Leveling the Playing Field: The State of Small Business Contracting
Summary
The printed record of a House Committee on Small Business subcommittee hearing on the state of small business contracting, on May 11, 2023 and published as Small Business Committee Document Number 118-012, with Chairman Nick LaLota presiding. Chairman LaLota says small businesses eligible to contract with the federal government declined by nearly 40 percent from 2010 to 2019, and criticizes self-certification and double counting in goal reporting. Ranking Member Hillary Scholten says the government has missed some small business goals, including the women-owned small business goal, and raises contract consolidation. The witnesses lead SteerBridge, American Fashion Network and Premier Enterprise Solutions. The appendix adds statements from GovEvolve, GovSmart, Inc., the HUBZone Contractors National Council and others.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
LEVELING THE PLAYING FIELD: THE STATE OF
SMALL BUSINESS CONTRACTING
HEARING
BEFORE THE
SUBCOMMITTEE ON CONTRACTING AND
INNOVATION
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
MAY 11, 2023
__________
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 118-012
Available via the GPO Website: www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
52-169 WASHINGTON : 2023
-----------------------------------------------------------------------------------
HOUSE COMMITTEE ON SMALL BUSINESS
ROGER WILLIAMS, Texas, Chairman
BLAINE LUETKEMEYER, Missouri
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
BETH VAN DUYNE, Texas
MARIA SALAZAR, Florida
TRACEY MANN, Kansas
JAKE ELLZEY, Texas
MARC MOLINARO, New York
MARK ALFORD, Missouri
ELI CRANE, Arizona
AARON BEAN, Florida
WESLEY HUNT, Texas
NICK LALOTA, New York
NYDIA VELAZQUEZ, New York, Ranking Member
JARED GOLDEN, Maine
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
GREG LANDSMAN, Ohio
MORGAN MCGARVEY, Kentucky
MARIE GLUESENKAMP PEREZ, Washington
HILLARY SCHOLTEN, Michigan
SHRI THANEDAR, Michigan
JUDY CHU, California
SHARICE DAVIDS, Kansas
CHRIS PAPPAS, New Hampshire
Ben Johnson, Majority Staff Director
Melissa Jung, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Nick Lalota................................................. 1
Hon. Hillary Scholten............................................ 2
WITNESSES
Mr. Robert Schroder, Founder and Managing Partner, SteerBridge,
Vienna, VA..................................................... 5
Ms. Jackie Ferrari, Founder and Chief Executive Officer, American
Fashion Network, East Syracuse, NY............................. 7
Ms. Jacqueline K. Lopez, President, Premier Enterprise Solutions,
Upper Marlboro, MD............................................. 8
APPENDIX
Prepared Statements:
Mr. Robert Schroder, Founder and Managing Partner,
SteerBridge, Vienna, VA.................................... 24
Ms. Jackie Ferrari, Founder and Chief Executive Officer,
American Fashion Network, East Syracuse, NY................ 29
Ms. Jacqueline K. Lopez, President, Premier Enterprise
Solutions, Upper Marlboro, MD.............................. 34
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
GovEvolve.................................................... 38
GovSmart, Inc................................................ 46
Ho-Chunk Incorporated........................................ 51
HUBZone Contractors National Council......................... 55
The Montgomery County Chamber of Commerce (MCCC)............. 60
LEVELING THE PLAYING FIELD: THE STATE OF SMALL BUSINESS CONTRACTING
----------
THURSDAY, MAY 11, 2023
House of Representatives,
Committee on Small Business,
Subcommittee on Contracting and Infrastructure,
Washington, DC.
The Subcommittee met, pursuant to call, at 2:00 p.m., in
Room 2360 of the Rayburn House Office Building, Hon. Nick
LaLota [chairman of the Subcommittee] presiding.
Present: Representatives LaLota, Molinaro, Bean, McGarvey,
Scholten, and Thanedar.
Also Present: Representative Williams.
Chairman LALOTA. Good afternoon, everyone. I now call the
Subcommittee on Contracting and Infrastructure to order.
Without objection, the Chair is authorized to declare a
recess of the Committee at any time.
The Committee is here today to hear testimony from three
small business owners engaged in federal procurement. And
I now recognize myself for my opening statement.
Good afternoon, again, and welcome to today's hearing.
First, I want to thank our witnesses for being here today and
joining us. Your time here is very much appreciated and I look
forward to hearing your testimonies.
Today, the Subcommittee on Contracting and Infrastructure
will focus on several critical issues facing Main Street
America. We must address the alarming decline in small business
federal procurement. Small businesses eligible to contract with
the federal government declined by nearly 40 percent from 2010
to 2019 and new businesses entering the procurement marketplace
declined by 79 percent from 2005 through 2019. Members of this
Committee from both sides of the aisle understand the crucial
role small businesses play in increasing competition,
innovation, and stimulating our economy, and yet, they have
been systematically squeezed out of our federal contracting for
decades.
This decline is exacerbated by the Biden administration
steering our economy and national security in the wrong
direction. At a time when the country needs a robust defense
industrial base, small businesses are getting pushed out of
government contracts in this space.
It is also crucial that we ensure small business
contracting goals are accurately reported by the government. As
we have seen in countless cases, the government does not have a
true representation of small businesses in contracting. For
example, contracting methods like the SBA's SCORE card portray
inaccurate assessments by allowing things like double counting
which leads to inflated numbers.
Finally, we must examine the effects of ineligible firms by
reevaluating issues such as self-certification. Just like any
small business program across the federal government, we must
ensure structure and guidance is in place to ensure firms are
accurately represented. Fraud is rampant in these self-
certification problems, and yet, the Biden administration seeks
to expand rather than correct these actions. Our goal on this
Committee is to create a pathway for small businesses to
succeed. We understand the value and substance that make up
each of these businesses in our hometowns and vow to continue
to advocate for their successes.
In my district, Long Island is home to so many incredible
small businesses and hardworking entrepreneurs who serve our
community and provide exceptional goods and services. When
traveling around the district, I hear each of these small
businesses about the issues they are facing and the actions we
can take in Congress to provide a better future for main
street.
Small business contractors play a vital role in America's
industrial base and national security apparatus. Your real
world experiences will help the Committee work to make
meaningful improvements to ensure small businesses are fully
utilized in the federal procurement marketplace. It is my fear
that the decline of small business contracting will continue
until steps are taken to improve competition and accuracy, and
accurately report on the true status of the state of small
businesses in federal procurement.
Thanks again for joining us today. And I am looking forward
to the conversation ahead.
With that, I yield to my distinguished colleague, the
Ranking Member from Michigan, Ms. Scholten for her opening
remarks.
Ms. SCHOLTEN. Thank you, Mr. Chairman, for holding today's
important hearing. Thank you so much to our witnesses for
taking time out of your busy days to come and share your
experience.
The federal government is spending almost half a trillion
dollars annually on the purchase of goods and services for its
needed daily operation. In Fiscal Year 2021, 6.5 billion in
defense contracting dollars were spent in Michigan alone. At
least 359 million of those dollars were spent in my district.
This money brings well-paying jobs to West Michigan and
stimulates local economies.
The U.S. Government remains a consistent and reliable
client. Yet, the federal marketplace is a hard space to break
into, especially for small businesses. Recognizing the need for
a diverse market, Congress included goals for small business
participation in federal procurement and created a variety of
contracting programs to help small firms compete in that
marketplace. The SBA plays a vital role in this process.
