An Overview of the Dynamic Between the Defense Production Act and Small Contractors (House Small Business subcommittee hearing, June 24, 2020)
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The printed transcript of a hearing titled An Overview of the Dynamic Between the Defense Production Act and Small Contractors, on June 24, 2020 before the Subcommittee on Contracting and Infrastructure of the House Committee on Small Business, 116th Congress (Small Business Committee Document Number 116–083). The subcommittee met via Webex with Chairman Jared Golden presiding, and opening statements are by Jared Golden and Pete Stauber. The witnesses are Ian Patterson of Koprince Law, LLC; David Black of Holland & Knight, LLP; Mary Lockhart of PEMDAS Technologies & Innovations, testifying for the National Defense Industrial Association; and Traci Tapani of Wyoming Machine, Inc. Their prepared statements are printed in the appendix, with no written questions or additional material listed.
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“An Overview of the Dynamic Between the Defense Production Act and Small Contractors (House Small Business subcommittee hearing, June 24, 2020).”
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AN OVERVIEW OF THE DYNAMIC BETWEEN THE
DEFENSE PRODUCTION ACT AND SMALL
CONTRACTORS
HEARING
BEFORE THE
SUBCOMMITTEE ON CONTRACTING AND
INFRASTRUCTURE
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
HEARING HELD
JUNE 24, 2020
Small Business Committee Document Number 116–083
Available via the GPO Website: www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
41–294 WASHINGTON : 2020
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELÁZQUEZ, New York, Chairwoman
ABBY FINKENAUER, Iowa
JARED GOLDEN, Maine
ANDY KIM, New Jersey
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
KWEISI MFUME, Maryland
JUDY CHU, California
DWIGHT EVANS, Pennsylvania
BRAD SCHNEIDER, Illinois
ADRIANO ESPAILLAT, New York
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANGIE CRAIG, Minnesota
STEVE CHABOT, Ohio, Ranking Member
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
TROY BALDERSON, Ohio
KEVIN HERN, Oklahoma
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
TIM BURCHETT, Tennessee
ROSS SPANO, Florida
JOHN JOYCE, Pennsylvania
DAN BISHOP, North Carolina
MELISSA JUNG, Majority Staff Director
JUSTIN PELLETIER, Majority Deputy Staff Director and Chief Counsel
KEVIN FITZPATRICK, Staff Director
(II)
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CONTENTS
OPENING STATEMENTS
Page
Hon. Jared Golden ................................................................................................... 1
Hon. Pete Stauber ................................................................................................... 3
WITNESSES
Mr. Ian Patterson, Attorney-Senior Associate, Koprince Law, LLC, Lawrence,
KS .......................................................................................................................... 4
Mr. David Black, Attorney-Partner, Holland & Knight, LLP, Tysons, VA ......... 7
Ms. Mary Lockhart, President & CEO, PEMDAS Technologies & Innovations,
Alexandria, VA, testifying as the Chair of the Small Business Division
for the National Defense Industrial Association (NDIA) .................................. 9
Ms. Traci Tapani, Co-President, Wyoming Machine, Inc., Stacy, MN ................ 11
APPENDIX
Prepared Statements:
Mr. Ian Patterson, Attorney-Senior Associate, Koprince Law, LLC, Law-
rence, KS ....................................................................................................... 24
Mr. David Black, Attorney-Partner, Holland & Knight, LLP, Tysons,
VA ................................................................................................................... 31
Ms. Mary Lockhart, President & CEO, PEMDAS Technologies & Innova-
tions, Alexandria, VA, testifying as the Chair of the Small Business
Division for the National Defense Industrial Association (NDIA) ............ 43
Ms. Traci Tapani, Co-President, Wyoming Machine, Inc., Stacy, MN ......... 45
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
None.
(III)
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AN OVERVIEW OF THE DYNAMIC BETWEEN
THE DEFENSE PRODUCTION ACT AND
SMALL CONTRACTORS
WEDNESDAY, JUNE 24, 2020
HOUSE OF REPRESENTATIVES,
COMMITTEE ON SMALL BUSINESS,
SUBCOMMITTEE ON CONTRACTING AND INFRASTRUCTURE,
Washington, DC.
The Subcommittee met, pursuant to call, at 1:00 p.m., via Webex,
Hon. Jared Golden [chairman of the Subcommittee] presiding.
Present: Representatives Golden, Crow, Davids, Stauber, and
Balderson.
Chairman GOLDEN. So let’s get started.
I call this hearing to order. Without objection, the Chair is au-
thorized to declare a recess at any time.
I want to thank everyone, especially our witnesses, for joining us
today for our Subcommittee’s remote hearing. I want to make sure
to note some important requirements.
Let me begin by saying that standing House and Committee
rules and practice will continue to apply during remote pro-
ceedings. All Members are reminded that they are expected to ad-
here to these standing rules, including decorum, when they are
participating in any remote event.
With that said, the technology we are utilizing requires us to
make small modifications to ensure that the Members can fully
participate in these proceedings.
During the covered period as designated by the Speaker, the
Committee will operate in accordance with H. Res. 965 and subse-
quent guidance from the Rules Committee in a manner that re-
spects the rights of all Members to participate.
House regulations require Members to be visible through a video
connection throughout the proceeding, so please keep your cameras
on. Also, if you have to participate in another proceeding, please
exit this one and log back in later as soon as you can.
In the event a Member encounters technical issues that prevent
them from being recognized for their questioning, I will move to the
next available Member of the same party, and I will recognize that
Member at the next appropriate time slot, provided they have re-
turned.
Should a Member’s time be interrupted by technical issues, I will
recognize that Member at the next appropriate spot for the remain-
der of their time once their issues have been resolved.
(1)
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2
In the event a witness loses connectivity during testimony or
questioning, I will preserve their time as staff work to address the
technical issue. I may need to recess the proceedings to provide
time for the witness to reconnect.
And, finally, remember to remain muted until you are recognized
to minimize background noise. Having said that, I will also give ev-
eryone a friendly reminder because everyone who has done one has
probably made the mistake of beginning to speak, without
unmuting themselves. So keep that in mind.
In accordance with the rules established under H. Res. 965, staff
have been advised to mute participants only in the event there is
inadvertent background noise. Should a Member wish to be recog-
nized, they must unmute themselves and seek recognition at the
appropriate time.
I will now give a brief opening statement.
The Defense Production Act, or DPA, was enacted 70 years ago,
after the outbreak of the Korean War, in an effort to spur indus-
trial production to meet wartime needs. At that time, the Nation
was ill prepared for another war following World War II. To bolster
our country’s defense infrastructure, the President requested au-
thorities to mobilize our domestic industry to increase production
of military equipment and much needed supplies.
Since then, its authorities have been expanded to include a num-
ber of purposes, including emergency preparedness and response.
With that said, our country has faced an unprecedented threat
to the life and well-being of its citizens: The COVID-19 pandemic.
In response to the pandemic, and at the urging of congressional
leaders, the President invoked the DPA on multiple occasions to
compel companies to meet the shortfall of medical equipment and
supplies.
And while it has been used mostly as a tool to meet the sky-
rocketing demand for personal protective equipment and ventila-
tors, one thing is clear: There are still more opportunities to lever-
age its authorities as part of a coordinated response to the evolving
threat to our Nation.
And with that, we must look for ways to use the DPA and its
authorities to advance our small businesses, an opportunity other
members of this Committee and I have previously highlighted for
the Executive.
Small businesses have been hit especially hard by the pandemic.
