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SUBCOMMITTEE HEARING ON THE ROLES 

OF FEDERAL LABS IN SPURRING INNOVATION 

AND ENTREPRENEURSHIP ACROSS THE U.S. 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

SEPTEMBER 24, 2009 

Small Business Committee Document Number 111-047 

Available via the GPO Website: http://www.access.gpo.gov/congress/house 


Congress.#13
HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

DENNIS MOORE, Kansas 

HEATH SHULER, North Carolina 

KATHY DAHLKEMPER, Pennsylvania 

KURT SCHRADER, Oregon 

ANN KIRKPATRICK, Arizona 

GLENN NYE, Virginia 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

DAN LIPINSKI, Illinois 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

JOE SESTAK, Pennsylvania 

BOBBY BRIGHT, Alabama 

PARKER GRIFFITH, Alabama 

DEBORAH HALVORSON, Illinois 

SAM GRAVES, Missouri, Ranking Member 

ROSCOE G. BARTLETT, Maryland 

W. TODD AKIN, Missouri 

STEVE KING, Iowa 

LYNN A. WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

BLAINE LUETKEMEYER, Missouri 

AARON SCHOCK, Illinois 

GLENN THOMPSON, Pennsylvania 

MIKE COFFMAN, Colorado 

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KAREN HAAS, Minority Staff Director 

(II) 

STANDING SUBCOMMITTEE 

Subcommittee on Contracting and Technology 

GLENN NYE, Virginia, Chairman 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

KURT SCHRADER, Oregon 

DEBORAH HALVORSON, Illinois 

MELISSA BEAN, Illinois 

JOE SESTAK, Pennsylvania 

PARKER GRIFFITH, Alabama 

AARON SCHOCK, Illinois, Ranking 

ROSCOE BARTLETT, Maryland 

W. TODD AKIN, Missouri 

MARY FALLIN, Oklahoma 

GLENN THOMPSON, Pennsylvania 

(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Nye, Hon. Glenn ...................................................................................................... 1 

Schock, Hon. Aaron ................................................................................................. 2 

WITNESSES 

Lee, Ms. Cynthia, Associate Director, Langley Research Center, National 

Aeronautics and Space Administration .............................................................. 4 

Underwood, Mr. Bruce, Technical Manager, Wallops Space Flight Facility, 

National Aeronautics and Space Administration .............................................. 6 

Sebesta, Mr. Paul G., Center Director, National Center for Agricultural Utilization Research, USDA Agricultural Research Service, Peoria, Illinois ......... 8 

Seywald, Dr. Hans, President, Analytical Mechanics Associates, Inc., Hampton, Virginia .......................................................................................................... 10 

Suber, Mr. Chris, President, Construction Development Services, Inc., Norfolk, Virginia ......................................................................................................... 12 

Johnsen, Mr. Peter B., Chief Technology Officer, Biofuels Manufacturers of 

Illinois, LLC, Peoria, Illinois ............................................................................... 13 

APPENDIX 

Prepared Statements: 

Nye, Hon. Glenn ...................................................................................................... 22 

Schock, Hon. Aaron ................................................................................................. 24 

Lee, Ms. Cynthia, Associate Director, Langley Research Center, National 

Aeronautics and Space Administration .............................................................. 27 

Underwood, Mr. Bruce, Technical Manager, Wallops Space Flight Facility, 

National Aeronautics and Space Administration .............................................. 27 

Sebesta, Mr. Paul G., Center Director, National Center for Agricultural Utilization Research, USDA Agricultural Research Service, Peoria, Illinois ......... 31 

Seywald, Dr. Hans, President, Analytical Mechanics Associates, Inc., Hampton, Virginia .......................................................................................................... 38 

Suber, Mr. Chris, President, Construction Development Services, Inc., Norfolk, Virginia ......................................................................................................... 41 

Johnsen, Mr. Peter B., Chief Technology Officer, Biofuels Manufacturers of 

Illinois, LLC, Peoria, Illinois ............................................................................... 43 

(V) 

(1) 

SUBCOMMITTEE ON CONTRACTING AND 

TECHNOLOGY HEARING ON THE ROLES OF 

FEDERAL LABS IN SPURRING INNOVATION 

AND ENTREPRENEURSHIP ACROSS THE U.S. 

Thursday, September 24, 2009 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 12:45 p.m., in Room 

2360, Rayburn House Office Building, Hon. Glenn Nye [chairman 

of the Subcommittee] presiding. 

Present: Representatives Nye, Ellsworth, and Schock. 

Chairman NYE. Thank you all for being here. Our apologies for 

getting started a little bit late. We had a vote called right about 

at the beginning of the hearing time. The good news is that we 

only had one more vote today, and that was it, so we won’t be interrupted again. 

What I would like to do is go ahead and call this hearing to 

order. And I am going to read an opening statement, and then I 

am going to provide an opportunity for the ranking member of the 

Committee to make any remarks he would like to make and then 

give you all an opportunity to make your statements. And, again, 

pleased to have you here today. 

Small businesses are the most innovative sector of our economy. 

Not only are they responsible for some of the most important technological breakthroughs of the past century, but they are also going 

to be responsible for 60 to 80 percent of the new jobs as they drive 

our economy to recovery. 

One of the most successful ways we have to help support the 

growth of innovative small businesses is through partnerships with 

Federal labs and research facilities. Last year, small businesses 

won 4,000 contracts through USDA Federal research facilities, 

amounting to over $100 million. Meanwhile, NASA awarded an additional 2,500 small business contracts, totaling $400 million. All 

told, fiscal year 2008 saw a $143 billion investment in research and 

development. 

At face value, these are significant investments, the kind that go 

a long way to spark innovation. But the benefits don’t just stop at 

the laboratory door. Rather, they go on to support regional economies through job creation and product commercialization. 

In today’s hearing, we will examine the role that Federal labs 

play in local markets and the support they provide entrepreneurs 

nationwide. We will also look for ways to ensure that procurement 

policies continue to work for small firms and that promising research makes its way from the laboratory to the marketplace. 

2 

In local economies across the country, Federal labs have brought 

tremendous growth. In Hampton Roads and on Virginia’s eastern 

shore, NASA labs sustain roughly 11,000 jobs and generate a billion dollars in economic output each year. At the national level, the 

impact of these facilities is also significant. Every year, the NASA 

Wallops Flight Facility and Langley NASA Research Center help 

create 25,000 jobs and $2.8 billion in revenue, thanks in large part 

to the ingenuity of the small businesses with whom they work. 

Through R&D grant programs, Federal agencies work with entrepreneurs to develop critical innovations. As a result of these 

partnerships, small firms have successfully pioneered breakthroughs in sectors ranging from health care to defense. But while 

there is no shortage of entrepreneurial innovation, the best ideas 

don’t always make it to market. The real economic benefit of R&D 

occurs when inventions get to the point where they can be sold to 

both Federal agencies and private-sector clients. 

One of the businesses you will hear from today, Analytical Mechanics Associates from Hampton, Virginia, developed cutting-edge 

computer simulation and modeling software to enable NASA to design the spacecraft of the future. That same software is now used 

by interior designers and architects to help plan new offices and 

homes. 

