Leveling the Playing Field: Challenges Facing Small Business Contracting (House Small Business subcommittee hearing, February 15, 2024)

Summary

Transcript of a February 15, 2024 hearing of the House Small Business Subcommittee on Contracting and Infrastructure, Small Business Committee Document Number 118-041, on obstacles small firms face in federal contracting. Chairman Nick LaLota presided from 10:03 a.m., with Hillary Scholten as ranking member. Witnesses were Joseph Spinosa of ADDAPT, Joel Lipsky of Lipsky Construction for the Associated General Contractors of America and Bob Taylor of Alliant Healthcare in Grand Rapids. Added material came from Associated Builders and Contractors, NASA, Piliero Mazza, the Women Veterans Business Coalition and the HUBZone Contractors National Council.

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“Leveling the Playing Field: Challenges Facing Small Business Contracting (House Small Business subcommittee hearing, February 15, 2024).” Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/leveling-the-playing-field-challenges-facing-small-business-contractin-c79dcd054e/, SHA-256 44f08add5b85fad2b2064d108cbda7a91cd22da553de3f1d252dba3042004542.

Full text

LEVELING THE PLAYING FIELD: CHALLENGES
FACING SMALL BUSINESS CONTRACTING

HEARING
BEFORE THE

SUBCOMMITTEE ON CONTRACTING AND
INFRASTRUCTURE
OF THE

COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION

HEARING HELD
FEBRUARY 15, 2024

Small Business Committee Document Number 118–041
Available via the GPO Website: www.govinfo.gov

U.S. GOVERNMENT PUBLISHING OFFICE
54–744 WASHINGTON : 2024
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
CELESTE MALOY, Utah
NYDIA VELÁZQUEZ, New York, Ranking Member
JARED GOLDEN, Maine
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
GREG LANDSMAN, Ohio
MARIE GLUESENKAMP PEREZ, Washington
SHRI THANEDAR, Michigan
MORGAN MCGARVEY, Kentucky
HILLARY SCHOLTEN, Michigan
JUDY CHU, California
SHARICE DAVIDS, Kansas
CHRIS PAPPAS, New Hampshire

BEN JOHNSON, Majority Staff Director
MELISSA JUNG, Minority Staff Director

(II)
CONTENTS
OPENING STATEMENTS
Page
Hon. Nick LaLota .................................................................................................... 1
Hon. Hillary Scholten .............................................................................................. 3

WITNESSES
Mr. Joseph Spinosa, Vice Chairman, ADDAPT, Massapequa Park, NY ............ 5
Mr. Joel Lipsky, President, Lipsky Construction, Bayport, NY, testifying on
behalf of Associated General Contractors of America ....................................... 7
Mr. Bob Taylor, Owner and Chief Executive Officer, Alliant Healthcare,
Grand Rapids, MI ................................................................................................ 8

APPENDIX
Prepared Statements:
Mr. Joseph Spinosa, Vice Chairman, ADDAPT, Massapequa Park, NY ..... 25
Mr. Joel Lipsky, President, Lipsky Construction, Bayport, NY, testifying
on behalf of Associated General Contractors of America .......................... 29
Mr. Bob Taylor, Owner and Chief Executive Officer, Alliant Healthcare,
Grand Rapids, MI ......................................................................................... 37
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Associated Builders and Contractors (ABC) ................................................... 41
National Aeronautics and Space Administration (NASA) ............................. 43
Piliero Mazza .................................................................................................... 53
Women Veterans Business Coalition .............................................................. 58
The HUBZone Contractors National Council ................................................. 59

(III)
LEVELING THE PLAYING FIELD: CHALLENGES
FACING SMALL BUSINESS CONTRACTING

THURSDAY, FEBRUARY 15, 2024

HOUSE OF REPRESENTATIVES,
COMMITTEE ON SMALL BUSINESS,
SUBCOMMITTEE ON CONTRACTING
AND INFRASTRUCTURE,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:03 [a.m.], in Room
2360, Rayburn House Office Building, Hon. Nicholas LaLota [chair-
man of the Subcommittee] presiding.
Present: Representatives LaLota, Ellzey, Molinaro, Bean, Maloy,
Scholten, McGarvey, and Thanedar.
Chairman LALOTA. Good morning. Before we get started, I
would call on Ranking Member Scholten to lead us in the Pledge
of Allegiance.
Ms. SCHOLTEN. Would you please stand with me.
All. I pledge allegiance to the Flag of the United States of Amer-
ica, and to the Republic for which it stands, one nation, under God,
indivisible, with liberty and justice for all.
Chairman LALOTA. Good morning. And welcome to today’s
Small Business Subcommittee hearing on leveling the playing field
and challenges facing the small business contracting.
First, I want to thank our witnesses for joining us today, a few
of who have traveled here from the best place in the country, Long
Island. Your time is very much appreciated, and I look forward to
your testimonies, all three of you.
Today our Subcommittee will focus on several critical issues fac-
ing Main Street America.
First, the number of small businesses receiving federal contracts
has decreased by 50 percent over the past 10 years. Further, nearly
60 percent fewer small businesses are entering the federal con-
tracting system. Second, the regulatory burden placed on small
businesses that seek to enter federal contracting is too high. And,
finally, third, we intend to address the systemic failures in the fed-
eral acquisition process which undermines small business partici-
pation in contracting.
But it is not enough that we point out those problems. The focus
here should be on how we solve these three and other issues, know-
ing the crucial role that Main Street America and small businesses
play. We want to help increase competition, innovation, and stimu-
lating our economy through our small businesses.
It is embarrassing and even shameful that our small businesses
have been systematically squeezed out of federal contracting for
(1)
2

decades, and this decline comes as no surprise as the administra-
tion actively steers 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 con-
tracts in this very space. Specifically, in my district, we are the na-
tion’s second largest industrial park after Silicon Valley, in
Hauppauge, and, more broadly, Long Island is home to over 167
defense and aerospace companies comprising over 3 million square
feet of industrial and commercial space, with 10,000 full-time em-
ployees and $3 billion of economic activity.
And with the decline of domestic industrial small- and medium-
size defense contractors, it is vitally important that we recognize
and promote the vital work of our existing industry, like Long Is-
land’s industrial defense industry, whose contributions keep our
military prepared at a moment’s notice.
As we look at contracting the Department of Defense, we must
not only consider the primes but also the tiers of suppliers pro-
viding parts for ships, submarines, and planes, or businesses pro-
viding vital services.
The bureaucratic red tape small businesses are forced to navi-
gate is also extremely harmful and burdensome. Needless to say,
the complexity of these barriers makes it even harder for small
businesses to enter the federal marketplace. For example, involve-
ment in federal contracting requires a sufficient understanding of
the long and cumbersome regulations related to federal acquisition,
defense federal acquisition, and within the federal register. To-
gether, these burdensome and bureaucratic documents are over
94,000 pages long and require thousands of man hours to read. I
am sure that we can all agree that no small business has the man-
power to accomplish this burden successfully.
Finally, we must examine the systemic failures currently in the
federal acquisition process which consistently undermine main
street. Practices like self-certification and joint ventures are ripe
for exploitation by large companies to the detriment of small firms
when large firms partner with a small business to gain access to
small business contracts. Fraud is rampant in self-certification, and
yet the administration seeks to expand rather than correct these
actions.
I recently joined my colleague from the other side of the aisle and
fellow New Yorker, Ranking Member Velázquez, in introducing a
bill that would phase out self-certified women-owned small busi-
nesses from the governmentwide procurement goals and protect the
integrity of that program.
Just like with any small business program across the federal gov-
ernment, we must ensure structure and guidance is in place to en-
sure firms are accurately represented. Our goal in this Committee
is to create a pathway for small businesses to succeed, and we
must ensure that small business is given the opportunity to thrive
without drowning in bureaucratic red tape.
Thanks again for everybody joining us today. Our witnesses’ real
world experiences, which we will hear shortly, will help this Com-
mittee work to make meaningful improvements to ensure small
businesses are fully utilized in the federal procurement market-
3

