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39–918 PDF 2008

FULL COMMITTEE HEARING ON SBA’S

PROGRESS IN IMPLEMENTING THE

WOMEN’S PROCUREMENT PROGRAM

COMMITTEE ON SMALL BUSINESS 

UNITED STATES HOUSE OF 

REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

SECOND SESSION

JANUARY 16, 2008

Serial Number 110-65

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 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

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 

DEAN HELLER, Nevada, Ranking 

BILL SHUSTER, Pennsylvania 

STEVE KING, Iowa 

VERN BUCHANAN, Florida 

JIM JORDAN, Ohio

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 

JIM JORDAN, Ohio

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 

DEAN HELLER, Nevada 

DAVID DAVIS, Tennessee

Subcommittee on Investigations and Oversight

JASON ALTMIRE, PENNSYLVANIA, Chairman 

CHARLIE GONZA ́ LEZ, Texas 

RAUL GRIJALVA, Arizona 

, 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: 

Preston, Honorable Steven C., U.S. Small Business Administration .................. 3

Papez, Elizabeth, U.S. Department of Justice ...................................................... 6

PANEL II: 

Dorfman, Margot, U.S. Women’s Chamber of Commerce .................................... 35

Farris, Denise, Farris Law Firm ............................................................................ 38

Gloss, Beth, United Materials, LLC ....................................................................... 39

Rubenstein, Pam, Allied Specialty Precision ......................................................... 41

Brown, Jennifer, Legal Momentum ........................................................................ 43

APPENDIX 

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 58

Chabot, Hon. Steve .................................................................................................. 60

Braley, Hon. Bruce .................................................................................................. 61

Altmire, Hon. Jason ................................................................................................. 64

Preston, Honorable Steven C., U.S. Small Business Administration .................. 65

Papez, Elizabeth, U.S. Department of Justice ...................................................... 69

Dorfman, Margot, U.S. Women’s Chamber of Commerce .................................... 74

Farris, Denise, Farris Law Firm ............................................................................ 77

Gloss, Beth, United Materials, LLC ....................................................................... 92

Rubenstein, Pam, Allied Specialty Precision ......................................................... 95

Brown, Jennifer, Legal Momentum ........................................................................ 100

Statements for the Record: 

National Association of Women Business Owners ................................................ 111

National Women Business Owners Corporation ................................................... 114

CMW & Associates Incorporated ............................................................................ 115

Bailey Edward Architecture .................................................................................... 117

Nash Resources Group ............................................................................................ 118

Miller’s Office Products ........................................................................................... 119

Peak Electric, LLC ................................................................................................... 122

Pope Institute for Health and Education, LLC ..................................................... 125

CertifytoSuccess ....................................................................................................... 126

(V) 

(1)

FULL COMMITTEE HEARING ON 

SBA’S PROGRESS IN IMPLEMENTING 

THE WOMEN’S PROCUREMENT PROGRAM 

Wednesday, January 16, 2008

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 10:07 a.m., in Room 

2360, Rayburn House Office Building, Hon. Nydia M. Vela ́zquez 

[chair of the Committee] Presiding. 

Present: Representatives Vela ́zquez, Gonza ́lez, Cuellar, Altmire, 

Braley, Clarke, Sestak, Hirono, Chabot, Graves, Akin, Gohmert, 

Davis, Fallin, and Jordan. 

Also Present: Moore of Kansas.

OPENING STATEMENT OF CHAIRWOMAN VELA ́ ZQUEZ

Chairwoman VELA ́ ZQUEZ. I call this hearing to order. Today the 

Committee will continue its review of SBA programs in implementing the Women’s Procurement Program. This initiative was 

created in part because of the government’s inability to meet the 

five percent contracting goal for women-owned small businesses. 

Even though this goal was set in 1994, Federal agencies have yet 

to achieve it. 

Seven years - yes seven years - have passed since the Women’s 

Procurement Program was enacted. And now, after all this time, 

the SBA publishes a rule that is so poorly constructed and so illconceived that it is insulting to the tens of thousands of women 

business owners that have been waiting for action. This makes it 

apparent that the administration is not serious about carrying out 

the law, and I don’t believe it ever will be. 

In creating the program, Congress’s objectives were clear: to increase participation by women-owned firms in the Federal market 

place. The very design of the legislation was meant to reverse at 

a systemic level the lack of women-owned businesses involved in 

Federal contracting. But the SBA’s proposed rule is just too narrow 

and burdensome to achieve this intent. 

It is evident that few, if any, women-owned businesses will benefit from the new regulation. As a result, of the more than ten million women-owned businesses in this country, only 1,247 businesses will qualify. Women entrepreneurs in industries like conVerDate 0ct 09 2002 10:19 Feb 29, 2008 Jkt 033615 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\01-16-08 SBA WOMEN’S PROCUREMENT.TXT
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struction and manufacturing that are omitted are left scratching 

their heads. Can this be real? 

SBA has chosen one of the most restrictive methodologies to determine which industries will qualify for the program. Out of the 

28 approaches identified by RAND, the agency chose a method that 

designates less than three percent of industries as underrepresented by women businesses. In doing so, it is using a ′′dollar 

amount of contracts′′ method for determining underrepresentation, 

which is inconsistent with the program’s intent. 

The initiative was designed to be used as a contracting tool, to 

reverse the under usage of women firms in the Federal marketplace - not as a way to solely advance large dollar awards. A better 

measure would be the ′′number of contracts′′ method, which would 

find 77.1 percent of industries as underrepresented, or a mix of 

both the number and dollar approaches. 

The SBA is also requiring that Federal agencies make a determination of discrimination before any contract can be awarded 

under the program. This step creates another massive roadblock in 

the long series of obstructions to the program’s implementation. 

The manner in which this finding is required is vague and could 

add layers of unnecessary bureaucracy to the program’s administration. 

Perhaps most problematic, the proposed rule appears to exceed 

what is constitutionally required. As a gender-based program, 

′′intermediate′′ scrutiny is called for. But, instead, it appears that 

the administration is stealthily applying a restrictive ′′strict′′ scrutiny standard. They can call it what they want, but the reality is 

that this is a standard that has no place in this rule. 

The truth is that the SBA’s proposal does not embody the program that Congress envisioned. If this rule becomes final, the administration will be successful in blocking by regulation the program’s implementation. As a result, women businesses will be one 

step further from gaining access to the Federal marketplace. 

Instead, the SBA should scrap this rule and go back to the drawing board to provide a wider path for the inclusion of women. 

Women-owned firms are one of the fastest growing segments of our 

economy. They employ nearly 13 million people, and their annual 

payroll is almost $175 billion. These firms are driving future 

growth and job creation in our communities. It is long past the 

time that they are given greater access to the Federal Government 

as a customer. 

And with that, I now recognize the ranking member, Mr. Chabot, 

for his opening statement.

OPENING STATEMENT OF MR. CHABOT 

Mr. CHABOT. Thank you Madam Chairwoman. This morning the 

Committee is again examining the implementation of the Women’s 

Procurement Program by the Small Business Administration. This 

hearing continues the efforts of this Committee to understand the 

issues and difficulties associated with the regulatory establishment 

of a program enacted by Congress back in 2000. Without prejudging the ultimate outcome of the SBA’s effort, I remain concerned that the will of Congress remains unfulfilled after more 

3

than seven years and more than two years after a federal district 

court ordered the implementation of the program. 

Federal agencies are required to ensure that small businesses receive a fair proportion of contracts for goods and services purchased 

by the federal government. Recognizing the growing importance of 

women-owned small businesses to the growth of the economy and 

the longstanding perceptions that women-owned small businesses 

were at a disadvantage in obtaining federal government contracts, 

Congress enacted bipartisan legislation authorizing the SBA to create a Women’s Procurement Program. 

Slightly more than seven years after enactment, the SBA finally 

issued a proposed rule to commence the process for implementation. I, like many members of this Committee and many Members 

of Congress, am somewhat dismayed at the length of time it took 

to begin the process of implementing the will of Congress. 

Administrator Preston’s efforts to manage the implementation 

process should be commended, even if there is disagreement about 

the results. The notice of proposed rule-making identifies certain 

industries in which women-owned small businesses are underrepresented in federal government contracting. However, I am troubled by the fact that the notice does not provide the public with 

sufficient information on the type of probative evidence that would 

convince the agency to expand the scope of the industry as initially 

covered by the rule. 

The crucial part of the program is the identification of industries 

in which women-owned businesses are underrepresented in federal 

procurement. In the notice, the SBA proposes to calculate underrepresentation every five years, but fails to specify how it will 

make that calculation. Without that information, the potentially-affected public has no way of accurately informing the SBA whether 

the proposal is adequate. In conclusion, the Administrator is taking 

an important first step to see that the program is implemented. 

On the other hand, the deficiencies in the notice raise real concerns about the adequacy of the notice and comment procedures 

mandated by the Administrative Procedure Act. I would urge the 

SBA to provide additional supplemental information to enable the 

public to respond to the notice in an intelligent manner, I yield 

back the balance of my time. 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Chabot. 

So now I welcome our first panel. 

Chairwoman VELA ́ ZQUEZ. The Honorable Steven Preston, Mr. 

Preston is the administrator of the United States Small Business 

Administration. He has served in this capacity since July of 2006 

and has testified several times before our Committee. 

Mr. Preston, you are most welcome.

STATEMENT OF THE HONORABLE STEVEN C. PRESTON, 

ADMINISTRATOR, U.S. SMALL BUSINESS ADMINISTRATION 

Mr. PRESTON. Thank you for inviting me to testify today. The 

proposed rule that will implement the women-owned small business Federal contracting procedures has been published in the Federal Register and is currently in the 60-day comment period. The 

SBA has been and remains committed to implementing the statuVerDate 0ct 09 2002 10:19 Feb 29, 2008 Jkt 033615 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\01-16-08 SBA WOMEN’S PROCUREMENT.TXT
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torily authorized set-aside for the program while at the same time 

meeting the specific directives provided in the legislation. 

Based on a nonpartisan guidance provided by the National Academy of Sciences or NAS, RAND conducted a statistical review to 

determine underrepresentation for women-owned small businesses 

in Federal contracting. The NAS recommended considering a variety of data sources and a variety of methodologies in order to gain 

a broad perspective. 

It did, however, emphasize that greater weight be given to results based on contracting dollars. In addition, NAS emphasized 

the importance of considering more detailed industry information 

represented by the four-digit North American Industry Classification System, which is called NAICS. And then they highlighted the 

need to demonstrate that businesses in the review were ready, willing, and able to perform in Federal contracting. 

To determine underrepresentation and substantial underrepresentation, RAND identified 28 possible approaches and considered data in the Central Contracting Registration; the Federal Procurement Data System; the Survey of Business Owners, which is 

a broad industry-wide survey. And relying on the guidance from 

NAS and the results of parsing the data, RAND then zeroed in on 

those methods that accurately measured underrepresentation and 

substantial underrepresentation. 

After careful analysis of the remaining approaches and in keeping with in the direction of the NAS and RAND, SBA adopted an 

approach that best captured the most appropriate measures. First, 

based on the NAS comments and the need to align with Federal 

policy, we used measures which considered contracting dollars 

going to businesses rather than the numbers of contracts. The very 

goal of the statute was intended to support five percent Federal 

contracting dollars going to women-owned small businesses. Getting revenue from contracts is what creates value for small businesses, not numbers of contracts. And the entire appropriations 

budgeting, contracting, and accounting process in the Federal Government is based on dollars. 

Second, based on NAS comments and the need to tailor the rule 

to address the need, we used the more detailed classifications in 

the four-digit NAICS codes. The proposed rule assists certain 

women owned small businesses in pursuing contracting opportunities with the Federal Government by providing procedures for certifying as an eligible women-owned small business; protesting eligibility determinations and awards; and providing a road map for 

agencies to make the determination that women-owned small business underrepresentation is related to gender discrimination. 

In addition, the rule sets forth when contract officers can restrict 

competition to women-owned small businesses. SBA’s goal is not 

only to develop regulations implementing those procedures but to 

help women-owned businesses so they can compete both in the private marketplace and for Federal contracts. 

I and my team were surprised at the results of this study. We 

learned that those women-owned small businesses registered in the 

CCR generally received a higher percentage of their revenues from 

Federal contracting dollars than other businesses and that the data 

only showed underrepresentation in four categories. 

5

According to the study, once women-owned businesses register to 

do business with the Federal Government, they appear to be doing 

well as a percentage of their total revenues compared with other 

firms in their same industries. The study indicates the real issue 

is increasing the number of women-owned small businesses who 

compete for Federal contracts. 

In fiscal year 2007, we, the SBA, began an initiative to more effectively assist small businesses interested in doing business with 

the Federal Government. We have aligned our field staff. We have 

provided additional training so they are better equipped to advise, 

train, counsel small businesses; so they are prepared to do marketing necessary to find procurement opportunities. As part of this 

initiative, PCRs will have a greater role in ensuring that Federal 

agencies reach the small business procurement goals which will increase procurement opportunities for small business. 

SBA has made great progress. In 2006, contracting dollars going 

to women-owned small businesses reached a record level, $11.6 billion. And in 2006, we experienced the largest growth in a single 

year since that goal was established in 1994, $1.5 billion. The 

amount of contracting dollars going to women-owned small business is more than two and a half times the level it was in 2000, 

growing at almost 17 percent per annum. In addition, subcontracting dollars increased to over $10 billion, representing six percent. 

SBA is taking a forward-looking approach. First, our programs 

are tasked with growing the universe of women-owned businesses 

and encouraging businesses to register with the CCR, making those 

businesses eligible to contract with the Federal Government. Second, the role of SBA is to help those businesses become ready, willing, and able to undertake and build a successful track record 

working with the Federal Government. 

We provided our entire field organization with a full week of 

training to make them more effective in outreach and training. We 

have rolled out new technologies to help other agencies easily identify women-owned businesses that meet their specific contracting 

needs. We have established outreach goals for every single district 

office in the country within the SBA, and we are holding Federal 

agencies accountable for their performance to the score card process. 

We have a number of exciting initiatives planned for 2008. Some 

highlights: SBA intends to participate in almost 600 procurement 

related events which have some component of women-owned small 

businesses focused on. Additional training and match-making, we 

are rolling out online courses on procurement. We are realigning 

our field staff to focus on these opportunities. We think these initiatives will help women-owned small businesses to achieving the 

congressionally established goals. 

We must remember, I think, that there is no one single approach 

that will expand the participation of women-owned small businesses in Federal Government; rather, a combination of initiatives 

that take into account that the individual needs of businesses is 

the best approach to provide opportunities for women-owned small 

businesses to do business with the Federal Government. 

6

Thank you for the opportunity to testify today, and I look forward to any questions you might have. 

[The prepared statement of Mr. Preston may be found in the Appendix on page 65.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Administrator Preston. 

And now I welcome Ms. Elizabeth Papez. Ms. Papez serves in the 

Department of Justice Office of Legal Counsel. She is the Deputy 

Assistant Attorney General and serves as counsel to the Assistant 

Attorney General. 

Welcome. You’ll have five minutes to make your presentation.

STATEMENT OF ELIZABETH PAPEZ, DEPUTY ASSISTANT ATTORNEY GENERAL, OFFICE OF LEGAL COUNSEL, U.S. DEPARTMENT OF JUSTICE 

Ms. PAPEZ. Thank you, Madam Chairwoman, Ranking Member 

Chabot and members of the Committee, for allowing me to appear 

here today to discuss the Justice Department’s legal views on the 

Federal Government’s efforts to improve contracting opportunities 

for women. 

The Justice Department’s view of all gender-based programs 

rests on a simple premise: These programs, no matter how strong 

their policy justification, must comply with the Constitution. To do 

so, these programs must be able to withstand scrutiny under the 

equal protection component of the Due Process Clause of the Fifth 

Amendment. The type of programs addressed in the SBA’s proposed rule clearly trigger equal protection scrutiny because the programs would require Federal agencies to grant contracts to some 

businesses and deny contracts to others on the basis of gender. 

The practical problem the government faces in administering 

these programs is determining what exactly this equal protection 

scrutiny means for the programs. The precise level of equal protection scrutiny that applies to a preference program depends on the 

type of preference at issue. Preferences, such as veterans preferences, that do not involve race or gender are subject to rational 

basis scrutiny, which means that courts will uphold them as constitutional as long as the government has a rational basis for 

adopting them. 

On the other hand, preference programs that do involve race or 

gender are subject to much higher equal protection scrutiny by the 

courts. Race-based programs are subject to ′′strict′′ scrutiny, which 

means the particular program must be narrowly tailored to serve 

a compelling government interest. In other words, they are highly 

disfavored. In contrast, gender-based programs are subject to 

′′intermediate′′ scrutiny, which the Supreme Court has said is 

much more demanding than rational basis scrutiny but different 

than the ′′strict′′ scrutiny that applies to race-based programs. 

Justice Ginsburg’s opinion for the U.S. Supreme Court in the 

VMI case elaborated on what ′′intermediate′′ scrutiny requires. It 

requires that the government be able to show, in the court’s words, 

an ′′exceedingly persuasive′′ justification for awarding government 

benefits on the basis of gender. The reason is that these awards, 

no matter how well intentioned, grant or deny government benefits 

7

on the basis of gender rather than individual abilities or qualifications. 

Accordingly, the Supreme Court said that although 

′′intermediate′′ scrutiny is different than ′′strict′′ scrutiny, 

′′intermediate′′ scrutiny requires the government to show that a 

gender-based program furthers an important governmental interest 

and that the gender discrimination the program requires is substantially related to achieving those interests. 

The Justice Department in reviewing gender programs adheres 

to the ′′intermediate′′ scrutiny standard the Supreme Court set 

forth in VMI and looks to how courts have applied this standard 

to particular types of gender programs. 

For contracting programs, Federal courts have consistently held 

that to satisfy ′′intermediate′′ scrutiny the government must show 

genuine non-hypothetical evidence of discrimination in the particular field where the program will operate. 

I want to point out again that this standard of ′′intermediate′′

scrutiny and the court’s focus in gender cases on the government’s 

ability to prove discrimination does not erase the distinction between ′′strict′′ and ′′intermediate′′ scrutiny. The 11th Circuit explained the difference this way: While there is a difference in the 

evidence required to support a race- versus gender-based program, 

the difference is one of degree, not of kind. In both contexts, race 

and gender, the constitutionality of a government program turns on 

the adequacy of the government’s evidence of discrimination. 