From cash flow concerns to availability of materials, the economic
devastation cannot be underestimated.
In particular, DPA Title III authorities provide a series of eco-
nomic incentives that seek to maintain, restore, and expand domes-
tic industrial capabilities. The CARES Act provided $1 billion to
carry out the responsibilities of Title III of the DPA, specifically to
prevent, prepare, and respond to the COVID-19 pandemic.
It is not only our responsibility but our duty to ensure that small
businesses engaged in the manufacture of medical supplies, as well
as those in the defense industrial base, have the maximum oppor-
tunity to participate in Title III programs.
Access and participation in these programs will supplant lost
revenues due to COVID-19 and guarantee the livelihood of small
businesses.
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Moreover, recognizing the ingenuity and nimbleness of our small
businesses, this investment will translate into innovation and the
acquisition of much needed resources for the Federal Government.
And so today’s hearing will serve as an opportunity to examine
the DPA and its main authorities, including those provisions in the
law that establish a preference for small firms.
Additionally, we hope to discuss potential legislative measures to
strengthen the DPA for small businesses.
Finally, we wish to hear more about the challenges that small
businesses are facing due to COVID-19 and how leveraging Title
III authorities could provide substantial relief.
I look forward to hearing from our distinguished witnesses today
about the DPA, its application to the COVID-19 relief and response
efforts, and the dynamics between the DPA and small business
contractors.
Again, I want to thank the witnesses for joining us here today,
and I now yield to the Ranking Member, Mr. Stauber, for his open-
ing statement.
Mr. STAUBER. Thank you, Chairman Golden.
You know, the events of this year have underscored the fragility
of our medical preparedness as a Nation. In times of unprecedented
disasters, it is critical that we come together to leverage the im-
mense power and capability of the American workforce to help pull
our country through crisis.
Indeed, we have already seen an aggressive ground flow of volun-
teer and voluntary activity from businesses, particularly small
businesses leaping at the opportunity to help their neighbors and
frontline healthcare workers during this COVID-19 pandemic.
And while the efforts of these businesses are commendable,
sometimes the needs of the country are so urgent and so great that
it becomes necessary to rapidly mobilize the full power of the
United States industrial base to ensure supplies for our national
defense are produced and distributed appropriately.
This is where the Defense Production Act takes center stage. In-
voking the DPA is not a step to take lightly. Its authorities upend
some of the essential tenets of Federal contracting principles, such
as full and fair competition. Furthermore, the authorities provided
under the DPA can compel a company to do business with the Fed-
eral Government even if it does not wish to do so and impact its
ability to manage its priorities as it sees fit.
Once the DPA is invoked and a business is tapped, it must
prioritize DPA ordered contracts above all others it may have in
the queue, and it has limited choice but to comply. While these are
significant departures from the typical Federal contracting frame-
work, Congress has decided time and again, through dozens of re-
authorizations of the DPA, that these drastic measures can become
necessary in times of significant national strife, times such as now.
When the DPA is activated, businesses tasked with DPA orders
must reshuffle existing priorities and work with their suppliers and
subcontractors to ensure the government’s needs are met first and
foremost. DPA orders, therefore, impact an entire chain of busi-
nesses, from the large prime down to the small subcontractor sup-
plier.
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The role small businesses play cannot be overstated. Without
these companies, we would not be able to produce the ventilators,
the masks, and the essential PPE and other medical equipment
necessary to protect healthcare workers at the levels needed to sti-
fle this pandemic.
The critical role small businesses play applies across the board
to all DPA invocations, whether it be for military preparedness,
natural hazard response, or domestic preparedness. Indeed, the
DPA even contains a special preference for issuing contracts to
small businesses under its authorities, directing the President to,
in quotation marks, accord a strong preference for small business
concerns which are subcontractors or suppliers.
Regardless of whether the disruption caused by DPA orders are
welcome or not, it is clear that we depend on a vast network of
small business contractors and suppliers to generate the essential
items needed for national defense.
I hope through the insights of our esteemed panelists here, we
will be able to understand how the DPA interacts with small busi-
nesses, learn more about what the actual operation impacts of the
DPA on our small businesses, and understand what Congress can
do to ensure small businesses have the opportunity to participate
and contribute to the national defense through the DPA.
Mr. Chair, I yield back.
Chairman GOLDEN. Thank you very much, Mr. Stauber.
So I am going to do my best to move on. I understand that my
microphone is muffled, so I am going to quickly make the introduc-
tions for the first panelist, and then I will be calling in from my
phoneline while you are making your first presentation. I think
that is probably the easiest way to move forward for the time
being.
So with that, I am going to introduce our witnesses. Our first
witness is Mr. Ian Patterson.
Mr. Patterson is a senior associate with the law firm Koprince
Law, LLC. He has a wide range of experience with Federal pro-
curement topics and is a seasoned bid protest litigator. In this role
he has closely followed and written about procurement issues re-
lated to COVID-19 pandemic.
Mr. Patterson, I am going to go ahead and recognize you right
now for 5 minutes while we work on my microphone issues.
STATEMENTS OF IAN PATTERSON, ATTORNEY-SENIOR ASSO-
CIATE KOPRINCE LAW, LLC, LAWRENCE, KS; DAVID BLACK,
ATTORNEY-PARTNER, HOLLAND & KNIGHT, LLP, TYSONS,
VA; MARY LOCKHART, PRESIDENT & CEO, PEMDAS TECH-
NOLOGIES & INNOVATIONS, ALEXANDRIA, VA, TESTIFYING
AS THE CHAIR OF THE SMALL BUSINESS DIVISION FOR THE
NATIONAL DEFENSE INDUSTRIAL ASSOCIATION (NDIA); AND
TRACI TAPANI, CO-PRESIDENT, WYOMING MACHINE, INC.,
STACY, MN
STATEMENT OF IAN PATTERSON
Mr. PATTERSON. Thank you, Mr. Chairman, Rank Member
Stauber, and members of the Subcommittee.
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Thank you for the opportunity to speak to you today regarding
the use of the Defense Production Act to combat COVID-19 and the
inclusion of small businesses in that fight.
As currently enacted, the Defense Production Act includes three
titles that provide the President and his designees with various au-
thorities to mobilize and augment America’s industrial resources.
The current Defense Production Act titles include Title I, Title
III, and Title VII. The remaining titles have been struck through
various renewals of the Act.
With respect to Title I, it grants the President the authority to
compel private businesses to accept orders and to prioritize those
orders. This so-called prioritization authority is implemented
through rated orders, which is a mechanism by which agencies can
prioritize their orders ahead of both government procurements and
that business’s private interests as well.
Title III, on the other hand, allows the President to invest in in-
dustries that are essential for national defense. Under Title III au-
thority, the President may issue loans to businesses. He may guar-
antee business loans from private lenders, make purchase commit-
ments, and also sponsor research and development efforts.
Now, Titles I and III are designed to work together to address
different mobilization needs.
Title I provides immediate contracting authority to be able to
combat instant needs based on whatever the crisis facing the
United States is.
Title III, on the other hand, allows the President to develop
America’s industrial resources so that, when necessary, they are
there and available to be mobilized.
Finally, Title VII contains a wide array of provisions that ad-
dress a variety of topics, including jurisdiction, enforcement, things
of that nature.
But of particular import to this Committee, that is also where
the small business provision is found within the Act. I know it has
been quoted before, but I will quote it again. Under this section,
small businesses are to be given maximum practicable opportunity
to participate as contractors, as subcontractors at various tiers, and
participate in all programs to maintain and strengthen the Na-
tion’s industrial base and technology base undertaken pursuant to
this Act.