place. We must work together to stop the decline of small business
contracting and fight to keep main street open for business.
With that, I yield to my distinguished colleague, the Ranking
Member from Michigan, Ms. Scholten.
Ms. SCHOLTEN. Thank you so much, Mr. Chairman, for holding
today’s important hearing.
The premise is simple and straightforward: The federal govern-
ment needs to contract with businesses in order to run. We believe
they should be contracting with small businesses. How and the
means through which that happens is what we are going to be talk-
ing about today.
The federal government is spending almost half a trillion annu-
ally on goods and services needed for its daily operation. In fiscal
year 2022, 5.5 billion defense contracting dollars were spent in
Michigan alone. At least 131 million of those dollars are spent in
my district. This money brings well-paying jobs to west Michigan
and stimulates the economy.
The U.S. Government remains a consistent and reliable client,
yet the federal marketplace can be a hard space to survive, espe-
cially for small businesses. Small businesses experience challenges,
including lag time between the speed of approvals and the speed
of acquisitions, lack of uniform requirements across agencies, and
inconsistent contract windows. These issues threaten the health of
the industrial base and those businesses participating in it.
If anything, we should be able to agree that the economic secu-
rity and national security of our country is dependent upon a
strong industrial base fueled by secure supply chains. Small busi-
nesses play a critical role in making sure that happens.
To that end, I am glad that this Committee is examining the
ways to empower our agencies to establish clear guidelines that
would spare businesses the costs of associating with compliance
with varying redundant and antiquated reporting requirements.
The ability of small businesses to compete in the federal market-
place has also been adversely affected by the lack of staff in critical
roles. Our witnesses here today may not be surprised to learn that
there are openings in the role of procurement center representa-
tives and commercial market representatives overseeing millions of
contracting actions. Those delays result in attendant delays down
the chain. Small businesses cannot be adequately advocated for
with such few numbers promoting their use and ensuring the agen-
cies are following the small business contracting procedures.
Lastly, the government has taken steps, such as in the SBA tak-
ing over the certification process for Service-Disabled Veteran-
Owned Small Businesses from the Department of Veterans Affairs,
to streamline the certification process and eliminate unnecessary
redundancies. I welcome discussions like today so we can build on
success like this and identify additional factors challenging our
small contractors and develop thoughtful, effective solutions.
What is important for this Committee to keep in mind is that the
testimony we hear today is part of the bigger picture, which is that
the federal procurement marketplace is always evolving, and it is
incumbent upon our agencies to remain agile, responsive, and ac-
countable to the partner small business community that they work
with. Small firms bring new ideas to the table, which in turn gen-
4

erate new jobs, new solutions, and, again, secure our industrial
base. We must take steps to ensure that they can thrive and navi-
gate the federal marketplace.
I want to thank all of the witnesses for being here today, includ-
ing our constituent business represented by Mr. Bob Taylor here
today.
And I yield back the balance of my time.
Chairman LALOTA. Thanks so much.
One of the responsibilities of both the Chair and the Ranking
Member of the Committee is to identify and invite qualified wit-
nesses to help us identify those issues and to help to provide solu-
tions.
And I am thrilled to introduce our first witness here today, hail-
ing all the way from my neck of the woods on Long Island, Mr. Joe
Spinosa.
Thanks for being with us today, sir.
Mr. SPINOSA. Thank you.
Chairman LALOTA. Mr. Spinosa is the Vice Chair of ADDAPT
and former co-owner and vice president of business development at
East/West Industries located in Ronkonkoma. Mr. Spinosa has an
amazing 44-year track record of success in business development
with his contributions including designing, developing, and manu-
facturing aircraft subsystems.
As the Cold War is ending, ADDAPT was formed in 1991 in re-
sponse to reductions in defense spending by the federal govern-
ment. ADDAPT’s focus is on promoting the interests of New York
companies adversely affected by consolidations among prime con-
tractors and downsizing throughout the aerospace and defense in-
dustry.
Mr. Spinosa graduated from Fordham University with a bachelor
of arts degrees in economics and applied psychology.
Thanks again for joining us today, Mr. Spinosa, and we look for-
ward to the conversation ahead.
Our next witness here today is also a very qualified Long Is-
lander too, Mr. Joel Lipsky. And Mr. Lipsky is president of Lipsky
Construction located in Bayport, New York. Lipsky Construction
was founded in 1955 when Herbert Lipsky founded the Levittown
carpentry program, earning its reputation by transforming hun-
dreds of Cape Cod models into expanded Colonials. Now Mr. Lipsky
serves as president of his own third-generation family business.
Prior to working for his family business, Mr. Lipsky worked for the
Haskell Company and the Turner Construction Company.
Mr. Lipsky graduated from the University of North Florida with
a bachelor’s degree in construction management.
Thanks so much for joining us here today, and we look forward
to the conversation ahead.
And I am going to yield to the Ranking Member for our final in-
troduction.
Ms. SCHOLTEN. Thank you so much, Mr. Chairman.
It is truly my pleasure to introduce our final witness today, Mr.
Bob Taylor. Mr. Taylor is a decorated veteran of the U.S. Air Force
and is the founder, CEO, and sole owner of Alliant Healthcare
Products which is based in my district, Grand Rapids, Michigan.
Alliant specializes in manufacturing lifesaving and life-improving
5

healthcare products that help our Active Duty military and vet-
erans every day.
Mr. Taylor earned his bachelor’s of science degree from Michigan
State University. Go Green.
Since founding Alliant in 2002, he has successfully grown his
company, navigated an evolving federal marketplace, and estab-
lished strong relationships with the Department of Defense and
Department of Veterans Affairs. In 2019, the SBA’s Michigan chap-
ter recognized his efforts in naming Alliant as the Veteran-Owned
Small Business of the Year.
I am thrilled to have you here, Mr. Taylor, and look forward to
your testimony. Thank you for being here and thank you for your
service to our country.
Chairman LALOTA. And thank you. Appreciate, Mr. Spinosa,
Mr. Lipsky, Mr. Taylor, all three of you, for making the trek to
Washington to help inform us on this important conversation here
today.
Before I formally recognize you for your testimony, I want to re-
mind you that your oral testimony is restricted to 5 minutes in
length. If you see the red light in front of you come on, it means
that your 5 minutes has concluded, and that is go time. That is
time to wrap it up.
And we want to recognize first, Mr. Spinosa, for your 5-minute
opening remarks, sir.
STATEMENTS OF MR. JOE SPINOSA, VICE CHAIR, ADDAPT; MR.
JOEL LIPSKY, PRESIDENT, LIPSKY CONSTRUCTION; AND MR.
BOB TAYLOR, OWNER AND CEO, ALLIANT HEALTHCARE