But, unfortunately, the overall rate of commercialization is not 

yet where it should be. We must do more to help good products get 

to market, and it is important that our Federal labs have an increased focus on enhancing the process. Not only will this bring 

new products and technologies to the market, but it will help create 

jobs and speed our economic recovery. 

For small firms already making marketable products, the Federal Government can be a critically important customer. Last year, 

the Federal marketplace grew by 9 percent, and today it is more 

important than ever that we ensure that the procurement process 

is fair for small businesses. Our entrepreneurs must have the tools 

they need to compete effectively and win Federal contracts. 

So, as Congress moves forward, we will be making procurement 

a priority. By reauthorizing and enhancing SBA’s contracting programs, we can ensure every small firm has a part to play in the 

innovation economy. 

This past Monday, President Obama spoke about the importance 

of investing in research and development, not just to spur the 

growth of jobs today, but to maintain our position as the world 

leader in science, innovation, and breakthrough technologies. 

Across the country, small businesses are already leading the 

way, and Federal laboratories are playing an important role in supporting their progress. It is my hope that we can build on their momentum and harness it, not only to strengthen small firms but to 

fuel our economy and to power the future of American innovation. 

So, again, I would like to thank everyone for being here. And, at 

this point, I will yield to Mr. Schock, our ranking member, for any 

opening comments. 

[The statement of Mr. Nye is included in the appendix.] 

Mr. SCHOCK. Good afternoon. Thank you, Mr. Chairman, for 

holding this hearing to study the impact that the roughly 1,000 

Federal labs across this country have in spurring economic growth 

3 

and opportunity in the States and local communities in which they 

operate. 

I would also like to extend thanks to each of our witnesses, who 

have taken the time to provide this Committee with their testimony and have traveled here today in person. 

Each year, the Federal Government spends about $143 billion on 

research activities, of which less than half is spent by Federal employees. That means there is a significant opportunity for Federal 

laboratories to engage in collaborative research with business or institutions within their local communities, providing a boost to the 

surrounding economy. 

The importance these laboratories provide to the domestic marketplace through the exchange of ideas, inventions, research, and 

innovation cannot be understated. A number of inventive advancements developed in this country can be directly attributed to research done in conjunction with these Federal laboratories. In my 

hometown of Peoria, Illinois, the National Center for Agricultural 

Utilization Research, or Ag Lab, was one of the first to discover the 

uses, benefits, and power of the penicillin bacteria. The innovation 

these laboratories invoke is a vital component to keeping good-paying research-and-development-related jobs right here in the United 

States. 

The success of these laboratories show that there is, in fact, an 

appropriate level of government involvement in the field of scientific research. However, it is important that we find what is the 

right level of involvement. Should the government be the sole proprietor of the innovative research done in this country? Or should 

we promote policies that engage private research, protect inventive 

property rights, and incentivize an equal participation in research 

and development from the private sector? It is important that we 

develop policies that continue to ensure our domestic industries 

participate in these fields and are assisted, rather than impeded, 

by the Federal Government. 

Today, I anticipate that we will hear several different accounts 

of how the Federal research laboratories from different agencies 

are working to ensure that they have collaborative entrepreneurial 

partners in the communities in which they work, whether through 

the universities in their own backyard or with local businesses. 

And I look forward to hearing how each has made working with 

their local community a priority in their business model. 

Additionally, I look forward to gaining insight into how some of 

these laboratories have been able to have a significant impact on 

the local economy, encouraging research-related businesses to 

flourish in the immediate areas. Specifically, what steps have these 

laboratories taken that are different from others? How can they be 

replicated by others to ensure that these research facilities are 

serving the American public, including small businesses in the 

area, rather than simply conducting research of interest to the bureaucrats here in Washington? 

It is also equally important that we hear from the small businesses here today. It is the direct role of this Committee to ensure 

the integrity of the contract process so that small businesses receive their fair share of Federal research and procurement dollars. 

4 

What adjustments could be made to the procurement or research 

award process with laboratories on some of these public-private 

ventures to ensure that small businesses can bring their innovative 

skills to assist the Federal Government and improve economic development in the area in which the labs are located? I look forward 

to the insights that they can provide regarding the ease or difficulty in which they are obtaining some of these contracts. 

Again, I thank all of the witnesses for traveling here today. At 

the end of this hearing, I hope we will gain a better understanding 

of what formulas or models work best for Federal laboratories to 

help promote economic growth and development with the local 

business community and in which they reside. 

With that, Mr. Chairman, I yield back. 

[The statement of Mr. Schock is included in the appendix.] 

Chairman NYE. Thank you, Mr. Schock. 

I would like to go ahead, and I am going to call on our witnesses 

to present their opening comments one by one. 

We have a 5-minute rule that we are going to try to ask you to 

stick by. I know sometimes that can be a challenge. But in order 

to help you with that, you will notice in front of you when you are 

speaking a lighting system. The green one indicate you have time 

left. When it gets to yellow, 1 minute. Red means your 5 minutes 

are up. So if you get to the red, I hope you will please try to go 

ahead and wrap up your comments. 

I would like to start by again thanking everyone for taking the 

effort to be with us and make the trip to be here today. 

And I would like to introduce, first, Ms. Cynthia Lee, who is the 

associate director of the Langley Research Center for NASA. Ms. 

Lee oversees the operations of the center and serves as senior adviser to the center’s director. Langley was founded in 1917 and is 

the Nation’s first civilian aeronautical research facility and NASA’s 

oldest field center. 

Ms. Lee, thank you for being with us today, and we are looking 

forward to hearing your comments. 

STATEMENT OF CYNTHIA LEE 

Ms. LEE. Good afternoon. I am Cindy Lee, the associate director 

at NASA Langley Research Center, located in Hampton, Virginia. 

Thank you for the opportunity to testify before the Subcommittee 

regarding the significant role of high-tech small businesses in the 

research being performed at NASA Langley. 

As you know, Langley is one of 10 NASA centers, and one of two 

facilities located in Virginia. NASA Langley provides a critical 

agency role through a diverse portfolio of work in aeronautics, exploration, science, space operations, and education. We are helping 

to transform the Nation’s air transportation system to ensure safer, 

environmentally friendly, and efficient air travel. We are contributing to the science that will enable better understanding of our 

home planet, and we are helping develop the vehicles to support future human space activities. 

There are currently about 3,700 employees at Langley, approximately half of whom are private-sector contractors working on or 

near-site. Of these private-sector employees, over one-third are employed by small businesses. During 2008, NASA Langley made a 

5 

total of nearly 900 awards to small businesses and obligated in excess of $150 million on both new and existing small business contracts for services ranging from commodities to research. 

Today, I am going to highlight three examples of small businesses providing high-tech, cutting-edge research to Langley. 

Science Systems and Applications, Incorporated, or SSAI, is a minority, woman-owned business of nearly 550 employees that is 

playing a critical role in science research and technology development. They contribute heavily to the Atmospheric Science Data 

Center that is located at Langley. This data center is one of the 

premier national repositories of atmospheric data important to understanding global climate change. Their efforts in data archiving 

and processing have resulted in major system performance improvements while significantly reducing costs. 