Despite the desire to include these small businesses, the Defense
Production Act does not provide any further instruction for how
small business participation should be accomplished.
Indeed, there are no small business contracting goals that are
stated within the Act. There is no process for including small busi-
nesses in consideration for priority contracts. There is no cross-ref-
erence to other legislation, including the Small Business Act, to
provide direction for how to ensure that small businesses are able
to participate.
Consequently, the [inaudible] Defense Production Act, small
business initiatives are left undefined by the Act itself. And, in-
deed, in terms of regulation, they also are not well defined.
With respect to utilization, the Department of Defense has regu-
larly used the prioritization authorities under Title I. It antici-
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pates, in at least 2018, that roughly 300,000 orders were issued
using the priority initiatives under Title I.
Title III authorities however, are used with less frequency. In-
deed, it has been nearly three decades since any of the loan guar-
antee or loan provisions have been utilized. Additionally, the De-
partment of Defense indicates it has used roughly 20 orders in
2018 to leverage Title I authorities. These have typically been used
to try and invest in metallurgy and things of that nature.
Despite these examples, one of the immediate challenges with
evaluating the Defense Production Act is the absence of available
data. As the Congressional Research Service noted, as recently as
April of this year, quote, Public reporting and congressional over-
sight of Defense Production Act activities is fragmented and irreg-
ular.
Now, this is likely due in part to the various delegations of au-
thority that have been provided to agency secretaries by the Presi-
dent. As it currently stands, data, or the lack thereof, represents
one of the greatest challenges to evaluating the use of small busi-
ness in the Defense Production Act.
Ultimately, the Defense Production Act establishes a series of
tools to mobilize America’s industrial resources, as well as invest-
ment and development of those resources. Unfortunately, however,
it is very possible that small businesses are getting left behind.
Without data, it is impossible to know, with any degree of cer-
tainty, the extent to which small businesses are or are not partici-
pating.
Accordingly, I encourage this Committee to work to develop a
better reporting system for Defense Production Act procurements.
This will provide the data necessary to guide policymaking and en-
sure that small businesses are not being left behind in this fight.
Thank you, Mr. Chairman, and I look forward to your questions.
Chairman GOLDEN. Thank you.
And how is this audio working for you all? Is this better?
I see some heads nodding. All right. Great.
Steve, how are you doing on time?
Mr. STAUBER. We are good, Jared. I think we are good right
now.
Chairman GOLDEN. All right.
So our second witness is Mr. David Black. He is a partner with
the law firm of Holland & Knight, LLP, in Tysons, Virginia, and
Co-Chair of Holland & Knight’s National Government Contracts
Group.
Mr. Black’s practice involves serving as a trusted advisor, prob-
lem-solver, and advocate for Federal contractors, awardees, and
subcontractors in every stage of growth. He provides legal advice
and representation to help his clients secure opportunities, enhance
performance, mitigate risk, and respond to threats.
Mr. Black serves contractors and awardees in a broad array of
industries, with an emphasis on innovative technology, cutting
edge products, professional services, healthcare, and research and
development.
Welcome, Mr. Black.
Before I have you go, I am going to quickly move to our third
witness introduction, Ms. Mary Lockhart. She is the founder of
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PEMDAS Technologies & Innovations, a woman-owned, service-dis-
abled veteran-owned small business, that develops high technology
hardware and software environmental intelligence products and
services for the Department of Defense.
Through her extensive career in the public and private sector,
Ms. Lockhart has held vital research in leadership positions across
multiple Federal agencies, to include the Department of Defense
and NASA.
In 2013, she retired from a 30-year career as a colonel in the
United States Air Force Reserves. Ms. Lockhart has served as the
President for Women-in-Defense Washington, DC, Chapter and is
currently the Small Business Chair for the National Defense Indus-
trial Association.
Welcome, Ms. Lockhart.
And I will now yield to our Ranking Member, Mr. Stauber, to in-
troduce our final witness.
Mr. STAUBER. Thank you, Chairman Golden.
And I would like to welcome our final witness. It is a pleasure
for me to do so. She is from my district, Ms. Traci Tapani.
Ms. Tapani is the co-president of Wyoming Machine, Incor-
porated, a precision sheet metal fabrication company located in
Stacy, Minnesota. Wyoming Machine is a woman business enter-
prise, National Council certified women-owned family manufac-
turing business, run by sisters Traci and Lori Tapani. Under their
leadership spanning 25 years, Wyoming Machine has become a
thriving, successful small business in a brutally competitive indus-
try.
Ms. Tapani’s considerable expertise led her to serve a 3-year
term as an appointee to the Minnesota Governor’s Work Force De-
velopment Board and a 6-year term on the Board of the Minnesota
Chamber of Commerce. She serves as Board Chair of the Min-
nesota Initiative Foundation and is a member of the United States
Chamber of Commerce Small Business Policy Council.
She has won numerous accolades and awards, including in 2014,
the STEP Award for demonstrating excellence in leadership and
manufacturing and the Minnesota National Association of Women
Business Owners Lifetime Achievement Award.
In addition to being a savvy small business owner and a public
servant, Ms. Tapani actively volunteers in our local community fo-
cusing on issues such as workforce development and narrowing the
skills gap and helping women gain access to nontraditional careers
such as in manufacturing.
Thank you for all that you do for our district and for your partici-
pation today, and I look forward to your testimony and I yield
back.
Chairman GOLDEN. Thank you, Mr. Stauber. And I have gone
a little bit out of order. I apologize, that is unusual but I had to
fix the audio issue there. It is the adapt and overcome approach.
So having heard from Mr. Patterson. We are now going to recog-
nize Mr. Black for 5 minutes.
STATEMENT OF DAVID BLACK
Mr. BLACK. Thank you, Chairman Golden, Ranking Member
Stauber, members of the Subcommittee.
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I think we are all doing things a little unusually these days, so
we are all adjusting. I really appreciate the opportunity to be here
today to help the Subcommittee understand and address the dy-
namic between the DPA and small business contractors.
As Mr. Patterson said the purpose of the DPA is to mobilize do-
mestic industry and the service of the National Defense and emer-
gency preparedness, and there are provisions in the DPA that show
it has long been Congress’ intention to include domestic small busi-
nesses in that effort. But when you look at them, there is an under-
utilization of what exists and it is probably time for some reforms
to help those pieces move together.
So just to build on what Mr. Patterson did, I want to focus on
really five provisions in the DPA that address small business.
Under 50 USC 4518, that is where there is the strong preference
for small businesses, for consideration of small businesses when
making awards under Title III of the DPA.
Under Section 4551(a), that is where there is a maximum—agen-
cies are supposed to give. The President is supposed to give max-
imum practicable opportunity to small businesses to participate as
contractors and subcontractors. So, again, that is the one-two
punch of making DPA investments in small business and then pro-
viding opportunities as primes and subs to meet the government’s
needs.
Also under 4551 subsection (c), there is authority to include
small businesses in advisory committees established under the
DPA. Under 4551 subsection (d), agencies are supposed to provide
information about DPA activities to small business.
And then Congress has created the DPA Committee, which
makes an annual report and annual policy recommendations to
Congress. And what you see, and if you look at the current use,
these pieces exist, but they are either not being utilized, they are
being underutilized, the DPA committee is not, you know, taking—
making the most of these authorities, and things really are not
working to the extent that they could to bring in small businesses
into DPA investment and DPA opportunities.