′′Intermediate′′ scrutiny just means that, in gender cases, less evidence is required. Exactly how much less evidence is not clear from 

the cases. What is clear is that to survive ′′intermediate′′ scrutiny, 

a government’s gender program must allow the government to 

show genuine, non-hypothetical evidence of discrimination in the 

particular field where the program will operate. And the cases 

make clear that mere findings of underrepresentation or disparity 

are generally not sufficient to satisfy the constitutional standard. 

The lesson these cases leave for Federal agencies implementing 

gender-based programs is clear: If the agencies want their programs to be upheld as constitutional, the programs must be based 

on government evidence of discrimination in the particular field 

where the program will operate. That is exactly what the proposed 

SBA rule requires. It requires that an agency intending to implement a gender-based set-aside program identify, as the government, evidence of discrimination in the field where the program 

will operate. 

It is for that reason that the Justice Department views the proposed rule as consistent with what the Constitution requires under 

′′intermediate′′ scrutiny. 

The rule is also consistent with Federal agencies’ obligation to 

implement statutes and programs in a constitutional manner. In 

order to discharge their obligations, Federal agencies can and 

should take steps to maximize the chances that courts will uphold 

their programs. Doing so not only helps the agencies comply with 

the Constitution, it also helps ensure that the programs will survive legal challenges that would otherwise prevent those programs 

from serving the very people they were intended to benefit. 

8

Thank you again for the opportunity to testify. I look forward to 

taking any questions. 

[The prepared statement of Ms. Papez may be found in the Appendix on page 69.]

Chairwoman VELA ́ ZQUEZ. Thank you, Ms. Papez. 

I will address my first question to Mr. Preston. 

Mr. Preston, after seven years, a Federal lawsuit and multiple 

congressional hearings, the SBA puts out a rule that designates 

four industries as underrepresented. If this proposed rule is finalized, less than 1,300 out of ten million women-owned businesses 

will potentially benefit from the Women’s Procurement Program. It 

also requires agencies to make a discriminatory finding regarding 

its past procurement practices, a heavy and unrealistic burden for 

any Cabinet Secretary. Once this is implemented, do you believe 

that it will increase contracts so dramatically that the five percent 

goal will be achieved? 

Mr. PRESTON. First of all, I want to highlight a couple of the 

numbers you just mentioned. Roughly 1,200 businesses versus 

many millions; the 1,200 is not all businesses in these categories. 

It is all businesses that are registered to do business with the Federal Government. So that 1,200 relates to about 55,000, granted 

still about two percent. 

We believe it will be an additional tool in their quiver, but we 

certainly don’t think this is going to be the end all at helping agencies meet their Federal goals. And as I mentioned in my testimony, 

we think that Federal agencies are going to continue to have to 

focus on outreach efforts, recruiting more women into the CCR, and 

doing the job and finding the right business for those contracts. 

Chairwoman VELA ́ ZQUEZ. Do you believe that the five percent 

will be achieved? 

Mr. PRESTON. I believe that a five percent will be achieved some 

day. And I think if you look at the growth over the last several 

years, it has been very, very strong. So I think we are on the path. 

Chairwoman VELA ́ ZQUEZ. Okay. Do you believe it will be 

achieved this year? 

Mr. PRESTON. I don’t believe it will be achieved this year. 

Chairwoman VELA ́ ZQUEZ. Mr. Preston, we have gone back and 

examined the numbers, and in order to achieve the five percent 

goal, each—and I know that you mentioned your numbers, but we 

went back, and based on the data, we found that 1,247 businesses 

designated as underrepresented will have to receive a contract 

worth $4.4 million. This is ten times the average a small business 

contract gets. 

How likely, on a scale of one to 100, with one being absolutely 

no way, to 100 being absolutely guaranteed that each and every of 

these 1,247 women-owned businesses will receive a contract worth 

$4.4—

Mr. PRESTON. Ma’am, you are presenting that Federal agencies 

are going to look at four out of 313 categories to increase their contracts with women. And you are presuming that the only way to 

do that is to go to those categories. It is a much, much broader opportunity, and I think for agencies to hit those goals they have to 

look well beyond those four categories to be effective. 

9

Chairwoman VELA ́ ZQUEZ. The number that I mentioned to you 

will have to correspond to the four categories, those four industries. 

Mr. PRESTON. Ma’am—

Chairwoman VELA ́ ZQUEZ. I don’t agree with you, and you know 

that. 

Mr. PRESTON. The $1.5 billion increase we saw in 2006 had nothing to do with set-aside programs. It had everything to do with 

agencies doing more business with women-owned businesses that 

were competing effectively. And these firms are competing effectively. And so I think this is an additional tool, but I don’t think 

this is what we can look to—

Chairwoman VELA ́ ZQUEZ. Well, Mr. Preston, the focus of today’s 

hearing is the Women’s Procurement Program. 

One of the four industries that SBA designated as underrepresented was national security and international affairs. Is that 

correct? 

Mr. PRESTON. That is correct. 

Chairwoman VELA ́ ZQUEZ. However, the size standards specify 

that such contracts cannot be performed by private businesses. Do 

you know that? 

Mr. PRESTON. My understanding is that there were private firms 

in that category, but most of the contracts were classified, so it was 

difficult for us to get that information. 

Chairwoman VELA ́ ZQUEZ. The size standards, Mr. Preston, specify that such contracts cannot be performed by private businesses. 

What this means is that it will prevent women-owned businesses, 

and any small business for that matter, from getting a national security contract, so I am appalled. And please explain to me then 

why the SBA included such an industry in its proposed rule? 

Mr. PRESTON. This was one of the four industries that was recommended by the RAND Corporation study, and that is why we included it. 

Chairwoman VELA ́ ZQUEZ. ′′Section 92, small business size standards are not established for this sector. Establishments in the Public Administration sector are Federal, State and local government 

agencies which administer and oversee government programs and 

activities that are not performed by private establishments.′′ So 

what it means is that this industry is out. So we now have three 

industries where women will be able to participate. So the Small 

Business Administration had seven years to get this right. And you 

come back with this product. It just amazes me, Mr. Preston. 

Your regulation requires an agency to make a discriminatory 

finding in order to use the program. Has this ever been done before 

for a congressionally created affirmative action program? 

Mr. PRESTON. I don’t have the history on that. My understanding 

is there is significant precedent in looking at contracting preference 

or contracting programs that require that. 

Chairwoman VELA ́ ZQUEZ. Ms. Papez, can you tell us if an agency 

finding of discrimination has ever been required before for a similarly situated program? 

Ms. PAPEZ. Yes, absolutely. 

Chairwoman VELA ́ ZQUEZ. And I need a yes or no answer. 

10

Ms. PAPEZ. Yes, absolutely. Multiple Federal Courts of Appeals 

and multiple Federal District Courts applying ′′intermediate′′ scrutiny have required exactly that; they have required—

Chairwoman VELA ́ ZQUEZ. Can you provide the Committee examples of such? 

Ms. PAPEZ. Of course, absolutely. One of the examples I mentioned in my opening testimony was an 11th Circuit case—by the 

way, all the cases that I refer to—

Chairwoman VELA ́ ZQUEZ. Ms. Papez, I am asking about programs, not court cases. 

Ms. PAPEZ. Yes, yes, programs. The court cases address programs—programs to give women-owned businesses contracting 

preferences. Those were the court cases I was relying on. They all 

deal with the kind of programs that we are talking about here. 

Chairwoman VELA ́ ZQUEZ. For each agency, you will require. 

Ms. PAPEZ. Well, for the government, yes—

Chairwoman VELA ́ ZQUEZ. I want you to mention for each agency, 

programs such as the one that we are discussing today, is required 

for each agency? 

Ms. PAPEZ. Well, if by each agency you mean, do courts require 

the government agency or entity doing the contract program to 

prove discrimination, yes, they do. 

Chairwoman VELA ́ ZQUEZ. So why then in a proposed rule don’t 

you say the Federal Government instead of saying each agency has 

to prove past discrimination? 

Ms. PAPEZ. Well, to be clear, I think what the courts require is 

that there has to be evidence of discrimination in the particular 

field where the program operates. So it makes sense to say that the 

agency who is administering the program, they are the agency in 

the field where the program operates, has to have the evidence of 

discrimination. That is what all of the cases hold. 

Chairwoman VELA ́ ZQUEZ. Do you think that what you are stating 

today is clear in the rule? 

Ms. PAPEZ. I think it is clear in the rule that the agency doing 

the program has to identify evidence of discrimination in the field 

where the program is going to operate. I think that is clear, and 

it is absolutely consistent with the cases. 

Chairwoman VELA ́ ZQUEZ. But let me ask you, the test that you 

are putting out is not more consistent with ′′strict′′ scrutiny? 

Ms. PAPEZ. No, it is not more consistent—it is the ′′intermediate′′

scrutiny test that the Supreme Court and Federal courts all over 

the country have applied to women-owned business contracting 

programs. It is not a ′′strict′′ scrutiny test that courts apply to—

the tests that I am talking about and the test that is in the rule 

is what courts, not the Justice Department, courts have applied to 

women-owned business contracting programs across the country. 

Chairwoman VELA ́ ZQUEZ. It seems to us that there is a disagreement regarding the test that you are putting out, and you feel that 

corresponds to ′′intermediate′′ scrutiny. I would like for you to state 

for the record which member of your staff will remain in this Committee hearing so that you get the benefit of the second panel. We 

are going to have legal experts here which totally disagree with the 

interpretation that you are stating today. Would you please menVerDate 0ct 09 2002 10:19 Feb 29, 2008 Jkt 033615 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\01-16-08 SBA WOMEN’S PROCUREMENT.TXT
11

tion the name of your staff that will remain in the Committee hearing? 

Ms. PAPEZ. Yes, of course. I will stay as long as I personally can. 

I have a staff member, Mr. Phillips, behind me who will stay. And 

the Justice Department will be happy to do whatever we can to 

help resolve this disagreement. We are committed to doing that. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Preston, in the preamble to the proposed regulation, the SBA 

states that RAND provided 28 different approaches to determining 

which industries are underrepresented by women. The SBA chose 

one of the narrowest methods to implement the program, even 

though the National Academy of Sciences recommended that two 

approaches be used. So I would like to know, why did the SBA ignore the National Academy of Sciences in this instance and just 

use one method? 

Mr. PRESTON. I would be happy to. Before I mention that, I think 

we need to reconcile some information, because my staff advises me 

that both small businesses and women-owned small businesses 

have contracts—

Chairwoman VELA ́ ZQUEZ. I am sorry, Mr. Preston—

Mr. PRESTON. I just want to state for the record here that we 

need to reconcile some information, because my staff has advised 

me that small businesses and women-owned small businesses have 

received contract awards under the category that you mentioned, 

so I would like to make sure that we offer something for the record 

subsequently. 

I think if you look at the guidance in the National Academy of 

Science, they recommend considering a broad number of approaches to get a broad understanding of the issue. However, when 

you look at the detailed guidance that the National Academy of 

Sciences provides, they provide very specifically a mention that 

monetary awards are critical to compute; that they are preferable 

because legislatively mandated goals are based on dollars. Dollar 

value is critical to business success—

Chairwoman VELA ́ ZQUEZ. I understand that, Mr. Preston, but I 

am asking you about how the RAND Corporation, the company 

that you hired to do a study, recommended that out of 28 you could 

use more than one or multiple factors. 

Mr. PRESTON. Okay. The RAND study provided a multiplicity of 

methodologies, most of which are not defensible, we believe, in this 

case. There are two concepts I think that are clear to understand, 

the study looks at dollars of contracts because that is the goal we 

were trying to achieve, they look at underrepresentation based on 

dollars. The other piece of information they use is four-digit industry codes, which are much more detailed and which give us better 

information on underrepresentation. When you use those two concepts, it winnows it down to two methodologies. You know, I can 

get into a broader explanation, but it is as simple as that. 

Chairwoman VELA ́ ZQUEZ. Mr. Preston, it doesn’t disturb you that 

by choosing the number of dollars amount, in terms of contracts 

given out will only, if you use that criteria, it will cover only three 

percent of women that are underrepresented, and if you use another method or a combination of more than one, it will show that 

other women are underrepresented, as high as 80 percent in some 

12

cases; it doesn’t disturb you, that disparity between three percent 

and 80 percent? 

Mr. PRESTON. Well, I think I can describe for you why that disparity occurs, but what I would tell you is, it would be a lot easier 

for me to stand here and provide you and the rest of the Federal 

agencies with a broad set of set-aside capabilities to meet this goal. 

But what we did is we determined what we thought was the most 

accurate depiction of what we needed to do to satisfy the statute, 

the Constitution, and align with the goals. I think there are some 

things--

Chairwoman VELA ́ ZQUEZ. Let me ask you, of the 28 methods, do 

you agree with me that any of those will meet constitutional standards? 

Mr. PRESTON. I don’t believe certain of them would meet constitutional standards, nor—

Chairwoman VELA ́ ZQUEZ. At least maybe one, two, three, four out 

of 28? 

Mr. PRESTON. Ma’am, let me—if you’d like, I can talk about the 

numbers versus dollars issue because you brought it up in your testimony. When you look at numbers of contracts going to businesses, 

it doesn’t look at a dollar value going to them. And let me just 

draw a comparison: If you have a $5 million business with five $1 

million contracts from the Federal Government, so 100 percent is 

from the government. And you have GE with ten $1 million contracts from the Federal Government, so they have more contracts, 

but it is an irrelevant percentage of the revenues. That small business would be considered under-representative, even though all of 

the revenue is coming from the Federal Government. Numbers you 

have got to adjust for the capacity to firm and their ability to perform. Numbers put sole proprietorships on the same basis as multinationals in terms of numbers of contracts they are able, capable 

of performing. That is why that is not a reasonable comparison. 

Chairwoman VELA ́ ZQUEZ. It is just frustrating, Mr. Preston, because what I am asking you is based on the National Academy of 

Sciences, which recommended to use more than one method, for 

you to explain why you choose to only use one when it is going to 

produce such a disparity in terms of the three percent that you are 

going to achieve by using one method or the 80 percent, in some 

cases, if you would have chosen to use multiple methods. 

Mr. PRESTON. The NAS said that all or most of the methodology 

should point to representation. They also mention very specifically 

that heavier weight should be given to dollars. And they also specifically said that two-digit NAICS codes were too broad to be used 

as the basis of disparity, which is what the preponderance of these 

methodologies used. They even said it is too broad. 

Chairwoman VELA ́ ZQUEZ. Okay. 

Mr. PRESTON. Let me make one more comment. A two-digit 

NAICS code, as retailers, when you get to the four-digit, you are 

looking at automobile dealerships, grocery stores, jewelry dealers, 

you know. And if you don’t look at a more detailed category, you 

might say there is underrepresentation in jewelry dealers, and that 

would lead you to give a preference to auto dealerships. 

Chairwoman VELA ́ ZQUEZ. So the National Academy of Sciences is 

wrong. 

13

Mr. Preston, I have to leave with Mr. Chabot, we have a bill on 

the floor. And Ms. Clarke will be chairing this hearing, and I will 

be coming back as soon as I can. 

Ms. CLARKE. [Presiding.] Ms. Fallin, I understand you have questions at this time, we yield to you. 

Ms. FALLIN. Thank you, Mr. Chairman, we appreciate you coming today, and Ms. Papez, we appreciate your expertise, knowledge 

on constitutional issues and appreciate your explanation of court 

hearings and Supreme Court rulings. It is very complicated, so 

thank you for helping to give us a better understanding of what is 

going on. 

I think all of us are very concerned about how we can encourage 

more women to be able to participate in Federal Government contracting. I certainly know that I have heard from my district back 

over the many years that I have been in office that women would 

like to have more opportunities. But I had a couple of questions, 

and I had a wonderful briefing by your staff yesterday, so thank 

you for allowing them to come see me. 

I have a couple of questions. In looking through all the information, what can we do as a Nation to encourage under-performing 

business categories to register to be on the list so that more women 

can take advantage of the Federal contracts? I know back in my 

district over the years I would hear women say, I don’t know how 

to do this. I have heard you say that you are working closely with 

the contract procurement people at various agencies within the 

SBA to help them coordinate, but it seems like we are still not 

doing as good of a job as we can be. What can the Federal agencies 

do? 

Mr. PRESTON. Well, first of all, I think we can all continue to participate and expand our outreach efforts by holding forums; by 

doing match-making sessions where we bring businesses together 

with Federal agencies and procure; and by getting the word out 

there. We are working very hard do that, both by expanding our 

own physical outreach and making it simpler for people to understand how to do contracting with the Federal Government through 

various Web tools, through educational sessions that they can get 

through the SBA Web site. So it is outreach. It is education. We 

are also providing the Federal agencies with tools to simplify their 

ability to find the right business. 

A few months ago we rolled out a tool where if agencies put in 

what they are buying, where they need to buy it, they can basically 

get a list of all the women-owned businesses that perform that 

service. So we are helping them find the right small business, 

which is a brand new opportunity that we have given them. So it 

is on a number of fronts and increasing awareness as well. 

The last piece is holding people accountable. And we rolled out 

a score card last year to hold Federal agencies accountable for hitting not only their overall procurement numbers but for women in 

other target groups. And I can tell you that we have gotten more 

outreach in our direction since we started publishing that information than probably ever before, because the agencies do not want 

to appear like they are not doing the job to support these businesses. So we are trying to hit it on a number of fronts. 

14

Once again, I would remind the Committee, we had the largest 

increase in the government’s history last year, women, on procurements. So we are on the right track. We just need to continue do 

more of it. Because we believe it is not only good for women-owned 

businesses; we think it is good for the Federal Government to have 

these qualified contractors competing. 

Ms. FALLIN. And if I could clarify, what percentage of womenowned businesses receive, the ones that are registered, actually receive the Federal Government contracts? 

Mr. PRESTON. Last year it was 3.4 percent of contract revenues 

compared with a five percent goal in 2006, and I would highlight, 

in terms of our own commitment, that in 2007, SBA will hit almost 

25 percent of our contracts. So we are trying to lead by example 

here, and we are leading the entire Federal Government. 

The other thing is, and I know the Chairwoman mentioned a lot 

of numbers, but when you look at the revenues of small business 

in the economy, the most recent census data shows that womenowned businesses get about 4.2 percent of the revenues of the economy, and women-owned small businesses get 3.4 percent of the revenues in the economy, compared with 3.4 percent from the Federal 

Government. So we are working within that body of businesses to 

get those revenues. I think it is important to make that distinction 

because we are comparing the numbers of firms with the dollars 

they get, and that is not the relevant comparison. We need to look 

at the capacity to perform versus the dollars we have to give out. 