SSAI has continually shown a dedication to supporting the NASA 

mission, and has recognized the importance of attracting and retaining specialized expertise for Langley. In addition to their technical excellence, they provide outstanding services to the community and to their employees through training and their scholarship 

programs. SSAI was recently selected as Langley’s 2009 Small 

Business Prime Contractor of the Year. 

Analytical Services and Materials, or AS&M, is a minority, 

woman-owned business of approximately 130 employees. For many 

years, they have provided analytical and experimental services that 

have contributed to NASA mission success across high-visibility 

aeronautics and space exploration programs. AS&M employees are 

part of a formidable team that has delivered thousands of computational solutions to the Constellation Program. Acting upon recommendations of the Columbia Accident Investigation Board, 

AS&M employees provided key analyses leading to corrective actions for improved Shuttle safety. 

Responding to a 911 call from the National Transportation Safety Board, NASA brought AS&M experts in to help us analyze aircraft structural failures associated with airline accidents. Their 

work has been recognized with numerous awards, including the 

NASA Engineering and Safety Center Engineering Excellence 

Award and the 2006 Small Business Administration National 

Prime Contractor of the Year. 

Analytical Mechanics Associates, or AMA, is a small business of 

nearly 90 employees who deliver critical support to NASA’s exploration, science, and aeronautics programs. Their high-caliber team 

has provided key support to NASA’s Constellation Program, including analysis of human lunar architecture concepts; the Ares launch 

vehicles, and the Orion crew module landing system. 

AMA has provided critical support to NASA’s science missions to 

Mars, including modeling and simulation for entry, descent, and 

landing. They also supported the recent Inflatable Reentry Vehicle 

Experiment flight demonstration at Wallops Island. AMA was nominated this year for NASA’s prestigious George M. Low Award in 

the small business services category. 

Small businesses are important to Langley because they are innovative, cutting-edge, agile, responsive, and provide technical excellence. Because Langley realizes the value of this community, we 

are heavily engaged in outreach activities for small businesses. In 

6 

2009, we communicated with small businesses over 5,000 times. 

We also have a Small Business Administration Procurement Center Representative on site. NASA Langley has spent approximately 

one-third of our procurement budget on small businesses for the 

last 12 years, and we have exceeded our small business goals for 

the past 9 years. 

Again, I would like to thank you for the opportunity to appear 

before the Subcommittee today, and I look forward to addressing 

your questions. 

Chairman NYE. Thank you very much, Ms. Lee. 

I would like to now recognize Mr. Bruce Underwood, the technical manager of Wallops Space Flight Facility for NASA. Wallops 

Space Flight Facility was established in 1945 and is NASA’s principal facility for management and implementation of sub-orbital research programs. 

Mr. Underwood, thank you for being with us. 

STATEMENT OF BRUCE UNDERWOOD 

Mr. UNDERWOOD. Thank you, and good afternoon. My name is 

Bruce Underwood, and I am Chief of the Advanced Projects Office 

at NASA’s Wallops Flight Facility. I am pleased to be here today 

to share with you the successes of small businesses at Wallops. 

NASA’s Wallops Flight Facility, part of the Goddard Space Flight 

Center in Greenbelt, Maryland, is located in a remote area of Virginia’s eastern shore and is NASA’s principal facility for the management and implementation of suborbital research programs. 

Employing approximately 1,000 civil servants and contractor employees, Wallops is a major economic influence in the Maryland 

and Virginia regions, providing high-tech jobs in the areas of 

science and aeronautics. Wallops is one of the region’s largest employers and is the largest technical employer within 100 miles. 

Because of the nature of the mission and the remoteness of our 

campus, Wallops relies heavily on small businesses for support 

services. Wallops has found that there are intrinsic benefits that 

come with working with small businesses, including better customer focus, less bureaucracy, and often lower overhead costs. Wallops takes pride in being small but innovative and has found that 

the small businesses we work with share this important characteristic. 

Wallops currently has six active construction contracts, all of 

which have small businesses as the prime contractors. One of these 

contractors, Construction Development Services, Incorporated, is 

based closely in Norfolk, Virginia. CDSI performed the renovation 

of the X-85 launch building at Wallops Island, a contract that was 

awarded on February 20, 2008, in the amount of $1.1 million 

through the Small Business Administration’s 8(a) Program. 

Prior to the completion of the original period of performance, 

funding became available to award two options for the original contract. These two areas of work were for a fire sprinkler system for 

the building and for new fabric door systems. As a small business, 

CDSI was able to offer Wallops an exceptional price for sprinkler 

and door systems that resulted in a minimal cost increase to the 

contract. A new period of performance was established, and the 

work completed satisfactorily and ahead of schedule. 

7 

CDSI was an exceptional contractor to work with on the renovation of X-85, the range’s main meteorological station. Our launch 

range worked seamlessly during the construction period, which was 

a major concern. The supervision and coordination of this project 

was outstanding, as the contractor kept the project on schedule 

while balancing various subcontractors as well as several contract 

modifications during the life of the contract. 

In August and September, two new contracts were awarded to 

this 8(a) firm for work at Wallops. One is for a new fire detection 

system in all of Wallops’s buildings, and the other is for a grouping 

of small projects at other various facilities. 

In fiscal year 2008, Wallops awarded 59 new contracts to small 

businesses, adding to the already existing 46 open contracts with 

small businesses. Fiscal year 2008 total obligations for new contracts to small businesses were $5.5 million, with another $41.5 

million in modifications to existing contracts obligated. These numbers reflect the value of small businesses to Wallops and their important role in NASA’s work. 

Contract awards for Wallops are managed by the Goddard Space 

Flight Center, which works to ensure that small businesses continue to be a vital part of Wallops’s operation. As part of this process, Goddard’s Small Business Office reviews all procurement requests that are expected to exceed $100,000. Should there be qualified small businesses, the action is set aside for the small business 

community. In addition, all other actions that are not set aside and 

are above $550,000 are reviewed, and subcontracting goals are provided to be incorporated in the request for proposal and later into 

the contract of the successful offerer. Through these procedures, 

Goddard fosters opportunities for small businesses to provide their 

services in support of Wallops’ mission. 

While Wallops depends on small businesses for the success of its 

operations, the surrounding community relies on the success of 

Wallops to sustain and grow the local economy. The partnership 

between Wallops and small businesses is integral to a thriving 

economy on Virginia’s lower eastern shore. And we at NASA are 

committed to building upon the current successes of that partnership to the benefit of all those involved with and touched by it. 

Again, thank you for the opportunity to appear before the Subcommittee today, and I look forward to your questions. 

[The joint statement of Ms. Lee and Mr. Underwood is included 

in the appendix.] 

Chairman NYE. Thank you very much. 

I am going to yield to Mr. Schock to do the next introduction. 

Mr. SCHOCK. Thank you, Mr. Chairman. 

Welcome, Mr. Sebesta. 

Director Sebesta has been with the agriculture lab in my hometown of Peoria since November of 2008. Under his leadership, the 

lab works to develop new industrial and food products from agricultural commodities, as well as develop techniques that are used to 

control agricultural pests that decrease crop yields, pose health 

hazards, and limit exports for American crops. 