When you look under this strong preference under Title III, as
Mr. Patterson noted, there really are no procedures in place other
than the statute about how are agencies, when they are consid-
ering making a Title III award, a Title III investment, how are
they supposed to consider small business, how are they given the
preference. There is really nothing in the books in terms of proce-
dure and operation.
There is no data currently being collected and reported to Con-
gress about Title III awards. It is sort of a mishmash. You could
probably find it through FOIA, but it is not being centralized and
recorded, and Congress would probably benefit from that informa-
tion for both small business awards and March business awards
under Title III.
Regarding the maximum practicable opportunity, this is where I
think the whole community is missing a big opportunity. There is
an information system called the Federal Procurement Data Sys-
tem, FPDS, that collects a tremendous amount of data about pro-
curement actions, and it has dozens of fields that contracting spe-
cialists have to fill in to report contracting actions. And Congress
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9
initiated this to help determine is the government meeting small
business goals.
Right now there is no field for whether an order or a contract is
priority rated, and simply adding that information to see when
agencies are using priority rating for both large and small would
really lift the veil and let Congress and agencies see how that pri-
ority rating authority is being used for small business.
Currently there is authority to have a Small Business Advisory
Committee, but in my research, I am not aware of one that exists.
And then for the DPA Committee, the Small Business Administra-
tion is not currently designated as a member.
Regarding the information provided to—by DPA activities, the
Congress wants provided to small business and that is in the stat-
ute, but there is a lot of information, you know, on the websites of
government agencies about the DPA, but nothing is really geared
towards small business. Nothing has really indicated, hey, this is
how we are meeting Congress’ requirement to provide small busi-
ness specific information about the DPA.
So, you know, when you look at what could be done, this is real-
ly, I think, belt-and-suspenders fixes. This is about taking the ex-
isting provisions and making them work together, and it is, you
know, just basic stuff, the basic work of the government of col-
lecting better information, making that information accessible to
agencies and Congress.
Requiring that procedures be established so that these small
business authorities and responsibilities are considered, are ad-
dressed by agencies exercising DPA authority and then connecting
the decisionmakers to small business stakeholders really through
the DPA Committee.
So things that I think Congress could do that I think would be
low impact but high value for the strong preferences is to have the
DPA Committee——
Chairman GOLDEN. Mr. Black, if I could jump in, I apologize.
We have gone through 5 minutes here, and in the interests of pre-
serving a little time, I am going to cut you off there.
Thank you for your opening statement, and we will certainly be
able to work through the rest of your recommendations through the
Q and A, I have no doubt, and I will be sure to give you more op-
portunities to continue.
With that, I am now going to give 5 minutes to Ms. Lockhart.
STATEMENT OF MARY LOCKHART
Ms. LOCKHART. Chairman Golden, Ranking Member Stauber,
and the members of the Subcommittee. Thank you for the oppor-
tunity to testify here this afternoon and for your consistent efforts
in supporting America’s small business community.
First of all, Chairman Golden, thank you very much for the in-
troductions. My small business, PEMDAS, provides high-value en-
gineering services and innovative hardware and software products
to the Department of Defense.
But today I am honored to be representing the Small Business
Division of the National Defense Industrial Association, NDIA, the
Nation’s oldest and largest defense industry association, comprised
of over 1,650 corporate and over 70,000 individual members. My
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testimony this afternoon will focus on leveraging Title III authori-
ties to support the small business preference in the Defense Pro-
duction Act. This will help to preserve America’s small business in-
dustrial base during this very challenging pandemic.
My small business colleagues and I support all efforts to make
government procurement more efficient, streamlined, and cost ef-
fective. Unfortunately, COVID-19 has created unforeseen chal-
lenges to small businesses that are eclipsing the recent beneficial
changes to the defense procurement systems.
An NDIA survey that was published 2 months ago in April, con-
sisting of over 750 members from the small business industrial
base, found that 60 percent of the respondents experienced a seri-
ous cash flow disruption due to the crisis. 51 percent reported that
shelter-in-place orders negatively impacted their ability to execute
contracts. Sixty percent expected to have long-term financial and
cash flow issues resulting from COVID-19.
The underlying reasons cited were cuts to billable hours, delays
in payments due to government shutdown and telework require-
ments for both prime contractors and the government, and a lack
of telework options or contract schedule flexibility. Now, granted
this survey went out in March. We have a second survey that has
gone out, and those results will be available next month.
Unsurprisingly, the brunt of these impacts fall hardest on those
small businesses with fewer than 50 employees because of their
limited resources. These businesses are often new to the defense in-
dustrial base and represent a vulnerable, but vital, part of the na-
tional security procurement apparatus.
Congress recently appropriated the $1 billion for DPA Title III
in the CARES Act. This Act, as has been discussed, provides provi-
sions relevant to small businesses that support our national secu-
rity. It is important that these provisions and the investments
reach small businesses as they are proven innovators of technology
to strengthen military readiness.
Small business also generates thousands of local jobs. Ensuring
the vitality of small businesses will help America’s preparedness,
response, and recovery from this pandemic.
It is important, therefore, to strongly emphasize the small busi-
ness preference and to maximize opportunities to the extent pos-
sible, especially in areas of high unemployment and ones that dem-
onstrate a continuing pattern of economic decline.
In closing, I offer, on behalf of NDIA, the following suggestions:
Use DPA Title III to maximize small business participation; accel-
erate, and streamline the acquisition process for small businesses;
establish a centralized office for DPA implementation reporting and
coordination; ensure DPA has ample funding for small business;
use supplemental appropriations if DPA fund is exhausted; and
allow small and medium size manufacturing enterprises to use
Title III funds that are intended by DPA.
This Act provides for guaranteeing the purchase or lease of ad-
vance manufacturing equipment and, subject to meeting certain re-
quirements, to replace key equipment that supports the defense in-
dustrial base.
Chairman Golden, Ranking Member Stauber, and the members
of this Subcommittee, thank you very much for the opportunity to
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speak this afternoon, and I would be pleased to respond to any of
your questions.
Chairman GOLDEN. Thank you, Ms. Lockhart.
And we would now recognize Ms. Tapani for 5 minutes.
STATEMENT OF TRACI TAPANI
Ms. TAPANI. Thank you.
Chairman Golden and Ranking Member Stauber, thank you for
the opportunity to be here today. I want to thank all the members
of the Subcommittee for your service in support of small business.
As you have already heard, I am Traci Tapani, an owner of Wyo-
ming Machine in Stacy, Minnesota. Our company was founded by
my father, Thomas Tapani, in 1974, and I have owned and oper-
ated the company with my sister for the past 26 years. Small busi-
ness ownership and strong leadership by women are part of our
family DNA.
Many of you may have been working remotely due to the COVID-
19 pandemic. At Wyoming Machine we are part of America’s crit-
ical manufacturing sector, and as an essential business, we have
been reporting to work since the start of the pandemic, and I am
joining you today from my office at Wyoming Machine. My apolo-
gies if you hear any unexpected noise. Sometimes it can be difficult
to do manufacturing quietly.
We are proud of our workforce for continuing to report to work
even when most workers have been urged to stay at home. I am
happy to share that so far everyone in our company has remained
healthy and safe.
Our purpose today is to discuss the interaction between the De-
fense Production Act and small contractors. It will be helpful for
you to know that over time my company has participated in ful-
filling defense contracts and other government orders. While I
would not describe myself as an expert in the DPA, I hope to share
useful information, and I look forward to answering any questions.