Ms. FALLIN. And the percentage of women-owned businesses in 

the United States, what percentage of those women actually registered to get the Federal contracts? 

Mr. PRESTON. Oh, it would be a very small percentage. It would 

be a fraction of one percent. Now, when you look at the 18 million 

women-owned businesses in the United States, probably half of 

those are one-woman shops. They don’t have employees. And then 

the preponderance of the rest of them are relatively small. So it is 

a very small number, but I think if you looked at all other businesses of comparable size, you would find a very small percentage. 

That having been said, it means that there is also a large group 

of businesses out there for us to go to as we look at recruiting 

them. 

Ms. FALLIN. Madam Chairman, if I can ask one last question. 

Ms. CLARKE. Yes. 

Ms. FALLIN. Was the SBA removed from the process as far as 

being independent from the RAND study? 

Mr. PRESTON. Oh, yes. What we did with RAND is we conveyed 

to them the guidelines that were given to them by the National 

Academy of Sciences. And as many of you know, because it has 

been a long journey, the original study the SBA did was deemed 

to be not defensible. So we went to the National Academy of 

Sciences and said, how does a study have to look to be defensible 

here? They laid out a methodology. The SBA conveyed that methodology to RAND, and RAND followed the methodology. The agency pulled very much back from the analytical process and left it to 

the experts because we wanted to ensure that we had a third party 

unbiased in any way performing that analysis. 

Ms. FALLIN. Okay, thank you, Madam Chairman. 

15

Ms. CLARKE. Thank you. I now yield to the gentleman from 

Pennsylvania, Mr. Sestak. 

Mr. SESTAK. Thank you very much. The arguments which I understand for what your position is reminded me of some civil arguments I heard over the last 30 years, but there is an institution 

of the U.S. Government that understood that there was a national 

interest, an important interest which I think the Engineering v. 

Metropolitan Dade case established for gender discrimination. And 

that organization, the Federal Government said, We really do need 

women to be more represented. So the U.S. Military actually set 

goals for promotion boards, not the same as this legislation does, 

that needed to be achieved. 

The arguments I heard prior to this were not dissimilar. Everybody took every position they could of the old timers to prevent 

them from becoming or getting into combat roles. I can remember 

being off Afghanistan the first night, and this young, 27-year-old 

woman pilot diving down as we went into the air and trying to salvage Special Forces that had died and got the other four out. But 

I never understood when I listened to you today, why was that unconstitutional? We do it today. We have goals that so many women 

should be promoted into these combat positions and all. 

Ms. PAPEZ. I’m sorry, is the question addressed to me? 

Mr. SESTAK. Yes, it is. 

And second is, when you set the standard that you have, it is a 

great block, frankly, yet military does it every day. And I have 

never heard the administration take a differing position. 

Ms. PAPEZ. Well—

Mr. SESTAK. If I could, when you go down and look at the Metropolitan case, they actually say societal discrimination in the economic sector is sufficient for the government to prove discrimination. Why are you pushing a higher standard than that court said, 

the Third Court refers to the Ensley Branch case? Why are you 

now making a higher standard of having to prove direct discrimination than what the court already said, societal discrimination is 

sufficient? 

Ms. PAPEZ. I guess there are a lot of parts to your question, so 

let me try to take them piece by piece. First, I just want to say, 

the Justice Department is not setting any standards here. We reviewed a rule consistent with case law so I want to say that at the 

outset. 

Secondly—

Mr. SESTAK. But shouldn’t we as the Justice Department then 

say the military acted against the Constitution? Because one of 

your arguments was, we don’t want the agencies to set off on a 

wrong course here and be pulled back. It appears to me you have 

got an agency, the Department of Defense, that is evidently on the 

wrong course. Why haven’t you pulled them back? But we are preventing—

Ms. PAPEZ. If I could answer that, first, I want to say I don’t recall saying or the Justice Department ever saying that anyone has 

acted unconstitutionally, so I am not really sure where that part 

of your question comes from. We are not saying that anybody is 

acting unconstitutionally here. 

16

Mr. SESTAK. No, I guess what you are saying is, if you do not 

do this direct discrimination evidence, the intermediate level, that 

you won’t be held constitutionally valid; it will be against the Constitution, because of court cases. My argument is, well, it seems to 

me we have got an agency over here that is doing exactly that. 

Ms. PAPEZ. First of all, I don’t know exactly the details of the 

program you are talking about. Secondly, I would say—

Mr. SESTAK. It is a goal that actually says—and we go to promotion boards there—5 percent that is our goal of how many 

women we want promoted. 

Ms. PAPEZ. But it is a goal, not a requirement. 

Mr. SESTAK. And that is what this is, five percent here for 

women-owned business is a goal, not a requirement. 

Ms. PAPEZ. Right, I think. 

Mr. SESTAK. What is the difference? 

Ms. PAPEZ. Well, I think the same standard applies, and it is the 

standard I said. 

Mr. SESTAK. So we should be over at DOD telling them that they 

are—that it is unconstitutional? 

Ms. PAPEZ. Not at all, I don’t think that is the case. 

Mr. SESTAK. It is the same program that you are trying to defend 

here, ma’am. 

Ms. PAPEZ. But I haven’t said any program is unconstitutional. 

The point is a simple one; it is that if the government wants to do 

all it can to ensure that a court will uphold the program as constitutional and not strike it down, and I would point out—

Mr. SESTAK. Why hasn’t the court struck this down as unconstitutional? We have been doing it for decades or so. Why all of a sudden are you holding at a higher stricture than the government already holds on a similar program? 

Ms. PAPEZ. Again, I don’t know exactly what DOD program you 

are talking about. One DOD program I do know about is the DOD 

program that has been at issue, tied up in litigation in the Rothe 

case for almost ten years. I guess if your question is, why hasn’t 

a court struck down or upheld the particular program you are talking about, again, I don’t know the details. 

Mr. SESTAK. Can you go to the next question? It amuses me because I heard so many old timers over those decades say, We just 

don’t need women in combat roles. It sort of like sounds to me, we 

don’t need that many women to try to interpret this more easily 

for women to get a fair share. So my second question is, why are 

you setting what appears to me a higher standard of proving direct 

discrimination rather than evidence of societal discrimination in 

the economic sector? 

Ms. PAPEZ. I really would like to address that. First I want to 

say, no one is disputing—I think we all share the goal that we 

want to encourage more women in contracting. No one is trying to 

block them. 

Mr. SESTAK. Is the ′′we′′ the Justice Department, or that one 

should that have been addressed to Mr. Preston? I mean, it seems 

to me Chairwoman Vela ́zquez’s comments were spot on. I mean, 

you could have taken any of the measures, because the law did not 

specify the amount of money. And so it is unfair to you; that question was really to him of a combined. You went to the amount of 

17

money rather than the number of contracts. Anyway if you would 

go back to the societal issue. 

Ms. PAPEZ. Let me talk about that. When you talk about the Justice Department advising on rules and these constitutional standards, we do that because we are trying really hard to help agencies 

make sure that these programs are upheld, that the programs that 

are helping these women are upheld and not struck down. So that 

is why we are doing it. We are doing it because we want the programs to be right and—

Mr. SESTAK. Why didn’t you say the bar was societal discrimination? That is a lower standard than direct discrimination; correct? 

Ms. PAPEZ. But I didn’t say direct discrimination or societal, I 

said, like the cases say, that in order to sustain a program, the government must show evidence of discrimination in the relevant sector. That is what I said, and that is what the cases require. 

Now your point is some cases, like the ECA case, have said that 

evidence of societal discrimination may be enough to sustain a program. I would point out in the ECA case that the court actually 

struck down—

Mr. SESTAK. Actually, it said it can be satisfied by society, not 

may; there was no may in that hearing. 

Ms. PAPEZ. Can be, can, may, it doesn’t mean it must necessarily 

where it is. It can or may if the evidence is sufficient. What I would 

point out is, in that very case, the court struck down the program, 

the women’s contracting program at issue, because the evidence 

was not sufficient. And where Justice comes from is we look at 

cases like that, and we advise agencies that if you don’t want your 

program to be struck down like this one was, you need to have 

good robust evidence the courts will accept to uphold the program. 

It is not in the agency’s interest or in women’s interest to have 

courts strike these programs down, and that is what that ECA 

court did, it struck it down. 

Mr. SESTAK. Yes, but it struck it down because they had not attempted to show societal discrimination, so if they would come 

back. Correct me if I am wrong, because—

Ms. PAPEZ. I hate to say that, but you are wrong in that case. 

They did try to show it, and the court held the evidence, which was 

a disparity study, was insufficient evidence. So they tried to show 

it through a disparity study, akin to RAND, and the court said that 

is not good enough. 

Mr. SESTAK. But if I could, doesn’t—I am not a lawyer, I am just 

a seaman, but if an intermediate—is that what it is called—discrimination, doesn’t that require direct discrimination finding? 

Ms. PAPEZ. No, the courts haven’t said that, and the Justice Department hasn’t said that. It doesn’t require direct versus indirect. 

It requires evidence—

Mr. SESTAK. So societal is enough? 

Ms. PAPEZ. It may be enough depending on the strength of the 

evidence. That is what courts have held. Courts have held that societal discrimination may be enough depending on the strength of 

the evidence. And in ECA, the court held that a disparity study 

was not good enough evidence of discrimination to qualify the program. 

18

Mr. SESTAK. Can we then, either you or staff, I would like to 

know and then go through the military program which has similar 

goals as that does, why is that okay, and what is different about 

it that evidently what you speak about has not been a part of what 

the U.S. Government’s agencies have tried to also lay down as requirements for the agency to be concerned or aware about? 

Ms. PAPEZ. I actually think they have. Again, I don’t know what 

specific Defense program you are talking about. The one I know a 

fair amount about, because it has been in litigation, is the 1207 

DOD program, which has race and gender preferences and has 

been tied up in litigation for years on precisely the issue I was 

talking about, which is that people were coming in and saying, we 

don’t think that these preferences DOD is giving to contracts are 

constitutional because—

Mr. SESTAK. No, it is promotion of women from lieutenant to 

lieutenant commander. That is a different—what I am talking 

about is a different program. It is just purely promotions. 

Ms. PAPEZ. Okay, I am sorry. 

Mr. SESTAK. I mean, same thing, trying to get more—I have gone 

over my limit—representation of women into the upper ranks, and 

so goals were set. Same thing, but same thing; it was gender-based 

and it was not—and we have been doing it for years. So I am curious why in this one we are so concerned to make sure the agencies 

don’t get caught up, that they can work their way through constitutional issues, but over there in a very similar program, it seems as 

though they are going along for what is a national interest good. 

I have gone on too long I yield back. 

Ms. PAPEZ. If I could say briefly for the record, I am not familiar 

with the military promotions program. I think that there are probably some real differences between that and the contracting program. And all of the evidence and testimony I have presented today 

is specific to contracting programs, although we would be happy to 

look at the military program and provide any answers that might 

help the Committee. 

Mr. SESTAK. I would be interested, because there seems to be 

such commonality of more gender-based representation; the principle seems to be the same. And when I hear the other side of the 

argument here, I kind of look at the old Navy admirals that did 

not want them at the top and picked the right measure to make 

sure they didn’t get in there. Thank you very much. 

Ms. CLARKE. Ms. Hirono from Hawaii. 

Ms. HIRONO. I have several questions for Mr. Preston. You note 

in your testimony that the proposed rule—about a proposed rule. 

And I take it that the proposed rule doesn’t insulate the agencies 

from being challenged on constitutional grounds when they are 

awarding contracts to women-owned small businesses. 

Mr. PRESTON. I’m sorry, can you restate the question? 

Ms. HIRONO. I’m saying the rule does not completely or even partially insulate the agencies from legal and constitutional challenge. 

Mr. PRESTON. No, the agency has to undertake its own review. 

Ms. HIRONO. So have they been doing that? Have they set up, established, it says, a framework to make a determination as to justifiable discrimination so that they can award these contracts to 

women-owned businesses? 

19

Mr. PRESTON. The agency would need to look at the facts and circumstances within their agency, which vary dramatically from one 

agency to another and from one business category to another. And 

that is why, because of those uniquenesses, it doesn’t set out a specific framework in sort of a one-size-fits-all fashion. 

Ms. HIRONO. I realize that, but all of the agencies have particular types of contracts that they are awarding, and so they need 

to justify, just in case someone decides to challenge, they need to 

lay out their rationale, so have they done that—

Mr. PRESTON. Prospectively? 

Ms. HIRONO. Yeah, in anticipation of legal challenges? 

Mr. PRESTON. I don’t know what they have done. We haven’t 

asked them for a description of how they would do it. Certainly in 

the process of the proposed rule, people bring forward ideas on that 

issue, and we will consider them in the rule-making process. 

Ms. HIRONO. I think that that is an area that you probably 

should—if I can make a suggestion, you probably should proceed 

with, because it should be anticipated that these challenges will 

come forward, especially based on the Supreme Court decisions and 

the circuit court decisions. So you note two areas that you are moving toward. One is to increase a number of women-owned businesses that are registered, and I take it that the registration is a 

simple thing for women-owned businesses to do, that we don’t have 

a lot of barriers for them to register themselves. 

Mr. PRESTON. No, there aren’t a lot of barriers for them to register themselves. I would tell you that participating in the entire 

Federal contracting process has its own challenges just because of 

the Federal Regulations. And clearly they have to make sure they 

are aware of those and comply with those, which is somewhat of 

a higher hurdle. 

Ms. HIRONO. I think registration is your easier challenge, I would 

think. 

Mr. PRESTON. I would agree with you, absolutely. 

Ms. HIRONO. Because then you have all these thousands of businesses that are registered, and unless they know what to do once 

they have registered, it is just funds on seats. And so that is the 

second part of your task, the second part being the educating and 

helping them actually get these contracts. 

Mr. PRESTON. And I mentioned some new technology we have. 

Once they are registered, we have the ability to find them very 

simply based on the industries they compete in and their locations. 

So it is important for us to get them in there to help the other 

agencies find them. 

Ms. HIRONO. That is right. But I see the larger problem as making sure that these agencies—you want to—you want to encourage 

them to give these contracts to women-owned small businesses, but 

they are not going to do that if they are going to have to face a 

legal challenge every time they do that. So I think the larger challenge is for you to really help them establish the—be able to sustain a legal challenge, and I don’t see that as part of your push 

right now. 

Mr. PRESTON. I just want to emphasize one concept. 

Ms. HIRONO. I am suggesting that it be. 

20

Mr. PRESTON. I want to make one comment. The only issue with 

respect to legality here has to do with an agency that chooses to 

do a set-aside for only women-owned small businesses in one of 

those four industry categories, which is—as we have all acknowledged, it is a relatively small percentage of the overall contracting 

pie, and only, once again, if it is set aside to the exclusion of other 

businesses. 

With respect to the overall contracting picture, where 99 percent 

plus of the revenue base is, those types of justifications are irrelevant because women-owned businesses would be going to the table 

competing against other small businesses. The only thing I would 

mention is in our 8(a) program, about 30 percent of those companies are women-owned, and women represent a significant portion 

of the HUBZone program and overall small businesses. So there 

are set-aside possibilities in those categories, but they would be 

competing against non-women-owned small businesses in those categories. 

Ms. HIRONO. And those would not be subjected to legal challenges, I take it. It is only the instance where it is just going to 

be women-owned small businesses that can qualify for the particular contract that raises a potential constitutional challenge. 

Mr. PRESTON. Yes. Specifically in those four categories for setasides. I would tell you that there are ongoing cases that are challenging the constitutionality of our other programs, but I think 

that is a different issue. 

Ms. HIRONO. That is probably a different constitutional standard. 

Now that you have explained that, then what percentage of all 

of your agencies’ contracts are in the category where constitutional 

challenges could arise based on gender? 

Mr. PRESTON. It is less than one percent within these categories, 

and, once again, only if it is a set-aside, which I think is the concern that you raised is because of the small number of categories. 

Ms. HIRONO. Is there a possibility of increasing this one percent 

to more than that to give—basically to really focus on womenowned small businesses? 

Mr. PRESTON. Yes, there is. One of the challenges in the RAND 

study is there are a number of codes where they found that there 

was not enough statistical evidence to really dig into it. For example, there might not have been any women signed up for those categories. There may have only been a few Federal contracts going 

to those categories. And I think it will be important for the SBA 

to continue to review those categories to see if they are significant 

enough to matter, and if there is additional activity coming into 

those categories that would enable us to do a review to determine 

underrepresentation. 

The other thing which we mention in this study is I think periodically it will be incumbent upon the SBA to update its findings 

to determine whether or not there is a change and whether or not 

the categories could be expanded. So that is, I believe, a task that 

we will have going into the future. 

Ms. HIRONO. Thank you very much. 

Thank you, Madam Chair. 

Ms. CLARKE. The gentleman from Texas Mr. Gonza ́lez. 

Mr. GONZA ́LEZ. Thank you very much, Madam Chair. 

21

My first question will go to the Administrator, and I am going 

to read from a story from the Post, January 7th, and see if you can 

respond to this concern expressed by a certain individual. 

The quote: The government’s recent preference for hiring one 

large company to manage several smaller projects also makes the 

idea of capping individual projects at $3 million unfeasible, said 

Faye Coleman, president of Westover Consultants in Bethesda. 

And I am sure that you have addressed it, and I apologize for getting here late. We are starting the second session of the 110th, and 

we are spread out all over the place. But I am sure what Ms. Coleman is talking about is you already have a problem with bundling 

out there, and is this just basically an accommodation or an incentive for further practice in expanding what procurement officers are 

already doing, which will basically shut out women-owned businesses by capping it? Does it work that way, or am I just totally 

wrong? 

Mr. PRESTON. Well, the $3 million that is in the rule is based on 

the statute that was passed. So the $3 million in the rule, we have 

only implemented it to mirror the statute, and that is why it is in 

there. 

The other thing I would mention is on the $3 million, once again, 

that only relates—3 million for service, I think $5 million for manufacturers, only relates to the ability to do set-asides, not for the 

ability for those people to compete for business. So it doesn’t mean 

that these businesses can’t compete for $5 million or $10 million 

contracts. It would only mean that those would not be available—

Mr. GONZA ́LEZ. We are talking about set-asides, aren’t we? 

Mr. PRESTON. Right. 

Mr. GONZA ́LEZ. We will leave it at set-asides then. That was her 

concern. And I understand you are pointing something out that is 

very important: That is part of a reg, it is part a rule, you are 

bound by the $3 million. 