Director Sebesta has a long history in scientific research at the 

university and Federal level. He has been published nearly 20 

times and given numerous professional presentations around the 

8 

country on various research and development topics relevant to the 

agricultural community. 

Welcome, and thank you for traveling to be with us. 

STATEMENT OF PAUL G. SEBESTA 

Mr. SEBESTA. Thank you, Congressman. 

Chairman Nye, Ranking Member Schock, members of the Subcommittee, it is an honor to be here today to testify before you, and 

I thank you for asking me to attend. My name is Paul Sebesta. I 

am the center director of the National Center for Agricultural Utilization Research at USDA Agricultural Research Service Laboratory 

in Peoria, Illinois. 

Nationwide, ARS operates over 100 laboratories and employs more than 8,100 people, with a budget of approximately $1.2 billion. The center in Peoria currently employs over 245 people and 

has a budget of more than $35 million annually. 

ARS recognizes that small businesses are critical to our economic 

recovery and strength, to building America’s future, and to helping 

the United States compete in today’s global marketplace. The staff 

of the center also recognizes the fact that we are part of the local 

community and that the investments we make have significant impacts on the local economy. In fiscal year 2009, thus far we have 

made over $231,000 in purchases from 19 different small businesses in the central Illinois region. 

ARS strives to assist and protect the interests of small business 

concerns in order to preserve free, competitive enterprise, which 

will strengthen the overall economy of our Nation. ARS annually 

exceeds all Federal small business procurement preference program 

mandates, and its small business coordinators and procurement 

personnel are extremely conscientious in assisting Americans to 

create, build, and grow small businesses. Thus far in fiscal year 

2009, ARS has awarded 69 percent of its purchase contracts, or 

over $91 million, to small or disadvantaged businesses. 

In order to focus on the regional and local economic impacts of 

ARS’s contracting, I would like to focus on the Midwest. A recent 

review of prime contracts through the third quarter showed that 

ARS’s Midwest area, of which the Peoria center is a part, is on 

course to not only meet but, in most categories, to far exceed its 

fiscal year 2009 small business goals. 

The complete results of this survey, as well as the complete analysis of ARS’s contracting nationwide, can be found in the appendix 

of my testimony. 

The data reveals that two-thirds of all Midwest-area contract dollars have been awarded to small businesses. It also shows that the 

area has nearly tripled the 3 percent mandatory Federal-wide goal 

of contract dollar amounts to be awarded to service-disabled, veteran-owned small businesses. 

Examples of ARS’s Midwest area’s commitment to finding local 

small businesses and forging strong business partnerships are 

three NCAUR small business contractors in central Illinois that 

have been providing supplies and services to the center for several 

years. 

Maurer-Stutz is an architect and engineering firm who has an 

indefinite-delivery, indefinite-quantity contract with the Midwest 

9 

area office. Task orders issued to Mauer Stutz average $40,000 annually. 

Poly Generics Company has been providing Environmental Protection Agency-regulated hazardous waste pickup for over 5 years 

to NCAUR. Orders placed with Poly Generics Company average 

$33,000 annually. 

Herr Petroleum has been providing diesel for supplemental heating for the NCAUR facility for over 2 years. Orders placed with 

Herr Petroleum total approximately $23,000. 

Additionally, a new 5-year operations and maintenance contract 

for NCAUR has just been awarded to AMERITAC, a small business 

located in Concord, California, in an amount in excess of $10 million. The contract staffs approximately 37 local employees, which 

has created job opportunities in Peoria. Materials used in direct 

support of the operation of the facility are also provided under this 

contract. A significant portion of those materials are purchased locally from small businesses. 

The center in Peoria was established by Congress in 1938 and 

has occupied the same building since that time. In addition to 

being one of its oldest, the facility is also one of ARS’s largest, at 

over 270,000 square feet. Currently, we are in the midst of a major 

multiphase modernization project. The contracts associated with 

this project also present opportunities for small businesses and are 

a boon to the local economy. 

The current modernization contractor is Hammer Logistics, located in Caseyville, Illinois. The majority of work performed on the 

modernization contracts is subcontracted to local contractors, and 

materials are purchased through local suppliers. From 2000 

through 2009, $21.6 million in appropriated funds have been allocated to NCAUR for modernization. These construction projects 

create many jobs within central Illinois and stimulate the economy 

through material purchases. 

The American Recovery and Reinvestment Act will significantly 

advance this modernization project, as well as a large number of 

other ARS construction projects nationwide. The ARRA appropriated $176 million to ARS to conduct deferred maintenance 

projects on its facilities. 

Thirty-eight projects have been selected across the agency, of 

which Peoria is the largest. The total projected cost for the Peoria 

project is estimated to be $40 million, which ARS estimates will 

create approximately 435 jobs. 

As discussed earlier, ARS in the Midwest area have a strong history of awarding significant portions of contracted dollars to small 

businesses, and it is highly likely that this will continue as ARS 

works to obligate its ARRA funding. 

In conclusion, Mr. Chairman, ARS realizes that Federal procurement is associated directly with the economic well-being of firms, 

municipalities, and cities. The agency, in concert with its area offices, will continue to seek partnerships with small businesses and 

continue to not only meet but to far exceed Federal and departmental small business goals. 

Mr. Chairman and Ranking Member, thank you again for your 

invitation to testify today. I look forward to answering your questions. 

10 

[The statement of Mr. Sebesta is included in the appendix.] 

Chairman NYE. Thank you very much. 

I would like to go on now and introduce Dr. Hans Seywald, who 

is the president of Analytical Mechanics Associates, Incorporated, 

headquartered in Hampton, Virginia. AMA is a small business specializing in aerospace engineering, information technology, business 

analytics, and visualization solutions. 

Doctor, thank you for being with us today. 

STATEMENT OF HANS SEYWALD 

Mr. SEYWALD. Thank you, Congressman Nye, Congressman 

Schock, and distinguished members of the Small Business Subcommittee on Contracting and Technology. 

Thank you for the invitation and the opportunity to testify before 

the Committee. Specifically, we are here to discuss our experience 

in working with NASA, our role in generating innovative technology, and our success in stimulating local economic activity. 

We are sincere in our hope that small business continues to be 

the driver of America’s innovation engine. We seek not only to support NASA’s mission to lead the world in space, exploration, 

science, and aeronautics, but also to help ensure America continues 

to be an economic leader in the 21st century. Headquartered in 

Hampton, Virginia, home is where the heart is. Our passion is to 

help NASA Langley and Wallops Flight Facility in their honorable 

pursuits. 

Analytical Mechanics Associates, or AMA, is a small business 

celebrating almost 50 years of service to NASA and the industry. 

We specialize in engineering, information technology, visualization, 

and business analytics. Armed with this skill set and our passion 

to do excellent technical work, AMA has supported a broad range 

of past, present, and future NASA missions, including space shuttle, International Space Station, the Orion spacecraft and ARES 

launch vehicle developments for the Constellation Program, Mars 

missions, Earth science missions, and the Hyper-X flight experiment. 

