions would you specifically make? 

Mr. PALATIELLO. We actually find the ID/IQ process to be very 

advantageous, and a number of agencies have very successfully implemented ID/IQs. The A&E community operates very differently 

than our construction friends. We are generally held to professional 

liability requirements and not a performance bond requirement, 

and it is not as capital intensive as some of the construction activities. So the problems that Mr. Zelenka identified are not the same 

in our community. 

ID/IQ has actually worked very well, and it is an opportunity for 

an agency, particularly when their requirement over a year or over 

a period of years are not well defined, they can basically do a competitive procurement and put firms on retainer and then call on 

them on an as needed basis. 

We are very glad that, for example, the USGS has done that in 

a memorandum of understanding with FEMA so that now in an 

emergency response, when you need aerial photography or mapping 

after a hurricane, they just activate a task order, but the contract 

is prepositioned. So it is a very effective way of using the service 

when you need it, but then not having to pay for it or pay for a 

procurement when you do not need it. 

Mr. CHABOT. Thank you. 

Mr. Zelenka, how can bidder behavior be improved when reverse 

auctioning is used? 

30

Mr. ZELENKA. You know, it is very difficult to police. You know, 

you have some inherent problems, especially when you look at it 

from a small business and a large business standpoint. 

Large business is just in much better position to sustain bigger 

losses that are inherent with the variables that you are dealing 

with in construction than small business. So it is very easy for 

them to look at it and cut a small business number, and if that job 

goes south, they can absorb the loss. So it is hard to control that 

behavior. 

Small business, on the other hand, you know, is faced with a 

whole different set of problems. In construction if a job goes south, 

you know, it is not like manufacturing where when you are doing 

a reverse auction, you are just cutting away at maybe potential 

profits and all of your costs are controlled. You can have a job go 

bad in our industry, in civil works in south Louisiana. A hurricane 

could come through. You could have some bad weather sustained 

over long periods and actually lose money, not profits, not overhead, but you go through that and into, you know, getting upside 

down on your production costs. 

So as you sit there, those are real risks that a small business has 

to weigh a lot heavier than a large business, and you know, some 

people will take that risk, you know, because we’re driven by, you 

know, survival as opposed to just increasing our profits. When you 

are out of business and you are out of work and you are looking 

for business, you can be tempted to cut below what is reasonable 

given those weather factors, and it puts a small business at a problem, and I do not know how to control that. 

You know, we are kind of fighting an uphill battle at that point 

that a large business does not even have to consider. They could 

absorb those losses and move right on to the next project. 

Mr. CHABOT. Thank you. 

Mr. Salus, what acquisition alternatives would you recommend 

to GSA that they pursue that would give small business concerns 

a greater opportunity to do business with the federal government 

for travel services? 

Mr. SALUS. I think the simple answer is that GSA, if they will 

agree to implement just set-asides in their contracts; if they put 

set-asides in their contracts for small businesses in the e-Travel 

side, I think that the TMCs, as were noted, will get more business, 

and I believe that GSA is going to be open to this, but we have to 

wait and see. 

Mr. CHABOT. Thank you. 

Mr. Leazer, when National Office Products Alliance or any of its 

members suspect the existence of a ′′pass-through′′ or ′′fronts,′′ do 

they notify the Small Business Administration or the agency that 

is sponsoring the monitoring program, or what should they do? 

Mr. LEAZER. Typically what a dealer would do or a GSA schedule 

holder in our industry would do is notify NOPA, the National Office Products Alliance, and typically what happens is our staff 

counsel will work with SBA to try to address that issue, and that 

has happened a number of times in the past. 

This case with Faison that I mentioned was one brought by a 

dealer in California. The dealer did protest through the proper 

channels, and through SBA’s actual ruling on the matter, was able 

31

to determine that Faison was truly a front and did have financial 

ties to a large competitor, and that the relationship was solely for 

the purpose of gaining access to a contract that was set aside for 

small business. 