STATEMENT OF MR. JOE SPINOSA
Mr. SPINOSA. Thank you very much, Chairman and Congress-
woman. Thank you for allowing ADDAPT to testify today.
I will be presenting points which have been collected from mem-
ber companies of ADDAPT, over 120. They represent tiers 1, 2 and
3 of the supply chain.
In order to set a baseline, let me reference the following points
that were made in a message by Secretary of Defense Austin.
Small businesses account for 99 percent of all employer firms, 44
percent of our nation’s economic activity. Small businesses com-
prise more than 70 percent of the companies that do business with
DOD. They keep our military forces combat ready with critical
parts, cutting edge technology, and top notch services. They fortify
our defense supply chains in times of crisis. They ensure the mili-
tary has the best capabilities to keep us safe.
The most innovative minds in the country come from smaller
companies. Despite efforts, though, the defense industrial base has
declined by over 40 percent in the past decade. If we do not work
to reverse the decline of small business contracting, then the indus-
trial base that equips our military will weaken. If we do not take
action, we risk losing mission-critical domestic capabilities, stifling
competition and innovation, and potentially weakening the supply
chains.
From ADDAPT’s perspective, in fact, small businesses that sup-
port aerospace and defense efforts are struggling to survive and
6

stay relevant. Small businesses are faced with many challenges.
We have categorized our presentation of challenges in two basic
categories: overarching or primary issues and breakdown of system
or secondary issues. Today I will cover my oral only the primary
issues.
Regulations are many and complicated, leading to the need to
hire costly attorneys and translate regulations for small business
owners. Small business owners do not employ full-time attorneys
on staff. Many small businesses agree to contractual terms and
conditions that are onerous or risk-intense because they have no
choice.
Financial issues arising from the economic environment resulting
in high interest rates and limiting access to capital.
There is a need for equitable adjustments to be available for
multiyear fixed price contracts to counter the unprecedented infla-
tion increase and drastic changes to the markets of raw material,
process and finishing, and power.
Consideration should be made for interest costs to be considered
as allowable costs, where progress payments have not been ex-
tended as part of the contract consideration. It is difficult for small
businesses to be extended progress payments or milestone pay-
ments as part of contracts from the government or primes.
There is a need to maintain the waiver on progress payment
rates and encourage prime OEMs to extend that to tier 1 suppliers.
Also request the progress payment threshold to remain at 95 per-
cent for small businesses.
Cybersecurity has added a new wrinkle to the challenges. We un-
derstand and support that this is a required effort, but it is expen-
sive to implement for a small business. According to our Members,
to accomplish and implement CMMC for a small business can run
from $200,000 to $500,000. For the average small business, this is
a considerable amount and is growing. This is just to be allowed
entry into the system to provide a quote to the prime or the govern-
ment.
Who will ultimately bear the cost for this? If it is added to the
cost of items being quoted, will the small business be deemed non-
competitive? Furthermore, at the lowest levels of the supply chain,
having to implement CMMC can be too expensive or beyond their
capabilities, leading to a death spiral in the defense industrial
base. Is there a right size solution to protect small business of the
DIB while still protecting data integrity of the warfighting appa-
ratus? Will there be sufficient numbers of assessors on hand to per-
form the certification to address the demand?
Workforce development is another issue. Pandemic effects have
reduced the workforce. In order to recover, defense manufacturers
need programs that encourage and assist those that wish to be em-
ployed in the industry. Grants for training, certification, and trans-
portation are needed to develop that workforce.
As we have seen, there are many issues that challenge small
businesses. It has become very difficult for small businesses in the
aerospace and defense industry to make a good living and continue
to invest in their companies to provide the kind of stabilities and
capacities we need as the country moves into the future.
Once again, ADDAPT thanks you for this opportunity to testify.
7

Chairman LALOTA. Thank you.
And I now recognize Mr. Lipsky for his 5-minute opening state-
ment.
STATEMENT OF MR. JOEL LIPSKY
Mr. LIPSKY. Chairman LaLota, Ranking Member Scholten, and
Members of the Committee on Small Business, Subcommittee on
Contracting and Infrastructure, thank you for inviting me here to
testify today. It is an honor to be in your presence.
My name is Joel Lipsky, and I am president of Lipsky Construc-
tion located in Long Island, New York. Lipsky Construction is a
third-generation commercial contracting company started by my
grandfather in Levittown. Since my brother and business partner,
Alex, and myself succeeded the company from my father and my
uncle only a few short years ago, our organization has grown to
over 12 construction management professionals who currently work
with us today. We work in collaboration with some of the region’s
most respected design professionals in the New York area, and our
work covers both the private and public sector.
I am testifying on behalf of the Associated General Contractors
of America, otherwise known as the AGC. The AGC is the leading
association in the construction industry, representing more than
27,000 firms and their employees, including some of America’s
leading small business construction firms. It must be noted that
more than 90 percent of firms within the construction industry
have 20 or fewer employees. The AGC appreciates and thanks the
Subcommittee for its continued efforts to help improve our nation’s
infrastructure and help develop small businesses.
One of the greatest challenges contractors face with federal agen-
cies is the disruption of cash flow on a construction project. Cash
flow is critical, and without sufficient cash flow, a construction
project would never start. Government projects rarely provide any
deposit to initiate services and largely do not release funds for any
type of early material procurement, leaving the onus on the prime
contractor to manage those expenses.
Oftentimes to keep the project moving, small businesses self-fi-
nance government projects. Lipsky Construction and other small
contractors like myself can only self-finance these projects for so
long. Slow payments impact not only the prime contractor but all
lower tier subcontractors and suppliers as well.
It must be noted, Chairman LaLota, as a prime contractor, we
at times put the burden on the second- and third-tier subcontrac-
tors and suppliers to self-finance their portions of the work. And
for Lipsky Construction, this includes putting that financial burden
on many of the contractors who are your constituents, as a large
portion of my subcontractors who I work with live within your dis-
trict.
The result is a decrease in competition for federal projects and
fewer opportunities for small businesses. Additionally, these bar-
riers prevent potential construction companies from ever even
wanting to enter the federal market.
Construction has been a well-regulated industry, and trans-
parency is important to providing accountability to the American
people. While there are many benefits to regulation, there is a bal-
8

ance between regulation and overregulation. This issue becomes
particularly hard for small businesses with fewer than 15 employ-
ees.
As the owner of such business, I frequently navigate the chal-
lenges by deploying my support staff in very diverse roles. One day
my office manager might be handling phone reception. The next
day she might be engaged in tasks like minority- and women-
owned reporting, and another day she might be doing Section 8
labor outreach, all of which are required to work on federal
projects.
For the construction industry, labor shortage is still one of our
biggest challenges. Despite increase in pay and benefits, the con-
struction industry’s labor shortage remains. A 2023 AGC survey
found that 93 percent of construction firms have open positions
that they are struggling to fulfill, not only skilled labor but also
skilled construction professionals.
I want to thank you again for inviting me and the AGC to testify
before the Subcommittee today. I look forward to answering any
questions you may have.
Chairman LALOTA. Thank you.
I now recognize Mr. Taylor for his 5 minutes of remarks.

STATEMENT OF MR. BOB TAYLOR
Mr. TAYLOR. Good morning, Chairman LaLota, Ranking Mem-
ber Scholten, and distinguished Members of this Committee. Thank
you. It is my honor to provide my testimony to this Committee
about the way that my small business can work with the federal
government in a more effective and efficient manner.
My name is Bob Taylor, and I am testifying on behalf of the
three businesses that I have in Grand Rapids, Michigan, where I
employ 71 people. I am the 100 percent owner of Alliant
Healthcare Products, a verified Service-Disabled Veteran-Owned
Small Business, which sells healthcare products to the VA and U.S.
military hospitals throughout the world, its sister company,
Medisurge, a contract medical manufacturer, and Alliant Biotech,
an orthopedic company focused on knee implants.
As background, I had a 17-year military career leading to the
rank of major. I served my first 6 years in the Air Force on Active
Duty as a B-52 navigator and radar navigator. As a first lieuten-
ant, I flew 11 combat missions during the first Gulf war.
I wrote a book which was published earlier this year called
‘‘From Service to Success.’’ The book reflects on my combat experi-
ence, the challenges I faced, and provides a roadmap for how vet-
erans can overcome these challenges and not only survive but to
find the greatest success of their lives.
Since starting Alliant Healthcare almost 22 years ago, we have
earned a strong reputation as an exceptional federal market expert
who provides value throughout the supply chain. Small businesses
are vital to this space. If we have learned anything from our time
with COVID it is that our supply chain is fragile, and it is impera-
tive to our national security and the welfare of our citizens that we
maintain a vibrant and diversified supply base which focuses on
small business.
9