Mr. PRESTON. It is part of the statute. 

Mr. GONZA ́LEZ. Exactly. I am just saying if that restricts you, you 

need to let us know so that we can understand how it may mitigate 

and actually work against the very thing that we are attempting 

to accomplish, because, believe me, we have serious problems with 

bundling already. Whether it is 8(a) or it is going to be 8(m), it 

doesn’t matter. The whole problem is that they cannot compete because we have contracting and procurement officers out there that 

intentionally bundle these things because they really just want to 

deal with one big ball of wax rather than maybe ten moving parts, 

which we all understand is human nature. But it frustrates what 

we attempt to do, and that is why Chairwoman Vela ́zquez’s scorecard for governmental agencies and departments usually amounts 

to nothing more than maybe a lot of Ds, a lot of Fs, and maybe 

a C here and there. 

My next question would go to Ms.—is it Papez? 

Ms. PAPEZ. Papez. 

Mr. GONZA ́LEZ. Papez. And let me—the good thing, and you are 

a lawyer, and the wonderful thing for members of the Committee 

is that we have staff that will prepare memos that really do explain where we are, at least with the situation, and give us some 

guidance. I am going read from the memo. 

22

The SBA has proposed that in order for an agency to set aside 

a new contract, the procuring agency would have to conduct an appropriate analysis of its own procurement history to show that 

there has been discrimination against women-owned small businesses in the past. 

Is that correct? 

Ms. PAPEZ. I think the rule generally requires that the agency 

that would be administering a set-aside program has to find discrimination in the relevant field, which is the area where that 

agency is going to administer contracts. 

Mr. GONZA ́LEZ. So where does societal discrimination, as my colleague Mr. Sestak pointed out—where does that come into play? 

Because if we are really going to restrict it to what is going on in 

that particular arena, to that particular agency, to that particular 

product or service, then what happens with the bigger picture of 

what we are really trying to address as a societal issue, as a societal problem, reducing it to a specific instance here? Because that 

simply is not a consideration, it is really not a factor. I mean, they 

should just basically stay within their own purview, their own little 

universe and say, well, what our agency does and how we conduct 

our business is not discriminatory, one, within, again, another 

what I would say—I don’t know if it is a subsection of a subsection 

of a subsection as far as the type of business product or service in 

which they are dealing. Is that where we find ourselves today? 

Ms. PAPEZ. That is a very good question. I am glad you asked 

it because this goes to something that is a tough issue in these 

kind of programs, and it goes to the cases that your colleague mentioned also. 

I am not going to say that societal discrimination isn’t a factor, 

because I don’t think I need to say that or it is appropriate to say. 

I think what I would say is the rule talks about agency findings 

of discrimination in the area where they do government contracts, 

because that is what the cases are going to hold the agency to in 

order to get the program to pass muster. And specifically what 

these cases have said, including the Supreme Court, is the government, in this case the agency that is doing the contract program, 

has to show evidence of discrimination in—this is the Court’s 

words—the particular field where the contract program is going to 

operate. And so the particular field is going to be the field where 

that agency is giving out government contracts. 

And the reason that the rule tells agencies line up your evidence 

of discrimination in your area where you do contract is because 

that is what courts are going to require. And I would point out in 

that ECA case that I was talking about a few minutes ago, it is 

an 11th circuit case in Florida, it involved a contracting program 

administered by the State to benefit women-owned businesses, and 

they contended that societal discrimination was indeed relevant, 

and they tried to sustain the program based on it. They had a disparity study and they were saying, look, women are underrepresented. The government, the State of Florida had, the county has 

an important interest in trying to help women out. They have been 

underrepresented, they have suffered societal discrimination, we 

want to help them, here is our program to do it. And they put forth 

23

that evidence, and the Court struck the program down. It said that 

is not good enough evidence under intermediate scrutiny. 

So what I am saying is we at Justice, we look at cases like that, 

and when we look at a rule, we say, okay, what should the rule 

say that agencies need to do in structuring these programs in a 

way that is going to get them upheld? Because that is what the 

real end game is here. I don’t think it is in Congress’ interest or 

the administration’s interest to see these programs struck down. 

So a long story short, it is not that anyone is saying societal discrimination is irrelevant at all. The rule just simply reflects what 

the courts have been requiring the government and in these cases 

the agency that is doing the contracting program to show. 

Mr. GONZA ́LEZ. It seems to me then there is no application for 

a societal discrimination factor. 

Ms. PAPEZ. I don’t know that that is true. 

Mr. GONZA ́LEZ. Give me an example of where you might have an 

agency or department rely on societal discrimination as a factor to 

maybe carry the day before the Court. I am in a certain sector. I 

am an agency or department that deals in a certain product or 

service. Give me an instance where I might be able to bring into 

the legal argument societal discrimination. 

Ms. PAPEZ. I think, I guess, the best and hardest, most concrete 

example I can give you is that ECA case where the government 

doing the contracting program relied on evidence of societal discrimination. The evidence they had was a disparity study. The 

Court said that wasn’t enough because the disparity study didn’t 

do regression analyses and other things that backed out the disparity and linked it up to discrimination. And the Court seemed to 

suggest that if the study had done that—in other words, instead of 

just saying there is disparity or underrepresentation, it can link it 

up to specific discrimination. And the Court, I guess, left open that 

discrimination could have been from society or the government if 

the study had gotten into that level of proof of discrimination. And 

again, the Court left it open; maybe it is societal, maybe it is government discrimination, but at the end of the day, you are linking 

up the disparity to discrimination. It might have upheld it. 

So that is, I guess, a court case and a fact pattern that says the 

government could convince a court that it has sufficient evidence 

of discrimination in the relevant sector by pointing to societal discrimination. They have got to show discrimination related to the 

disparity in the government contracting sector, and they have got 

to do that with statistics and hard evidence, not just with arguments or hypotheses. 

Mr. GONZA ́LEZ. Do you believe as a society there is still discrimination being practiced against women, again, gender bias and prejudice and discrimination in business enterprises, you as an individual? 

Ms. PAPEZ. I think that is entirely possible. 

Mr. GONZA ́LEZ. It is way more than possible. You don’t really—

because I am going to get eventually to my last question. This is 

only my second question. Again, I am going to read from the memo. 

Furthermore, the Metropolitan Dade case cites the third circuit 

case for Ensley Branch, which states that the discrimination offered into evidence need not be governmental discrimination. In 

24

that case the Court found that, quote, one of the distinguishing features of intermediate scrutiny is that unlike strict scrutiny, the 

government interest prong of the inquiry can be satisfied by a 

showing of societal discrimination in the relevant economic sector. 

This suggests that the level of scrutiny required by the SBA in its 

proposed rule is beyond what is required under current case law. 

Is that an accurate statement by staff that prepared the memo? 

Ms. PAPEZ. I do not think it is accurate to say that the SBA rule 

goes beyond what is required by intermediate scrutiny. I would 

say, and I think I just said it a couple minutes ago, including under 

that ECA case, that we are not saying that evidence of societal discrimination doesn’t have a place here. That is not at all what we 

are saying. 

I explained in talking about the ECA case how a court might find 

evidence of societal discrimination to be good enough where the 

government can link up that kind of evidence of discrimination to 

the underrepresentation in the government contracting field, and I 

think that is clearly what the cases stand for. 

I think what your question goes to—and maybe the Committee 

generally looked at this rule and said, wait a second, isn’t this rule 

making it harder than necessary? And if your question is are there 

cases out there that suggest that a program might be able to survive on something less than what the rule is requiring, I think 

there are some cases out there that may suggest that. But the body 

of the case law under intermediate scrutiny, and even those cases, 

are all clear about one thing: The government has to prove discrimination. 

So if the issue is is it okay to just go ahead with the set-aside 

program based on a disparity study that doesn’t link up to evidence 

of discrimination, that is not going to pass muster. And I don’t 

think it is advisable for an agency to proceed on that basis. 

Mr. GONZA ́LEZ. Have you ever advanced any argument relying on 

the societal discrimination factor, not alone, but in conjunction 

with specific practices within that agency or department’s own 

practices when it comes to the specific service or product? 

Ms. PAPEZ. Well, when you say ′′you,′′ you mean the Justice Department? 

Mr. GONZA ́LEZ. I am just saying in your memorandums or brief, 

anything that you would even provide in the way of guidance to the 

Administration, to the Small Business Administration, as they attempt to promulgate certain rules governing this particular program. I mean, do you ever have a discussion about societal discriminatory practices that might come into play that would be relevant to substantiate and support whatever SBA would do in trying to meet their obligation under 8(m)? 

Ms. PAPEZ. That is exactly what we do in discussing these cases 

when we look to the cases and try to explain what an agency would 

have to show to have their program upheld. 

Mr. GONZA ́LEZ. And so you do touch on the big picture. Societal 

discrimination is something that they would be able to try to show 

or establish to support whatever SBA efforts might be. 

Ms. PAPEZ. Certainly we highlight that courts do look to, like the 

ECA case, societal discrimination as a relevant factor. The thing 

that we go on to point out, though, is that the ultimate test is 

25

whether your set-aside program is furthering a government interest, and do you have evidence of discrimination in the area where 

the program is going to operate? 

If the area where the program is going to operate is an area of 

government contracting where the government is the actor, we also 

caution, because courts have done it, that the government ultimately bears the burden of showing discrimination in that sphere. 

So if the government is going to rely on societal discrimination, 

they better be able to link that up to discrimination in the contracting sphere. 

Mr. GONZA ́LEZ. Do you know what, though? I think you have 

touched on it. There is no relevance when it comes to societal discriminatory practices unless you have a specific discriminatory 

practice occurring by that particular agency in whatever it is doing 

in its procurement practices on its products and services, which 

means—and as a lawyer you know this—you can throw out societal 

discrimination, it has no application. 

That is what I really want—I don’t want to deal in fictions. I do 

not want to deal in fictions. I don’t think the courts are dealing in 

fictions. What I think is the courts are sending out a message to 

all you lawyers out there saying, bring back these arguments, let 

us develop them. 

And I am going to leave you with one final thought. And I understand, look, you have a job to do, and as a lawyer you want to give 

advice to SBA that whatever they do will survive judicial scrutiny, 

because someone is going to contest it. Believe me, I know that is 

important. But you are still an advocate and a representative indirectly of women, of women in all the programs that we attempt to 

effectuate through legislation such as 8(m) or 8(a), whatever we 

may have. 

But I will never forget, there was a wonderful old lawyer named 

Judge Curry in San Antonio, and we would be up there arguing a 

case, and we would have the controlling case authority, and then 

he would rule against it. And we would say, but, Judge Curry, 

Smith v. Jones stands for the very opposite proposition. Do you 

know what Judge Curry would say? I am going to give the appellate courts another chance to get it right. 

And you really need—we used to think that was outrageous as 

lawyers. Do you know what? Judge Curry was right, because sooner or later they overturned old precedent because society moved on, 

and it was reflected more often than not by the judicial branch of 

our government. And that is the beauty of it. I think you represent 

actually both. But when it is all said and done, it will be some 

judge up there that will decide that we need to move forward as 

a society. 

So I am just going to say still look at the societal discriminatory 

practices as a relevant factor, and I hope that we are totally wrong 

that it really is not that relevant. 

And I yield back. And thank you for your indulgence, Madam 

Chair. 

Ms. PAPEZ. If I may just respond very briefly to say that, again, 

we do not serve women or programs that benefit them by advising 

agencies to implement them in a way that courts are going to 

strike down. 

26

I would also say that I did not take the position, nor does the 

Justice Department, that in judicial challenges evidence of societal 

discrimination is irrelevant. That is not the position we have taken. 

What we have said is if agencies are going to rely on that, under 

the case law they have got to link it up to discrimination in their 

agency contracting field in order for the program to be upheld, 

which is really what everybody wants at the end of the day. 

And the final thing I would say is the U.S. Supreme Court very 

recently, it is not an old precedent, confirmed the intermediate 

scrutiny standards that I am talking about and that the rule reflects. I don’t think the Supreme Court thinks, and I certainly hope 

they don’t decide, that this country should move on from the equal 

protection standards that must be satisfied in these cases. These 

standards should be satisfied and should not, for policy preferences 

or even the most well-intentioned policy reasons, depart from basic 

constitutional protections that have protected both sides of this 

question for a very long time in a way that has really benefited 

women. 

Mr. GONZA ́LEZ. The Constitution—I mean, we are going to go on 

and on on this thing, but the whole point is the way that the Constitution and its protections have been interpreted in the past have 

not been truly the most admirable way of doing it. Society has 

moved forward because brave lawyers and judges have been able 

to give true life to the words and spirit of the written word. That 

is what I am trying to discuss with you here. 

And I know that you keep telling me that societal discriminatory 

practices are relevant, but in your answers you are still telling me 

you are going to tell your client that that is lofty and wonderful, 

but if it doesn’t have a specific application when it comes to your 

interpretation of intermediate scrutiny on what they are doing specifically within their own department, within their own product, 

with their own service, it doesn’t matter. So if I am on the receiving end of that legal advice, where do you think I am going to go 

with this? 

Ms. PAPEZ. Well, I didn’t say it doesn’t matter. I never said that. 

What I said—and it is not my standard or the Justice Department’s standard. I said if an agency wants their program to be 

upheld by the courts, and that is what everyone should want, because it doesn’t benefit women to have these things struck down, 

what I said was if you are going to rely on societal evidence of discrimination, and courts will look to it and they will let you rely on 

it, you have to link it up, because if you don’t, your program is 

going to go the way of the 11th circuit case program, it is going to 

get struck, and that doesn’t benefit anybody. 

Mr. GONZA ́LEZ. Thank you very much. 

Chairwoman VELA ́ ZQUEZ. Will the gentleman yield? 

Mr. GONZA ́LEZ. I yield back. 

Chairwoman VELA ́ ZQUEZ. Will you yield for me for one second? 

Mr. GONZA ́LEZ. Oh, absolutely. 

Chairwoman VELA ́ ZQUEZ. I want to ask a question of Mr. Preston. 

Mr. Preston, the 8(a) program is the most challenged program in 

the Federal Government. It has been challenged in court. It is the 

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ment. Are you required to admit past discrimination in order to 

award contracts under the 8(a) program, yes or no? 

Mr. PRESTON. I don’t know, frankly, what the judicial history is 

for supporting discrimination. 

Chairwoman VELA ́ ZQUEZ. I am asking you today as the Administrator of SBA. This is a program that exists under SBA statute. 

Mr. PRESTON. Yes. 

Chairwoman VELA ́ ZQUEZ. Is it required to admit past discrimination in order to award grants, contracts? 

Mr. PRESTON. It is required for us to show social disadvantage 

and economic disadvantage. And social disadvantage, I think, is 

closely related. 

Chairwoman VELA ́ ZQUEZ. Ms. Papez, before I asked you to give 

me an example of programs in the Federal Government that will 

have to prove past discrimination. 

Ms. PAPEZ. Yes. 

Chairwoman VELA ́ ZQUEZ. You didn’t answer my question. I want 

to ask which programs and agencies. 

Ms. PAPEZ. Well, 8(a) is certainly one. 

Chairwoman VELA ́ ZQUEZ. It is not. 

Ms. PAPEZ. It is. 

Chairwoman VELA ́ ZQUEZ. It is not. 

Ms. PAPEZ. Actually it is. In the Rothe case, the Texas case that 

just came down on Rothe said that, and the Supreme Court has 

said that, any program that awards benefits based on race or gender requires the government to show evidence of discrimination. 

Chairwoman VELA ́ ZQUEZ. Are you telling me each agency has to 

go through this in order to award 8(a) contracts in their agencies? 

Ms. PAPEZ. I guess maybe I was confused on the question. You 

are saying, are there programs that have to show past discrimination? And I am saying, yes, all race and gender programs have to 

do that. If your question is agency-specific admissions of past discrimination, is that what you are asking about? 

Chairwoman VELA ́ ZQUEZ. Yes. 

Ms. PAPEZ. If the question is do agencies have to admit past discrimination, I think if they do, they would certainly pass constitutional scrutiny. I don’t know that they have to do that in order to 

pass constitutional scrutiny. But I would say also—

Chairwoman VELA ́ ZQUEZ. It is a matter of semantics. 

Ms. PAPEZ. No. If I may, though, I think this is partly—I get the 

sense that part of the frustration that the Committee is feeling, 

and I think what I understood you to be saying before, before you 

left for the break, was the Committee looked at this rule and said, 

wait a second, what is going on here? This rule is requiring individual agencies to find discrimination when we have already got a 

disparity study. 

Chairwoman VELA ́ ZQUEZ. What I am saying is that for genderbased programs, it would be necessary to demonstrate that there 

is past discrimination when you do not require minority programs 

to do so. That is the whole issue here. 

And now I recognize Mr. Chabot. 

Mr. CHABOT. Thank you, Madam Chairwoman. 

Mr. Preston, let me start with you if I can. I know there is considerable frustration in the seven years how long this has taken to 

28

implement, et cetera. How much, if any, of the delay in implementing the program is attributable to trying to make sure that it 

will ultimately withstand constitutional muster? 

Mr. PRESTON. I think the long and storied past of this rule is exactly based on that. The SBA, I think, after the 2000 statute was 

passed, very quickly conducted a study of underrepresentation, and 

as part of the interagency review, it was determined that somebody 

on the outside basically needs to look at this to determine whether 

or not it was adequate. That is when it went over to the National 

Academy of Sciences, and the National Academy of Science basically said this will not for a number of reasons, which we can go 

into. The National Academy of Science then laid out a detailed 

methodology for what would be sufficient for a program of this nature, and then that methodology went over to RAND, and RAND 

took obviously a period of time to actually do the analytical work, 

to write it up and present it to us. 

So the entire pathway is one of trying to get this right. And as 

you have heard from Ms. Papez and other people, these are very 

complex issues and require a great deal of solid foundation to be 

able to ensure that this is sustained. 

Mr. CHABOT. Thank you. 

Ms. Papez, I assume you agree with that, and is there anything 

that you would like to add to that? 

Ms. PAPEZ. I would thank you. I very much appreciate the opportunity, and this partly goes back to the Chairwoman’s question. I 

want to make a distinction here. The law and the Constitution require government proof of discrimination in both race and gender 

programs. So from the standpoint of the law and the Constitution, 

discrimination would have to be shown for 8(a) programs and 8(m). 