The DPA is undoubtedly a valuable tool in times of emergency,
but that doesn’t mean that the DPA is the driving force that com-
pels small contractors to act. Following the attack on Pearl Harbor,
my great aunt, Magdalene Hallady, left her office job in Chicago
and headed for shipbuilding yards in Sturgeon Bay, Wisconsin.
When she arrived, she asked, ‘‘What can I do to help?’’ She soon
joined many others who stepped up to ensure that the necessary
goods were produced for our military.
Magdalene stepped up not because she was ordered to do so or
because she was paid a lot of money. She did so—or she was only
paid 25 cents an hour, but she would have worked for free because
it was the right thing to do.
Magdalene’s story illustrates my belief that small contractors
and small businesses mobilize and act during times of crisis out of
necessity and desire to support and provide for our Nation, our
communities, and our employees.
In March 2020, Wyoming Machine received an order to produce
a part for a medical ventilator. We have been producing this part
for about 15 years, but until just recently, we did not even know
the part went into a medical ventilator. Over a 2-month period, we
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produced a quantity of almost 60,000 parts or 12 times our normal
annual volume.
You might be surprised to hear that the DPA was not part of the
contract under which we produced these parts. When the produc-
tion orders were released to our shop floor, they were accompanied
by a note that told our employees three things: These parts are
used in the production of a medical ventilator, you are an essential
worker, and your work during the COVID-19 pandemic has the po-
tential to save lives, and we are proud of you and thankful for the
work that you are doing at Wyoming Machine.
Our workforce organized and mobilized among themselves to en-
sure that parts were produced quickly and accurately. When we
were asked to deliver at a faster pace, our workers made it happen.
So if it wasn’t the DPA that compelled us, why did we mobilize
and respond to the need for medical ventilator parts as quickly as
we did? Wyoming Machine and many other small contractors oper-
ate under a business model that allows them to respond quickly to
change in demand. We can produce many types of products and
serve a wide array of industries simultaneously.
The COVID-19 pandemic is both an economic crisis and a health
crisis. Small businesses in the United States employ nearly half of
all workers. As an employer, I feel a personal responsibility to en-
sure that my employees continue to have a place to work and that
they can support themselves and their families. During the crisis
our ability to be flexible in responding to demand for production of
essential parts and products is just part of what we do. Author
Simon Sinek wrote that working hard for something we don’t care
about is called stress; working hard for something we love is called
passion.
Wyoming Machine employees were told about the opportunity to
help during the pandemic, and they were inspired and motivated.
Our company passion for manufacturing, combined with our desire
to help in a time of need, made our work feel almost effortless.
My testimony before this Committee is not to argue for or
against the merits of the DPA but rather to share a small business
perspective during a time when the DPA has been used to direct
private sector business to produce medical ventilators and other
supplies needed during the pandemic. There will always be Amer-
ican businesses ready and willing to respond in a time of need, and
I believe that the small businesses have a special role to play due
to their agility and ability to quickly mobilize.
Thank you.
Chairman GOLDEN. Thank you, ma’am. I appreciate that testi-
mony.
And thank you to all of you for your opening remarks. I look for-
ward to continuing the conversation through the question-and-an-
swer phase of the hearing.
Understanding that Mr. Stauber needs to testify with the Rules
Committee shortly, I am going to begin by recognizing the Ranking
Member for 5 minutes.
Mr. STAUBER. Thank you very much, Chair Golden.
And, Traci, as you are reading your story, if there is nobody that
didn’t get a lump in your throat, I want to check your pulse. That
was very inspiring.
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But I do want to start out with you. You know, the job shop
model exercised by Wyoming Machine that you describe in your
testimony seems to be perfectly positioned in responding quickly in
times of national emergency, you know, such as this pandemic.
Can you tell us more about this model, like, is there something
only small manufacturing or business practice as opposed to a large
manufacturing facility?
Ms. TAPANI. So thank you for your question, Representative
Stauber.
I believe that the job shop model is most common among smaller
businesses. Part of the reason for that is that we ultimately supply
larger businesses. So throughout Minnesota, we are supplying
many different companies that are producing equipment. We need
to bulk buy parts and assemblies in order to complete final pieces
of equipment.
So it is pretty common to the small business model to work in
that type of environment and allows us to be successful by [inaudi-
ble] and that diversity is what helps us stay in business and keep
people employed.
Mr. STAUBER. Thank you.
And then I appreciate you sharing your story about your great
aunt.
I want to know what it is like and I would like to hear more from
you about some comments or concerns, if any, that your employees
had during this time, obviously, helping the country in making the
ventilators, keeping us safe. Can you describe to us the sentiment
of your employees coming to work during the pandemic, being es-
sential?
Ms. TAPANI. Yes. Thank you for that question.
You know, I think that when we knew that the State of Min-
nesota was likely to be ordering a stay-at-home order from our
Governor, you know, many people’s initial concern was what are we
going to do and how are we going to get paid, and I think that
would be a common concern among employees.
We were happy to find out that we were considered an essential
business and that we would be allowed to continue to report to Wy-
oming Machine and do our jobs every day.
I think the most difficult part of this for people has been that
early on in the pandemic, the information was changing rapidly,
new information kept coming out, and trying to develop those plans
and protocols to keep our workforce safe was probably the most dif-
ficult thing and I think the thing that people were most alarmed
about.
As time has gone on, and no one here has become ill at this
point, and as we continue to improve the protocols that we have
in place, I think people’s comfort level has increased. But, honestly,
they are very happy that they have been allowed to continue to
come to work.
And I tell people I think the reason for that is for people to main-
tain their well-being during a crisis like this, staying attached to
your employer is critically important. They know that as of right
now, no matter what happens, they are still working and they have
an employer. Once they are released from their employer, it creates
a whole other level of anxiety for them.
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Mr. STAUBER. I really appreciate those comments.
And we are so proud of you. You are leading our State, and I
can’t say enough about Wyoming Machine, and it is a privilege and
a pleasure to have you here.
Thank you for those comments.
Mr. Chair, I have one more comment for—one more question for
Mr. Patterson. And that is, Ian, given the DPA’s strong preference
for small businesses, what role, if any, do you think that SBA
should have in DPA-related efforts?
Mr. PATTERSON. Thank you, Representative.
I think that is a very good question. The SBA plays a very large
role, and it is a little outside the scope of this; but they have a very
large responsibility with respect to administering small business
preferences in the traditional Federal acquisition regulation style of
procurement. There is a lot of regulations that I deal with on a
daily basis that are designed to try and provide opportunities for
a wide variety of small businesses and then socioeconomic groups
as well.
These are well developed, and the SBA has a large background
of experience to be able to implement these things. I think that
leveraging that experience makes total sense, particularly given
the DPA’s stated desire to include small businesses.
Mr. STAUBER. Thank you very much.
And, Mr. Chair, I yield back. I do have to leave to get up to
Rules.
I appreciate all of the expert testimony. Thank you.
Chairman GOLDEN. Thank you very much, Mr. Stauber, for
yielding back. Thanks for your participation and enjoy the Rules
Committee.
So I will now recognize myself for 5 minutes, and I may end up
asking a second round of questions.
So, Mr. Black, having cut you off a little bit right in the middle
of some of your recommendations, I wanted to come back to you
first.
Having read through your opening statement in advance, I know
that one of your recommendations was to direct DPAC to establish
a small business participation advisory subcommittee to provide
annual recommendations on how to increase small business partici-
pation in DPA authorities and funding.