Our small business has streamlined the process for helping the
VA military hospitals in acquiring 200,000 different healthcare
products from over 40 different manufacturers through 60,000 an-
nual purchase orders. In addition, our most important benefit to
the government is that we do not mark up prices for approximately
90 percent of the products we provide. We allow contracting officers
to negotiate fair and reasonable pricing as though they are buying
directly from the manufacturer, and then we honor those prices. In
the words of one contracting officer, ‘‘We love working with Alliant
because you offer the same exact pricing and your team under-
stands the government procurement process better than the manu-
facturers,’’ unquote.
Challenges? My understanding is this Committee wants to un-
derstand a little bit better about how small businesses are exiting
this space. I think I can provide some insight.
Our major challenge in dealing with the federal government is
the time and data required prior to obtaining necessary contracts
to meet the government’s need. The impact is significant. It costs
our company in lost revenue and lost profit. But it also delays life-
saving and life-improving healthcare for our nation’s warfighters
and veterans. The delays are not measured in weeks or months. It
is measured in years.
As examples, our products need to be on multiple different con-
tracting tools, such as the Federal Supply Schedule, ECAT, IDIQs,
DAPA, MSPVs, HTMEs, among others. All require hundreds of
thousands of transactional data, and most do not require the same
data. And if one contracting officer determines that our prices are
fair and reasonable, the others do not recognize that determination.
Each submission takes 12 to 18 months or longer. The process of
their analysis can take so much that we have to resubmit data,
which causes more delays. The requirements are daunting.
Our challenges also include government payments. Alliant
Healthcare currently has $7.4 million in receivables from the gov-
ernment. Of that, approximately $4.2 million is past due. The gov-
ernment is not paying in a timely manner. What is interesting is
Congress passed laws to ensure timely payments to small busi-
nesses described in FAR Part 32.009, but the agencies are not ad-
hering to the law.
Congress also passed laws to require prime contractors to sub-
contract with SDVOSBs, but are allowed to achieve subcontracting
goals that are far below the requirements. For example, the law re-
quires 3 percent subcontracting, but the numbers are an order of
magnitude below that.
In conclusion, Alliant offers the military and VA hospitals the
ability to acquire healthcare products in a streamlined and efficient
manner. We could do more with greater efficiency, but we need to
work together to solve these challenges. The government needs to
realign its contracting tools to consolidate the required data re-
quired for awarding contracts, and the agencies also need to follow
the laws already in place.
This concludes my testimony. And I have provided nine items as
recommended improvements.
Chairman LALOTA. Thank you, Mr. Taylor. I suspect we will be
talking about some of those nine here coming up soon.
10

We are going to now move to the Member questions under the
5-minute rule, and I will start by recognizing myself for 5 minutes.
Mr. Spinosa, thanks again for being here.
Prior to being and serving as the Vice Chairman of ADDAPT,
you have had 44 years of success in your industry, including being
the co-owner and vice president of business development at East/
West Industries. And we have said how the federal bureaucracy
can be very difficult, 94,000 pages of rules and regulations for busi-
nesses like the ones that you represent.
Mr. Spinosa, in your experience, what are some of the unique
challenges that small businesses encounter when navigating the
Department of Defense procurement process?
Mr. SPINOSA. Thank you, Chairman. The challenges are, as
have been stated by other testimony here, daunting. You run a
small business. You do the best you can to get everything together.
These regulations that come in, as I said, require attorneys to come
in and help translate from legal speak to business speak and exe-
cution. And, you know, small businesses don’t have attorneys on
staff. It is expensive to do that and even bring attorneys in to go
through this.
And in the end, you are trying to figure out—at times people
come in and quote, irregardless of what the regulations have in
place, they ignore some of the regulations. And the government
doesn’t pick that up.
You need to be able to have the regulations readily identifiable
and clear to the businesses so that they adhere to that and every-
body is on a level playing field. That is really what it boils down
to.
Sometimes the businesses go through looking at it and signing
on to contracts, as I said, that were onerous or have a lot of risk
associated with it, and it is—I am going to put it in this kind of
fashion. Sometimes you need to step up to those to be competitive
and land the business. You need to keep the business going, be-
cause when the big gorilla in the room comes in, they sit wherever
they want to sit. And that is, you know, the challenge to the regu-
lation side of stuff.
It is also staying on top of those regulations. My feeling about
the regulations is a lot of them are designed to rein in large busi-
ness, and large business has a tremendous amount of resources to
apply to that. The small businesses don’t, and that is almost—not
that there should be two different. I understand where some of the
regulations are going to regulate the industry, but the onerous part
of it is just driving nonvalue-added cost into the system.
If we go to the folks at the pointy end of the spear, the
warfighters, and ask them, ‘‘How does this affect you?’’ they look
at that and say, ‘‘What are we even spending money on this for?
We need to spend it in the right places to get the right equipment,
the right services, the right technology.’’
Chairman LALOTA. So small businesses like the ones that you
represent don’t typically have an attorney on staff to help chew
through those 94,000 pages of regulation?
Mr. SPINOSA. They do not. They do not. And, you know, a side
note, I worked in the time early on when everything was paper,
and the books that we would bring in were huge to go look through
11

regulations and stuff. Electronic maybe makes it a little bit easier,
but it doesn’t change the issue of taking legal speak and moving
it into plain language.
Chairman LALOTA. So when you have to spend money to hire
counsel to help chew through those 94,000 pages worth of regula-
tions, where do you pass those costs off to?
Mr. SPINOSA. It has got to get passed back through the parts
or, you know, through the nonrecurring costs. It has got to go
somewhere.
Chairman LALOTA. So with the less than a minute I have re-
maining in this round of questioning, what is the best solution to
that?
Mr. SPINOSA. The solution, to me, is the regulation has to be-
come more plain language. It is just too legalese.
Chairman LALOTA. And we are going to stick with costs. And,
Mr. Lipsky, sir, can you discuss some of the costs associated with
a company like yours when you are bidding for a federal contract?
Mr. LIPSKY. Similar to my colleague here, we spend a tremen-
dous amount of time just qualifying for the bid opportunity without
any assurances that we are actually going to be awarded that
project. And I think that is what he was trying to say is that just
to get in to submit a price, there is tremendous burden and over-
head that is not guaranteed to be recovered that goes back to the
corporation’s overhead.
I also do not have an attorney on standby, although the joke in
my office is that she is the second highest employee within my
company.
Chairman LALOTA. Thanks.
My time has expired.
I now yield 5 minutes to my colleague from Michigan, the Rank-
ing Member, Ms. Scholten.
Ms. SCHOLTEN. Thank you so much, Mr. Chairman.
Just as a point of privilege, Mr. Spinosa, I could not relate more
readily to your fervent insistence on plain language. My team
knows, everyone who has ever worked with me knows, I am a firm
believer, if you can’t explain a concept in plain language, you don’t
really know what you are talking about. I am with you 100 percent.
The SBA needs to just put these regulations in much more easily
understandable terms. Why say it in 94,000 pages when you can
say it in one?
Again, I just want to thank all the witnesses for being here
today. As the Ranking Member of this Subcommittee, one of my top
priorities is to ensure that Service-Disabled Veteran-Owned Small
Businesses like Alliant are able to navigate and grow in the federal
contracting marketplace. They served our country. Now it is our re-
sponsibility to serve them. As such, I am committed to improving
the process with which agencies award contracts and pay our hard-
working small businesses what they are owed in a timely manner.
Mr. Taylor, in your testimony, you explained your company has
$7.4 million in receivables from the federal government and, of
that, $4.2 million is past due. I am so sorry about that.
As a business delivering lifesaving and life-improving tech-
nologies to VA and military hospitals, how do delays in payments
impact your business and our servicemen and women?
12