AMA’s current management, Dr. Renjith Kumar and myself, took 

over the company in 1997 after economics and health forced the 

previous owners to sell the business. With just five employees and 

limited cash flow, the company was barely viable and could have 

folded at any time, but it didn’t. 

Our primary motivation in taking over the company had little to 

do with the ambition of running a business. Like so many small 

technical firms in their infancy, the primary objective was to do 

cutting-edge engineering research and development. Had the company gone out of business, an interesting small business innovative 

research grant that we were working on would have evaporated. 

We didn’t want that to happen. 

So that is our story, how two engineers evolved into entrepreneurs. We believe we are not alone. We believe that this is the 

true spirit of business in America, small business in America. 

The company survived in part because we were able to enter the 

company into the SBA 8(a) program. We were actually surprised 

that we were still solvent at the end of the first year. Not only had 

we not lost our life savings, we were able to pay ourselves a meaVerDate Aug 31 2005 11:18 Dec 11, 2009 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\52263.TXT DARIEN
11 

ger salary and, at the end of the day, made a profit. This exceeded 

our expectations. So we made a $5,000 donation to a local high 

school in an economically disadvantaged area. The school later told 

us that it was the largest donation that they had ever received. 

Let’s now fast-forward 12 years. Today, AMA has almost 100 employees with some full-time consultants. We have experts in multiple aerospace engineering disciplines, information technology, 

business analytics, modeling and simulation, and visualization and 

multimedia. 

The majority of our business falls under government contracts for 

NASA, but we have also started doing some work in the commercial sector. Over the last few years, our commercial business has 

fluctuated between 10 percent and 30 percent, with an overall increasing trend. 

In a hyper-competitive global market, it is not easy for a small 

business to establish a presence in the high-tech industry, but we 

are making good process. Could we have done it without the relationship to NASA? Absolutely not. 

Before we could cross over into the commercial market, we needed to assemble a critical mass of talent. The contract work at 

NASA enabled us to grow and retain these critical skills. In addition, being able to refer to our NASA work helped build the trust 

of new commercial clients. 

Today, most of the solutions that we provide to our commercial 

customers are spinoffs or extensions of technologies that we developed for our customers at NASA. Also, our work at NASA provides 

a somewhat steady funding stream, helping bridge funding gaps 

that we face in the much more volatile commercial sector. 

I think I need to skip a bunch of things. 

Let me briefly touch on the role in education. We, as a company, 

place high importance on education and its role in the wellbeing of 

our community and country. We are privileged to help mold and 

educate future generations of aerospace and IT professionals 

through our internship programs, oftentimes in collaboration with 

NASA. There is nothing that captures the imagination of young 

minds more than space flight. 

In conclusion, I would like to reiterate our sincere thanks for the 

opportunity to share our thoughts and story with the distinguished 

Committee. We would like to thank NASA for the continued support for almost 50 years. We are committed to the NASA mission 

and hope our efforts continue to help America pursue her highest 

goals. 

Thank you. 

[The statement of Mr. Seywald is included in the appendix.] 

Chairman NYE. Thank you very much, Doctor. 

I would like to go ahead now and introduce Mr. Chris Suber, 

president of Construction Development Services, Incorporated, 

based in Norfolk, Virginia. Construction Development Services provides general contracting, project management, design build, and 

consulting services to their clients and is a certified 8(a) small business established in 2000. 

Mr. Suber, thank you for being with us. 

12 

STATEMENT OF CHRIS SUBER 

Mr. SUBER. Thank you, Congressman Nye, Mr. Schock. And I 

would like to also thank my partner here today with me, Joe 

Slavinsky. 

Construction Development Services, or CDSI, began servicing the 

Hampton Roads area in 2000, performing residential and light 

commercial projects. In May of 2006, CDSI became certified as a 

small disadvantaged business 8(a) general contractor. 

This certification has allowed us to diversify and perform different types of construction projects, such as residential, institutional, commercial, and infrastructure. Each project has varied in 

cost and complexity with various scopes of work, including roofing, 

masonry, site work, HVAC, electrical, fire protection systems, sewage lift stations, and utilities. We have completed each project successfully by partnering with the government and understanding 

their needs and requirements. 

My primary customer is the Federal Government at the military 

bases located in Hampton Roads and NASA Wallops Island. We 

currently service Norfolk Navy Base, NASA Wallops Island, Little 

Creek Amphibious Base, Portsmouth Naval Shipyard and Medical 

Center, and Langley Air Force Base. 

In the last 3 years, we have completed over 75 different projects, ranging from $500 to $4.5 million. We have also consistently employed 20 to 25 personnel and employed approximately 75 different 

small, service-disabled-veteran-owned business, woman-owned 

businesses, and other subcontractors, vendors, and a multitude of 

tradespeople through this opportunity. These projects have been 

traditional design build and bid build, and they have all been 

awarded on a firm fixed price. 

CDSI strives to know government contracting. As a result, we 

are able to adapt and use our in-depth experience gained while 

working at other small businesses and my partner Joe’s experience 

as a Civil Engineer Corps officer in the Navy Seabees. Our goal is 

to be the Federal Government’s contractor of choice for any type of 

project, including renovations, design build, contingency operations, 

and emergencies. 

As Mr. Underwood testified, CDSI recently completed the renovation to launch project building X-85 at NASA Wallops Island. We 

demolished the existing facility down to its bare structural columns, concrete slab, and removed all exterior and interior walls 

and utility systems in total. We then renovated the facility, to include a new front entrance lobby area, which required pile-driving 

operations, new masonry/EIFS/storefront exterior, newly framed 

walls with interior walls, ceiling and floor finishes, along with a 

completely new electrical and HVAC system, men and women’s 

restrooms, three 30-foot fabric-type roll-up doors, along with a new 

fire alarm and sprinkler systems. All work was in compliance with 

all the latest ADA requirements. 

The project involved 15 different subcontractors from both the 

eastern shore and Hampton Roads area. The project created a multitude of job opportunities, both for CDSI and all of our vendors 

and subcontractors, of which 90 percent were small businesses 

themselves, and employing approximately 85 different people during the various construction phases of the project. 

13 

This project provided the scientists and technicians with far better working conditions, very modern finishes, amenities and utility 

systems which bettered the overall environment to conduct their 

research. 

We look forward to participating in similar type construction 

projects that improve the quality of life for researchers and, at the 

same time, help the economic climate of the local area. 

Thank you for this opportunity, and we look forward to answering any questions. 

[The statement of Mr. Suber is included in the appendix.] 

Chairman NYE. Thank you, Mr. Suber. 

Again, I am going to yield to our ranking member, Mr. Schock. 

Mr. SCHOCK. Thank you, Mr. Chairman. 

It is my pleasure to welcome back to Washington, D.C., Dr. Peter 

Johnsen, who is the chief technology officer for Biofuels Manufacturers of Illinois, or BMI, which is also located in Peoria, Illinois. 

BMI is assisting with the operation and construction of a biodiesel plant to be located in Mapleton, Illinois. BMI is also active 

in the development and education of the pennycress crop as a renewable energy source. 