I think what the Chairwoman may have been getting at is that 

the language of the Federal rules implementing these programs 

may not say the same thing about exactly what an agency has to 

do. That may be. I don’t have the rules on 8(a) in front of me. But 

just because an administration rule in an 8(a) versus 8(m) program 

doesn’t use the exact same language on agency findings doesn’t 

mean there are different legal standards or that discrimination is 

not required in both. 

Mr. CHABOT. Thank you. 

Mr. Preston, irrespective of the outcome of the rulemaking, what 

efforts is the SBA taking to get more women small business owners 

to register with the Central Contract Registry or otherwise get involved in the federal procurement process? 

Mr. PRESTON. Very significant outreach efforts through our network. We have about 100 locations throughout the country. We 

hold events to bring in people to teach them about Federal contracting, to introduce them to purchasers within the Federal contracting region so they can actually connect with contracts. We are 

providing educational tools on the Web site. We have retrained our 

entire field organization, over 1,000 people, to enable them to provide better training in support to small businesses when they come 

in. We have redirected the PCRs, which are procurement center 

representatives, that work for the SBA that actually sit at other 

agency procurement activities. They are focusing not only entirely 

now on those contracts, but we have also rolled out a new program 

29

where even when they look at small business set-asides, they will 

be working with the individual agencies to ensure that they are 

meeting their goals for preference groups within small business. 

And women-owned small businesses is one of the targeted categories for them to work with, and we continue to expand it. 

So these are very real, very tangible initiatives that we think will 

continue to drive that number forward. 

Mr. CHABOT. Thank you. 

And also given the fact that the ultimate authority for utilizing 

the program rests with contracting officers, what actions will the 

SBA take to educate contracting officers about the program? 

Mr. PRESTON. We have a very consistent process of meeting with 

all the other Federal agencies on any new rules, any new processes. 

We get their input. We have dramatically expanded our coordination efforts with the other agencies in a number of ways. So I 

think—and they are very much apprised of the progress on this 

rule and what they are going to be required to do. 

Mr. CHABOT. Thank you. 

Have you determined who in the SBA will be involved in interacting with other Federal agencies in the development of the final 

rule? 

Mr. PRESTON. There are a number of people. And frankly, this 

is an issue that my deputy is very engaged with directly and in 

chairing those meetings with the other agencies. So we have a very 

senior person at the agency focused on it all the way at the deputy 

level. 

Then we also have a new head associate administrator for government contracting business development named Fay Ott, who 

will be the primary contract person and primary driver of the implementation of the rule. 

Mr. CHABOT. Thank you. 

And my final question with you is typically the SBA will only 

consider comments filed after the deadline if it is able to do so 

without delaying the rulemaking. Will the SBA consider late-filed 

comments in this proceeding given the potential controversy associated with the rulemaking? 

Mr. PRESTON. I think if we find that there is the possibility of 

a lot of additional comments coming in, what we would like to do 

is extend the comment period, and we have done this in a number 

of other situations. This is a rule that obviously has some very 

complex legal issues and analytical issues associated with it, so we 

would certainly be open to expanding that period if we believe it 

will be helpful in getting more comments in. 

Mr. CHABOT. Thank you. 

And, Ms. Papez, finally, because of the Chairwoman and myself 

being called over to the floor and having to handle a different bill, 

we weren’t here to hear all the questions that may have been 

asked. I know there has been a lot of controversy. Were there any 

of the questions asked of you that you think that you need to expound upon or to clarify that there still could be any confusion 

about? 

Ms. PAPEZ. I think all I would say is, and this partly goes to one 

of the Chairwoman’s questions, also something you touched upon, 

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mediate scrutiny in the Constitution? I think, again, all the cases 

applying that test, it is not the Justice Department, it is the courts, 

the government has to show discrimination in the relevant area, 

which would be the area where the agency administers its contracts, and what the rule represents is a prudent approach to that 

standard. Basically it is saying, agencies, get ready for the legal 

challenges, and if you want to do the best you can to make sure 

your programs are upheld, which is what everyone, I think, would 

want to see with these programs, you should have your evidence. 

I would point out, though, the rule doesn’t say exactly how much 

evidence an agency has to have. I feel like some of the Committee 

may be frustrated with the rule - which is not a disagreement 

about the law, because the law is clear the government has to show 

discrimination - because the rule sort of looks like it makes it too 

hard on an agency. And I would just point out, the rule doesn’t require an agency to have a specific level of discrimination. Again, 

this is a prudent approach to comply with the Constitution, but if 

people feel as a policy matter a riskier approach to the litigation 

challenges is appropriate, then that is certainly something that can 

come in through the notice and comment. 

Mr. CHABOT. Thank you. 

Chairwoman VELA ́ ZQUEZ. Will the Gentleman yield? 

Mr. CHABOT. I would be happy to yield to the Gentlelady. 

Chairwoman VELA ́ ZQUEZ. Ms. Papez, my frustration is that I 

asked you where does the Court rule, tell me where, that each 

agency has to show past discrimination; not the Federal Government, but each agency? I just want for you to tell me which case. 

Ms. PAPEZ. Well, the cases say the government, not the Federal 

Government. And in the cases where it has been a county, for example, or a county board doing the contracts, they say that county 

board. So it is the issue of whatever government entity is administering the contract. 

Chairwoman VELA ́ ZQUEZ. That is not definitive. That is your interpretation. 

Ms. PAPEZ. Well, no. What I am saying is the cases require that 

the government entity doing the program show discrimination. And 

all the rule is saying is the best way to be able to meet that standard is to have the showing. The rule doesn’t say how much or exactly what—you know, it is consistent with the cases. There is not 

some hard, fast rule that says this has to be so. 

Chairwoman VELA ́ ZQUEZ. I yield back. Thank you. 

Mr. CHABOT. I reclaim my time, and I yield back the balance of 

my time. 

Chairwoman VELA ́ ZQUEZ. Now I recognize Ms. Clarke. 

Ms. CLARKE. Thank you. Thank you very much, Madam Chair. 

Last week I attended the Wall Street project hosted by the Rainbow/PUSH Coalition and Reverend Jesse Jackson. It was a women’s luncheon that took place during our district work period. And 

I came away from that luncheon energized and knowing one thing: 

Women-owned businesses are the fastest-growing sector of our 

small businesses. 

But I sit here today and I feel like I am in a time warp. Quite 

frankly, I just feel like I am in a time warp. And there is this huge 

disconnect between what is happening in the 21st century in comVerDate 0ct 09 2002 10:19 Feb 29, 2008 Jkt 033615 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\01-16-08 SBA WOMEN’S PROCUREMENT.TXT
31

munities across this Nation and what our government is really 

stuck on at this point. It pains me, it totally frustrates me to hear 

and read that despite this progress, it has been seven years since 

the Equity in Contracting for Women Act of 2000 was enacted. 

Women-owned businesses are still underrepresented in many industry and regions across this country. Almost 50 percent of all the 

women-owned businesses provide goods and services to the Federal 

Government, yet this administration has continually failed to increase procurement opportunities and provide a fair share to a sector that has made an invaluable contribution to the Federal marketplace. 

As you know, women-owned businesses recently received a meager 3.4 percent of small business contracting dollars from the Federal Government, which cost these businesses about $5 billion a 

year. This is disturbing when the Federal Government, the largest 

purchasing organization of the world, has seemingly not been able 

to provide a fair share of about $410 billion annual procurement 

spending to women-owned businesses. 

As a member of this Committee and as a Member who just completed their first congressional session, I find it unacceptable that 

here we are yet again exploring and examining why the SBA has 

still not implemented the women’s procurement program. 

Now, I understand all of the litigation and all of the challenges 

that we are facing in terms of interpretation of the law, but at 

what point is disparity morphed into discrimination is really what 

we are trying to deal with here. Can we agree that it will take a 

concerted effort within your agency to break through this wall that 

has been built up through litigation? On the one hand we have the 

acknowledgement that the participation of women-owned business 

is most desirable. On the other hand we have this paralyzing fear 

of the court challenge that keeps your agency operating under a 

philosophy of the lowest expectations of what could possibly happen. 

The one thing I know is that at the end of the 110th session, the 

end of your administration’s tenure, we will all be able to say that 

through the procurement mechanism for women-owned business 

under the Presidency of this administration, there was no support, 

no assistance and virtually nothing was done. And I say, what a 

shame. 

Mr. Preston, in our last hearing I asked you whether you believed that the SBA, and by extension the Federal Government, 

discriminated against women. You stated, no, you did not believe 

it. Now, your agency recently proposed a rule that will require 

agencies to find evidence of direct discrimination against womenowned small business in order to qualify for protected status. Is 

there a change in position here, or do you believe that there may 

be discrimination? 

Mr. PRESTON. You have got a number of points in your speech. 

Let me make a couple of comments. First of all, I find it entirely 

unreasonable that you would say that about the administration. 

Contracts to women during the administration have gone up two 

and a half times where they were when the President came into 

office. It is a 17 percent growth rate, and it is significantly higher 

growth rate than occurred in the prior administration. 

32

Ms. CLARKE. But five percent has not been achieved. I am sorry, 

in No Child Left Behind, if you don’t meet the mark, you shut 

down the school. 

Mr. PRESTON. You also said it is a faster-growing sector. We 

agree. Last year the women-owned business sector in the Federal 

Government grew faster than any of the other set-aside programs. 

And so what I am unwilling to do is to let there be any implication 

that we aren’t working hard, making progress, and that the President is for some reason not committed to this. The other thing is 

we rolled out a scorecard that one of the measures is the performance of women-owned business and expanded the transparency 

there. 

So I think this administration has done a lot here. We are presuming that a set-aside rule here is the only way through which 

we are going to expand contracting, and that is totally unrealistic, 

and it is not the right way to go, because I think that diminishes 

the strength of the businesses that are actually coming in here to 

do the contracting. 

So the other thing I would like to highlight is your comment to 

me in the last hearing addressed discrimination with me personally, and that is why we got a little fire in the last hearing. Your 

question did not have to do with discrimination more broadly. 

Thank you. 

Ms. PAPEZ. If I may have a chance also. 

Ms. CLARKE. But you didn’t answer my question. My question is 

is there an acknowledgement now with the agency? And certainly 

as the head of the agency, you would be able to determine this. 

This is something that as the head of the agency you would be able 

to see. This is something that as the head of the agency you would 

set a tone for in terms of how all of your subordinates would focus 

on this project. 

It was not personal, and if you took it personally, I am sorry. It 

certainly was not personal. It is to the office that you hold. 

Mr. PRESTON. Well, what I would tell you, within the agency is 

25 percent of our procurements this year went to women-owned 

small businesses. I think that shows a pretty big commitment within the agency. And I think if you look at the activities of people 

within the agency that have led to the expansion of this number 

dramatically over the past year, you will see commitment of people 

in the agency to expanding this goal. 

Ms. CLARKE. My time is up. But we are to go about a very specific program here, and I think we need to focus on that because 

that is where the failure exists. 

And I yield back, Madam Chair. 

Chairwoman VELA ́ ZQUEZ. Mr. Gohmert. 

Mr. GOHMERT. Thank you, Madam Chair. 

Since all of this is being recorded, taken down—and I appreciate 

my friend Representative Gonza ́lez’s comment about Judge Curry, 

having been a judge—I just have to point out for posterity that any 

judge at the trial court level who says I am not going to follow the 

law, I am going to make new law is legislating from the bench and 

is violating his constitutional oath that he takes when he takes office. He is violating his oath, and I find that reprehensible. 

Mr. GONZA ́LEZ. Will the gentleman yield? 

33

Mr. GOHMERT. Sure. 

Mr. GONZA ́LEZ. If Judge Curry heard you say that, and you are 

a Texan, you would probably be called out there, and you all would 

have your six guns, and you would have a shoot-out. 

He is a very honorable man. I think what Judge Curry was saying and, to be honest with you, was telling the lawyers to think beyond where we may be today and to continue to advocate and fight 

for a more just society. It was his way of telling us. Of course 

Judge Curry was going to follow his duties and his responsibilities. 

I only said that as an example. 

Mr. GOHMERT. Let me reclaim my time here. He was not following his oath, he was not following the law, he was creating law. 

And as a judge, the way I would do that with lawyers was to say, 

I don’t like this law, I think it is an unfair law, but I took an oath 

to follow the law, so I hope you will pursue this to the appellate 

court because I do not think it is fair and just, and that is where 

the change will be made. But my oath was to follow the law at this 

level, and that is what I will have to do. But I would encourage 

the lawyers to think outside the box, just as you. And that is why 

I think you were right when you felt like the judge was being unfair. 

Mr. GONZA ́LEZ. And you are speaking to the lawyer, as a matter 

of fact. 

Mr. GOHMERT. I understand, I understand. And I will encourage 

that. But just so everybody understands, too, just basic constitutional law, when we have programs that say we want you to specifically consider gender in awarding contracts, that violates the 

Constitution, except that it is allowed to violate the Constitution if 

it is fixing past discrimination and past injustice. That is where we 

constitutionally allow discrimination based on race and gender is 

if there has been past discrimination. Otherwise, we can—and I 

hope and pray and look so forward to the day when we can achieve 

Martin Luther King, Jr.’s dream of people being judged by the content of their character, by their capability, and not by race, not by 

gender, but just by the content of what they can provide. 

But there are some—there have been some injustices in the past. 

And I think just Representative Clarke’s comment, you know, just 

when disparity morphs into discrimination, that was a good characterization, that is the issue. But that still has to be addressed if 

it is going to pass constitutional muster. 

So I think the problem is you have obviously felt from this Committee is let us don’t take too long finding those places where disparity has been discrimination. Let us fix those, let us address the 

discrimination so that we can move closer ever to that day when 

we can live out Martin Luther King’s dream. 

And just a parenthetical, the No Child Left Behind probably isn’t 

an adequate comparison because I think that is an area where this 

administration has stepped far beyond its powers and started having the Federal Government tell local governments what they can 

do. 

Ms. CLARKE. Will the gentleman yield? 

I was saying that with regard to the No Child Left Behind Act, 

if school districts didn’t meet the goals, they were seen as failures. 

Mr. GOHMERT. Right. 

34

Ms. CLARKE. I am not disparaging the program. I am saying now 

we have a situation, we have a group that is saying that they—

we will talk about that in the Labor Committee. But what I am 

saying here is that now we are saying, well, we made minimal 

movement, and so that should be touted a success, when we actually had a goal set at five percent, which has never been met, and 

it has been seven years. The administration is almost over. So I 

think we need to acknowledge that and not brush that aside and 

pat ourselves on the back. I believe in movement, but then let us 

say that across the board, that everywhere we are in this administration, those standards are held. 

Thank you for yielding. 

Mr. GOHMERT. And reclaim my time. Thank you. 

My point is there, that is a program where the administration 

has vastly exceeded, in my opinion, their constitutional authority 

because they haven’t really understood the 10th amendment. 

But anyway, I appreciate your time and effort here, and we hope 

we will continue to see great progress in the future. Thank you. 

Chairwoman VELA ́ ZQUEZ. Mr. Preston, I would like to ask you my 

last question. We have votes on the House floor. Regulations specify four unique industries as being underrepresented. My question 

to you is do you find it arbitrary, for instance, that your agency 

specifies that women are underrepresented in the field of kitchen 

cabinet making but not in installing kitchen floors? 

Mr. PRESTON. No. I find that the information that came out of 

the RAND study was based on a methodology that was supportable. So I haven’t looked at the specific kitchen floor category to determine whether that is or not. 

Chairwoman VELA ́ ZQUEZ. Well, I did. That is my function here; 

it should be your function, too, to look at the industry and the 

RAND study. 

Mr. PRESTON. I looked at every number in that study and wax 

eloquent on them if you would like. 

Chairwoman VELA ́ ZQUEZ. When I looked at it, and I saw yes for 

this one, kitchen cabinet making, but not in installing kitchen 

floors, you know, my first reaction, this is silly. 

Mr. PRESTON. Ma’am, the category isn’t kitchen cabinet making, 

it is a much broader cabinetry category and gets to institutional 

furniture and all sorts of things. So I think it is important to look 

at the fullness of the category. 

Chairwoman VELA ́ ZQUEZ. Okay. My last question to you is would 

you at least agree with me that this program as currently crafted 

by SBA will do little, little to ensuring the government will come 

closer to achieving its five percent contracting goal for womenowned businesses? 

Mr. PRESTON. I think the government is going to have to focus 

on many different programs other than this program to reach those 

goals. 

Chairwoman VELA ́ ZQUEZ. Well, the focus of this hearing today is 

this program, the women’s procurement program. And the fact is 

that after seven years, with all the things that you read in your 

testimony saying that we are training staff, that we are making 

these changes, that there is a scorecard, I am happy to know that 

after all the many scorecards report that we issue from this side, 

35

that you decided and opted to issue your own scorecard. That is 

great, but yet the five percent per women’s procurement program 

has not been achieved. And with all these roadblocks under the 

proposed rule, I doubt that it will be achieved. 

Mr. PRESTON. I think it is important to note that there are no 

additional roadblocks being put in front of women through this 

rule. This specifically deals with an additional opportunity, not putting a roadblock in front of the opportunities that exist today. 

Chairwoman VELA ́ ZQUEZ. I think that all comes down to a philosophical disagreement with the program. 

With that, I excuse the first panel. And the Committee will be—

will adjourn until we take the votes on the House floor. Basically 

we will be back in 20 minutes. 

[Recess.] 

Chairwoman VELA ́ ZQUEZ. This hearing is now called to order, 

and we are going to start with our second panel. And I want to, 

in advance, thank all the witnesses for being here this morning. 

Chairwoman VELA ́ ZQUEZ. Our first witness is Ms. Margot 

Dorfman, she is the CEO of the U.S. Women’s Chamber of Commerce based in Washington, D.C.; the Chamber represents 500,000 

women throughout the country. 

Ms. Dorfman, you will have five minutes to make your presentation.

STATEMENT OF MARGOT DORFMAN, CEO, U.S. WOMEN’S 

CHAMBER OF COMMERCE 

Ms. DORFMAN. Thank you, Congresswoman Vela ́zquez, Ranking 

Member Chabot and members of the House Small Business Committee; thank you again for addressing this very important issue. 

I am here again today on behalf of millions of women-owned 

firms all across America to tell you that the Small Business Administration has once again sabotaged the implementation of the Women’s Federal Procurement Program, and to remind you why this 

program, as Congress originally intended it to be implemented, is 

so dearly needed. 