Mr. TAYLOR. Thank you, Ranking Member Scholten. The issue
is that it impacts us disproportionately to how it impacts larger
businesses that have access to larger credit facilities. What hap-
pens is, when we deliver a product, say, an operating room table,
it gets received, but then the documentation doesn’t get processed
in a timely manner. And it can take a month to get someone to fill
out the documentation before their clock starts. So the clock doesn’t
start when the operating room table shows up. It starts when they
have gone through the bureaucracy of receiving it.
So it is an unfair position for the government to take. They have
received the products. We have already paid for the products, and
we are under tremendous pressure from our suppliers to pay on
time. And so we have to borrow millions of dollars so that we can
pay our suppliers in a timely manner so that we can continue to
do business. And all of that detracts us. That cash is going to
payables rather than innovation. It is going to payables instead of
new salaries.
And so that is where it impacts us is in how can we provide bet-
ter, more cost effective, and streamlined service to the government.
Ms. SCHOLTEN. Thank you. That is incredibly helpful.
Another issue that I consistently hear about as an impediment
to small businesses contracting is agency unique requirements.
These can be barriers to growth for companies already in the mar-
ket but who don’t have the capacity to meet requirements for new
agencies, even though they are already a government contractor.
I’ll be very brief, and you all can be brief as well. This is for all
of you, but beginning with Mr. Taylor, can you speak to your expe-
riences in meeting the specific requirements when contracting with
different agencies?
Mr. TAYLOR. Congresswoman, the issue is that it is not only
agency specific, it is contracting tool specific, and then it is con-
tracting officer specific. So each contracting officer is allowed to in-
terpret the language in the federal regulations independently of
others, and each contracting tool has separate regulations and re-
quirements separate from others. So there is no consistency at all
on how to work with each federal contracting or contracting officer.
Ms. SCHOLTEN. Thank you.
Mr. Lipsky.
Mr. LIPSKY. So I am a builder, and we build for multiple agen-
cies. It just behooves me that if I build for one agency, that the pro-
curement, the payment terms, the change order process vary from
agency to agency. As soon as I figure out one agency—and we are
having a similar problem with New York State where I just don’t
understand why it is not a unilateral way to do a change order or
unilateral way to get a procurement. Everyone does it a little dif-
ferently. And to my colleague’s credit, different agencies handle it
better and pay faster than others.
I will yield my time to Mr. Spinosa.
Ms. SCHOLTEN. Do you have a few thoughts in the remaining
seconds?
Mr. SPINOSA. I can only say—I will give an example. In the test
area, you always look at the assessors and find out are they out
there to do a gotcha or are they out there as a learning and move
forward and keep the system moving forward.
13

I will give an example. You go to different folks where you have
a part that you have been making for years, and it should go right
through the whole procurement process and the production lead
time, et cetera, testing. You go to some folks, and they delay and
delay, delay getting stuff in that you have been making for dec-
ades. And to what end? It just adds cost and cost and cost to the
system going back and forth.
Ms. SCHOLTEN. Thank you.
Chairman LALOTA. Thank you.
I now recognize Representative Ellzey from the great State of
Texas for 5 minutes.
Mr. ELLZEY. Thank you, Chairman LaLota, my shipmate from
the Naval Academy. Thanks for having this hearing today. And
thank you all for being here today.
Small businesses make up 50 percent—nearly 50 percent of all
jobs in the United States. And despite claims from agencies that
they are prioritizing small businesses, the numbers show other-
wise.
While the total value of contracts issued to small businesses has
generally increased over time, since 2010, the number of small
businesses receiving prime contracts from the federal government
decreased by more than 50 percent. In that same period, the num-
ber of small businesses entering the federal contracting system has
also decreased by 60 percent.
The Biden administration has only made things worse. And in
2021, 27 percent—27.2 percent of contracts went to small busi-
nesses, while in 2022, only 26.5 percent of contracts were issued to
small businesses.
Bureaucratic regulations and red tape hurt small businesses.
Small business contractors play a vital role in America’s industrial
base and national security apparatus, and stifling red tape has
caused a number of small businesses receiving federal contracts to
significantly decrease.
And while I mentioned the Biden administration, I want to point
out that after administration after administration, it doesn’t matter
which party they are from, they stay. They outlive those of us at
this dais and they outlive administrations. And the only reason
they exist is, as I said yesterday, a self-licking ice cream cone, and
they get ahead by adding more burdens to you because they are
getting a paycheck every 2 weeks. So they don’t make it easier for
small businesses to succeed.
And when the balloon goes up, as we are looking at a time of un-
precedented—at least since 1938—potential for worldwide conflict,
the primes have their roles to play in providing for our military
and industrial might. However, they rely on the subs, like you, to
make sure that on-time delivery of those weapon systems is en-
sured.
In my own district in Red Oak, Texas, is Qarbon Aerospace,
which is providing the fuselage and the wings for the Boeing T-7.
Boeing is the prime, but without Qarbon Aerospace, they couldn’t
get it done. Without that workforce, they couldn’t get that done.
Without the materials that they are responsible for the supply
chain of achieving, they wouldn’t get that done.
14

Now, Qarbon Aerospace can afford those attorneys that we have
talked about and the manpower and the ability to navigate this ex-
tremely expensive process of providing for our nation’s infrastruc-
ture, but you guys don’t.
And so while the bureaucracy lives on administration to adminis-
tration, you guys struggle to try to even turn a living. But when
the balloon goes up—and, by God, I hope it doesn’t. But if it does,
the only people who are going to be able to scale up to provide in-
creased production of any weapon system we have is going to be
relying on you because the primes are already tapped out.
So pulling back, clawing back what the SBA does, what the
banking industry does is essential to success of American busi-
nesses, because we are from the government and everything looks
like a nail, and all those nails are the same size. So when you talk
about the banking industry and too big to fail and the big boys up
high adhering to the Basel Endgame and they can provide for law-
yers to negotiate that, our small community banks can’t. And it is
exactly the same way in government contracting, specifically for
our military.
So access to capital is great for the big guys and for the primes,
and it is almost impossible for you because we have made life so
difficult for the small banks that you bank at, your community
banks, you can’t get capital to provide these subcontracts that you
have signed up for. So this is a real problem that we have to get
through.
And I would like to ask, Mr. Spinosa, can you explain the impor-
tance of subs to national defense very quickly, 30 seconds?
Mr. SPINOSA. Subs to the primes are their primary blood flow
of parts. Whatever prime you pick, the small businesses are prob-
ably 60 to 70 percent of what they are seeing, similar to what DOD
sees, because it is the same type of stuff, the same type of parts,
the same type of services.
Mr. ELLZEY. Mr. Taylor, I know that you are the so-called Dem-
ocrat witness here today, but I see three men up here with small
businesses whose job is for them to provide for their families and
for their communities.
First of all, thank you for your 17 years in the Air Force. I am
not sure why it wasn’t 20, but thank you for doing it. And I see
a man who is trying to make money and provide for his small fam-
ily. So there is not a chasm here of Republican versus Democrat
or Biden administration versus any other. You have a bureaucracy
issue that prevents you from providing in a way that would add
real value to our nation’s economy and to your bottom line.
And so I would like to thank all of you for being here, and this
is something we need to address sooner rather than later so that
you all can be successful and so can our economy.
Mr. Chairman, I yield back.
Chairman LALOTA. Thank you, shipmate.
I now recognize my colleague from Kentucky, Representative
McGarvey, for 5 minutes.
Mr. MCGARVEY. Thank you, Mr. Chairman.
I want to thank everybody for being here today. Really high-
lighted the challenges you all face and giving us insight in this
15