Dr. Johnsen has 30 years’ experience at the university, government, and private-sector levels and the research and development 

field, helping to bring scientific innovations into the marketplace. 

Dr. Johnsen is also the former director of the agricultural lab in 

Peoria, and in 2004 he was named the Federal laboratory director 

of the year. 

Dr. Johnsen, appreciate you coming to D.C. And joining us here 

today, and I look forward to your testimony. 

STATEMENT OF PETER B. JOHNSEN 

Mr. JOHNSEN. Mr. Chairman and Congressman Schock and members of the Committee, thank you for the invitation to testify before 

you today on the importance of small businesses working with Federal research facilities to promote innovation and entrepreneurship. 

I believe that I may have a unique perspective in that I have 

been both a director of a national laboratory and am also now involved in several small technology companies working with Federal 

research facilities. I spent 20 years with USDA Agricultural Research Service and 12 of those as the director of the National Center for Agricultural Utilization Research in Peoria, Illinois. 

And as a scientist and administrator, I was an early user and 

adopter of the National Technological Transfer Act, or the CRADA, 

Cooperative Research and Development Authority, to work with 

many companies to commercialize new discoveries. I have seen 

firsthand the benefit, and even the necessity, of Federal laboratories working with the private sector in creating economic value 

from basic science discoveries. 

Since leaving the government, I have been involved with several 

companies that have approached technology commercialization in 

very different ways. In one, we took fundamental knowledge discovered by a USDA laboratory and refined the concept to develop a 

commercial product and methods to manufacture an advanced 

biobased product. 

14 

Absorbent Technologies, Incorporated, makes ZEBA, a starchbased ′′hydrogel′′ which holds and releases water similar to a 

sponge below the soil. Each ZEBA granule holds 500 times its 

weight in water and reduces the amount of water and nutrients required to produce greater yields and higher-quality crops. This 

company made use of the CRADA process early on and quickly 

achieved results that gave it the ability to obtain venture capital 

funding to bring its products to the marketplace. Today, we are 

selling this innovative product for commercial agriculture and lawn 

and garden applications in more than 10 countries worldwide. 

I also serve as the chief technology officer of Biofuels Manufacturers of Illinois, as Congressman Schock mentioned. Our plan is 

to build and operate a production facility for biodiesel in central Illinois. But what distinguishes our effort is that we have been working with the USDA ARS to develop a new energy crop called 

pennycress. Pennycress is a member of the mustard family that 

has seeds with 36 percent oil, or twice that of soybeans, that can 

be used to make high-quality biodiesel fuel. 

The crop is planted in the fall after corn harvest, grows as a winter annual, and then is harvested in late spring before soybean 

planting. So farming pennycress uses traditional equipment and allows farmers to grow two crops in 1 year, earning additional income. And, as a nonfood crop that does not displace food crops from 

the land or marketplace, it avoids both the food-versus-fuel and the 

indirect land use controversies completely. 

The economic impact of this new crop is significant. A single bio- diesel plant will purchase $100 million of pennycress seed each 

year. And Illinois alone has the capacity for 18 such operations, 

with the economic impact of pennycress as an energy crop across 

the Midwest corn belt being extraordinary. 

It was USDA research scientists who discovered the potential of 

pennycress as a remarkable new energy crop, but the only way for 

the Nation to benefit from this discovery was for the government 

to collaborate with the private sector. However, there are a number 

of issues that have made it very difficult for a small business like 

ours to work effectively with the government in completing this. 

We have made significant investments in sponsoring research at 

two Federal laboratories and the university through CRADA agreements to develop this crop. And, clearly, it takes significant financial upfront capital to create such an energy crop, develop its logistics infrastructure, and optimize processing technology. 

Because this energy crop meets the strategic objectives of both 

USDA and DOE in creating a sustainable energy source, we have 

competed for competitive grants to develop this crop. One of the requirements of these grant applications is that a 20 percent financial match be made by the applicant, and for small businesses like 

ours this is a very difficult problem. 

It is ironic that BMI is funding USDA and university research 

rather than being able to obtain contracts from them to perform 

the important task of creating a new environmentally friendly and 

sustainable energy source. It would be helpful if the Committee 

were to examine the policies that require small businesses to provide significant financial matches in grant application processes. 

This is a very difficult process for the small companies and limits 

15 

the scope and duration of the project proposals. We would propose 

that these be eliminated entirely or be scaled to the resources of 

the small technology company. 

In my many years as a university professor, director of a government laboratory, or in a private company, I have seen the evolution 

of laws and policies that enhance the ability of the Nation to benefit from public investment in science and technology. I hope that 

I have provided information today and in my written statement 

that this Committee will consider in its work to maximize the opportunities of small businesses to work with Federal research laboratories to promote entrepreneurship and innovation. 

Thank you for this opportunity, and I would be happy to answer 

questions at the appropriate time. 

[The statement of Mr. Johnsen is included in the appendix.] 

Chairman NYE. Great. Thank you. 

And, again, thank you to all of our panel members for being here 

and for your opening statements. 

I am going to ask a number of questions and then offer opportunities for the other members of the Committee to ask some questions. 

I want to just start with Ms. Lee. I want to follow up on something you mentioned in your opening statement. And you outlined 

some successful examples of small businesses with whom you are 

working through Langley, one of whom is here. And, in fact, you 

mentioned that Langley had exceeded its small business target, I 

think you said, over the last 9 years in a row, and I am impressed 

to hear that. 

And I was hoping you would maybe provide us with a little bit 

more detail on some, perhaps, some examples that we can use and 

apply to others and tell us, kind of, how you did that or if there 

are particular advantages at Langley or things that you have done 

that have helped you surpass that goal and what might we learn 

from your example. 

Ms. LEE. Thank you, Chairman. I would be happy to. 

So, for us, small business is a contact sport. And we have a small 

business office located at Langley that does significant marketing 

and outreach. They counsel small businesses. They provide things 

like an automatic e-mail system that is actually a NASA system, 

such that companies can provide their area of expertise or their 

core competency and automatically gets update from FedBizOpps 

on either government-wide or NASA procurements. 

But we also do a host of other things. We do conferences, expos 

and market research to ensure we know what companies are out 

there and what they are providing. And then regionally, we do a 

lot of things. 

Overall in our procurement office, 63 percent of our procurements—this is not just small business—are for funds that are for 

work performed in Hampton Roads. And so, regionally we have a 

Hampton Roads Technology Council. We have an AeroSpace Day, 

where we match local businesses with NASA, and together we go 

up to the General Assembly and we talk about the aerospace community and what we bring to the Commonwealth. So we raise 

awareness in that way for our small businesses. 

16 

We have texpos, where we invite industry in so that they can see 

the areas of work that NASA’s interested in. And then we have 

open houses, as well. 

And then a couple of things that are a little bit unique to NASA 

Langley, we have things called tech fusion and tech infusion workshops. Now, tech fusion workshops are between our prime contractors and SBIR—or small business innovative research—proposal 

winners, such that those prime contractors can be made aware of 

those innovations. And then we target our prime contractors with 

additional goals beyond our own goals. So we ask them to meet 

some of them upwards of 30 percent goals. So, goals just like ours 

that they have to meet. And so it is incumbent upon them to understand what our small businesses are doing. 