Recently, the SBA filed a new set of proposed rules for the implementation of the Women’s Procurement Program. These new rules 

ignore the recommendation of the scientific and legal experts and 

render the program ineffective by limiting its use to a handful of 

industries and requiring each and every Federal agency to conduct 

an analysis of the agencies past procurement activities and make 

a finding of discrimination by that agency in that particular industry. 

For years and years, the SBA has hidden behind false pleas for 

time while women business owners have lost billions of dollars annually: time to hear from the experts, time to gather the data and 

time to understand how to determine women-owned status. But 

with this last action they can no longer hide their contemptuous 

position towards securing fair access to Federal contracts for 

women business owners. 

The arbitrary and unscientific method they have chosen to select 

the industries for the program looks more like something pulled 

out of a hat than the results of seven years of work and of this sciVerDate 0ct 09 2002 10:19 Feb 29, 2008 Jkt 033615 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\01-16-08 SBA WOMEN’S PROCUREMENT.TXT
36

entific disparity study. And the outrageous requirement that every 

agency that conducts the studies of discrimination in all industries 

only shows us how far this administration will go to prevent 

women from gaining fair access to Federal contracts. 

When Congress first passed the Equity in Contracting for 

Women Act of 2000, the SBA was to prepare a study to determine 

industries in which women business owners were underrepresented 

in Federal contracting and establish procedures to verify eligibility 

and participation in a competitive set-aside program. The SBA first 

undertook this study in house after completing their own study, the 

SBA leadership determined that they needed a study of the study 

and that they needed experts to tell them how to do their study 

correctly and how interpret the data. 

To this end, the SBA employed the National Research Council of 

the National Academy of Sciences. NRC is a prestigious and wellrespected institution which regularly is employed to provide experts advice to the Federal Government. 

The NRC established a prestigious steering committee for the 

project including the Chair of the School of Public Policy in Social 

Research at the University of California, Los Angeles, and scholars 

from the Hass and Marshall Schools of Business, the Department 

of Sociology at Rutgers University and the School of Law at the 

University of Virginia. 

The scientific experts and legal experts carefully framed the requirements for the study through the lens of the legal framework 

of disparity studies and the legal standards of gender preferences. 

They made a very clear set of recommendations. They recommended using four variables in four tables to show industry 

groups using a wide view of ′′ready and able′′ and a narrow view, 

and measuring contract actions versus contract dollars. 

The NRC clearly stated how they recommend this data be interpreted. The agencies that appear in two or more of the four tables 

may be deemed unrepresented. Using the NRC recommendations 

and the RAND data that followed, 87 percent of all industries 

should be included as underrepresented in Federal contracting. 

But nothing is simple, direct or clear in the hands of the SBA. 

The SBA threw out the NRC scholarly recommendations and whittled away possible measurements until they found a narrow selection they liked. Then they tried to move the emphasis from underrepresentation to discrimination and tagged on the incredible requirement that every agency complete a discrimination study in 

every industry. Again, the SBA has turned years of time and 

money into a ridiculous circus treating the lives of thousands and 

thousands of American citizens as toys in some political game. 

Trust me, to women business owners, this is no game. Fair access to Federal contracts is serious business. The economic and political rise of women in America is truly something for the history 

books, but the economic realities for women business owners remains very troublesome. 

Since the paltry five percent goal for contracting with womenowned firms was set in 1994, the Federal Government has never 

hit the mark. Even today, as women own 30 percent of all firms 

in America, the Federal Government lags behind in doing business 

with women. Women lose between $5 and $6 billion every year as 

37

the Federal Government fails to meet the low five percent mark. 

And the openly unsupported attitude that is exhibited by the SBA 

only serves to continue a sad tradition of failure within the government contracting ranks. 

Once again I ask the House Committee on Small Business to 

compel the SBA to implement the Equity and Contracting for 

Women Act of 2000 as intended by Congress seven years ago. It is 

clear that without this law in place, women-owned firms are losing 

billions of dollars annually. Women business owners are ready and 

able to grow their businesses. We ask you to support their growth 

as they provide for their families and advance the economic growth 

for their communities. 

Thank you. 

Chairwoman VELA ́ ZQUEZ. Thank you, Ms. Dorfman. 

[The prepared statement of Ms. Dorfman may be found in the 

Appendix on page 74.]

Chairman VELA ́ ZQUEZ. And now we would like to recognize Mr. 

Moore from Kansas for the purpose of introducing his constituent, 

Ms. Farris. 

STATEMENT OF THE HON. DENNIS MOORE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KANSAS 

Mr. MOORE. Thank you, Madam Chair, for the invitation to be 

here today. 

I am Dennis Moore from the Third District of Kansas, and as the 

member of the Small Business Committee who has been on leave 

from the committee since the beginning of 2001, it is great to be 

back here in the hearing room. 

I am here today to introduce my constituent and your next panelist, Denise Farris. Denise is the founder and managing partner 

of the Farris Law Firm where she practices general business in 

commercial construction law. She was AV-rated by MartindaleHubbell, representing the highest peer review ratings for expertise 

and ethics. Her firm provides legal services related to corporate 

consultation information with special emphasis on women and minority-owned small business, including Federal contracts and affirmative action, along with risk management and general contract 

litigation. 

Denise is a rising star in Kansas City and in surrounding areas 

with her law practice and experience as a small business owner. 

During 2007 alone, she was named Women Impacting Public Policy’s Instant Impact Team Leader and awarded their 2007 National 

Public Policy Award. 

Kansas City Business Magazine named her among the 50 most 

influential businesswomen and the Kansas City Chapter of the Nation Association of Women Business Owners named her Member of 

the Year. She is rated by the Missouri Bar top 25 presenters. 

Denise is a frequent speaker and author for various local, regional, and national trade organizations and magazines. She has 

authored chapters on affirmative action, and Denise has also been 

a featured presenter for the National Foremen in Construction Industry annual meeting, the Association of General Contractors, 

Builders Association of Kansas City and Springfield. 

38

My staff has another 14 pages of introduction, I will stop right 

there and welcome Denise Farris. 

Chairwoman VELA ́ ZQUEZ. Ms. Farris, you will be recognized for 

five minutes.

STATEMENT OF DENISE FARRIS, FOUNDER AND MANAGING 

PARTNER, FARRIS LAW FIRM 

Ms. FARRIS. Thank you very much. Thank you, Chair Vela ́zquez, 

Ranking Member Chabot, members of the committee. And Congressman Moore, thank you for coming by. 

My name is Denise Farris and I am appearing today on behalf 

of WIPP, Women Impacting Public Policy, and its general membership, which represent over a half million business owners nationwide. I own the Farris Law Firm in Stilwell, Kansas, which sits on 

the border of Kansas and Missouri. I am a certified WBE company, 

and I am apparently one of the 55,000 women currently registered 

in the CCR. 

I am a commercial construction lawyer and for the past 17 years 

I have focused on the constitutional parameters of affirmative action in government contracting. I know the committee appreciates 

how important this rule is to us and to me personally and professionally. I have focused my comments today on three aspects of 

rule: first, the RAND study, the legal standard applied and then 

the flow-down effect. 

The 2000 law gave the SBA the responsibility to determine in 

which industries women-owned businesses were underrepresented. 

The RAND Corporation released its study in 2007 after seven long 

years of waiting. 

As discussed earlier in this hearing, the RAND Corporation, per 

SBA direction, computed disparity ratios for women-owned businesses in four different categories. The RAND study concluded that 

depending on how the SBA chose to interpret the data, either 87 

percent on the one hand or zero percent on the other hand of industries shows a significant disparity for women-owned businesses. 

We believe this indicates some fundamental flaws in the data on 

which the proposed rule is based, and the RAND study actually admits the owned errors in the data. It identifies inaccurate NAICS 

codes, does not analyze the huge disparity variance in the methods, 

relies on outdated size standards. It omits important data such as 

the entire Department of Defense procurement stats, and it also ignores the effect of multiyear schedule contracts and classifications. 

In light of these deficiencies, the SBA nonetheless chose the method least supportive of the original legislative intent. 

Second, we believe the SBA proposed rule applies an incorrect 

standard of review. Although it says it is applying intermediate 

scrutiny, it clearly, in fact, has created a new level which goes beyond even strict scrutiny and created a level that doesn’t currently 

exist for any other program. For example, under intermediate scrutiny, the government only has to show an important State interest 

or a government interest and a program substantially related to 

achievement of that interest. This standard has already been met. 

Specifically, as acknowledged in Public Law 106-554 and the 

RAND study and the preface to the current Federal Register Rule, 

39

the government has acknowledged, one, that women-owned businesses are the fastest growing segment of our economy; number 

two, that we are growing at twice the rate of the average business 

in the economy; and three, that despite this fact since 1994 we 

have not been able to hit a five percent target in Federal procurement. 

But here the SBA is actually saying we need a new strict scrutiny standard because we are saying, first, despite the law, the program can’t be implemented until we have done this 7-year study. 

And secondly, even after this study has found underrepresentation, 

we are now requiring a new level that requires each agency to do 

an additional study before the rule is implemented; and that is the 

key fact. 

For example, the 2007 study determines that if you are a women 

cabinetmaker you are substantially underrepresented, but before 

you can justify a set-aside, each agency then has to review its discriminatory cabinetmaking contracting practices before they can 

justify the set-aside. Now, we all know that government moves deliberately and slowly, but quite frankly under this standard any 

contracting opportunity will be gone once this study-after-study is 

done. 

Finally and importantly, this rule has a chilling effect on State 

and local programs because of this new standard, which effectively 

kills all gender-related programs. 

True availability cannot be measured until women business owners are encouraged to register their businesses and their capabilities. The message flows down to women-owned businesses that 

there is no reason to register because effectively no program will 

ever survive this standard. We urge the committee to send the SBA 

back to the drawing board and to investigate why only 55,000 

women-owned businesses out of a pool of 10.4 million are currently 

registered in the CCR. 

Since it has taken the SBA seven years to get this far, we believe 

the agency should thoughtfully consider the public comments it receives during the next 60 days. WIPP encourages Congress to require the SBA to implement a meaningful Women’s Procurement 

Program which will actually have a positive effect on women-owned 

businesses in Federal procurement. Thank you. 

Chairwoman VELA ́ ZQUEZ. Thank you, Ms. Farris. 

[The prepared statement of Ms. Ferris may be found in the Appendix on page 77.]

Chairwoman VELA ́ ZQUEZ. Our next witness is Ms. Beth Gloss. 

Ms. Gloss is the President of United Materials, a small business in 

the roofing industry located in Denver, Colorado. Ms. Gloss’s company is one of the less than two percent of women-owned business 

firms in construction. 

Welcome.

STATEMENT OF BETH GLOSS, MANAGING MEMBER, UNITED 

MATERIALS, LLC 

Ms. GLOSS. Thank you very much. I am Beth Gloss, the managing member of United Materials. We are a roofing contractor in 

40

Denver, and we specialize in commercial roofing, particularly reroofing and roof repair. 

We are a successful company and handle Federal contracts as 

part of our normal business. We provide excellent value and customer service, but lose out on a great deal of business due to the 

lack of a clear, defined woman-owned business procurement program and an emphasis from Washington to fulfill the guidelines 

that are set. 

The SBA in my experience does nothing to encourage Federal 

buying from women-owned business, but only from existing, formal 

set-aside programs, and vehemently discourages contracting officers in a variety of agencies from attempting to purchase from 

women-owned small business. Conversely, the SBA, in its own 

words, has a program whose mission is to level the playing field 

for women entrepreneurs still facing unique obstacles in the business world. 

The ambivalence found inside this taxpayer-sponsored agency is 

frustrating and unconscionable, because there is no set-aside program for women owners in business in place. Every pressure is 

continually applied in our construction field to purchase from contractors where a formal set-aside program is in place; this happens 

even when there are women-owned contractors available and eager 

to do the work. 

I have been floored in any and every attempt to encourage government buyers to do business with my company as a womanowned business. I have questioned the individual buyers and purchasers with whom I have been working, and they have directed 

me to one reason for not following through with a woman-owned 

bid opportunity. The one common answer is, the SBA is pressuring 

them to use one of the existing formal programs. 

Consequently, the lack of a women-owned set-aside program is a 

double-edged sword. There is no way for contracting officers to 

reach out and set aside competition between women-owned businesses, and there is obviously not a serious push from Washington 

to reach women business owners. 

The attitude towards women’s businesses is negative. There is no 

pressure coming down to the local level to outreach to women. The 

abundance of other set-asides without a specific program for 

women makes it difficult for women to get a fair opportunity to 

compete. 

Following a review of my negative experiences in dealing with 

the SBA and government purchasing, I have made three different 

trips to the local SBA office to search for information and help in 

obtaining Federal contracts. I was sent from person to person only 

to be repeatedly told, unless I was undercapitalized and could qualify for an 8(a) program, I was beating my head against a wall. 

We were the successful bidder on a contract for indefinite-quantity roof repairs at the Denver military base. Without a women’s 

program in place, the SBA pushed the buyer to cancel the bid and 

to do their purchasing within another formal program. This resulted in the purchasing being bundled in with other contracts to 

hide their steps. 

We have been told many times bundling is horrible approach in 

our field because the number of lawyers and people involved in 

41

communications essentially takes up the possibility of good emergency response to water leaks and infiltration. This is poor value 

for the government because a great deal of physical damage is done 

to valuable real estate and property while wading through procedures required in the bundled contract. 

I have had several meetings with the director of the Small Business Utilization Center at the Denver Federal Center. I wanted to 

encourage buying based on a woman-owned small business status. 

While I received courteous treatment, when I have gone back to the 

government buyers, they say that they were discouraged from pursuing woman-owned business purchases by the very office set in 

place to help us, because it doesn’t help meet any formal percentages that are required. 

The new SBA proposal has unreasonable expectations and requirements, which are not included in other government set-aside 

programs. It is unrealistic and unfair to ask contracting officers of 

Federal agencies to prove which industries have discriminated 

against women. That statistical analysis has already been developed by the SBA. Several separate government-funded studies have 

been presented which identify over 2,300 types of businesses that 

are underutilized when it comes to women, yet only four have been 

outlined. 

Small business employs approximately 50 percent of the private 

sector workforce. We account for 60 to 80 percent of new jobs. A 

great deal of new technology and innovation comes from the small 

business community. Even though over 30 percent of the small 

business in the United States today is owned by women, only 3.4 

percent of contracting dollars go to these businesses. 

Providing a strong set-aside program for women-owned small 

businesses will increase the number of excellent competitive contractors from which purchasing agents have the right to procure 

goods and services quickly and efficiently. This increases opportunities for women business owners, helps them gain a stronger foothold into Federal contracting, makes sound economic sense, and 

provides far better value for the government as they continue to 

encourage small business to build and grow. 

Chairwoman VELA ́ ZQUEZ. Thank you, Ms. Gloss. 

[The prepared statement of Ms. Gloss may be found in the Appendix on page 92.]

Chairwoman VELA ́ ZQUEZ. Our next witness is Ms. Pam 

Rubenstein, the President and CEO of Allied Specialty Precision, 

headquartered in Indiana, a aerospace manufacturing firm. Ms. 

Rubenstein’s company is one of the 0.1 percent of women-owned 

businesses in the manufacturing industry. 

Welcome, and you have five minutes.

STATEMENT OF PAM RUBENSTEIN, OWNER AND CEO, ALLIED 

SPECIALTY PRECISION, INC. 

Ms. RUBENSTEIN. Thank you. Good afternoon. 

My name is Pam Rubenstein. I am the second-generation owner 

and CEO of Allied Specialty Precision, Inc., in Indiana. My company was founded in 1954, and today has grown to 85 employees. 

42

We produce precision aerospace component parts serving the hydraulic fuel control and braking systems of every commercial and 

military aircraft that flies in the USA today. 

Since I bought my business in 2005, I am proud to say that we 

have added a major customer, doubled sales, increased employment 

and purchased five major machine tools. We have invested over 

$1.5 million in the last year alone in equipment and training. 

The advanced manufacturing business is expensive and competitive; and even with our strong effort, it is clear to me that implementing the Women’s Federal Procurement Program would be a 

terrific boost to my company and employees. Direct Federal contracts are very important to our growth and movement into new industry sectors. 

The only industry we currently serve is aerospace. Right now, as 

you all know, aerospace is booming, and the outlook for the next 

ten years is excellent, but all business, even advanced manufacturing, is cyclical. I need to begin to prepare for that eventual 

downturn in aerospace manufacturing now, so that my employees 

and their families will be protected in the future. The Women’s 

Federal Procurement Program would be an amazing asset in this 

endeavor. If the Federal Government is encouraged to seek out 

women-owned manufacturers, I would see more potential work, 

could quote more and find my way into other industries. 

Allied Specialty Precision, Inc., does not play on a level playing 

field. Unfortunately many daily challenges arise simply because I 

am a woman. Business people, whether bankers, insurance brokers, tool salespeople, machinery brokers, even some of our customers are shocked when they call or visit my shop. Many men are 

so taken aback at the fact that we are woman-owned that they 

can’t look me in the eye during a conversation. We may be talking 

about my purchasing a half million dollar machine, but they just 

can’t get past my being female. 

Two years ago I attended the international manufacturing technology show in Chicago; it is a huge venue dedicated to showcasing 

the latest in machine tools, technology, software, et cetera, for advanced manufacturing plants. I had been to the tool show many 

times during my years at Allied, but this was the first time that 

I was there as a business owner, and I had a mission at that show. 

I was shopping for a $500,000 five-axis simultaneous mill, a very 

high-tech, specialized piece of equipment that I needed to manufacture parts for hydraulic pumps in aircraft. As you might imagine, 

most booths at the show were staffed with men, giving out information, answering questions and writing quotes. 

As I entered the booths of manufacturers who offered such machines, most of the salesmen ignored me. One asked, what do YOU 

want? Another asked me whether my husband was out shopping 

since I was at the tool show. When I told them what I was looking 

for, their jaws dropped, but not one of those men apologized or offered me the information I was seeking. Obviously, they did not get 

my business or my money. Since that show, I have purchased two 

five-axis simultaneous mills from a company who took me seriously. 

Just yesterday I had a telephone call from a customer who wants 

to come visit our shop. He ended the conversation by asking me to 

43

make his plane reservations between New York and South Bend, 

find him a hotel and tell him how to get around town. He certainly 

would not have asked that of a male business owner. Needless to 

say, if he really comes to visit us, he will have made his own travel 

reservations. 