Committee and do what we want to do, which is improve con-
tracting for small business owners.
We hear over and over again—and I know I hear it from con-
stituents in Louisville, Kentucky, these business owners—the pro-
curement processes for these business owners can be incredibly
burdensome. And that is because when the small businesses apply
for the federal contracts, they have to spend incredibly valuable
time, expend limited resources, and parse each agency’s pre-
requisites necessary for certifications and required skill sets to
even determine their eligibility. It is only after you do all of those
things that then you get to write up your formal proposal.
And so, Mr. Taylor, you mentioned how tough it is to find the
time and resources to do all the work you need to do even to have
the opportunity to apply. You also talked about how federal agen-
cies fail to meet the contracting goals for service-disabled veterans,
who I am sure face additional barriers to applying.
So, Mr. Taylor, when the SBA recently took over certifications for
service-disabled veteran small business owners from the Depart-
ment of Veterans Affairs, how was your experience with that tran-
sition and what is the SBA’s process like?
Mr. TAYLOR. Congressman, I have a very recent experience
with the transition. This was probably our sixth certification proc-
ess as an SDVOSB, and we just went through the process in Janu-
ary, and we submitted our data and all of the information. It was
quite a bit of information that they wanted, but we are happy to
supply it. And, shockingly, we received our certification in 2 weeks.
And so that is months improved over what it was when it was in
the VA.
So the change to the SBA for that certification process has been,
in my opinion, one of the best examples of what can be done.
Mr. MCGARVEY. We like good news up here, so I appreciate
that.
Mr. TAYLOR. That is good news.
Mr. MCGARVEY. I appreciate that. And please let us know how
that continues to work and if it is not.
So looking back in 2021, the Biden administration set a goal of
increasing procurement for disadvantaged small businesses, aiming
for 15 percent by fiscal year 2025, and requiring agencies to review
category management practices, encourage new entrants in the fed-
eral marketplace, and include small business contracting success
and senior official’s performance goals along with some other re-
forms.
This is for the whole panel. Anybody gets to answer. I would like
any of you to answer who want to. Has this goal translated into
action? And have you and your colleagues in the industry noticed
more opportunities?
Mr. TAYLOR. Congressman, I can speak a little bit.
The SBA and the focus on small business at this level from legis-
lation has been exceptional, but the agencies do not live up to those
standards and requirements. Just like the subcontracting goals
with SDVOSBs, there is a lack of authority, it seems, for the small
business representatives in the government to effect the change. So
I think the laws and requirements are there, but the follow-
16

through and the authority to get large businesses and the govern-
ment to follow through isn’t sufficient.
Mr. MCGARVEY. Anybody else?
Mr. SPINOSA. I’d like to pass a comment on that, an example.
The SBA works very hard to make things happen. And, obviously,
you look at the metrics of performance are there, but in terms of
what it boils down to, the execution, the implementation at the
agency level, the service level, if you get a request for a quote that
has gone out, full and open competition, and has a very short fuse
on it, response date, small businesses are challenged to meet that.
And to me, my opinion on it, when that comes out, it is really des-
tined. They already figured out who they want to award it to. They
are just trying to get the check boxes knocked off for, you know,
okay, I tried. I put it out there. You know, we are going to get some
responses from somebody, but, you know, it is destined for a large
business. Even though they would want to, you know, destine it for
a small business, the service itself doesn’t make that happen.
Mr. MCGARVEY. Thank you.
I see I am out of time. So, Mr. Chairman, I yield back.
Chairman LALOTA. Thanks very much.
Many Long Islanders consider what is north of Yankee Stadium
to be upstate. While that might not be the case, somebody who
truly represents upstate New York, my good friend from New York,
Mr. Molinaro, for 5 minutes.
Mr. MOLINARO. Thank you, Mr. Chairman. Most of us think,
you know, you live on an island. It should likely worry many that
they are surrounded by so many New Yorkers, but I do appreciate,
Mr. Chairman, this hearing today. It is somewhat timely on a num-
ber of fronts.
But for me specifically, yesterday I participated in a round table
discussion with my colleague, Representative Chris Pappas, along
with Department of Defense Office of Small Business Programs to
discuss actually with the providers, the government entities, the
employees within the federal government expected to administer
programs to support small businesses. We discussed at length ways
to better assist small businesses in navigating DOD’s many serv-
ices, resources, and contracts.
To a conversation had just a few moments ago, I too, having
served in local government, can appreciate, although not from the
business perspective, but in local government we speak in plain
talk, and we have regulations that are very clear. It is one of the
reasons that I cosponsored and led the POST IT Act, which is an
effort adopted and passed by this Committee in the House to be
more transparent with small businesses so you understand how to
access and navigate very complex federal regulations.
From the conversation yesterday, it is very clear—and you, of
course, reinforced—the complexity of contracting rules and regula-
tions. Now, for communities like mine in way upstate New York,
rural and underserved areas like those within upstate New York,
small businesses rely on partnerships with the Small Business De-
velopment Centers and APEX Accelerators. These each provide
necessary lifelines and assistance to small businesses.
In Binghamton alone in my district, the Binghamton SBDC ad-
vised over 26,000 clients, created over 11,000 new jobs, and
17

accessed nearly $600 million in new capital. It is clear that SBDCs
are really helpful, but we also know that knowledge of and partner-
ship with SBDCs can become a bit of a challenge.
So to both Mr. Spinosa and Mr. Lipsky, to the extent that you
have had experience with SBDCs—and I know that you have—
what has been that experience? What understanding exists of what
SBDCs provide, and what support do they provide? And then to the
extent you want to offer some recommendations on how they can
approve their work, we welcome that.
Mr. LIPSKY. Yes, I can comment on this.
So associations like the Associated General Contractors also has
the New York State Chapter, which also represents a lot of the con-
stituents upstate as well. The problem that I see with small busi-
nesses, which are the second tier subcontractors and suppliers, is
that governments have competition to private. So if there is a op-
portunity to get a deposit in advance and to get your money out
on something, they are going to go for that versus entering a State
agency or federal contract.
So I think that the SBDC, as far as the partnerships, the small
business partnerships, helps try and bring those people into the
market, but also poses a challenge because you guys have fierce
competition on the private side.
Mr. MOLINARO. Sure.
Mr. Spinosa?
Mr. SPINOSA. Yes. Experience with the SBDCs as well as the
MEPs are important, very important from the manufacturing side.
I believe overall they are trying to do a good job. The problem we
run into is, again, funding disappears to those organizations very
quickly.
I will give a quick example. Cybersecurity, trying to achieve
CMMC evaluation, starting the process to become cyber secure. I
know that the MEPs have run out of funding to put in to that ef-
fort, and that is—Mohawk Valley is a cyber secure expert area on
the MEPs, and they have run into that issue time over time over
time. And that, again, just delays small businesses getting the
process started, getting themselves ready and entering, because the
cybersecurity aspect is being pushed as a barrier to entry from both
the government as well as the primes. If you don’t get yourself
cyber secure to 800-171 or CMMC, you are not going to be able to
continue, even if you have something that you do currently. So——
Mr. MOLINARO. Appreciate that.
My district is home to the Lockheed Martin facility in Owego,
New York. That is in upstate. From my understanding, there are
a number of ADDAPT Members who have worked on two of Lock-
heed’s Owego’s projects, including the Air Force combat rescue heli-
copter.
So I just want to restate what we all know: The role of small
businesses as relates to DOD contracting and support for our de-
fense, our national defense, critically important; 70 percent of new
jobs created by existing small businesses helping navigate the reg-
ulatory regime, critically important.
And thank you all for testifying today.
With that, I yield back.
Chairman LALOTA. Thank you very much.
18