The SBA works with agencies to help them meet the small
business goals. It also implements and oversees programs used
by many small firms to start contracting with the federal
government, and they have been successful in these tasks.
In recent years, the government has consistently surpassed
the small business goal, allowing the government to receive
quality goods and services at competitive prices and strengthen
its industrial base. The SBA also plays an important role in
ensuring that small businesses owned by women, veterans, and
economically disadvantaged individuals are able to compete in
the federal procurement space.
However, there is always room for improvement, and it is
the role of this Committee to make sure that the SBA is doing
the best it can. Oversight is a critical component of this and
the hearing today will help us to help the SBA do the best job
that it can.
The government as a whole and some agencies have failed to
meet all of the small business participation and several
individual goals, such as women-owned small business. These
failures deprived small businesses of billions in contracting
dollars. Additionally, the Committee has seen the average
contract size increasing. On first take, this appears to be
promising as larger contracts may be more profitable for small
business companies. However, it might suggest that more
contracts are being consolidated, resulting in fewer
opportunities for small businesses.
I am particularly interested in the witnesses' perspective
today on this issue. The ability of small businesses to compete
in the federal marketplace has also been adversely affected by
the lack of staff in critical roles.
Sadly, there are openings in the roles of procuring center
representatives and commercial marketplace representatives
overseeing millions of contracting actions. Small businesses
cannot be adequately advocated for with such few Members
promoting their use and ensuring that agencies are following
the small business set-side procedures.
Lastly, the government steps, such as developing and
implementing category management to deliver savings to federal
agencies and eliminating unnecessary redundancies. Yet, the
approach has also contributed to a decrease in the small
business industrial base. I welcome discussion like today so we
can identify the many factors challenging our small business
contractors and develop thoughtful actions together.
What is important for this Committee to keep in mind is
that these developments are part of a bigger picture, which is
that the federal procurement marketplace is always evolving.
Small firms bring new ideas to the table which in turn generate
new jobs and even new industries. We must take steps to ensure
that they can access the federal marketplace. I thank all of
the witnesses for being here today, and I yield back the
remainder of my time.
Chairman LALOTA. Thank you.
I now yield to the Chairman of the Full Committee, the
gentleman from Texas, Mr. Williams, for his brief opening
remarks.
Mr. WILLIAMS. Thank you very much. And you heard him say
brief, so they will be brief, Chairman.
I want to say again thanks to our witnesses. It is good to
be able to say hello to you and visit with you. And I want to
thank my colleague, Chairman LaLota for holding today's
Subcommittee hearing that will highlight the current state of
small business contracting, and as I have said earlier, I am a
small business also and very familiar with some of these
problems.
Small business plays a vital role in America's industrial
base and national security apparatus. As we saw during the
pandemic, it is detrimental when our country is too relied on
other nations to source goods that keep America moving. The
government contracting system helps solve this problem. The
sides for the small businesses keep key opportunities available
to build out our industrial base and diversify our supply
chains. Unfortunately, the number of small businesses
contracting with the federal government has been decreasing for
the last decade, and this is not a missed opportunity for small
businesses to expand their business operations but also
weakening the overall economy. I hope that this hearing will
begin to shine light on these problems and will help guide us
to find solutions to strengthen or solve business contractors.
So with that, Mr. Chairman, I appreciate, again, you
calling this hearing and I yield back.
Chairman LALOTA. Thank you, Chairman. I will now introduce
our witnesses.
Our first witness here today with us is Mr. Rob Schroder.
Mr. Schroder is a 1993 graduate of the finest of our nation's
service academies, the Naval Academy in Annapolis and he is a
retired Marine Corps harrier pilot. After the Marines, Mr.
Schroder founded SteerBridge, a veteran-run company that
provides technological and professional run services to the
U.S. Government and private entities. Mr. Schroder prides
himself on having a special emphasis on elevating the stature
of veterans in the private sector by integrating their
experience into federal projects. Rob lends his operational,
congressional, and acquisition expertise developed in the
Marine Corps with his management success while at the U.S.
Chamber of Commerce to deliver effective results for
SteerBridge customers. Mr. Schroder also holds master's degrees
from the Industrial College of the Armed Forces, the Marine
Corps University, and the Indiana University Kelly School of
Business. Mr. Schroder, sir, thank you for your service to our
country and for being here today. We look forward to the
conversation ahead.
Our next witness is Ms. Jackie Ferrari. Ms. Ferrari is the
founder and CEO of American Fashion Network located in
Syracuse, New York. In 2005, Ms. Ferrari built AFN to be a
trusted apparel supplier to major retail brands and small
businesses across the country. AFN serves their partners with
trend right apparel from manufacturers across the globe and
prides themselves on being a reliable federal contractor. Ms.
Ferrari graduated from the University of Arizona where she
studied journalism and then went into apparel design and
manufacturing. Ms. Ferrari, thank you for being here today and
we look forward to the conversation ahead.
I now recognize my colleague, Representative Scholten to
briefly introduce their constituent who is before us today.
Ms. SCHOLTEN. Sadly, not a constituent though. I wish that
we could claim her. We are happy to have our witness, Ms.
Jackie Lopez with us here today. Thank you, Mr. Chairman.
It is my pleasure to introduce our final witness, Jackie
Lopez. Ms. Lopez is the president of Premier Enterprise
Solutions, a company specializing in cybersecurity, information
technology, and program management. Premier is a service-
disabled, veteran-owned, and women-owned small business
participating in the SBA 8(a) development program. She
cofounded Premier in 2012 after serving in the Air Force. And
we thank you for your service. Prior to her time in the
military, Ms. Lopez served as the director of Defense
Department programs at the GSA Federal Systems and Integration
Center where she oversaw the acquisition and management of
large-scale enterprise information technology contracts. Jackie
received her BS from the University of Southern Missouri and
studied business administration as a post-graduate at Embry
Riddle Aeronautical University. She is a graduate of the VA
Women, Veteran-Owned Small Business Initiative, an ACTIAC
fellow, and an active Member of the Women Impacting Public
Policy. Ms. Lopez is also a graduate of the Veterans Institute
for Procurement, Grow, and VIP Advanced Programs and he SBA's
Emerging Leaders program. I am thrilled to have you here today,
Ms. Lopez, and look forward to your testimony. Thank you so
much for being here.
Chairman LALOTA. And once again, thank you to all of our
witnesses for being here today.
I now recognize Mr. Rob Schroder for his 5-minute opening
remarks.
STATEMENTS OF ROB SCHRODER, FOUNDER AND MANAGING PARTNER,
STEERBRIDGE; JACKIE FERRARI, FOUNDER & CEO, AMERICAN FASHION
NETWORK; JACQUELINE K. LOPEZ; PRESIDENT,PREMIER ENTERPRISE
SOLUTIONS.
STATEMENT OF ROB SCHRODER
Mr. SCHRODER. Chairman LaLota, Ranking Member Scholten,
Chairman Williams who recently just left, and distinguished
Members of the Subcommittee. Thank you for inviting me to
appear before you to discuss the importance of small business
in the federal procurement, a system and how this legislative
body can help to secure government agencies are fully engaging
and utilizing these vital partners.
My name is Rob Schroder. As mentioned, I am the founder of
SteerBridge, a government services provider and a Service-
Disabled, Veteran-Owned Small Business. Our company specializes
in delivering best in class solutions to the federal
government.