So why does the SBA feel that advanced manufacturing businesses owned by women should not be one of the industries selected for the Women’s Procurement Program? Not a day goes by 

that we don’t have some issue over my gender. Obviously, those 

issues haven’t shut us down, but they certainly have slowed our 

growth. 

My employees and their families deserve the best that I can offer 

them, and I can offer them more if I can attract more work, especially from industries that are new to us. 

I ask the support of Congress to assure that the SBA amends the 

proposed rules for the implementation of the Women’s Procurement 

Program to include manufacturing. We are ready to step up to new 

heights in business, and we hope Congress will act to support 

women business owners. Thank you. 

Chairwoman VELA ́ ZQUEZ. Thank you, Ms. Rubenstein. 

[The prepared statement of Ms. Rubenstein may be found in the 

Appendix on page 95.]

Chairwoman VELA ́ ZQUEZ. Our next witness is Ms. Jennifer 

Brown. She is the Vice President and Legal Director of Legal Momentum, founded in 1970. Legal Momentum is the oldest legal advocacy organization dedicated to advancing the rights of women 

and girls. Legal Momentum is a leader in establishing litigation 

and public policy strategies to secure equality and justice for 

women. 

Ms. Brown, you are welcome and have five minutes.

STATEMENT OF JENNIFER K. BROWN, VICE PRESIDENT AND 

LEGAL DIRECTOR, LEGAL MOMENTUM 

Ms. BROWN. Good morning, distinguished members of the House 

Committee on Small Business. Thank you so much, Chairwoman 

Vela ́zquez, for inviting me to speak here today. And thank you, as 

well, Ranking Member Chabot. 

I have been the Legal Director at Legal Momentum for five 

years, and I am very happy to have the opportunity to contribute 

today to your consideration of the Small Business Administration’s 

proposed rule for implementing the Women’s Procurement Program. I can summarize my testimony very briefly, but of course I 

will go on for five minutes. 

The SBA has correctly named ′′intermediate scrutiny′′ or ′′heightened scrutiny′′ as the constitutional standard that the Women’s Procurement Program must meet; and the program, as Congress created it, meets that standard. It is substantially related to 

the important governmental objective of redressing and ending discrimination against women-owned businesses. The SBA’s proposed 

rule, however, would require Federal agencies to make a public 

finding that the particular agency had discriminated against small 

women-owned businesses in particular industries in their own proVerDate 0ct 09 2002 10:19 Feb 29, 2008 Jkt 033615 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\01-16-08 SBA WOMEN’S PROCUREMENT.TXT
44

curement practices before they could let a single contract under 

this program. 

This is an emperor-has-no-clothes moment. The SBA’s requirement is frankly preposterous. It has no basis in law and would 

doom this program. 

I used to represent the Federal Government against discrimination claims as an Assistant U.S. Attorney in the Southern District 

of New York. I can assure you no Federal agency will ever voluntarily make a finding that it has discriminated in its contracting 

practices. It is absurd. 

The proposed rule would guarantee that no woman-owned business would ever benefit from this program. It is an insult to the 

Congress that created the program, and it is an insult to the 

women like those on the panel today who own small businesses 

and are the driving force behind economic growth that this country 

needs. 

Congress created the Women’s Procurement Program against a 

background of persistent discriminatory barriers faced by womenowned small businesses in government contracting, and amid evidence of the Federal government’s continuing failure to award even 

a mere five percent of its contracting procurement dollars to these 

businesses despite the goal that was set to do so in 1994. 

My written testimony details some of the evidence that Congress 

has had available to it over the years of discrimination against 

women business owners. There can be no doubt that the program 

meets the Constitution’s requirement that it serve a substantial 

government objective. 

The Constitution also requires that gender-conscious means, like 

the Women’s Procurement Program, be substantially related to the 

achievement of their objectives. Congress met this requirement by 

limiting the availability of the program to small, women-owned 

businesses in exactly those industries where they are underrepresented in Federal procurement contracting. This type of limitation is exactly what courts look for when they assess the scope of 

affirmative action programs. 

The SBA’s proposed rule would go far beyond constitutional requirements into unrecognizable territory. It would impose an unprecedented and entirely unwarranted condition on a well-crafted 

program by actually barring any Federal agency from letting a single contract under it without first making—and I quote this from 

the introduction to the Federal rule as submitted by the SBA—′′a 

finding of discrimination by that agency in that particular industry.′′

As I said, this is truly remarkable. What agency would ever announce to the world that it had documented its own history of sex 

discrimination in awarding contracts? I can only imagine the rush 

to the courthouse the next day by disappointed contract bidders, a 

rush that would be fully justified. Of course, there is no precedent 

for such an absurd requirement nor any constitutional justification. 

To the contrary, the Supreme Court flatly rejected the position 

that the SBA is taking here, that the government may take affirmative measures only to address its own discrimination. The Court 

dealt with that forthrightly in the landmark Croson decision. 

45

Now, the Croson decision for the first time required strict scrutiny of a race-based State affirmative action program. It was a ruling that drastically reduced the scope of affirmative action programs, and yet in that ruling, the Supreme Court said the government has, ′′a compelling interest in assuring that public dollars 

drawn from the tax contributions of all citizens do not serve to finance the evil of private prejudice,′′ and that was nearly 20 years 

ago. 

Courts evaluating sex-conscious measures to enlarge opportunity 

have held explicitly—and over and over again as was noted this 

morning—that it is perfectly acceptable for such remedies to address societal rather than governmental discrimination against 

women. 

As lawyers who work to advance the rights of women and girls, 

we at Legal Momentum are frankly astonished by the SBA’s action 

here. After so many years of stalling, the agency has finally promulgated a rule to implement the Women’s Procurement Program 

only to include what can only be called a ′′poison pill.′′ Far from finally fulfilling its duty to implement this congressionally authorized program, the SBA’s proposed rule would render it a nullity. 

And if I could just very briefly, I do want to flag for the committee an issue which is not addressed in my written testimony, 

but I would urge you to get further expert advice on the methodology of the RAND study, in particular the way that the dollar 

value disparity measure is calculated. It says that if government 

spending for women-owned businesses, small women-owned businesses, in proportion to all spending in the industry is proportionate to not the number of women-owned businesses in that area, 

but the dollar value of those businesses in comparison to the dollar 

value of all businesses in the industry, then you have parity. 

That means that - small businesses are always going to be a very 

small fragment of the total dollar value of businesses in their 

fields, or most often they will be. So very small amounts of government spending will always produce parity when you are using that 

kind of measure. It is not how many dollars did we spend on 

women-owned businesses compared to what percentage of the companies in the field are women-owned businesses. 

So I would—as I said, I am not an expert in the area, but I 

would really urge you to get another look at that. It is not the way 

that most disparity studies are done, and it definitely bears further 

scrutiny from you. Thank you very much. 

Chairwoman VELA ́ ZQUEZ. Thank you, Ms. Brown. 

[The prepared statement of Ms. Brown may be found in the Appendix on page 100.]

Chairwoman VELA ́ ZQUEZ. I would like to address my first questions to you. 

Would you say, Ms. Brown, that this regulation is more in accordance with strict scrutiny or intermediate scrutiny? 

Ms. BROWN. I would say it is an unrecognizable standard. Contrary to Ms. Papez’s testimony this morning, there is no case in the 

country that has held that an individual Federal agency administering a government-wide program has to make findings of its 

own to begin with, much less an admission that it has discrimiVerDate 0ct 09 2002 10:19 Feb 29, 2008 Jkt 033615 PO 00000 Frm 00051 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\01-16-08 SBA WOMEN’S PROCUREMENT.TXT
46

nated in the past. So whether you are talking about a race-based 

affirmative action program or a gender-based affirmative action 

program, that just comes out of nowhere. 

Chairwoman VELA ́ ZQUEZ. Basically, you are stating that the representation made by DOJ this morning is incorrect? 

Ms. BROWN. Absolutely. It is not recognizable as intermediate 

scrutiny; it is not even recognizable as strict scrutiny. 

Chairwoman VELA ́ ZQUEZ. Had the Supreme Court ruled that 

strict scrutiny should be applied in a situation compatible to this? 

Ms. BROWN. No. The Supreme Court is very clear that heightened scrutiny is the standard for gender-based scrutiny. We are a 

women’s rights organization; we like to see government measures 

that differentiate on the basis of gender scrutinized very carefully. 

The Supreme Court has adopted the heightened scrutiny standard 

for that; it has spelled it out in different ways, but substantial relation to an important governmental objective is the standard, and 

this program clearly meets that. 

Chairwoman VELA ́ ZQUEZ. How would you respond to Ms. Papez’s 

testimony that the agencies must show past discrimination to meet 

the intermediate standard? 

Ms. BROWN. I think Ms. Papez was skating on two lines, with all 

due respect. First of all, when she said that Court decisions require 

the government—and she inserted here the agency—to show past 

discrimination, what she is ignoring and what that analysis ignores, not to personalize it, is that Congress speaks for the government here. 

Congress has had testimony before it for years about discrimination against women-owned businesses, and as I mentioned, some of 

that is detailed in my written testimony. Congress made the decision that there is a governmental objective here, and that is what 

would be tested, not an individual agency’s finding. 

And then she goes beyond that, most of her remarks focused on 

agencies having to show there is discrimination—discrimination in 

the industry. Well, that is exactly what the disparity study did. 

That was an important part of—that was an important, very useful 

thing that was built into this statute to require a disparity study, 

so you know that your remedies are focused on the industries 

where you have a proven disparity. But she goes even beyond that 

to say you also need an admission of discrimination by the agency. 

And the Supreme Court in the Croson decision itself said, no, you 

don’t. 

Chairwoman VELA ́ ZQUEZ. Are you familiar with the case cited in 

the regulation, Engineering Contractors Association of South Florida v. Metropolitan Dade County? 

Ms. BROWN. Yes, I am. 

Chairwoman VELA ́ ZQUEZ. Do you think that this case justifies the 

SBA’s requirement of individual agency determinations of discrimination? 

Ms. BROWN. Absolutely not. Again, I would say on two levels. 

First, let’s note that that is a case where a county has an affirmative action program for women-owned business enterprises. Nothing is the equivalent to the Federal Government on the county 

level—excuse me, the equivalent to requiring an agency-by-agency 

finding would be if the Court had said, where is the department 

47

of buildings, where is the school construction authority, where is 

the hospital, the health department that lets construction dollars? 

The Court never suggested for a moment that each agency of 

that county would have to show discrimination, never for a moment. And that is where the Department of Justice analysis would 

lead us. But besides that, the reason that the women-owned business provision was struck down in that case was that the disparity 

studies didn’t show sufficient disparity. 

Well, that is no problem. We are talking about a program here 

that is targeted, that can only be used if you already have a disparity finding for the industry. So it wasn’t that disparity findings 

were not enough. 

My testimony mentions multiple cases where courts, including 

the Supreme Court, have said disparity is prima facie evidence of 

discrimination. In that case, the disparity study showed results all 

over the place—up, down, all around—and the district court said, 

that doesn’t convince me, and the court of appeals said, I can’t see 

you are clearly wrong. 

Chairwoman VELA ́ ZQUEZ. Thank you, Ms. Brown. 

Ms. Rubenstein and Gloss, a lot of testimony and questions today 

have been regarding our concerns with the SBA’s approach to its 

proposed rule. The bottom line is, without this program, the Women’s Procurement Program, women business owners will continue 

to be shut out of government contracts. Less than two percent of 

women entrepreneurs are in construction and only 0.1 percent are 

in manufacturing, both of which are represented today. 

Aside from implementing this program, how can we increase the 

representation of women in your industry, if you can offer any 

guidance? 

Ms. GLOSS. I would say an active role needs to be taken by the 

Small Business Administration to genuinely educate and encourage 

women business owners. 

I have been in the roofing industry myself for 32 years and have 

experienced nothing but a negative approach or discouragement. 

Unless I was undercapitalized and couldn’t essentially afford to run 

my business—high litigation business takes a large dollar amount 

to be able to cure a problem, and they were not willing to help in 

any instance in any way unless I was an 8(a) contractor. Womenowned business, they said, means nothing to them because it 

doesn’t provide statistics, and without statistics they aren’t willing 

to put dollars behind it. That was all strictly at the local level. 

Chairwoman VELA ́ ZQUEZ. Ms. Rubenstein. 

Ms. RUBENSTEIN. From manufacturing there are very few of us, 

and in aerospace probably a lot fewer. It might be good to reach 

out to the trade associations, though. There are so many associations for manufacturing. 

I am very active in the National Tooling and Machining Association; there are some women-owned businesses there. So going that 

way may help you identify those of us that are there. 

That is the best I can say. 

Chairwoman VELA ́ ZQUEZ. Ms. Farris, the SBA regulation lists 

only four industries where women are considered sufficiently 

underrepresented. Do you think that adding more industries to 

48

that list, consistent with the RAND study’s finding, would make 

the program constitutionally questionable? 

Ms. FARRIS. Let me be sure I understand that question. In other 

words, if the SBA enlarges the four groups, including the women 

cabinetmakers—

Chairwoman VELA ́ ZQUEZ. Correct. 

Ms. FARRIS. Would the program be vulnerable to a legal challenge? 

Chairwoman VELA ́ ZQUEZ. Uh-huh. 

Ms. FARRIS. No. As a matter of fact, my concern is that if the 

rule is implemented as currently written, the program will be subject to a legal challenge on several bases. Number one, when I say 

it creates a new standard, I am very serious about this, there are 

currently three constitutional standards—rationale basis, intermediate scrutiny and strict scrutiny. 

There was a very good 1995 internal memorandum from the Department of Justice right after the Adarand decision came out that 

identified exactly what level of evidence is required before you implement these types of programs under a strict scrutiny standard. 

I want to point out to the committee there was some very good 

language in that internal memorandum. Under a strict scrutiny 

standard of review, it says, number one, you don’t delay the program until you do all these disparity studies, you only show that 

there is substantial evidence to make a prima facie case of the need 

of the program. 

Number two, it says, what level of evidence is required; and it 

uses the language, Not that level of evidence that rises to paradise; 

the SBA had basically suggested a rule that goes beyond paradise 

and lands at the foot of God. 

The third point in that internal memorandum, which I think is 

very, very good, is that it indicates that; and I think I know where 

Ms. Papez was coming from when she saying you have to do an 

agency-by-agency study. Croson was passed in 1989 and dealt with 

local remedial programs under strict scrutiny. 

Adarand was passed in 1995 in a series of cases that took that 

standard and applied it to the Federal Government. After Adarand 

came out in 1995, there was a flurry of internal governmental 

memorandums to the agency saying, What do we do now; how does 

this impact our program. The memorandum was saying, Let’s buttress our facts by taking a look at our internal practices. 

The big distinction is that all those remedial programs were already in place. You already had a WBE program basically working; 

you had an 8(a) program working. 

In this instance, the women-owned set-aside is not in place yet; 

and so applying this strict scrutiny-plus standard which states you 

have got to have a disparity study, you have to have a study of the 

disparity study and then you have to have an agency study of the 

disparity study that studied the disparity study. That is where it 

goes into this new strict, strict scrutiny standard. 

I think it is a slippery slope for the SBA and also a concern to 

all of the minority programs that are in existence, because it is 

suggesting a new standard that essentially means no program will 

ever by implemented because the studies will never be completed. 

49

Chairwoman VELA ́ ZQUEZ. Ms. Brown, do you believe that the program will be constitutional even if additional industries were 

added? 

Ms. BROWN. Well, you do need evidence that the—not need, but 

I think it is useful to have evidence that the particular industries 

are underrepresented in Federal contracting. But the RAND study 

produces, as you have discussed, four different ways to look at that 

question, and some of them have as many as 87 percent of industries underrepresented. 

So, no, I don’t think it would be subject to constitutional scrutiny—or overturned, rather—simply because there were additional 

industries identified through a different methodology. 

Chairwoman VELA ́ ZQUEZ. Thank you, Ms. Brown. 

I now recognize the ranking member, Mr. Chabot. 

Mr. CHABOT. Thank you, Madam Chair. 

Ms. Dorfman, I will begin with you, if I can. 

Without revealing any potential attorney/client communications, 

is the U.S. Women’s Chamber of Commerce planning on taking any 

further action in the federal court case? 

Ms. DORFMAN. We do have a status hearing coming up on January 28th. It is my hope here today to once again ask you all to take 

a look at what you can do to compel the SBA to do its job to implement the program. Certainly, passing H.R. 1873, which has the 

language that is needed to get a program in place for womenowned firms is a great start, and we are working with the Senate 

side to try and help them to make sure to get that through. But 

that may take some time, and I am curious if there is not something that Congress can do that deals with agencies that are, in 

fact, breaking the laws that they had passed and intended for implementation. 

So I am passing it back to you to see if there is something here 

that we can take further to compel the SBA to implement this program as intended by Congress when it was originally passed. 

Mr. CHABOT. Thank you. 

Ms. Gloss, I will move to you next, if I can. 

Do you know approximately how many women-owned roofing 

firms there are in the Denver area, and how does the SBA discourage contracting officers from buying from women-owned small businesses—if you know, if you have heard? 

Ms. GLOSS. I am aware of five women roofing contractors, and 

they are all members of the National Roofing Contractor Association, so I am familiar with them. 

In cases where I have been working with, since I have been in 

the industry for 30-plus years, I have gotten to know contracting 

officers throughout the Federal Government before many of the setaside programs were even in place. We have done business successfully with them. They solicited bids from us actively. We have actively solicited work with the Federal Government; we enjoy them 

as a good buyer of ours. 

Over the past five to six years, contracting officers have come to 

me and talked to me about, How can we better buy from you, how 

are they going to be able to continue to do business with us when 

the SBA pressure is so high to go to one of the other government 

set-aside programs. 

50

They say there is active discouragement from doing business 

with a women-owned firm versus doing business with an already 

set aside formal program; and I have lost, I would say, about $2 

million a year in bids set aside to just one of those programs. 

Roofing is an easy thing for people to feel it doesn’t take much 

talent to do. It is easy to shove it off onto someone who doesn’t 

have much experience, and that is exactly what the contracting officers that I have dealt with in the past have said. The pressure 

is so high from SBA to go with one of the other set-aside programs 

that they have no dollars left to come and purchase. 

Mr. CHABOT. Thank you. 

Ms. Rubenstein, what other steps, other than the implementation 

of the Women’s Procurement Program, could the SBA, in your opinion, or other Federal agencies take to increase participation by 

women in Federal Government procurement programs? 

Ms. RUBENSTEIN. I am really only familiar with my industry, and 

as I said, there are very few women in the industry. I think, for 

me, the best thing that Congress can do is implement the law as 

you originally intended it and that would help me and my employees tremendously. 