I now recognize a fellow freshman from the free State of Florida,
Mr. Bean, for 5 minutes.
Mr. BEAN. Mr. Chairman, a very good morning to you, and good
morning, Small Business Committee. And to our witnesses, what
an honor it is to welcome you here.
We had a hearing yesterday, had a hearing yesterday, and it was
all about just regulations on small business. And the National As-
sociation of Manufacturers say 12 percent of our economy—and, of
course, small business is the backbone of our economy—12 percent
is based on just trying to comply with regulations.
So hats off to each of you running small businesses. It is harder
than most people know. You are usually the first one to get there,
you are the last one to leave, last one to get paid. And nobody sees
all the work behind the curtain that you do.
And to listen to how hard it is to apply for a government con-
tract, what if—how about this? I want you all to just play along
with me. What if there was a world in which the government had
to compete with small businesses and the government itself had to
bid on a project to show that they could do it better than you? We
know they can’t, and many times small business does it better.
What if? Wait a minute. There is such a bill. It is a Bean bill. It
is called the Yellow Pages bill, and it says this: If a government
is going to provide a service and there already is a firm that will
provide that service, then they need to bid themselves, and let’s see
apples to apples and see what can be saved.
I have got good news, Committee Members. I have saved—I have
saved a spot for you to cosponsor this legislation. We can all go
hand in hand together. And so check it out, because that is the
world we want to live in if we are ever going to get spending and
just get everything under control.
I asked yesterday, I asked yesterday to the firms there, has it
ever been this bad? That answer yesterday—well, in fact, I will tell
you what they said yesterday after I hear from you guys. I don’t
want to spoil the answer of what these firms from across America
told me yesterday, unless you watch C-SPAN, which you probably
don’t.
But let’s start with Mr. Lipsky. Mr. Lipsky, you are an outlier,
because most people that are from New York move to Florida, but
you were in Florida and then went back to New York. I totally un-
derstand because you went to school in Jacksonville, and hats off—
I went to Jacksonville. You went to the University of North Flor-
ida. We are kind of archrivals. I will bow down. You won the River
City Rumble this time.
Has it ever been this bad, in your opinion?
Mr. LIPSKY. It is pretty bad. You know, just qualifying for some
of these programs—I mean, we just heard one niche, which is cy-
bersecurity, to get even entered into submitting a proposal is pretty
bad.
So I will yield my time to some of my other colleagues who might
be able to weigh in——
Mr. BEAN. Mr. Spinosa—so, for the record, you said it is pretty
bad. So we will take that as an answer.
Mr. Spinosa, what say you? What say you? Has it ever been this
bad, regulatory——
19

Mr. SPINOSA. It has not been this bad.
Mr. BEAN. It has not?
Mr. SPINOSA. It has not been this bad. It is hard to explain.
The confluence of all the different things that are happening—and
to go towards your bill for a moment——
Mr. BEAN. Yeah.
Mr. SPINOSA.—the government has tried to come out and do
things and say, oh, we are going to do this better than industry can
do. And every time they have gone through that, they found that
they can’t do it as innovatively, as effectively, as economically.
Mr. BEAN. Yeah.
Mr. SPINOSA. And the flip side is the organizations themselves
try to show obvious—you don’t want to show failure on things, so
they try and make it look like a success.
Mr. BEAN. Yeah. So if you were a Member, you would sign on
to that bill is what you are saying?
Mr. SPINOSA. Absolutely, absolutely.
Mr. BEAN. And in small business you look at every little num-
ber. You look at every little number, and that is why you run a
tight ship.
Mr. Taylor, what say you, my friend? Has it been this bad be-
fore?
Mr. TAYLOR. So I’ve been doing this for 20 years. I have seen
a lot of ebbs and flows, and—I’m sorry. And so I think the—the one
thing that makes this period worse——
Mr. BEAN. Yeah.
Mr. TAYLOR.—is the direction that we are going. We seem to be
heading in an even more difficult direction, and that—that’s what
causes me the greatest concern.
Mr. BEAN. Gotcha. Let me tell you what they said yesterday.
Yesterday, all of the firms that were represented—and they were
small oil and gas providing energy—they said it has never been
this bad, and they have been in business a long time.
I am almost out of time, and I talk way too much. I appreciate
you all coming forward, appreciate you all standing firm. You rep-
resent—I know some of you represent—right now you are rep-
resenting just thousands of small businesses across America that
are struggling to make it. You are fighting supply chain, getting
good help, you are fighting inflation. And so we are proud of you.
Hang in there. Help is on the way.
Chairman LALOTA. Will the gentleman yield for a question?
Mr. BEAN. Mr. Chairman, you are the Chairman. I will yield to
the Chairman.
Chairman LALOTA. Mr. Bean, the Bean bill. What is the bill
number, sir?
Mr. BEAN. You would think I would know that.
Chairman LALOTA. We are going to have a second round.
Maybe we can——
Mr. BEAN. 10-4. Thank you, Mr. Chairman. We will get it to
you.
Chairman LALOTA. I now recognize fellow freshman, the newest
Member of the Small Business Committee, but with a wealth of ex-
perience, Ms. Maloy from Utah, for 5 minutes.
20

Ms. MALOY. Thank you, Mr. Chairman. There is a lot of fresh-
man energy, a lot of New York energy in this room today. I don’t
know if I can rise to the occasion. I am going to do my best.
I represent Utah, which, for all of you in this room, is very far
west of western New York, also west of Florida. But Utah is a real-
ly entrepreneurial State. We love our small businesses. We are
small business friendly, but I have concerns.
To Mr. Bean’s point, things are harder than they have been in
the past for small businesses. I appreciate you being here to testify
about your experiences and what you are seeing.
I am going to give you a unique opportunity today. We are the
Small Business Committee. We are Congress. I am going to give
you a chance to give Congress a little bit of advice.
I’ve only been here for 2.5 months, and I know people who are
not in Congress all know how we should be doing our jobs. So I am
going to give you a platform to talk about it.
My first question—and I am just going to go right down the
row—is, how can Congress incentivize prime contractors to collabo-
rate with small businesses in infrastructure projects?
I know it is tough for small businesses to get into these federal
contracts because the—the prime contractors already have a lot of
the market. What advice would you have for us to help make that
better?
Mr. SPINOSA. Thank you very much, Congresswoman. I would
say that, obviously, the regulations need to be trimmed and—I am
going to say—common language so that the businesses can address
those. But more to the point, I am—there is a—there is a short-
term issue, which is the businesses are in tough times right now.
I’ll give you an example. Fixed price contracts, that—long-term con-
tracts that the government has done to try and control things, busi-
nesses applied normal incrementing of pricing as you go along
based on the—I am going to say on assumptions. We are in a time
of crazy interest rate increase that is killing small business. And
the primes and the government are not going back and allowing
the businesses to do equitable adjustments based on that.
That is why in my presentation I talked to progress payments,
I talked to allowable interest and equitable adjustments that are
desperately needed by small business to handle the times that we
are in right now.
If you want to adhere to fixed pricing, you have to take care of
areas that are out of the norm. Everyone went together to put pric-
ing together and quantities together. We put the facilities in place
to do stuff. You can’t hold them—hold feet to the fire and say, oh,
you quoted a price based on interest rates that are long gone. It
has got to be handled.
Ms. MALOY. Okay. Thank you, Mr. Spinosa.
Mr. SPINOSA. Thank you.
Ms. MALOY. Mr. Lipsky?
Mr. LIPSKY. Essentially, what I am hearing is, what advice do
you have to fix the problem.
Ms. MALOY. Yes.
Mr. LIPSKY. And my—as much as I can get into cash flow and
regulation tape, I think the two big pieces of advice that I can con-
tribute today is to continue to have open discussions with the pri-
21