As mentioned, I graduated from the Naval Academy. I had a
career with the Marine Corps, where I also served not only as a
harrier pilot but as an acquisition professional. So I got to
see this from the government side.
Following that career, I spent time at the U.S. Chamber of
Commerce as the vice president of International where it is
there that I learned the true value that the private sector can
provide to the federal government.
I launched SteerBridge with two goals in mind. One,
supporting the veteran community, while providing top tier
technology solutions for the federal government. I knew from my
career that the best and most underutilized talent in the
country can be found right here in our veteran community. I
wanted to showcase and leverage that talent, acknowledge, and
expertise that is largely underutilized.
Secondly, I had a deep personal knowledge of the critical
need to modernize and make private sector solutions available
for the federal government. Being part of the solution to these
issues for the government is the focus of SteerBridge.
Currently, I am very proud of our work to help modernize
the GI bill at the VA.
Alongside our VA partners and as a subcontractor to
Accenture, we have taken a 30-day GI bill approval process and
turned it into a 3 second button click. This has been a huge
win for the VA, but more importantly it has been a big win for
our veterans. And more importantly, it also shows what a small
business is able to do working alongside our government
partners. Speed, agility, and mission focuses, our advantages
of not just SteerBridge but our small business peers in the
industry.
We recently are working on an innovative solution and
groundbreaking work utilizing artificial intelligence and
machine learning for the Marine Corps. This shows the vital
advantages that we can provide to one of our best customers. We
are applying these advanced techniques to better supply the F35
on deployments. We have been successful in this contract
because we are agile, we are flexible, and we are innovative at
a speed only a company of our size, absent a big bureaucracy
can accomplish.
While the federal government, including Congress, has spent
a lot of time advocating or small businesses, those efforts
many times come up short. Even though Congress sets well-
intentioned goals for agencies to hire small businesses, the
fact is that it has not resulted in more small businesses
winning the government's businesses. For goals and good
intentions to be effective, they must have teeth to them.
Instead of the government creating small business goals, I
would implore this Subcommittee to consider legislation that
outlines specific requirements for small business contracting.
Taking this route will be more effective than advocacy and
ultimately, less costly for the government.
SteerBridge deep values the partnerships we have cultivated
with large businesses and the expertise we have gained by
working as subcontractors is invaluable. And let's be clear;
there is an absolute need for the value that big business
brings to the federal government. But as I look forward to
discussing with you further today, it is in the best interest
of the United States Government and the industrial base to have
more small businesses engaging with the government and
delivering be spoke and ``best in class'' solutions that are
difficult to find at a large company.
For Congress to truly level the playing field I would
implore you to consider the following:
Completely eliminate the Mentor-Protege Joint Ventures
(MPJV) program. The program was created with all the best
intentions but has been warped into simply being a path for big
business to drive revenue under a small business banner.
Additionally, MPJVs result in never-ending protests, confusion,
and hampering the government's ability to modernize.
Second, require a specific certification process for
subcontracting. While eliminating self-certification for SBA
set-aside programs, but not reporting, was addressed in the
most recent NDAA. There continue to be loopholes and delays
that allow companies to misrepresent their ownership.
Third, clean up SBA's government-wide contract reporting.
Congress should consider passing a policy that allows agencies
to only count their contract spending against one category for
a small business.
By bringing smaller and innovative companies further into
the federal government, we will ensure the United States is
leveraging the best of what small businesses have to offer.
While increasing competition for contracts, which will lead to
better prices for the American taxpayer.
Thank you, and I look forward to taking your questions and
discussing the importance of small business in the federal
government.
Chairman LALOTA. Thank you.
I now recognize Ms. Jackie Ferrari for her 5-minute opening
remarks.
STATEMENT OF JACKIE FERRARI
Ms. FERRARI. Chair LaLota, Ranking Member Scholten, and
Members of the Subcommittee, it is an honor to appear before
you today.
My name is Jackie Ferrari, and I am the founder and CEO of
American Fashion Network, a women-owned small business based in
Syracuse, New York. I am also a Member of the Women's
Procurement Circle, which advocates for policies that
strengthen women-owned companies that do business with the
federal government.
Over the last decade, I have seen first-hand how
congressional and presidential attention to domestic
manufacturing policies can significantly benefit small
businesses like mine. I am particularly pleased that this seems
to be, at least from where I am sitting, a bipartisan effort.
It has always been my goal to keep manufacturing in the
United States. Born and raised in Los Angeles County,
California, I was able to experience the glory of American made
products in the 1970s and 1980s before many of the jobs moved
overseas.
Together with the U.S. Government, I believe we can keep
American manufacturing alive. I founded AFN in 2005 and we have
since grown into a full manufacturing enterprise providing
clothing, fabric, and promotional specialty products to the
world's most prestigious retailers, corporations, and now the
federal government, which happens to be my favorite customer.
At the beginning of the COVID-19 pandemic, AFN made the
decision to pursue federal work as we watched the retail
industry suffer under economic strain of lockdowns. When
millions of dollars in sales were canceled, I knew I had to
pivot to keep my business and employees afloat. We began
producing masks, COVID-19 protection from design to shipping in
just 5 days.
Policies like Buy American encouraged domestic preferences
and small business participation that allow my business to
thrive. Federal contracting opportunities give small businesses
the prospect for security and long-term stability which is
important in the apparel industry where there is a constant ebb
and flow of business.
In 2021, AFN won a $52 million contract to produce a new
line of fitness training uniforms for service members. I cannot
express enough how grateful and proud I am for the opportunity
to provide garments for the U.S. military personnel. This gave
me the ability to hire five additional employees at our
headquarters, keep 70 workers in California and 56 workers in
Mississippi employed with a workforce of 76 women waiting to
work there if we have the business to give them, largely single
mothers.
This contract does not come without its challenges. We
anxiously wait for the contract to kick in after 2 years of
delays. Speaking to my peers across industry, I know delays are
commonplace. As a small business, they are also difficult to
manage. To date, we have provided two wear tests and a total of
300 samples, all using AFN's resources. For apparel designers
and manufacturers, delays disrupt our supply chain because we
cannot hire or keep employees without a promise of work.
For example, a 5-year IDIQ contract like the one I won
provides greater opportunity, but since there are no guaranteed
orders or ship dates, it is challenging to finance. When we
receive an order typically with a 6 month lead time delivery
issue, it is difficult to find a financial partner that can
accommodate the need for such significant capital in such a
short amount of time. Since you do not know what to expect from
delivery to delivery, it makes planning capital and employee
retention challenging.
From my point of view, there are a number of changes
Congress can make that would help small companies thrive in the
federal market. Better utilization of all small business
federal contracting programs is top of our list. According to
the SBA, the government has only met its women-owned
contracting goals which was established in 1996 two times and
has never met its HUBZone goals.
If the government is serious about doing business with
small companies, firms should no longer be allowed to self-
certify their socioeconomic status, instead, requiring an SBA
certification. Additionally, the overall small business goals
should be increased as well as the goals for SBA's contracting
assistance programs. And finally, sole source thresholds must
be raised and SBA's procurement resources for small businesses
adequately funded.
Broad bipartisan support for increasing small business
participation dictates changes are needed to bolster these
businesses. I applaud the Committee's effort to address these
issues and look forward to providing further input on ways
Congress can support small manufacturers.
Thank you, and I look forward to answering your questions.
Chairman LALOTA. Thank you.
I now recognize Ms. Jacqueline Lopez for her 5-minute
opening statement.