So the process is typically as follows: work through our national 

organization, NOPA, work through SBA, and see what can be done 

about it, and go through the typical protest processes that are in 

place. 

Mr. CHABOT. Thank you. 

And then finally, Mr. Spotila, you had mentioned about the plain 

language communication that our colleague, Mr. Braley, has been 

initiating and pushing, and could you again discuss why that is 

such an important piece of legislation or that concept is one that 

we ought to pursue? 

Mr. SPOTILA. Well, I think, again, it has a very practical effect 

on small businesses. Much of the procurement world language, 

whether it be in the FAR, whether it be in contract documents, 

whether it be in statements of work and solicitations, is very difficult for small businesses to interpret without expensive professional advisors. So all of this builds up additional costs and additional impediments. It makes it more difficult for a small business 

to compete effectively, and there is no excuse for it because these 

things can all be fixed. 

If decisions are faster and communicated clearly, if expectations 

are communicated clearly, including statements of work, then a 

small business can be much more cost conscious, can control the 

costs of going after these contracts much more effectively, and can 

make fewer mistakes. 

And I think all of these things would help considerably. 

Mr. CHABOT. Thank you very much, Madam Chairman. 

I want to thank the panel for their testimony here this morning 

and this afternoon now. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Zelenka, if a company makes a rash decision to try to underbid a competitor in a reverse auction and wins with an unrealistically low figure, how will this affect the government and taxpayers? 

Mr. ZELENKA. It puts the completion of the project at risk. As a 

prime contractor, I will not take a subcontractor’s price if I believe 

it is marginal. Performance is everything for my business. You 

know, you only get one chance to screw the jobs up. So I think the 

government gets in the same spot. 

If they take a price that they know is marginal, you know, it 

puts the completion of the project at risk, which then a project has 

inherent costs, and if you get too far below them, you know, you 

are going to end up with not being able to finish the job, and somebody else having to come back in, and that gets very expensive and 

delays the project or completion. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Palatiello, the Brooks Act requires agencies to use qualification based selection of QBS. This requires factors besides just price 

that are used when evaluating firms for the provision of architectural and engineering services. If any agency fails to do this, what 

enforcement mechanisms are in place to compel a corporation? 

32

Mr. PALATIELLO. They are actually rather limited, Madam Chairwoman. As Mr. Leazer indicated, we provide the same service to 

our members. If a firm sees a procurement that is not in full compliance with the Brooks Act, the firm will contact us, and we will 

try to be in touch with the agency, point out what the requirements 

are under the laws and regulations, but that is very voluntary on 

the part of the agency as to whether they want to try to work with 

us and make it right. 

The only other alternative is for the firm itself then to file a protest. We would like to see a provision. We do not have standing for 

protests. We are not under the definition of an interested party on 

behalf of our members. We think that ought to be changed and associations ought to have the right to protest, not the award, the associations do not want to get in the middle of does Company A or 

Company B win the contract, but in order to help make sure that 

the Brooks Act is properly enforced, we would like to have protest 

standing to do that on behalf of our member or our members so 

that their name is kept out of it. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Zelenka, the Office of Federal Procurement Policy conducted 

an online survey late last year on reverse auctions. Do you think 

that this was a useful method for gathering input on reverse auctions? 

Mr. ZELENKA. I am not too familiar with the survey that they 

did. It would just all depend on who the target was of the survey. 

You know, certainly there are industries like the manufacturing industry where you are making paper clips or supplies, you know, 

that would give you some positive feedback on it, and there are 

other industries, you know, the complex service industry or a construction industry I think you had noted. So I am not sure who the 

target was on it. 

Chairwoman VELA ́ ZQUEZ. Okay. Well, do you have any other 

questions? 

I want to thank the witnesses for spending time with us this 

morning and providing some insightful information as to the dynamics that are going on with federal procurement practices. 

With that I ask unanimous consent that members will have five 

days to submit a statement and supporting materials for the 

record. Without objection, so ordered. 

This hearing is now adjourned. 

[Whereupon, at 12:18 p.m., the Committee meeting was adjourned.]

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