vate sectors and the people who are affected, which is what we are
doing today, and to listen to the partners such—and the associa-
tions, such as the Association of General Contractors. We are a
great resource in order to provide representation on hundreds of
thousands of employees and their—and their—and all the sub-
contractors that they represent. That would be my biggest advice.
Ms. MALOY. I just want to make sure we put a fine point on
what you are saying. So you don’t feel like the federal government
is currently listening adequately and responding to your concerns?
Mr. LIPSKY. I think that this is a very good start. I haven’t per-
sonally seen it myself previous to this, but I appreciate the open
invitations to be here today.
Ms. MALOY. I also don’t think the federal government is ade-
quately listening, so thank you for bringing that up.
Mr. Taylor?
Mr. TAYLOR. Congresswoman, the first point I want to make is
I didn’t show up here today, nor do other small businesses, look for
handout.
Ms. MALOY. Right.
Mr. TAYLOR. I firmly believe that we offer the federal govern-
ment innovation, cost effectiveness, the ability to do things that
large businesses cannot do. We are more responsive, we are faster,
we are more adaptive. I am not asking the government to say,
here, here’s something for you.
What I would recommend is that I think there are laws and
goals in place, but the large businesses and primes need to be held
accountable to those. So, for example, if the subcontracting goal is
3 percent and they are achieving .3 percent, something needs to be
done. And it is not just to throw a favor to me. It is to give me
a chance, to give other small businesses a chance, to compete fairly.
That is all I ask for.
Ms. MALOY. Thank you. I yield my time, Mr. Chairman.
Chairman LALOTA. Thank you very much. As the gentlelady
said, there is a lot of freshmen energy in this room. And following
that, fellow freshman from Michigan, Mr. Thanedar, for 5 minutes.
Mr. THANEDAR. Mr. Chair, I am going to pass.
Chairman LALOTA. Excellent. We are going to have a second
round. So lucky you, we can get to you in the second round.
Mr. BEAN. Mr. Chairman?
Chairman LALOTA. The gentleman is not recognized just yet.
Mr. BEAN. 10-4.
Chairman LALOTA. We are going to start a second round for 5
minutes, and I am going to start my 5 minutes by yielding a
minute to the gentleman for the purposes of expanding upon the
bill to which he referred.
Mr. BEAN. Well-played, Mr. Chairman, well-played. Very nicely
done.
It is H.R. 2744. It is called the Freedom from Government Com-
petition Act. And it just says government needs to verify that they
can do it better than small business. We know they can’t.
So thank you, Mr. Chairman. H.R. 2744.
Chairman LALOTA. The gentleman yields back, and we hope
that at least 10 more co-sponsors are going to come on today.
22

We do a lot in Congress talking about China. And when we focus
on small business, we don’t always think there is a correlation nec-
essarily between small businesses and China, but indeed there is,
especially with our defense subs.
The defense subs have a great impact—despite being small busi-
nesses, have a great impact upon America’s most strategic compet-
itor, China. And rightfully so, here in Congress, we spend a lot of
time focusing on ways to outperform China. In fact, later on today
in the Armed Services Committee, I have a hearing on outpacing
China through innovation.
And, Mr. Spinosa, back to you. I understand small businesses are
16 times more likely to create a patent than their larger competi-
tors. So my question with respect to China, innovation, patents,
how can the DOD better harness the innovation of small busi-
nesses in the defense industrial base?
Mr. SPINOSA. I think it kind of boils down to—I am going to
give you just a couple of words on this. Number one is trans-
parency. Work together with us. That is the important aspect
there. It is—it is so close to the vest that there are things there
that will, even in the commercial area, that has application to help
things out, and they are not getting there because there is no
transparency.
I think the other aspect—I am going to call it this way: We—the
government needs to be less adversarial. The DOD needs to be less
adversarial with the small businesses and be more parental with
their, look, we have got a problem here we need to handle, and let’s
take care of that.
Because when that does happen—and it does happen within cer-
tain—certain groups. There is certain services and their program
offices that have that—that culture. When it happens, it is wonder-
ful. Things happen quick, happen effectively, and happen economi-
cally.
Chairman LALOTA. Moving back into what we talked about in
the first round with respect to the bureaucratic burdens that the
federal government places upon you, would you agree that if we re-
lieved you of some of those burdens, we would free you up to even
be more innovative than you already are?
Mr. SPINOSA. Quite simply, if a business is spending X amount
of money just trying to keep up with the regulations and that kind
of stuff, it is money for small business that can’t be applied to its
facilities, to getting the right people, the right engineers, et cetera.
As I said, it is nonvalue-added costs that just don’t do anything for
our warfighters or the government or whatever the application.
So it needs to be looked at and said, what do we really need. As
a small business, every day we look at different costs. We say, is
it a—is it a I got it, I need it, or is it a like, or is it, do I really
need it?
Chairman LALOTA. That sounds like some of the dialogue I
have with my three children.
Nevertheless, if we can make one more connection, if we can
agree that relieving you of some of these regulatory burdens leads
to more innovation, would you also agree that more innovation al-
lows us to greater outpace China?
23

Mr. SPINOSA. Absolutely. I mean, there is no question about our
innovativeness. As I said in my testimony, most of the innovative
technology comes out of small business. That is where it is. And
we are the ones that are creating it and keeping things moving for-
ward. Look at the different systems that are out there.
I will bear one comment on things that kind of hamstring us.
Businesses have been asked to become more commercial in their
approach to build systems that are close to ready or show the proof
of concept to the government. Most recently, the FARA program,
both on Bell’s side and Sikorsky’s side, they have come to the small
businesses and said, help us invest in the program, let’s go. And
I get it. It is a competitive program. But when it gets cut out right
out of the bottom, it hurts small business.
Chairman LALOTA. Yes.
Mr. SPINOSA. I don’t know how they thought about that. You
know, that is that whole supply chain. It is not just the business
itself, but everything that goes on underneath it, the tier 2s, the
tier 3s.
Chairman LALOTA. That is good insight. I appreciate you shar-
ing it.
My time is about expired. I am going to now yield 5 minutes to
the Ranking Member.
Ms. SCHOLTEN. Thank you so much, Mr. Chairman.
Well, the principal job of this committee is to provide some over-
sight to the SBA. My husband will often joke, what did the SBA
do wrong today, when he knows that we have a committee hearing.
We can spend a lot of time on it. But I also find a lot of value in
talking about what’s working.
You all are successful small business owners, and the SBA has
played a role in that. What good is the SBA doing and how can we
ensure that it continues to do that good work? We will start with
you, Mr. Taylor.
Mr. TAYLOR. Congresswoman, I think over the years, I have
seen what the SBA does as very positive. I see a lot of good that
comes from the SBA. My only issue is that they don’t have enough
authority or standing in the federal agencies to—to execute the
laws and the requirements that they are giving to the industry. So
I don’t see a lot of dysfunction in the SBA. I see them as kind of
the beacon in the forest for helping small businesses.
Ms. SCHOLTEN. Yes.
Mr. TAYLOR. I just wish that they had more authority. And I
don’t know if it is a desire, but something needs to happen so that
the voice of the SBA carries more weight.
Ms. SCHOLTEN. Thank you.
Mr. Lipsky?
Mr. LIPSKY. My experience with the SBA is a little limited, but
I will comment on some of the private clients that I have who use
the SBA, one of which is James Bonanno of the Tap Room, who
is—who owns a restaurant on Long Island that you may know of.
He uses the SBA quite effectively in getting his funding to have his
construction projects and restaurants expand in the Long Island,
New York, area.
So I will yield my time to Mr. Spinosa.
24

Mr. SPINOSA. Congresswoman, I think the SBA is not the one
to blame on this. I think, you know, obviously, regulations—we
would like to see regulations, more plain language.
But more to the point, it is more about the actual implementa-
tion. And, again, that, to me, boils down to my comments from the
Secretary of defense. All the points were there. The recognition was
there. How it gets down to the troops, how—when I say the troops,
the services, the procurement, the acquisition people—and gets im-
plemented, that is where it all—the rubber meets the road. Some-
times it is great and it is wonderful, and other times it is like, oh,
my God, what are we doing here again?
Ms. SCHOLTEN. That is more helpful than you know. Thank
you.
That is it for me.
Chairman LALOTA. Thanks so much. I appreciate you yielding
back.
We are going to wrap things up, but I want to say this. We spent
a good 75 minutes here together having a good dialogue. This is
probably the most effective 75 minutes I have had in Washington
in quite some time, which isn’t always saying much. But truth be
told, this dialogue that we are having is quite important.
I appreciate the witnesses for having taken their time to prepare
their testimony, prepare the issues that are important to your indi-
vidual constituencies, and coming here to Washington to inform
this committee of that. I want to say thanks to the professional
staff for preparing as well.
You know, these things don’t happen without a lot of folks on
this side. And Grady Austin, my guy back there, helps me out a
lot with things as well. I want to say thanks to him.
And without objection, Members have 5 legislative days to sub-
mit additional materials and written questions for the witnesses to
the Chair which will be then forwarded to the witnesses. And I ask
the witnesses to please respond promptly should you get that cor-
respondence.
And if there is no further business, without objection, the Com-
mittee is adjourned.
25

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