STATEMENT OF JACQUELINE K. LOPEZ
Ms. LOPEZ. Thank you, Chairman LaLota, Ranking Member
Scholten, and distinguished Members of the House Small Business
Committee on Contracting and Infrastructure. Thank you for the
opportunity to testify today on federal contracting programs
important to the small business ecosystem and strategies to
improve those programs.
I am Jacqueline Lopez, president and owner of Premier
Enterprise Solutions, a company specializing in cybersecurity,
information technology, and program management services in the
federal sector. Premier is a service-disabled veteran and
women-owned small business participating in the SBA 8(a)
development program.
Premier has grown into a successful firm employing
personnel in six states and the District of Columbia. Much of
my success is directed attributable to the 8(a) women-owned
small business and service-disabled, veteran-owned small
business programs, as well as many of the free resources for
socioeconomic programs, the government owns or supports.
These programs are not perfect but crucial to removing
barriers, creating growth opportunities, and bringing together
stakeholders with private sector innovators. I believe there
are challenges to the socioeconomic programs. One of the
challenges is category management which conflicts with the
government's goal to increase the industrial base. While well-
intended, the net effect has been a shrinking of the small
business industrial base.
Best in class vehicles (BICs) play a key part in category
management but it is very difficult for small businesses
generating less than $10 million annually and new entrants to
win an award on many the BICs. Very few small businesses can
compete for an award on several of the BICs without a large or
mid-size joint venture partner. As BICs are recompeted or new
vehicles created, they should take into account businesses that
have $10 million in revenue or less and new entrants. We need
more vehicles, especially GWACs, like 8(a) Stars which has a
simple and inclusive bid process and the criteria is designed
to get more businesses on the vehicle rather than keep them
off. We also need more vehicles to include a GWAC available for
women-owned small businesses. The 8(a) and service-disabled,
veteran-owned programs have access to GWACs. Having such a
vehicle for the women-owned small business program would help
more women-owned small businesses pursue larger contracts and
help federal agencies achieve their contracting goals.
The 8(a) development program has been the catalyst for many
small businesses entering the federal market. However,
anecdotal data has shown it takes several years for 8(a) firms
to actually gain traction and win contracts. An extension of
the 8(a) program from 9 to 12 years would allow 8(a)s more time
to understand the complexities of the federal procurement
process, increase their working capital, and sharpen
competitive skills, ensuring a sustainable business upon
exiting the program.
Lastly, the whole source threshold for 8(a) firms currently
stands at 4.5 million except for Native American tribes and
Hawaiians in which case the sole source threshold for civilian
agencies is $25 million without justification, and DoD, $100
million without justification. Ideally, the threshold would be
equal across all 8(a)s. But even a modest increase to the
threshold for non-Native and Hawaiian firms, 10 to 12 million
or more would be impactful. An increase to the threshold would
promote larger awards which means more revenue for the company
and subsequent job creation.
Despite these barriers, success is attainable. With these
programs, my business has been successful. Without them, my
ability to grow and create jobs would have been significantly
decreased. These programs provide invaluable opportunities for
the businesses that are able to successfully navigate them and
can be significantly more impactful with improvements. I want
to see small businesses have an opportunity to be engines of
job creation and economic growth.
Once again, I wish to express my deepest gratitude to this
Subcommittee and the Full House Small Business Committee for
its continued efforts to support America's women-owned
businesses and for inviting me to share my story and thoughts.
Chairman LALOTA. Thank you. And thank you to all of our
witnesses for your opening remarks.
We will now move to the Member questions under the 5-minute
rule, and I recognize myself for 5 minutes.
Mr. Schroder, the first question is going to be for you,
sir. Small businesses are vital to America's industrial base,
especially when it comes to providing goods and services for
our military. Unfortunately, fewer small businesses are
choosing to do business with the government, resulting in a 79
percent decline in new businesses entering the federal
procurement space from 2005 through 2019.
My question is, what did you do that helped prepare you for
the federal government contracting space knowing that fewer
entrepreneurs were getting involved?
Mr. SCHRODER. Thank you, Mr. Chairman.
I did it by small steps. And that would be my advice to any
entrepreneur or small business that is looking to start work
with the federal government. The barriers are so high and the
process is so lengthy that you cannot go full into it in one
step. It is an incremental approach.
And, so, that would be my advice is that you start slowly,
pick any customer that you have some expertise with and go at
it that way in terms of your initial start.
Chairman LALOTA. Were there dialogues that you had with the
SBA, websites that you referenced, other ways that you learned
tricks of the trade to get you off the ground the right way?
Mr. SCHRODER. So I did not find the SBA particularly
helpful. I went straight to the agencies and started working
directly with the programs as opposed to an advocacy. Every
time I went to a particular advocacy group or, you know, a
vendor management or any sort of, you know, technology path or
innovation path or vendor path, none of those proved useful at
all. The only thing that mattered was the program entity, the
end user, the customer, if you will, and what they needed and
what their requirements were. It was not that it could be
pushed on to them.
Chairman LALOTA. Thanks. And if any of the witnesses want
to add in some of their experiences I think we have a moment or
two for that.
Ms. FERRARI. Sure. I would love to. Thank you.
We read a book. We decided during COVID to jump into the
contracting space because we were a women-owned business and we
knew that in the federal contracting arena that that was
important. So we actually read a book called Government
Contracts Made Easy and took a 15-minute consultation with the
woman who wrote it. So we did a lot of homework and we looked
at the landscape. And then we went to the DOD and presented
some product that we thought that they would like and that
really started our path. So we aggressively pursued the
process.
Chairman LALOTA. Thank you.
And Ms. Lopez, did you want to add anything?
Ms. LOPEZ. Absolutely. I was fortunate enough to have an
understanding, some understanding of government contracting so
that was very helpful. But quite frankly, what I learned even
though I was a very experienced government contractor. If you
are a new entrant into the government space there is still a
lot you have to do. For instance, you have no access to
``vehicles,'' right? Because you do not have past performance,
though I could run $100 million projects, it did not matter to
the government when it comes to actually doing them because I
did not have that past experience, past performance.
One of the things though that honestly I have seen--I
mentor a lot--in government contracting is that a lot of
individuals cannot get started because the government is a very
complex thing to navigate. I know CIOs, individuals who have
been CIOs in industry, they tried and they said ``forget it'';
right? Because of all the procurement rules.
So one of the things that really worked for me and works
for others is having programs, like the Veterans Institute of
Procurement, Emerging Leaders, things like that that give
significant, substantive information for free. Those programs
are free but they give you every detail you need to really
begin to understand and grow in the federal space.
Chairman LALOTA. Thank you.
I want to change gears for a second about self-
certification and Ms. Ferrari, I want to direct the initial
question to you.
The Committee is concerned about self-certification of
firms and the potential for fraud or misrepresentation. And I
would like for you to take a first shot at this. But what are
your views on self-certification of firms?
Ms. FERRARI. Thank you, Chairman.
I think that it needs to go away. There is rampant fraud
across so many areas of contracting in general, but to self-
certify, there are so many companies that, you know, will list
their wife as the owner of the company and that person not
being involved in the day-to-day business. It happens full stop
so much. So we really think that that would be a very big step
in helping small businesses to actually thrive in this space by
having the program where you have to be certified by the SBA
with a stringent certification process. That really is a
critical move.
Chairman LALOTA. Thank you. And if the Ranking Member will
indulge me for 30 more seconds, Mr. Schroder, if you would not
mind, the same question.