Mr. CHABOT. Thank you. 

Any of the others who would like to take—

Ms. FARRIS. Yes. Thank you. I do a lot of work with minority and 

women-owned businesses, and I have a couple of thoughts on that. 

First of all, I think it is critically important that this committee 

acknowledge that Federal contracts use a unique type of delivery 

system called ′′indefinite delivery, indefinite quantity′′ contracts; 

these are large, long-term contracts that typically have thousands 

of line items within them that might include parts, might include 

roofing, might include labor services, et cetera. You bid it on a fair 

market value times a markup or a discount. And so there are 

many, many small businesses out there that don’t understand 

these IDIQ contracts or even how to bid them. 

My experience with the SBA has been that it is more of a ′′come 

to us,′′ instead of ′′let us come to you and actively recruit.′′ There 

should be active regional and local programs that are designed specifically to look at the local availability. 

Every major city in the United States has done its own internal 

disparity study that identifies minority and women-owned businesses within that city. There should be detailed training of the difference between a standard contract and an IDIQ contract. And I 

hate to admit my own stupidity, but I am a lawyer that specializes 

in this area; when I went through the CCR registration process, I 

had to stop and start over three or four different times because I 

wasn’t quite understanding what they were looking for. 

The NAICS classifications are extremely difficult to be able to 

take your company and get it to fit in this little hole. For instance, 

I am a law firm, but I also do education, I also do training. There 

are three or four different NAICS codes that I can register under. 

So all of these things are things that potentially are barriers to 

women within Federal contracting, and I think the fact that there 

are only 55,000 women currently registered in the CCR should be 

of significant concern to the SBA and should be addressed immediately. 

51

Mr. CHABOT. Thank you very much. 

Ms. DORFMAN. May I answer as well? 

Mr. CHABOT. Sure. 

Ms. DORFMAN. Thank you. 

First of all, when we met with the U.S. Women’s Chamber of 

Commerce we met with all the agency heads, and we said, How can 

we help you improve your goals for women-owned firms; you are 

not meeting them. They said, You have to get this law implemented. There is—the other set-aside programs that—there is an 

order they have to go through when we are at the very end, but 

they usually have to fulfill that. That means that women-owned 

firms are left to have to compete in full and open with the larger 

corporations. So we don’t have that access. 

When you get into the different programs that you were talking 

about, there are the procurement technical assistance centers out 

there to assist small businesses in contract accessing, that kind of 

information. But what we see the SBA’s whole focus should be on 

is implementing this program, not worrying about whether it will 

pass the court’s scrutiny, because that is not their role. Their role 

is to get this implemented, let the court do their job and help 

women to access these contracts. 

We have hundreds, if not thousands, of women-owned firms who 

are not registered in CCR right now. Why not? Because this program has not been implemented; it has been a waste of time for 

them to do so. So you will not see more registrants in CCR until 

we get this program moving forward. 

Mr. CHABOT. Thank you. 

Ms. Brown, I only have time for one more question. Do you want 

to take your shot at that one or do you want me to ask you an entirely different question? 

Ms. BROWN. Ask me what you would like. 

Mr. CHABOT. We will give you a different question. What data 

would you suggest that the SBA needs to examine to determine 

underrepresentation of women-owned small bushiness in the Federal contracting arena? 

Ms. BROWN. The data of an underutilization study—

Chairwoman VELA ́ ZQUEZ. Would you please get the mike? 

Ms. BROWN. Sure. I am neither an economist nor a statistician. 

As a lawyer, I can tell you that with underutilization studies, one 

court after the next has said this is excellent evidence of discrimination. So the repeated refrain earlier today from Ms. Papez, that 

you need that plus something else, is just not supported in the 

cases no matter how many times she asserted that it was. 

The thing about the underutilization analysis - the point I was 

making earlier about the dollar value measures as done by RAND, 

they basically accept that small businesses are going to get very, 

very small portions of Federal contract dollars. And as long as—

and since the whole—the problem with relying on that, it is a 

measure of underutilization, but the problem with relying on that 

is, it kind of freezes the status quo in place. 

Much of the impetus for having special efforts made to invite 

small businesses, minority-owned, women-owned or just small businesses period into the contracting realm is based on the idea that 

that will help them grow, that they remain small because they 

52

have been shut out; and by coming in, they will be able to realize 

their economic potential. So a measure that kind of captures and 

reinforces the status quo, as far as their size in relation to their 

industry as a whole, is not going to help you make any progress 

on getting them to grow, which I think is the whole idea of these 

programs in the first place. And that is why I hope the committee 

can get some additional expertise on that point. 

I looked at—I think it is mentioned in my written testimony—

there was a meta-analysis of maybe 60 disparity studies, it was undertaken by the Urban Institute under a contract with the Department of Justice, that is referenced in my testimony. And the normal disparity study as it was described there—they were looking 

at ones with different methods, too, but it was taking, not the number of contracts and the number of firms—I can see why that is no 

good; you can have a million tiny contracts that would look like disparity, but mean nothing economically for the businesses. But it 

was the percent of spending on that category of business compared 

to the number of those businesses in their industry. And I think 

that is a measure that many courts and statisticians and economists have been satisfied with for years. It would look to me like 

RAND could rerun the numbers it has already collected under that 

analysis and see what the result was. 

Mr. CHABOT. Thank you very much. I yield back my time. 

Chairwoman VELA ́ ZQUEZ. Ms. Clarke. 

Ms. CLARKE. This question is for Ms. Dorfman. It sort of is a follow-up to the question that our ranking member raised. I want to 

say that after being in Congress for one year, I too an outraged and 

frustrated by the blatant disregard of the SBA for the law mandated by our colleagues in 2000. 

Can you provide this committee today with any recent factual or 

legal background as to your association’s next steps? And are you 

planning another lawsuit against the SBA? And if so, what would 

be the nature of your action? 

Ms. DORFMAN. This, as you know, is the number one issue that 

we are working on and we will do whatever it takes to get this law 

implemented as originally intended by Congress. 

At this point, we do have the status hearing set for January 

28th. We are here today again to ask, Please help us to compel the 

SBA to implement the program, as it was originally intended. The 

fact that we have got the law that was put in a very narrow scope, 

which is in total disregard of the NAS study, it just shows that the 

SBA is again dragging its feet; and it is time to hold them accountable. And there certainly should be some remedy for Congress to 

be able to address an agency that is clearly breaking the law. 

We need to move forward to the next step, whatever it takes. 

Ms. CLARKE. Let me just say to all of you, thank you so much 

for coming and for testifying and for making it real, particularly 

from a legal perspective, from a practical application. I am just astounded, as our chairwoman has been, that again it has been seven 

years. And I raise that—I keep saying seven years, and I think we 

all do; but for me, being a freshman, who realizes that at the end 

of this year, we are entering into a whole new administration, it 

just indicates to us that this administration has done nothing, 

nothing, to advance, you know, the ability for women-owned busiVerDate 0ct 09 2002 10:19 Feb 29, 2008 Jkt 033615 PO 00000 Frm 00058 Fmt 6633 Sfmt 6633 G:\CLERK SB\HEARINGS\TRANSCRIPTS\01-16-08 SBA WOMEN’S PROCUREMENT.TXT
53

nesses to participate in billions of dollars that are being spent annually by our Nation, dollars that, quite frankly, you all contribute 

to, right, as women in our economy. 

And so I am standing very close to our chairwoman, who I know 

is going to pursue this, but quite frankly, I just don’t see it happening under this administration. If they have done this for seven 

years and they have not been able to close the deal with the American people, and women in particular, to make sure that they are 

equal participants in our economy and the things that we do, I 

don’t hold out a whole lot of hope that it is going to happen before 

this administration leaves. 

Having said that, I yield back the rest of my time, Madam Chair. 

Chairwoman VELA ́ ZQUEZ. Thank you, Ms. Clarke. 

Mr. Gonza ́lez. 

Mr. GONZA ́LEZ. Thank you very much, Madam Chairwoman. I 

think my colleague, Congressman Gohmert, indicated he had been 

a judge; and I also had the great privilege of being a judge. After 

listening to the testimony by Ms. Elizabeth Papez and listening to 

the testimony of Ms. Brown and Ms. Farris, then I understand the 

need for judges. 

But it really is interesting, because the basic proposition, the different hurdles that have to be overcome just to give this particular 

program, which has been legislated by Congress, and I think Ms. 

Brown points out—we see that there is a problem, we would like 

to see it addressed; we pass the ball off to the appropriate agency 

in our department, and then hopefully they will follow through. I 

do not think that has been the case. 

But I do not believe that Ms. Papez came here today to misrepresent anything to this committee in bad faith. She could be wrong. 

In her opinion, it is not an open, legal question, yet her interpretation of the same cases is 180 degrees from that which we have 

heard from this particular panel of the two attorneys Ms. Brown 

and Ms. Farris. 

In her written testimony, Ms. Papez states the Justice Department’s position on gender-based set-aside programs reflects these 

cases, and the simple lesson they offer Federal entities considering 

such programs, if those entities which must establish and administer gender-based set-asides in a constitutional manner wish to 

maximize the chances that a particular program will survive constitutional scrutiny, it is both legally appropriate and legally prudent to require evidence of discrimination before implementing the 

program. 

Now, I think the chairwoman specifically asked that question. I 

am not sure that Ms. Papez really looked at her own written testimony, because she didn’t basically just stand by those couple of 

sentences. But let’s just say it is an open, legal question, let’s just 

say it is out there and there is a prudent judge somewhere out 

there who is going to rule on this and try to give meaning to the 

legislative intent of Congress which—if you recall, that is one of 

those guiding principles in separation of the three branches of government and the duties of each and every one of them. 

The problem that I see, to be real honest with you—and those 

that are here from SBA and from DOJ, I don’t mind you going back 

and telling people. My problem is, the argument advanced by Ms. 

54

Brown and Ms. Farris, to the objective observer, would be the argument that would support and promote the program. 

The argument advanced today by DOJ and the representative, 

Elizabeth Papez, you would expect to hear from the opponent. No 

one has to do work for the government on this one, it is over, its 

over, because the position they have taken defeats it, that is my 

problem. That has been my problem with many representatives 

from different departments and agencies. I mean, from the get-go, 

we are not going anywhere. 

All I am saying to the agencies, to the Department, to DOJ, we 

are not asking you to misconstrue or lie to a court, but if I had Ms. 

Brown and Ms. Farris that can knowledgeably look at the same 

cases and come to this other conclusion, why can’t you advance the 

same legal argument to promote that which we are trying to accomplish as Members of Congress. That is the real question after 

all this is said and done today, but it doesn’t look like we are going 

to get anywhere. 

I am not sure what we do. We have a new Attorney General who 

knows, all sorts of things could happen in the coming months. It 

really is frustrating. That is a speech and that is a statement, but 

when it is all said and done, it really is, who is your advocate? This 

is the government attorney, this is the government attorney that 

is giving advice and guidance to agencies. 

Now, let’s just say you start off with the RAND information and 

all of us up here know all about statistics and studies and such and 

we can do all sorts of things with them. They have already placed 

a huge hurdle. I am not sure if Ms. Gloss’s enterprise is going to 

come under those enterprises’ product services where there is an 

easily identified disparity. I think Ms. Rubenstein might, maybe 

not, we don’t know. 

But a lot of people, the majority, the huge majority of womenowned businesses are not going to fall under certain categories. 

That is number one. We are going to have to deal with that; I don’t 

know what we do about it. Let’s see if the comment period is extended; let’s see if we get some good information out there, and 

people will listen. 

When we get into the legal framework, I don’t see that there is 

one change in giving direction on how they are going to meet what 

DOJ believes are the legal standards, and that is going to be past 

discrimination. 

My question goes back to what Ms. Brown says. I have never see 

a government official, civil servant—actually, I have never seen it 

in the civilian society either—someone come up and say, Oh, yeah, 

our practices are discriminatory, oh, yeah. Because you know why? 

There are consequences to that. Why would you expose yourself to 

that? Confession is fine in a confessional. 

This is just beyond belief. 

What I want to know, let’s just say we do have good-faith introspection by agencies and departments, and someone says, you 

know what, that appears to be discriminatory, it might be found to 

be discriminatory so we are changing it; as of right now, right now, 

we are not going to do that anymore. 

Would that cure it? Because it is past discrimination, are we 

talking about ongoing discrimination? I am just trying to figure out 

55

all sorts of ways to frustrate this whole program. We are going to 

come against—I am just saying, What are we talking about—past 

discrimination, present discrimination, ongoing discrimination? 

What is it that we are talking about? 

Either Ms. Brown or Ms. Farris or both. 

Ms. BROWN. Should I start? 

Ms. FARRIS. Go ahead. 

Ms. BROWN. Well, we could look at what DOJ or SBA in response 

to DOJ has said, and I think it would be saying that the agency 

has to find that it has a history of discrimination. 

But I want to address this one point. The Adarand decision was 

the Supreme Court decision that, for the first time, said Federal affirmative action programs also must meet the strict scrutiny standard if they are using race-conscious measures, by implication intermediate scrutiny if they are using gender-conscious measures. 

Now, the Adarand decision—Adarand went back on remand to 

the 10th Circuit Court of Appeals, and the 10th Circuit Court of 

Appeals examined the record of discrimination. They didn’t examine the Department of Transportation’s record of discrimination 

and that is the department of the Federal Government that was 

carrying out the program. 

They examined what Congress had before it, how did Congress 

come to the conclusion that this race-conscious program was necessary to redress discrimination. And again, I just have to emphasize, there is no court that has said that the government can act 

only to redress its own discriminatory actions. It has said time and 

again that participating in existing discriminatory practices is 

enough, and in the gender context it has said over and over again 

that societal discrimination is enough. 

So both—I do not believe, with all due respect, that there is a 

good-faith basis in the cases for requiring an agency-by-agency examination of discrimination, nor do I think there is a good-faith 

basis for requiring an agency determination that it itself has discriminated in order to implement a congressionally enacted program. 

Mr. GONZA ́LEZ. Thank you, Ms. Farris. 

Ms. BROWN. One other note. If you examine, as I did, the testimony submitted for the Department of Justice by Ms. Papez, you 

will not find cases cited to support those propositions; and that is 

a very glaring omission when you are talking about a lawyer’s testimony. 

Mr. GONZA ́LEZ. Ms. Farris. 

Ms. FARRIS. Thank you, I want to be sure your question again 

is, do the programs require remediation of past discrimination or 

are they more forward looking. And the case law again—I want to 

clarify. When I refer to ′′case law,′′ I am referring to the top law 

of the law of the land, U.S. Supreme Court decisions. 

The case law indicates that the programs are remedial in nature; 

they are designed to remedy past discrimination, but they are also 

forward looking because it defines discrimination as those patterns 

and practices which have created barriers to a certain class of people that don’t exist for other classes of people. 

So, in answer to your question, the programs are both backward 

and forward looking. 

56

I also wanted to pick up on a point that you made that I think 

is very important, and that is that there is a fundamental lack of 

logic to the SBA’s entire argument. That argument is that they 

have to do all of these studies to be sure that they have enough 

justification to withstand a legal challenge. 

Well, we are missing the fact that there will never be a legal 

challenge because there is no darn program in place to challenge 

and never will be. 

So, you know, I feel like sometimes we are out there doing battle 

with smoke and mirrors, when it is not complicated. 

Member Gonza ́lez, you correctly pointed out there is not a single 

Supreme Court decision identifying intermediate scrutiny that has 

the words ′′disparity study′′ and ′′narrowly tailored′′ in it; it is a different standard. The only case law, the only case in the entire universe of case law out there that the DOJ is building their argument 

on is one decision that even within the decision talks about you 

being able to use societal discrimination as proof. 

In my mind, there is no reason that the SBA cannot immediately 

implement this program. 

I want to address one other question and that was, do we have 

to do another disparity study? No. The proof has already been 

made through the disparity between the number of women-owned 

businesses and the ones that are currently competing in the CCR. 

But even taking it a step farther, if you want a disparity study, 

you have one with the RAND Corporation. Now, is it perfect? No. 

But you all look at statistics all the time and have you ever seen 

a perfect statistical study? 

What the study did was, it identified in a very forthcoming manner the flaws within its own study. It said, here are the four methodologies we were given; you have one that is way out there, and 

you have one that is way out here and you have two that are in 

the middle. 

I am not a statistician either, but I do remember a course that 

I took, and isn’t there a concept that you throw out the top and you 

throw out the bottom and you look at what is left to be somewhat 

average or representative? 

There really—again going to what Ms. Dorfman said, there is no 

administrative or legal justification for failure to immediately implement this program at a five percent level. 

Mr. GONZA ́LEZ. Thank you very much. I yield back. Thank you 

for your patience. 

Chairwoman VELA ́ ZQUEZ. Ms. Brown, if strict scrutiny is applied 

to gender-based programs like this one, what will that mean for the 

8(a) and other SBA business development programs? 

Ms. BROWN. I would have to say I don’t know the 8(a) programs, 

so I can’t answer that question. 

Ms. FARRIS. I would like to answer that. 

It should be a matter of extreme concern to any members of a 

minority or ethnic-based group, because what it is basically doing 

again is, it is creating a strict scrutiny-plus standard that, if it is 

applying to gender-based programs, its only a matter of time. The 

writing is on the wall that it will trickle down not only to every 

program within the Federal, but also to every program at the 

State, county and local level. Extremely concerning. 

57

Chairwoman VELA ́ ZQUEZ. Thank you. And as you can see, there 

is so much concern about the proposed rule. Based on the testimony provided here by all the witnesses, I just can’t help myself 

but to conclude that the proposed rule goes far beyond congressional intent. And it is my intent to submit comments on the proposed rule to the SBA, and basically stating the fact that what I 

feel they are doing, the bottom line regarding the proposed rule, is 

to destroy the program, just to make it so difficult that it will never 

be implemented. 

And if we are going to apply past discrimination, I just would 

like to find the one agency, including SBA, that will come out and 

say, yes, in the past we have committed discrimination against 

women business owners. 

Given all these facts and the testimony presented today by both 

SBA and the Department of Justice and the fine second panel of 

witnesses that we have with us this afternoon, I would strongly 

suggest to the Small Business Administration that they must scrap 

the proposed rule and go back to the drawing board. 

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. 

Chairwoman VELA ́ ZQUEZ. This hearing is now adjourned. 

[Whereupon, at 1:51 p.m., the committee was adjourned.]

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