I wanted to know, do you think that Congress would need to
broaden DPA’s scope so that the Subcommittee could provide those
recommendations on how to include small business participation
given what we know right now about their current scope and, you
know, how effective they are under Title I authorities? But, please,
in answering that question, feel free to use the remainder of the
time if you have it to continue with your other recommendations.
Mr. BLACK. Thank you, Chairman, I appreciate that. I appre-
ciate your courtesy.
Yeah, there is a—in the statute 4567 that establishes the DPAC,
there is a list of things that are supposed to report on, and adding
one section to ask it—because it already is supposed to make policy
recommendations about how to improve the DPA. Arguably, it al-
ready could encompass a small business, but it hasn’t been doing
it. So showing that is important to Congress and adding a provision
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to ask it to report would certainly give a purpose and meaning to
an advisory committee and potentially adding someone from SBA
to the DPA Committee, which is something Mr. Patterson was talk-
ing about.
You know, and the other provision, the DPA Committee really is
the focal point for what Congress could do to strengthen this. Just
starting to talk about how they could report annually on Title III
awards, that could be the mechanism.
The DPA Committee has representation from everyone who has
been delegated Title I authority by the President, those are the
agencies that are interested in building up capacity, so it has ac-
cess to the information. It has got the people on its committee. It
could probably easily collect that information and provide it to Con-
gress.
It could ask its members to establish procedures to have you con-
sider small business in making Title III decisions. That would at
least make the consideration happen. Right now there is nothing
on the books. That would be an improvement, and you would see
agencies having to at least have to wrestle with that.
I was talking a little bit about the FPDS, the Federal Procure-
ment Data System, adding simple fields to understand not only the
total small business spend and large business spend, but run our
DPA rated orders would provide amazing transparency.
I think Congress would find that small businesses already par-
ticipate and that to the extent there is concern about small busi-
nesses being able to respond to rated orders, you could probably
bust that myth. And it would also help with identifying small busi-
ness resources to help provide the maximum practicable oppor-
tunity to participate in the future; who are the small businesses al-
ready performing DPA rated orders.
We talked about the Small Business Advisory Committee, and
then having the DPA Committee—you know, there is this provision
to consolidate information for small businesses about DPA activi-
ties. There ought to be a clearinghouse somewhere. No one is doing
it at this time. It is sort of scattered. Congress wanted it done. And
maybe making that the responsibility, appointing the DPA Com-
mittee to put up a website, consolidate that information would be
helpful.
Thank you.
Chairman GOLDEN. Thank you very much, Mr. Black.
And I had lined up another question, but you pretty much an-
swered it in your testimony discussing some of the lack of data that
is out there and what could be gained by getting our hands on it,
in particular or perhaps even feeling reassured that small busi-
nesses are, in fact, already participating as you have suggested; but
the problem being right now, we have an oversight responsibility,
but a lack of data and information.
So you and Mr. Patterson have shared some ideas already about
how we could address that. And so rather than try and squeeze in
like a quick last-minute question and knowing that I will have
more time to come back to people, I wanted to go ahead and yield
and recognize Congresswoman Sharice Davids for 5 minutes.
Ms. DAVIDS. Thank you, Chairman Golden. And I know Rank-
ing Member Stauber had to head out, but I definitely appreciate
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the two of you holding this hearing on what is an incredible impor-
tant topic.
And it is definitely good to see a fellow Kansan on the panel
today, Mr. Patterson.
And so I want to—you know, I think that we have seen this since
the beginning of this pandemic, our frontline workers haven’t had
enough of the personal protective equipment and testing supplies
that they need to fight the virus, keep themselves safe and depend-
ing on which types of frontline workers we are talking about, keep
the folks that they are helping safe.
And I think that, you know, seeing that our national stockpile
ran out of supplies so quickly and the global supply just could not
keep up with the demand and then the interruptions we saw in
supply chain, you know, we really need to be forward thinking on
all of this and make sure that we don’t allow our supply of PPE
and testing materials to run so low again. And I think that most
of us are in agreement that this is definitely a matter of national
security and certainly one of public safety.
You know, I was one of the folks who early on urged the adminis-
tration to fully utilize the Defense Production Act to ramp up the
domestic manufacturing of PPE and testing supplies. And then, of
course, that is not the only thing that we need to be thinking
about, but it is certainly a key tool in our toolbox, you know.
And part of the reason that I became so familiar with this is be-
cause Dentec which is a local manufacturing company here in the
3rd District in Lenexa, Kansas, had previously produced N95
masks, and then they were forced out of the market or priced out
of the market, you know, with overseas competitors.
And so, you know, right now they make other types of masks;
but Dentec attempted to get into contact with the CDC, with HHS
about contracting to produce N95 masks for this current crisis, and
they registered with the system for award management, and they
just never heard back from anybody.
And, you know, I think we have companies like Dentec out there,
and not just Dentec but other companies, and that is why I intro-
duced the Supplies Act. It is a bill that would provide capital for
small businesses to help them shift manufacturing to produce some
of the critical PPE that we are seeing needs for.
And, you know, I think it also will help promote American manu-
facturing, domestic manufacturing here, and eliminate some of the
price gouging that we have seen.
So, you know, Ms. Tapani, I really appreciate you sharing your
family’s story about your manufacturing company, and I would love
to start with you.
I am curious, from your perspective—I know you mentioned that
you had been producing a piece that was useful for ventilators.
Hearing about Dentec and other companies that might not al-
ready—that might be able to maybe retool and get to that place,
what do you think about how we can, you know, better utilize
small businesses, better utilize manufacturers that are able to
quickly get up and going?
Ms. TAPANI. Thank you for your question.
You know, I think that one of the things, as a manufacturer, it
is hard for me not to think about the root cause of a problem, so
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what caused the problem that we are experiencing right now with
the shortness of PPE and difficulty getting businesses up and run-
ning to produce something different. And I don’t fully understand
what the causes are.
What I can tell you is that in Minnesota, I have heard from a
number of people in the industry that businesses were working on
ramping up to produce ventilators starting as early as December
and certainly in early 2020.
So it wasn’t the Defense Production Act that caused necessarily
that to happen, but I think a better understanding of how supply
chains work for people that are in decisionmaking positions would
also be beneficial because they are far more complex, and they are
global, global in nature, and so it is more complicated than just or-
dering someone to do something.
Even I had to look at—you know, for example, I saw stories of
Ford Motor Company and General Motors ramping up to do ven-
tilators, which I think is wonderful and I am so happy that they
did that, but as a manufacturer, I had to look at that and say, how
are they securing the supplies that they need because typically
there are lead times for those.
So I think finding out more about what the root cause of the cur-
rent situation was will help us understand what we need to do dif-
ferently.
Ms. DAVIDS. Yeah. And that is an interesting point. I also think
that one of the things that we need to be cognizant of is for the
manufacturers who are able to produce but, you know, might end
up having to push their customers down the list, they might run
into contract issues without use of the Defense Production Act.
But if I am here for the second set of questions, I might get into
that with Mr. Patterson.
Chairman GOLDEN. Thank you.
We will now go to Congressman Troy Balderson from Ohio.
Mr. BALDERSON. Mr. Chairman, good afternoon, and thank
you, and bear with me one second. Don’t start my timer yet. My
thing went away there.
There we go.