Mr. SCHRODER. Sure. And thank you for the question.
I would say that there are two reasons not to certify.
Number one, you are not capable of certifying because you do
not have the ownership structure and so you should be
ineligible.
The second reason, you are just lazy. You do not want to go
through the process. And I would say either one of those
reasons are enough to require the certification process. We
have encountered it multiple times and, you know, there is
nothing worse than losing to someone that is misrepresenting
themselves.
Chairman LALOTA. Thank you. I appreciate your feedback. My
time is well expired.
I recognize Ranking Member Scholten from Michigan for 5
minutes.
Ms. SCHOLTEN. Thank you so much, Mr. Chair. And thanks
again to our witnesses.
As you all know, last week was National Small Business
Week, and I had the opportunity to be out and about in the
district visiting a number of small businesses, one of them was
R&R Mechanical, a Latino-owned HVAC business. R&R Mechanical
started like so many other small businesses that grow into
great businesses in Grand Rapids in a garage. It has now grown
to a thriving 42 employee operation and is continuing to grow.
As they grow, they have expressed interest in breaking into the
federal contract's space.
As the Ranking Member of this Subcommittee, it is a top
priority of mine to ensure that minority-owned businesses like
R&R Mechanical are able to enter and navigate the federal
contracting marketplace. As such, I am committed to protecting
and strengthening the 8(a) program.
Ms. Lopez, you participate in the 8(a) program, as well as
the women-owned small business program. Have these contracting
programs helped your small business compete in the federal
procurement space?
Ms. LOPEZ. They have. One of the things that is really good
about the 8(a) program is because, again, even though you do
not have significant past performance, if you can convince the
customers that you can do the work you can get sole source
awards. So my first multimillion dollar sole source award was
critical in providing me capital that helped me to compete. So,
I mean, I am proud to say most of my work is not 8(a), it is
not direct, it is competed, but yes, it was very valuable.
Women-owned small business, honestly, I do have some women-
owned small business work, but I would really like to see more
vehicles and more efforts for sole sources for women-owned
small businesses.
Ms. SCHOLTEN. Thank you.
And in your view, what would you say if there is anything
missing or additional elements that could help the program,
what would those be?
Ms. LOPEZ. For 8(a), I think you really need to raise the
ceiling on 8(a) programs and you need to extend the number of
years. Unfortunately, because there is, it takes a while to
really get to know the federal sector begin to ramp up. And a
program, even like myself, you know, I have done pretty well in
it but I am really just at a place where I could do
exceptionally well. With women-owned small business, again, I
think a GWAC would be amazing. That is missing for us, a
vehicle that is dedicated to women-owned small business for
women-owned small businesses.
Ms. SCHOLTEN. Thank you.
Another issue that I consistently hear about as an
impediment to small business contracting is category management
which is a procurement initiative, as we know, led by the
Office of Management and Budget. Category management poses a
barrier for many small businesses in making federal contracts
too big for a small business to handle.
Ms. Ferrari, if you could talk a little bit more about how
consolidation and bundling of contracts through category
management has impacted your business, and talk just a little
bit more in detail about what you found in terms of the lack of
women-owned business small set-asides in your industry.
Ms. FERRARI. Well, thank you for the opportunity to talk
about it.
A vehicle like that, category management, I am frightened
to death of this coming. And when you talk about the
manufacturing base shrinking, that might send me running the
other direction when I have spent the last 2-1/2 years of my
life advocating for small business and federal contracting. I
do not believe that it works in the apparel industry because
there are so many different things that our warfighters need
for their safety and their security and their comfort, and I
just do not think it works, number one, from a high level.
From not so high a level in so many of the agencies under
these contract vehicles, they are not meeting the set-asides.
They have lists and lists of set-asides that they are supposed
to meet, and I do not believe that there is any governance to
make sure that they are meeting those. So it really knocks the
small business out of the loop. We do not get the opportunity
to compete because it is owned by this large vehicle. And I can
tell you it will absolutely decimate small business when it
comes to apparel.
Ms. SCHOLTEN. Thank you so much. And just at time. Perfect
timing.
Chairman LALOTA. The best Ranking Member.
I now recognize Mr. Bean from Florida, the home to so many
former New Yorkers, for 5 minutes.
Mr. BEAN. Mr. Chairman, thank you very much.
Good afternoon, Small Business Committee. Chairman, you do
look very stately in the Chairman's chair. So well done.
Congratulations. And Ranking Member Scholten, you, too. Of all
the Ranking Members in this Committee you are one of them.
I want to welcome our panelists to Washington, D.C. I read
your bios. They are very impressive. What you have built is
amazing and that is why you are here. You will be able to add
you testified before Congress, which is impressive, too.
We have heard today the declining number of small
businesses that are doing business with the federal government.
It is getting harder to do it, especially when government is
competing and government launches its own business to handle
that whatever it needs, procures it itself.
What if there was a law that said before the federal
government could enter this marketplace it should bid out to
see if there is some small business or an entrepreneur that
could do that service or procure that goods cheaper or more
effectively? Would that be a good idea or a great idea? Mr.
Schroder?
Mr. SCHRODER. Congressman, thank you for that question.
I would offer the VA as an example. So there is a law, a
decision that was handed down a few years ago that required the
VA Rule of Twos. So the VA is required to seek out service-
disabled, veteran-owned small business. I would say its effect
is mixed. And so, I would look to that to a guide. In theory,
yes, absolutely agree it would not be good; it would be great.
It would be awesome.
Mr. BEAN. It would be great. Very well said. Thank you so
much.
Ms. Ferrari, what say you? Would that be a good idea or a
great idea?
Ms. FERRARI. A great idea.
Mr. BEAN. That is the correct answer. Thank you so much.
You nailed it.
Ms. LOPEZ. Well, I do not have any other choice. So you are
saying actually putting it out to socioeconomics first?
Mr. BEAN. That is exactly right, Ms. Lopez.
Ms. LOPEZ. Well, I think that is absolutely fantastic. I
love it.
Mr. BEAN. I will accept fantastic to the idea, too. It just
so happens I have filed that bill. How about that to say to the
federal government before we put our toe in that water, let's
see what small business, see what Ms. Lopez's business can do.
Let's see what Ms. Ferrari is up to. Maybe she could procure or
provide that good or service cheaper, more effectively, and you
are hiring people. All of you are hiring people. So I say that
not only for you but I am plugging, shamelessly plugging my own
bill for our Committee Members to jump onboard. There is lots
of room to co-sponsor this bill. But seriously, we want to
know, and you have already hit on a handful of things, the
barriers, what barriers do we need removed? What pathways do we
need to clear? I know the VA, Mr. Schroder, you have already
had some experience and we want to make sure this bill does not
run into the same trap that is currently out there. We really
want them to focus on it because small business, the
entrepreneurship of small business is the heartbeat of America.
It is what makes America great. I throw that out there as a
tossup question. Anybody want to jump in? Barriers to remove or
pathways to clear to make it easier for small business to do
business with the federal government?
Ms. Ferrari, jump in.
Ms. FERRARI. I am going to jump in for a second.
I just want to say, you know, there are so many barriers to
entry. We are talking about them here where we can have Rule of
Two. So same thing in my industry. The Rule of Two is
exceptional, and if it were being adhered to it would create
the pathway that you are trying to create.
Mr. BEAN. Now, everybody knows what the Rule of Two is but
for those that might not know what it is, tell us about the
Rule of Two.