And then, likewise, we have many of our researchers that may 

not be aware of the contribution small businesses can make. So we 

have what are called tech infusion workshops, where we bring 

NASA program folks together with the SBIR community so that 

they can share and learn about each other’s needs and contributions that they can make. 

So, there are a host of things that we do. It is not any one answer that have made us successful, but it is continuing to get out 

there and understand the community and then set stretch goals for 

ourselves that has made us successful. 

Chairman NYE. Okay, great. Well, appreciate that. 

And I would like to follow that up by a question to Mr. Underwood. Wallops has been doing a lot of good work. And I wanted to 

note that, next year, a Taurus II rocket will launch to supply the 

International Space Station, noting also that there are additional 

commercial launch opportunities developing. 

Can you please just give me some thoughts on where you see 

that going and how that will affect the local small business community? 

Mr. UNDERWOOD. Yes, certainly. 

It is quite exciting, actually, for us. And we kind of view it as 

a major landscape changing, both figuratively as well as literally, 

in what is happening at Wallops, because over the next year and 

a half we have at least 40 and as much as perhaps 90-some million 

dollars’ worth of construction activities that we are going to have 

to undertake in order to create the infrastructure to accommodate 

the Orbital Sciences Corporation’s needs. Some of that will be from 

Federal investments, and some will actually be through the Commonwealth of Virginia’s investments in their infrastructure 

through our commercial space port. All of us in this exercise will 

be utilizing small businesses to one degree or another to help with 

those construction activities. 

And then, along with that are obviously, beyond the facilities, the 

brick-and-mortar aspects of accommodating the new vehicle and 

the growth in our launch activities. We are actually going to have 

Orbital Sciences Corporation bringing a large contingent of new 

employees to the area, of which they are going to be needing a lot 

of services, themselves, purely on the commercial side of what is 

going to happen. They are going to need workforce for engineers 

and laborers. They are also going to be needing component parts. 

All of these opportunities most easily or most effectively are proVerDate Aug 31 2005 11:18 Dec 11, 2009 Jkt 000000 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\52263.TXT DARIEN
17 

vided by the local economy as opposed to having to bring them in 

from outside. So the first place that all of us tend to look is in our 

own backyards for these opportunities. 

So I think the combination of what the Federal Government is 

going to be doing on the NASA side, as well as what the State, 

THE Commonwealth of Virginia, as well as what Orbital Sciences 

themselves are going to be doing, are going to create an enormous 

amount of opportunities over the next year. It is quite exciting at 

Wallops. 

Chairman NYE. Have you found that finding small business local 

in the community has been a challenge in terms of your interest 

in local small business community makeup? Or is that something 

that has worked out well? 

Mr. UNDERWOOD. It is kind of a constant supply-and-demand juggle, which is, if there aren’t the opportunities, then it takes a while 

for the companies to react when they do show up. So, in which 

cases, many of us at Wallops, both on the commercial side and the 

government side, are working with organizations such as the local 

community colleges and things like that to make sure that we are 

waking them up to the opportunities that are forthcoming. So then 

we hopefully have a workforce that is interested in the local folks 

coming out of the high schools, and go into area where we can keep 

them at home and actually employ them. So that is one particular 

aspect of what we are doing, working with the local community colleges and universities to be aware of the opportunities that are 

coming. 

But, yeah, in many cases, the growth happens faster than we can 

accommodate it, so we have to look elsewhere. But that is not our 

first means of searching. 

Chairman NYE. Okay. Thank you. 

I want to ask both Dr. Seywald and Mr. Suber, you mentioned 

that your businesses are 8(a) businesses. And I want to actually 

take the opportunity to ask you if you could comment on how the 

program has been helpful in terms of opening doors specifically for 

your companies, but also if there are any challenges that you have 

had with the program and if there are things that you would like 

us to know in terms of how we might make the programs work better or anything that you would change about it. 

And I will offer the opportunity to both of you to comment. 

Mr. SEYWALD. The program was absolutely essential for us in the 

beginning when we were, like, five people. It means, like, three income-generating people and two on overhead. SBA helped us tremendously in getting on the 8(a) program. And once we were on 

the 8(a) program, we were more attractive to the prime contractor 

as a teaming partner. 

Small businesses, microbusinesses, like less than 10 people, have 

really no way of interacting directly with NASA or other Federal 

labs. It is typically as a subcontractor, and there it is more like 

throwing darts. It is very difficult making yourself attractive for a 

prime contractor, and it is hard to pick the right one if you have 

a choice. 

So, if the prime contractor loses—and the prime contractor usually loses not because of the sub not performing well or not having 

a great background; it is based on the qualification of the prime. 

18 

So performance of the sub is not really a big issue there in the potential survival or demise of the small business. 

Yes, the SBA program was extremely helpful in the beginning. 

And, without it, we would probably not have survived. 

Mr. SUBER. Like Dr. Seywald said, it also made us more attractive, as well. Some of the challenges that we faced were, I guess, 

not similar to the service side of it, but bonding was an issue. We 

know that anything over the 35 mark you need a payment bond, 

and anything over 100,000 requires a performance and a payment 

bond, which is directly tied back to the capital of the company. 

And so, many times, you know, if personally you, as the individual owner or group of owners, may not have all of the capital 

necessary to get the appropriate bonding, you can have all of the 

capabilities to service a contract but not be able to be awarded it 

because of the bonding. 

The other piece of the challenge, I would say, is getting to the 

right person that could help you find or get that contract at a base 

where you don’t already have a relationship. For Langley, for 

NASA Wallops, for all of the bases that I mentioned, we had previous relationships, where we knew someone, where we could get 

past the gate, get in the door, talk to the right people. That seems 

to be a challenge. 

So if we had an opportunity—you can’t always get to the right 

folks, like Ms. Lee said, at some forum or something like that. If 

there was another way that you can get to the right person, that 

would be helpful. 

But it was critical to our success, as well. 

Chairman NYE. Great. 

And I want to offer, actually, an opportunity generally for any of 

the three of you, the business owners here, to provide any more 

comments on the contracting process. 

And if there are other things that you think particularly work 

well or barriers that you have identified that make it difficult for 

you, I want to offer an opportunity for anyone to add additional 

comments on things that they think we ought to know. 

Mr. JOHNSEN. Well, one of the things that is a little bit different 

for the agricultural community from, say, NASA or Department of 

Energy is that there are not a lot of technology contracts that are 

awarded to do discovery or development work. The only funding 

that comes in that direction tends to be in the form of competitive 

grants, and those are very, very difficult. 

I mentioned one issue with the matching process, but there are 

other elements that make small businesses be disadvantaged in 

competing for those grant systems that relate to, for example, in 

the loan guarantee programs that require that you have a money 

center bank cosponsor your application with a loan guarantee program. 

Where we have been able to put together a consortium of community banks who are willing to help us with the project, the USDA 

requires that a large money center bank, with the experience of a 

similar-size project, be the lender of record. And that means that 

small community companies and banks can’t build the capacity to 

go after the larger kinds of opportunities. 