Ms. Tapani, thank you again for testifying. My question for you
would be, what can we do to leverage the ability and capability of
small business companies like yours to meet the country’s needs in
time of crisis? And do you think we can or should use the DPA to
achieve this?
Ms. TAPANI. Thank you for your question.
I think that one of the opportunities that we have with small
businesses is, with or without the DPA, I think that there is a will-
ingness to mobilize and volunteer to step in when times are dif-
ficult. Oftentimes when DPA needs to be used, we are also in an
economic crisis, and small businesses feel that, I think, in a dif-
ferent way than large businesses. While certainly everyone in the
economy feels a downturn, small businesses have shallower pockets
and less resources to get funding during down times.
So I think that we are standing at the ready and ready to jump
in and do whenever we can to help, simply to keep our people em-
ployed and our businesses running, and, again, that is a little bit
different than what we see with larger companies.
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But recognizing and finding a way to involve more small busi-
nesses on an ongoing basis so that there is more knowledge in the
market amongst small businesses and through small business orga-
nizations for how we can be connected, how we can raise our hand
and say that we have the capability and we are ready to help, often
you hear from larger businesses when they are looking for smaller
suppliers to work with that there is no one out there who could do
the work.
My personal experience is that that is not true; it is just that
there is still a lot of difficulty in the marketplace for our larger
suppliers, like our primes, to identify small businesses that have
the capabilities that they are looking for.
Mr. BALDERSON. Okay. Thank you for that answer.
And I do want to say we talked about the PPE. I, along with a
couple of other members of this Small Business Committee, intro-
duced legislation last week for a tax credit up to $25,000 for PPP—
or PPE, excuse me, I am all PPP—PPE, so I hope that you will
take time to look at that and hopefully that is something that can
work for you.
Mr. Black, my question to you, given that the SBA does not issue
many DPA rated orders itself, what can the SBA currently do to
further the statutory goal of providing small business opportunities
under the DPA?
Mr. BLACK. I think they can share techniques for other agen-
cies. Agencies already have offices of small business utilization.
The DPA—or sorry, the SBA has process and procedures for what
we will call normal procurements for the research, market re-
search, collecting information about sources that contracting offi-
cers can easily consult.
You know, we all—I think many of us know about the Rule of
Two, which is basically market research to look for small busi-
nesses. And so, you know, they are experts in those procedures.
They develop the procedures that end up being in the Federal ac-
quisition regulation.
And so having that insight into the DPA process for rated orders
I think could add value. And so even though they are not the ones
issuing the orders, they would be teaching, funding best practices
for the agencies that are.
Mr. BALDERSON. [Inaudible] Are you aware of—a small busi-
ness preference for Title III awards?
Mr. BLACK. I am sorry, I didn’t hear the question.
Mr. BALDERSON. Excuse me. Are you aware of any Federal
agency that has—I had to look and make sure I wasn’t muted.
Are you aware of any Federal agency that has issued any regula-
tion pertaining to a small business preference for Title III awards?
Mr. BLACK. I am not. The agency that is most active—and this
really probably ties to the national defense purpose of the DPA
going back many decades—is DOD. They have an Office of Indus-
trial Policy that has a DPA Title III program, and they pose solici-
tations for companies to respond to.
So they have kind of an active ongoing solicitation and award of
Title III investments. But I am not aware of any regulations. They
are sort of run on a full and open basis, the ones I have looked at,
and I am not aware of any regulation or process or practice that
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that office has, which seems to be the most active one in the Execu-
tive Branch, to give life to the small business preference.
Mr. BALDERSON. Okay. Thank you very much.
Mr. Chairman, thank you very much, and I yield back my re-
maining time.
Chairman GOLDEN. Thank you, Congressman.
We are going to do a second round. I know I have still got plenty
of questions and, you know, I don’t know who else will be sticking
with it, but I will certainly recognize them as well if they do have
more questions.
Ms. Tapani, could you just quickly confirm for me so I under-
stand, were you, prior to the coronavirus pandemic, already—you
had a preexisting relationship with the company you are making
a part for.
Were you also already a government contractor?
Ms. TAPANI. So, yes, we are not directly supplying the U.S. Gov-
ernment, but we are a supplier to a number of prime contractors
and have done work in support of those. We are also an ITAR reg-
istered company doing work in that realm as well.
And the company that we were making the ventilator part for,
we were already doing business with them, and we had about a 15-
year history of making that particular part already.
Chairman GOLDEN. Thank you. And, you know, I think that
possibly that might be something that we can learn from is that
where we have companies that have preexisting conditions who are
already experienced in working with the Federal Government in
the midst of a crisis where there is a need, they might be well suit-
ed to more quickly transition if necessary.
Congresswoman Davids shared kind of a different example with
a company that had previous experience, but the relationship was
no longer there and they probably would have needed some help
in order to, you know, step in and start doing that work that they
wanted to be a part of making N95 masks.
I was going to ask Mr. Patterson, DPA authorities enabled the
small business in my congressional district up in Maine, Puritan
Medical Products in Guilford to respond to the COVID-19 pandemic
and this was a company that was already making a product swabs,
which we need more of in the United States, but they needed help
in order to achieve ramping up production.
And, you know, the unique thing that took place there is, the
government helped connect them with another employer in Maine,
Bath Iron Works and working together Bath Iron Works was able
to make machines that could then be used to stand up a whole new
second production site for Puritan Medical Products so that they
could essentially triple or more their production capacity of swabs.
It is a great example. The President of the United States came
to my congressional district to highlight this very thing. I think it
is a good example of how the DPA can work with a small business
to help them meet the needs of the United States in the midst of
a crisis, and so I wanted to ask, you present other examples from
the last few months, such as this and how can we find out how
many small businesses have been participating in these efforts?
Mr. PATTERSON. Mr. Chairman, those are both excellent ques-
tions. You know, the first one is kind of a theme that myself and
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Mr. Black have hit on and it is that the data reporting when it
comes to the Defense Production Act is spotty.
And so finding discreet instances of small business participation
really depends on whether or not there was a published press re-
lease, or press report, or something that that I could find because
much of this is not readily reported and that is not to say there
aren’t ways to find certain information, but in terms of a holistic
way to do it, it just isn’t there.
I certainly think that also there is ways to—like you men-
tioned—to definitely utilize the small business base to get involved,
but to my knowledge, I am unaware of anyone—of any other small
business who have had that and the other point I wanted to get
to also was that, the prime level is one thing, but we also need to
think about the supply chains. I know that a couple of my fellow
witnesses talked about this as well.
Getting small businesses involved in supply chains is a very im-
portant consideration and that is even harder to get data on. I
know that Mr. Black had mentioned FPDS. That is a great tool. I
also know that the Ranking Member had mentioned SBA involve-
ment.
One of the things that the SBA requires is for large businesses
to enact a small business subcontracting plan. That is a tool that
is pretty well accepted in other procurements and could also be uti-
lized to try and get additional data about what is the depth of
small business penetration on some of these Defense Production
Act procurements.
Chairman GOLDEN. Thank you. I only see 20 seconds left. I do
have other questions but first I have to be polite in thinking about
Congressman Balderson’s time.
Do you have more questions that you would like to ask, Con-
gressman?
Mr. BALDERSON. No Mr. Chairman, I am fine, thank you.
Chairman GOLDEN. All right. Thank you.
I am going to go ahead then and, you know, we have had Ms.
Lockhart join us. We haven’t had any more additional time to hear
from you. And I thought I would ask, Congress appropriated a bil-
lion dollars for DPA Title 3 authorities in response to the pan-
demic. A spend report said that DOD intends to invest quite a sub-
stantial amount into the defense industrial base addressing im-
pacts caused by the COVID-19 pandemic.