Ms. FERRARI. They have to go out, Procurement has to go out
and find two--if they can find two companies that can
manufacture, let's just say it is a physical training uniform.
Two companies that can do it that are small business, it has to
go to small business. So it cannot go to a large vehicle. It
cannot even go to prison industries because there are two small
companies who can do this.
So that is critical, and I love your great idea. And if I
could be here to vote for you I would.
I believe when there are these large contract vehicles, we
have had several through our industry come out and say the
large contract vehicle company is saying this cannot be made in
America. Can this be made in America.
And by the year, here is the number you should call at DHS
and tell them. And we have had four of these things in the last
2 months where we come back and say absolutely. And I will make
a sample. It will be on your desk by Friday.
In the fabric, with the yarns that are barrier amendment.
It is doable. But the agencies just do not know.
And I had an opportunity to attend an industry days at HHS
2 weeks ago for 2 weeks ago for PPE. You know, there is a law
now that says--I am getting the light--there is a law that says
you have to make----
Mr. BEAN. We both are getting the light but finish that one
sentence and hopefully they will not know. Hopefully they will
not know that we are over.
Chairman LALOTA. Finish that objection. You have another 90
seconds.
Ms. FERRARI. They have to make it in America so it has been
passed. But we sat in front of a panel of all these people from
the VA to HHS to DHS. They do not even know how to go about it.
So I think there has to be something that says, something from
the SBA, maybe it is a trade show where we all go and we say,
hey, we exist. Here is what we do. Like, it is here and we just
need to let people know we are here.
Mr. BEAN. Thank you very much.
Last thing. I was going to call this the Yellow Page bill.
If it is offered it is in the Yellow Pages. But people under 30
do not know what the Yellow Pages are.
Mr. Chairman, I yield back.
Chairman LALOTA. Thank you. I now recognize Mr. McGarvey
from Kentucky for 5 minutes.
Mr. MCGARVEY. Thank you, Mr. Chairman. Thank you, everyone,
for being here today. I really appreciate it, especially those
of you who served. Thank you for your service to our country.
We appreciate that as well.
I am going to continue on some things that Mr. Bean was
talking about, in fact, and you could tell he used to be an
auctioneer before he came up here. He might still be available
to birthdays and bar mitzvahs if you all want to.
But he was talking about some good things and how we
continue to get more small businesses involved in
subcontracting. I think that is something we are all interested
and something we all want to see. We also all serve on other
Committees. I serve on the Veterans Committee. One of the
things I am working on right now in the Veterans Committee is
ways to find more training opportunities for companies so that
we can get more veteran-owned businesses opportunities in the
space.
So Mr. Schroder, I will just start with you. You talked
about the Rule of Twos already. We have heard the great idea
from Mr. Bean. Give us a little bit more right now. What are
some ways that we can create more contracting opportunities
particularly for veteran-owned businesses and for service-
disabled veterans and their businesses.
Mr. SCHRODER. Congressman, thank you for the question and
the opportunity.
I would say I would focus less on training companies and I
would focus more on training contracting officers because that
is where the rubber meets the road. And there are two ways that
goes about. Number one is how they put the procurement out,
because they construct it. They can follow multiple paths. The
second is that they hold the big businesses accountable to the
small business goals in each contract. They are considered
goals but if you make the contracting officers hold them
accountable contractually, that is when you will see a
difference there because there are two areas where small
businesses play both as sub and as prime. And I would offer it
is more of training and holding contracting officers
accountable for that. And then there is a whole laundry list of
things, you know, specific barriers. We mentioned best in
class. I mentioned the Mentor-Protege program. There are
several things, you know, mechanically and structurally that
can be changed to help bring in businesses. That would be my
suggestion as opposed to training the businesses.
Mr. MCGARVEY. What is an example that comes to mind of ways
to hold contracting officers accountable to you?
Mr. SCHRODER. Number one, I would have them report their
small business set-asides, and then I would force them to
ensure that they are reporting accurately as to why different
contracts did not come out. Congressman, there are so many ways
that you can put a contract out. The myriad of ways is just
astronomical and every consultant advisor that you go to, they
all come back with the same answer. The federal government will
do whatever the federal government wants to do. Not necessarily
what they should be doing. And so there is all sorts of
different ways you can get around the different small set-aside
programs in order to contract.
Mr. MCGARVEY. Thank you very much.
And I will ask Ms. Lopez sort of the same thoughts on the
same topics.
Ms. LOPEZ. I have to say that I agree that contracting
officers, they need a lot of training. But I honestly also
agree with you in that small businesses also need training
because one of the things that happened is they do not know how
to navigate the market. My business partner and spouse here is
a former contracting officer. I cannot tell you how many times
that helps us when it comes to negotiating with the government
or speaking to what our rights are. We truly understand them.
The procurement laws and the acquisition regs are the heart of
how we do business with the government. To help educate small
businesses on that would be to give them a very powerful tool.
Mr. MCGARVEY. Thank you very much.
And just in the quick time we have left for both Ms.
Ferrari and Ms. Lopez, describe some of the challenges that
women-owned businesses face in this space, and how can we
create more contracting opportunities for companies like yours?
Ms. FERRARI. I would like to give a shout out to the DLA. I
think they have done a really good job with awarding awards to
small business. And we have been the recipient of four of them.
So I really think that they are taking the general, you know,
sentiment in the country to do that. But that is for small
business. So I won four awards as a small business; not one
single award as a women-owned small business. So like I said in
my opening remarks, since 1996, when that was put in place,
they have only met the set-aside twice, met their goals twice.
So I would like to see more effort be put toward women-owned
small business but not double counting it. So putting the award
out as small business but then not being able to say, oh, since
it is a woman we will check that box, too. So I think not only
women-owned small business but service-disabled, women-owned
small business, just hit those goals would help us tremendous.
Mr. MCGARVEY. Mr. Chairman, I know I am past time. Would
Ms. Lopez be able to answer that question quickly? Thank you.
Ms. LOPEZ. What she said. I absolutely agree with her and I
think also partnering with other agencies. Even outside of the
government. I have to say organizations like WIPP really have
helped me understand more about procurement. They help us
navigate the government more, so partnering with those agencies
which SBA does has been very helpful to me as well.
Mr. MCGARVEY. Thank you, all.
And I yield back, Mr. Chairman.
Chairman LALOTA. Thank you.
We are having a good productive dialogue so I want to open
it up to a second round if the Members would like.
Ms. Ferrari, especially, I was interested in your opening
statement where you discussed making uniforms for our military.
And I wanted to ask you about some of the sourcing that you
have experienced over the last couple of years, especially
post-COVID with supply chain issues. How has that sourcing
been? You are making uniforms for our men and women in uniform
who are fighting for our country for the flags that are behind
us right now. Are you still able to source those materials from
the United States? And can you describe any challenge you have
had along the way?
Ms. FERRARI. Yes. Thank you for the question.
We have had no supply chain issues whatsoever because it is
made domestically. So from every component that goes into it,
it is made domestically for Barry Amendment compliance and it
has been great. And I can go back and say like look what
happened during PPE and this is the value of the small
business. During COVID, and we needed PPE and companies were
standing in line waiting to get Chinese masks that were being
sold out of warehouses for cash, you know, it boggled my mind.
Why would we even want to be buying these? And I can tell you
every single aspect of our domestic supply chain kicked it into
gear and started shipping masks to everybody that needed them.