19 

So that is another problem for small businesses within the agricultural sector. 

Chairman NYE. Go ahead. I will yield to Mr. Schock. 

Mr. SCHOCK. I am just curious, for the benefit of the Committee, 

if you can talk a little bit more about that. I heard you say that 

they not only require a specific bank but also that bank have a history on like projects. 

Mr. JOHNSEN. Exactly. 

Mr. SCHOCK. Well, how does that spur innovation? If you are 

doing something new, how can a bank have history on this kind of 

specific project? 

Mr. JOHNSEN. That is the conundrum. It is sort of a catch-22, in 

that the loan guarantee programs are typically designed around development of rural infrastructure. And so, these are sort of classic 

construction projects. But if you want to come forward to build a 

new technology, a new kind of operation, you sort of fall in the gap 

with the rules that surround both the expertise of the company and 

the expertise and the resources of the lending institution. 

And so it has just been very difficult to kind of move an innovative project forward with these traditional programs. 

Mr. SCHOCK. And do you know, based on what you are being 

told, are those rules? I mean, in other words, are those regulations 

promulgated by rules? Are your Federal folks telling you—I won’t 

call them what I was going to say— 

Mr. JOHNSEN. Well, I will tell you where the language resides. 

The language resides in the Federal Register, a description of the 

program. And so, when we get ready to respond to the requirements of the program, we have discovered that we can’t qualify 

even to make the application, because we cannot get a money center bank to—because there are none in the central Illinois and the 

Midwest that are prepared to help us move a proposal like that forward. 

But, like I said, we have put together a consortium of community 

banks, who have very solid financial standing now, a lot of money 

to lend. But they cannot go before the—and this is the Rural Development Agency that we—and we can talk more offline about this 

specific program. It is a 9003. It goes on and on. 

Mr. SCHOCK. Okay, great. Thank you. 

Chairman NYE. Well, I appreciate that. It sounds like you have 

highlighted a very practical challenge. 

Again, I offer the opportunity to anybody else on the business 

side that wanted to comment on other challenges, if you have any. 

Mr. SEYWALD. In our experience, the contract bundling made it 

very difficult. Small businesses, even if they have great capabilities, typically cannot go directly to NASA and get these micro contracts. They really depend on the prime contractors. And so, it is 

not often the capability of the small business, it is the relationship 

to the prime contractor that plays a major role. 

Chairman NYE. Okay. Yeah, and of course that is something that 

we have heard a number of times. 

Again, I also want to offer an opportunity to our agency representatives to make any comments about particular tools that 

they have found useful in attracting small businesses or helping 

achieve small business contracting goals or any obstacles that you 

20 

find that you think we might be helpful in solving or that we at 

least ought to be aware of. 

Ms. LEE. I think one thing—you mentioned the Small Business 

Administration. And one of the things that we make sure in our 

small business office is to refer folks to the Small Business Administration Small Business Development Center, because we have 29 

of those in Virginia, and it really does assist those small businesses 

in how to start up. 

We also send folks to the DOD Procurement Technical Assistance 

Centers, or PTACs. That helps a small business learn how to do 

business with the Federal agencies. And so we hear from our small 

businesses that that has been very effective in helping them learn 

how to work with Federal agencies. 

Now, on the other side, once we have a contract with a small 

business, we look at a little bit different approach in terms of what 

they have to do in the way of reporting. Often, with our prime contractors, we have very rigorous costing performance reporting requirements, earned value management and things like that, that 

would be required. For small companies we don’t necessarily require that level of rigor, because we know that that is something 

a small company wouldn’t be able to do for us. And so, while we 

do expect costing performance that is excellent, we still look at different ways to help them do that reporting for us. 

Chairman NYE. Okay. Thanks. 

I think I will yield now to Ranking Member Schock for any other 

questions that he might have. 

Mr. SCHOCK. Thank you, Mr. Chairman. You have asked a lot of 

good questions, so I don’t have as many left. 

But I would ask specifically for one of my guests, Dr. Sebesta, 

if there is anything that we can be doing here in Washington, either through policies or providing you dollars for infrastructure, 

that would better help you create, kind of, agricultural utilization 

clusters there in Peoria or allow for better synergies to take place. 

Mr. SEBESTA. Thank you, Congressman. 

We are always looking for opportunities to partner with small 

business and with creative companies, such as BMI, in the development of technologies that come out of our research center. And perhaps we could have another dialogue later on how we might be 

able to do that and bring people together that we need to have that 

conversation. 

Our scientists are evaluated by the impact of their research, and 

that impact is measured by the amount of private-sector partners 

we have on that research and how that research is bettering American lives. And so we need to look at how we can develop that further. 

Mr. SCHOCK. Okay. Very good. 

Dr. Johnsen, I am interested in your reaction to the 2007 energy 

bill. The Small Business Administration, as a result of the 2007 energy bill, was required to create some special types of venture capital that invest in small businesses involved in the development of 

renewable fuels. 

And I am wondering if you are aware of that and whether such 

a venture capital company would help your company, specifically 

BMI. 

21 

Mr. JOHNSEN. We are aware of that. One of the challenges for 

most venture capital systems and programs is that they require 

that there be a large body of intellectual property protection—that 

is, a barrier to entry from other companies. 

When you are trying to do something similar to BMI, which is 

to create a whole national system of growing pennycress, where 

many other biodiesel companies would then take a crop that has 

so many economic and environmental and social advantages and 

make a renewable fuel, a company like ours, which is almost doing 

the public duty of the USDA in developing these kinds of activities, 

sort of falls short in the eyes of the venture capitalists. Because 

they are looking for, how can I invest in a company, make sure it 

makes the most money relative to anybody else that competes. And 

so, for a company like us that is trying to invent a system which 

is open, which serves the greatest national need, is a very difficult 

thing for venture capital. 

That being said, I think that those kinds of programs can enhance something that we have in Peoria called PeoriaNEXT, which 

is a partnership between, say, the Ag lab, Bradley University, Caterpillar research and development, the hospitals, where we are trying to actually create a business cluster around the research and 

development technologies. 

One of the things that PeoriaNEXT lacks is, sort of, operating 

funds to develop the relationships between the Ag lab, the scientists at Bradley University, the scientists that are at Caterpillar, 

where they can create businesses so that those businesses can then 

grow and compete for opportunities. 

So those kinds of, sort of, nurturing of that infrastructure to 

grow clusters is something that is a shortfall in our region and 

would be very helpful to growing small businesses that are particularly around science, technology, and agriculture. 

Mr. SCHOCK. Very good. 

That is all I have. 

Chairman NYE. Great. 

Well, this is very helpful to us. And I want to thank, again, our 

panelists for taking the time to be here today and for the hard 

work that you are doing out in our communities to try to spur innovation. I appreciate your being here and sharing your thoughts and 

your expertise with us and wish you all a very safe trip back home. 

Thank you very much for being here. 

I am going to ask for unanimous consent that members have 5 

days to submit statements and supporting materials for the record. 

Without objection, so ordered. 

Chairman NYE. This hearing is now adjourned. 

[Whereupon, at 1:50 p.m., the Subcommittee was adjourned.] 

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Æ