Are you aware, has DOD shared anything about how it intends
to apply the small business preference when spending of all of
these funds? And in addition, why would it be of particular impor-
tance, in your opinion, to ensure small business preference is ap-
plied?
Ms. LOCKHART. Chairman, thank you very much for that ques-
tion. I am not aware of a formal document or anything at all. I am
not sure there is such a document that states what defense is plan-
ning to do. However, what I will say is that, on the onset of this
crisis, the Office of Small Business under the direction of Amy
Murray has been phenomenal.
NDIA and the other industrial associations have been meeting
weekly and the lines of communication are there. The website for
the small business has been updated and it is extremely valuable.
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Now, combine that with an increase of communications and then
the ability to leverage DPA Title 3 to maximize opportunities for
our small businesses is a win-win.
We have seen an increase in communications. Ms. Murray has
been phenomenal. She has been reactive, and then combine that.
There was discussion about SBA. Well, I think the Office of Small
Business is also a very important agency to be involved in this
when it comes to the small business participation as well.
So I hope that helps answer your question, but for right now
cash flow is critical. Cash flow is and when you—to be able to do
that, it is going to really make a difference.
Chairman GOLDEN. Yeah. That is great. You just led me right
into my other question for you. You talked about your small busi-
ness survey and one of the biggest problems was cash flow issues.
I happen to also serve on the House Armed Services Committee
and I know this is something that we were hearing about down the
supply chain was concerns that we were hearing from, let’s say, a
business like Bath Iron Works about problems that were occurring
with their subcontractors, with the supply chain where cash flow
was a concern for them.
They didn’t have reserves to float them through this pandemic
and the loss of revenue coming in. And there were discussions
about what DOD could do to help keep them afloat.
I wanted to give you an opportunity to continue down this vein
how Title 3 authorities might be used to help important small
firms in the supply chain to make sure that we are not losing im-
portant assets.
Ms. LOCKHART. Thank you, Chairman. Again, another excel-
lent question. There has been some changes that were done for
progress payments, so increases for the small business supply
chain to increase up to the 90 percent, which has been a help.
Also for those small businesses that are primed, there had been
a big disruption. It was turbulent, right with the transition from
the Government working, and telecommuting, so obviously cash
flow became a problem because you were transitioning into a home
office environment, so there were delays in payments. The acceler-
ated payment is crucial for small businesses. That is absolutely es-
sential because we need the cash.
Small businesses as Ms. Tapani very eloquently answered, we do
not carry the reserves like other businesses do because what we do
is we invest right back into the company. And we also have to
carry our very talented workforce, our cleared workforce that also
is very important. We don’t want to lose that expertise.
So DPA Title 3 will be able to give more opportunities for small
businesses to continue to maintain our warfighter readiness.
Chairman GOLDEN. Well, thank you for that feedback. And in-
terestingly, the Ranking Member, Mr. Stauber, is the sponsor of
legislation that comes out of the work that we have had in previous
hearings where we were seeing government change order, you
know, in packages that was ultimately delaying payment to primes
and, just as importantly, to subprimes in ways—you know, these
small businesses sometimes getting paid, you know, quickly enough
for their work is critical.
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And he is actually—I am working with him right now not only
as the Chair of this Subcommittee, but as a member of the House
Armed Services Committee to try and help him successfully get his
legislation into the National Defense Authorization Act this year.
Which would ensure that when the government makes a change,
that small businesses are not negatively impacted by ensuring
that, at least, a portion of the payment is sped up on the front end
of that change and they could receive the rest when they deliver
the work.
And now I am hopeful that I will be able to help Mr. Stauber
in successfully getting that through.
Just to close things up here with a final question. Ms. Tapani,
I think it is always a good opportunity to hear from a small busi-
ness owner who has experience working with the Federal Govern-
ment.
What is the biggest obstacle that you had to overcome in order
to enter into the Federal procurement marketplace and what ad-
vice do you have out there for other small businesses who haven’t
had that experience yet, but would like the opportunity?
Ms. TAPANI. Thank you. That is a great question. You know, I
think that just understanding the rules and the regulations and
the jargon that goes along with working in this space is a chal-
lenge, but I would tell other small businesses that if you take the
time to try to read the information that you are given or read the
contracts or read the codes that you have——
You know, I am a business person with a degree in business, not
a manufacturing expert, but I have been able to successfully learn
to read the technical nature of a welding code, for example, and un-
derstand it so that I can lead my business down the right paths
so that we are successful in doing that business.
So don’t give up and just try to be patient and teach yourself
what you can. I think the importance for this Committee and oth-
ers to consider is that often times as a small business, when you
talk about cash flow issues and what not. If you are not the prime
and you are somewhere farther down the supply chain still playing
a critical role in whatever needs to be manufactured or delivered,
you often don’t have the full set of information and so you might
not be getting paid but you don’t know why.
An order may be delayed, but you don’t know why. An order may
be canceled and you don’t know why. And so I think doing a better
job from a Federal standpoint of being able to flow information
through the entire supply chain would be really helpful because,
you know, sometimes you are in the dark and you don’t know. Is
it something that I did or is there some other forces at play here
that I don’t fully understand?
But, you know, if I get to say nothing else today, just know that
from my perspective as a small business person who knows lots of
small businesses, we want to help and we want to participate and
we are here to do whatever we can to step up and do what is need-
ed.
So if nothing else, remember that.
Chairman GOLDEN. Thank you very much. That is great feed-
back. I know my office has heard from businesses in that situation
of just not knowing and needing clarity and this is what every
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business needs is certainty in information to make the best deci-
sion with that they can.
Congressman Balderson, give me a thumbs up if you are all set.
If you want to ask, you are good.
All right. Thank you all very much. This has been a good hear-
ing, informative, and helpful to the members of the Committee and
the staff of the Small Business Committee.
So I will quickly close things off by stating what you all know.
Small businesses play an important role in the economy in the cre-
ation of jobs. Haven’t we seen that demonstrated in the last several
months as so many small businesses have been put in tough posi-
tions and jobs have been lost.
Far too many. And thankfully through the work of this com-
mittee, in the House, and in the United States Senate, we had
things like the Paycheck Protection Program to step in and keep
as many people connected to their employer as we could and keep
those paychecks flowing.
Small businesses are an important part of the innovation that is
going to lead the country forward into a better future. Now more
than ever, ensuring that we do everything we can to preserve these
businesses in these trying times should be a priority.
I would like to thank all the witnesses for taking time out of
your schedules to be with us today and for providing expertise and
insight relative to this conversation about the DPA, the challenges
faced by small businesses, and the actions that Congress can con-
sider taking to preserve and guarantee the vitality of our small
business industrial base.
I would now ask unanimous consent that members have 5 legis-
lative days to submit statements, supporting materials for the
record.
Without objection, so ordered.
And if there is no further business to come before the Committee,
we are adjourned.
Thank you all very much for joining us.
[Whereupon, at 2:13 p.m., the subcommittee was adjourned.]
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APPENDIX
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Æ
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File and source
- File
- CHRG-116hhrg41294.pdf
- Size
- 1,846,309 bytes
- SHA-256
- 96da9656d7a0c1d2377f4ec5c918f417f5d1d934cf279cbb2e48121627f40091
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- CHRG-116hhrg41294.pdf
- Original
- www.govinfo.gov