It is such a long story but we did it. T-shirt factors turned
upside down to become hospital gown factories and, you know,
woven dress uniform factories were making masks and boot covers
and all of these things. So with the resiliency of Americans
and the resilience of small business in this country, we
answered the call. And what we need to continue to do is keep
these companies in business so that we can answer this call.
But from yarn to thread to every aspect of a uniform, we are
able to get it when the government needs it. We just need the
government to need it more and more consistently so we can keep
our factories going.
Chairman LALOTA. And it sounds like it is productive for
you to source inside the United States and from our perspective
we appreciate that as well.
Ms. FERRARI. One thousand percent.
Chairman LALOTA. That ends my questioning and I yield to
Ms. Scholten for some questions as well.
Ms. SCHOLTEN. Yeah, thank you so much. Thank you for your
additional time.
Ms. Lopez, you mentioned raising the sole source threshold
level to the playing field. I would like to give you an
opportunity to elaborate on how increased thresholds can help
not only your business but other small businesses and any
examples that you can give would be welcome.
Ms. LOPEZ. Absolutely. Thank you.
I will give you an example. When I first came into the
federal space, there was a cybersecurity program. I knew it
inside and out. Right? There was no one, honestly, who could do
a better job than us just because of the expertise I had in
that the work I had done in the agency. But that project was
$7.5 million, which meant it cannot be sole sourced to me. As a
matter of fact, it was sole sourced to someone else, you know,
because it was on a GWAC, really. And honestly, they did not do
the kind of job I would have done. The client was not as happy.
I just think that raising the threshold also allows 8(a)s as we
go along. As we increase in our ability do work, to do more
work for a given agency. A lot of times quite frankly agencies
will give you a $4.5 million this year, $4.5 million next year,
right? or $4.5 million for 2 years. Because you have done a
great job they want to do work with you. Why should we be
limited in that threshold? Why could it not be at least 22, 4.5
million a year for 5 years, 22.5, or 25? It only makes sense. I
think the government would get better value out of the 8(a)
programs and the contracting officers would honestly have less
work to do rather than more.
Ms. SCHOLTEN. Thank you. That is very helpful.
I also wondered if you could elaborate on what you learned
through the VIP program and the SBA's Emerging Leaders program.
Ms. LOPEZ. Wow. Both programs are absolutely phenomenal.
VIP is, I have to say, probably the best program I have ever
seen and it is free. I mean, everything about doing business
with the government they teach you and they teach you in stages
as you grow. There is a start. If you are a new entrant, you
learn so many of the things that are barriers here. Right? You
learn how to navigate those up front, whether it is financing
or contracting, partnering, all those things. Then there is
Grow; right? As you grow. And then there is Advanced. So, that
program was very, very significant for me because even though I
knew about the government space it gave me significantly more
detail, especially on financing. Emerging Leaders was a 6-month
program which accumulated in a growth plan. By the time you
finished, you had gone in-depth in every single area of your
business and I was able at that point to put together a really
sterling growth plan with smart goals. I use it now all the
time. I use it for all my strategic planning. So many of my
fellow businesses, when they see it, they want to use it. But
those programs really gave me a lot of great education and
information which helped me to not only grow but it helped me
mentor others.
Ms. SCHOLTEN. That is wonderful.
And in the last minute, if you have any thoughts on how we
could better integrate these programs into the contracting
process that would be hugely helpful.
Ms. LOPEZ. Honestly, you could give more funding for both
or either, especially VIP is free. I was actually just at a
meeting where Senator Cardin helped get $2 million more so they
could get 1,000 more individuals in the program. So anything
you can do to get funding, those are programs that are already
there. It is just a matter of getting it through.
Creating a program, SBA had begun, I am not sure what
happened to it but it had looked at doing what is called an
8(a) Academy. I think you can take 8(a) Academy, which was
awesome and VIP, you know, create a baby and almost all
socioeconomics should be able to learn and go through something
like that so that new entrants can understand how to navigate
the market and how to grow quickly.
Ms. SCHOLTEN. Thank you so much. I yield back.
Chairman LALOTA. Thank you.
I now recognize Chairman Williams, small business owner
from the great state of Texas for 5 minutes.
Mr. WILLIAMS. Thank you, Mr. Chairman. Again, I want to
thank all of you for being here. I appreciate you taking the
time to do that.
Recently, I spoke with a small business owner from Texas,
my state, who lost out on a federal contract to a business that
was a subsidiary of a large, multinational corporation. They
did not win the contract and the decision was challenged
because the winning business was part of an international
company. The decision still was upheld.
So Mr. Schroder, is this type of situation common where
larger companies have effective control over small businesses
that compete for some of these government set-asides and what
can we do to fix this issue?
Mr. SCHRODER. Mr. Chairman, thank you for the question. And
I would say, yes, we absolutely do run into that and I would
emphasize my number one recommendation for this Committee would
be the elimination of the Mentor-Protege program which allows
the large business to take 60 percent ownership and then,
thereby, competing on the small business side with 60 percent
ownership of that joint venture. And so that is an immediate
way to address what is a large problem in the procurement
system. It causes a lot of confusion, a lot of delays, and a
lot of unfair practices with the large taking advantage of the
small.
Mr. WILLIAMS. Good. Inflation has been hurting small
businesses across the country, and for contractors I fear that
this issue has an even more larger impact. And if you are
awarded a contract that you bid on months and suddenly all your
suppliers' costs have increased by 10 percent--we have all got
this story, don't we? Your margins are getting squeezed tighter
and tighter and it makes it harder to stay in business.
So Ms. Ferrari, how has your business been dealing with the
inflation over the past year?
Ms. FERRARI. Thank you for giving me the chance to talk
about it. We got hit hard with our Air Force contract. It came
to us just at the time inflation hit and we went from being in
the black to being in the red. And rather than putting it out
for recompete or saying to the DLA that we could not do it, you
know, in fear that if we said that we would never get another
program again, we just looked deeply into the whole supply
chain and actually went back to the DLA and asked if we could
change the packing and double the amount of pieces we put in
the box. And after a couple of weeks they vetted it through
their sources and when they said yes, it put us back into the
black, slightly. But yes, very much, it has affected small
business, and four contracts that I know of went back into
recompetition because they just could not handle the disparity
in price.
Mr. WILLIAMS. I have talked to many small businesses who
have said the federal contractor is so time consuming and
expensive they stopped even trying to even hire people to try
to get it done.
So Mr. Schroder, what advice would you have for these small
businesses? And how can we in Congress simplify the process to
bring more small businesses into the system?
Mr. SCHRODER. Mr. Chairman, I would say the best advice you
can have is for them to start small and then encourage through
the contracting officers with large primes, encourage those
contracting goals to be requirements because then they will be
out farming for the small businesses. And you can start out
with just one single contract gets you up and off your feet and
it is a process to get going. Little contract, by little
contract, by little contract, gets to a bigger one. And so the
advice is to start small. But if you are requiring small
businesses set asides as opposed to just goals, you set
requirements, that will force the system to be able to
encourage small businesses to join.
Mr. WILLIAMS. Good. I appreciate that.
Mr. Chairman, I yield my time back.
Chairman LALOTA. Thank you, Chairman.
I now recognize Mr. Thanedar from Michigan for 5 minutes.
Mr. THANEDAR. Thank you, Mr. Chairman.
As a former business owner, I believe it is important that
the federal government provides opportunities for small
businesses to thrive and grow. As we all know, they contribute
greatly to hiring and creating jobs and innovation, and
certainly, paying taxes.
To that end, we must ensure that contracting opportunities
are available for small business owners in my district and
those across our country. Despite more dollars being awarded to
small businesses, what is concerning really is the overall
participation of small firms in government contracting has
declined over the years.
Now, in Congress, we remain concerned, Ms. Lopez,
especially, we remain concerned about category management. And
the consolidation of requirements into a limited number of
government-wide contracts. And what I am afraid of is
consolidation means, what does this mean for small businesses?
And is this going to keep the new small businesses out of
running because the more established small businesses are going
to be able to compete better in this situation. What does that
do to the new small businesses coming in, especially the Black
and Brown community, the small Black-owned businesses?
Ms. LOPEZ. It does absolutely make it more difficult for
new entrants. Quite frankly, for those of us who are already in
the federal space, we have seen the shrinkage and so we have to
find more resourceful ways to compete. But for new entrants,
there are very, very limited opportunities, which is why with
category management, again, the keys are BICs; right? Those
best in class vehicles which are tier three. Even though they
give you tier two socioeconomic credit, the BICs, the tier
three, that is still the highest level. So why not take those
BICs, the best in class vehicles, and as we put them in place,
ensure that there is a way for entrants; right? New entrants to
bring in their past experience rather than just their
government past performance. You can create a vehicle that
allows them to participate. So I would like to see more of that
in addition to thinks being so stringent. The Mentor-Protege
program, honestly, and Joint Ventures, has worked well for me
and I think I have utilized it correctly, but some people
absolutely have been taken advantage of. One of the trends we
are seeing is that you have to be very large, almost a Joint
Venture to participate in a lot of these BICs and to get
awards. So I really see a large part of the answer as creating
vehicles where everybody has the opportunity.
Mr. THANEDAR. Thank you.
Now, the Biden administration announced it would increase
the share of federal contracts being awarded to small and
disadvantaged businesses to 15 percent by 2025. And I certainly
applaud this commitment by the administration. As small
business owners in my district often find it difficult to
pursue government contracting. Others on this panel have
commented on that difficulty in obtaining capital and
navigating the rules and regulations mandated by SBA. And that
is a general concern that I hear in my district.
But Ms. Lopez, do you think this will expand participation
or will existing businesses receive more contracting
opportunity at the expense of the new small business entrants?
Ms. LOPEZ. I do not know if it at the expense of the new
small business entrants. I can tell you that I have absolutely,
positively seen more opportunity personally. So, I cannot
honestly say that I know or can say definitively that it is at
the expense of new entrants. Again, I think what limits a lot
of new entrants are the vehicles and some of the procurement
rules.
Mr. THANEDAR. All right. Thank you, ma'am.
I yield back.
Chairman LALOTA. Thank you.
I now recognize Mr. Molinaro, my good friend from New York
for 5 minutes.
Mr. MOLINARO. Thank you, Mr. Chairman.
I do not know if there is some rule about having two
Members from New York in the same place at the same time, but I
do appreciate your leadership with the Subcommittee, and thank
you all for joining us.
As I know has been noted, we are confronting a real
challenge among small businesses entering the procurement
marketplace, if you will. As was noted, the Biden
administration has made several reforms to contracting policy,
including those benchmarks mentioned to diversify a small
business supplier base. However, without question, our small
businesses continue to face both challenges and obstacles.
Finding those opportunities and preparing the bids and many
times lose out to larger businesses. We have covered all of
this.
We know that 70 percent of new jobs are created by existing
small businesses, and so the federal government doing more to
break down those barriers and create opportunities for small
business access to procurement is critically important.
To narrow my questions I was going to start with Ms.
Ferrari, if you would not mind. We know that some of the major
challenges applicants face, there are significant challenges
applicants face within the economically disadvantaged women-
owned small business program. Could you speak I hope a little
bit to those programs and how might they be simplified,
streamlined, and maybe with some note in particular rural
communities?
Ms. FERRARI. Yes, thank you. Thank you for the question.
You know, small business, that is where innovation comes
from. It is the heartbeat of American and it is the heartbeat
of manufacturing in America.
The government needs our innovation. They need what we are
bringing to the table. We need to hear the cry. We need
uniforms that data moves through and how can we get there? We
hear it and we develop it. And when we go to the government we
just need access by adhering to the rules that are there. What
could disadvantaged businesses and women-owned businesses get?
We just need orders. And we can get those orders if those set
asides are met and they are not.
And you know, quite often I sit and I hear things about,
well, you know, can we give you a grant? What do you need? We
do not need your money; we just need the orders. And it is so
convoluted. It is like the rules are there, the infrastructure
is there, but there is just no oversight and they are not
hitting these set-asides so it is going to other things that my
counterparts here are talking about. So, what can you do? Just
hit the set asides and just give us the orders based on those
things. Again, I go back to 1996, they have hit that set aside
twice, and never hit HUBZone. So, for me it is that.
And going back to the innovation piece, like how can we
bring innovation if we do and then we do not even get the
contract. So, you know, it prohibits you from wanting to go out
and give your best foot forward to help our warfighter in my
case when it comes to apparel and say, oh, that is great and we
love it and now it is going out to bid. And by the way, you are
not getting the contract and they are not hitting the set-
aside. So I do not want to be just complaining all the time.
They are doing some great things and they are trying. It is
just we have to work harder and try harder.
Mr. MOLINARO. I appreciate that. It is very helpful. Thank
you.
Mr. Schroder, I am sure others have but I want to thank you
for your 20 years of service to this country. We obviously
celebrate that and all those who have served. I know an area of
importance is welcoming veterans into the same space.
As we discuss what further reforms can be made to the SBA's
role in small business contracting and its future, what are
some of those important reforms the Committee might take up to
modernize the federal procurement process specifically for
veterans?
Mr. SCHRODER. Congressman, thank you for the question. I
would say a couple things the SBA could do in order to help
veterans specifically. Number one, the SDVO speed program,
which they just took over, ensure that that program is run
effectively. That is kind of a pejorative statement but make
that thing run effectively. It is a tough process to get
through but to date it has gone rather smoothly. But that is
going to take constant focus because that is the number one
step that veterans take to get into federal contracting is to
get themselves certified. So that is step one.
Step two is SBA has got to be constantly educating across
the federal government the SDVO speed requirements, as well as
the certification process. There is a lot of, based on the NDAA
that went into effect with self-certification, there is still a
lot of loopholes and there is a lot of ambiguity and a lot of
misunderstanding. When it comes to veterans, specifically,
Congressman, I would say those are the two biggest things they
could do to drive home the requirement and drive home the
certification process and get rid of the self-certification.
Mr. MOLINARO. Thank you, sir.
I yield back. Thanks, Mr. Chairman.
Chairman LALOTA. Thank you. And as we close I would like to
thank all of our witnesses for being here today, for sharing
your insights with us. It helps us as a Committee gain the
right amount of information as we craft and vote on
legislation. I appreciate it. To my Ranking Member for a
productive and smooth meeting that helps inform us as well.
And without objection, Members have 5 legislative days to
submit additional materials and written questions for the
witnesses to the Chair which we forwarded to the witnesses, and
I ask the witnesses to please respond promptly.
If there is no further business, without objection, the
Committee is adjourned.
[Whereupon, at 3:15 p.m., the subcommittee was adjourned.]
A P P E N D I X
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