Realizing the Vision of Parren Mitchell— Untapping the Potential of Minority and Women Contracting (Senate Small Business Committee hearing, May 19, 2021)
Summary
S. HRG. 117–209, the printed record of a hearing titled Realizing the Vision of Parren Mitchell—Untapping the Potential of Minority and Women Contracting before the Senate Committee on Small Business and Entrepreneurship, held May 19, 2021 in the 117th Congress and printed in 2022. The committee met at 2:30 p.m. in Room 301 of the Russell Senate Office Building with Chairman Ben Cardin presiding. The two witnesses are Rosa Q. Caldas, President and CEO of ZemiTek, LLC, and Euripides Rubio, President and CEO of Ops Tech Alliance, LLC. The contents list their testimony and prepared statements, a National Urban League letter dated May 19, 2021, and each witness's responses to questions submitted by Senators Hirono and Young.
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“Realizing the Vision of Parren Mitchell— Untapping the Potential of Minority and Women Contracting (Senate Small Business Committee hearing, May 19, 2021).”
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S. HRG. 117–209
REALIZING THE VISION OF PARREN MITCHELL—
UNTAPPING THE POTENTIAL OF
MINORITY AND WOMEN CONTRACTING
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP
OF THE
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
MAY 19, 2021
Printed for the Committee on Small Business and Entrepreneurship
(
Available via the World Wide Web: http://www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
46–998 PDF WASHINGTON : 2022
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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED SEVENTEENTH CONGRESS
BENJAMIN L. CARDIN, Maryland, Chairman
RAND PAUL, Kentucky, Ranking Member
MARIA CANTWELL, Washington MARCO RUBIO, Florida
JEANNE SHAHEEN, New Hampshire JAMES E. RISCH, Idaho
EDWARD J. MARKEY, Massachusetts TIM SCOTT, South Carolina
CORY A. BOOKER, New Jersey JONI ERNST, Iowa
CHRISTOPHER A. COONS, Delaware JAMES M. INHOFE, Oklahoma
MAZIE K. HIRONO, Hawaii TODD YOUNG, Indiana
TAMMY DUCKWORTH, Illinois JOHN KENNEDY, Louisiana
JACKY ROSEN, Nevada JOSH HAWLEY, Missouri
JOHN HICKENLOOPER, Colorado ROGER MARSHALL, Kansas
SEAN MOORE, Democratic Staff Director
WILLIAM HENDERSON, Republican Staff Director
(II)
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C O N T E N T S
OPENING STATEMENTS
Page
Cardin, Hon. Benjamin L., Chairman, a U.S. Senator from Maryland .............. 1
WITNESSES
Caldas, Ms. Rosa Q., President and CEO, ZemiTek, LLC, Bethesda, MD ......... 4
Rubio, Mr. Euripides ‘‘Ruby’’, President and CEO, Ops Tech Alliance, LLC,
Bowie, MD ............................................................................................................ 11
ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED
Caldas, Ms. Rosa Q.
Testimony .......................................................................................................... 4
Prepared statement .......................................................................................... 6
Responses to questions submitted by Senators Hirono and Young .............. 36
Cardin, Hon. Benjamin L.
Opening statement ........................................................................................... 1
National Urban League
Letter dated May 19, 2021 ............................................................................... 32
Rubio, Mr. Euripides ‘‘Ruby’’
Testimony .......................................................................................................... 11
Prepared statement .......................................................................................... 13
Responses to questions submitted by Senators Hirono and Young .............. 41
(III)
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REALIZING THE VISION OF
PARREN MITCHELL—
UNTAPPING THE POTENTIAL OF
MINORITY AND WOMEN CONTRACTING
WEDNESDAY, MAY 19, 2021
UNITED STATES SENATE,
COMMITTEE ON SMALL BUSINESS
AND ENTREPRENEURSHIP,
Washington, DC.
The Committee met, pursuant to notice, at 2:30 p.m., in Room
301, Russell Senate Office Building, Hon. Ben Cardin, Chairman of
the Committee, presiding.
Present: Senators Cardin, Shaheen, Hirono, Rosen, Hickenlooper,
Scott, Young, Hawley, and Marshall.
OPENING STATEMENT OF HON. BENJAMIN L. CARDIN,
CHAIRMAN, A U.S. SENATOR FROM MARYLAND
Chairman CARDIN. Good afternoon and welcome to this com-
mittee hearing of the Small Business and Entrepreneurship Com-
mittee. I want to thank all of you for joining on this important and
timely hearing on the role the Federal Government must play in
supporting minority and women-owned businesses that supply our
government with goods and services.
The title of today’s hearing respects my late friend and mentor,
Congressman Parren J. Mitchell. Congressman Mitchell was the
first African American elected to Congress from the State of Mary-
land. He rose to become chairman of the Small Business Com-
mittee in the House of Representatives. He advanced opportunities
for minority small businesses, including the first minority set-aside
passed by Congress.
In addition to being the first African American elected to the
U.S. Congress from Maryland, Congressman Mitchell also created
the first set-aside minority program. It was created in 1977 when
he successfully attached an amendment to a $4 billion public works
bill that required State and local government to set aside 10 per-
cent of the funds for minority-owned businesses.
Congressman Mitchell called the amendment his proudest con-
gressional accomplishment. Congressman Mitchell understood that
any plan to strengthen the wealth of America must include entre-
preneurship, and that the U.S. Federal Government, the largest
purchaser of goods and services in the world, has an important role
to play in this effort by ensuring that small businesses owned by
members of historically disadvantaged communities, including mi-
(1)
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2
norities and women, are able to do business with government agen-
cies.
This hearing is timely because President Biden’s American Jobs
Plan proposes a once-in-a-generation investment in our Nation’s in-
frastructure across all types. Addressing equity for underserved
and disadvantaged communities must be a focus in all of these en-
deavors.
So today we will focus on the programs within SBA that help
level the playing field for minority- and women-owned businesses,
including the 8(a) Business Development Program and the Woman-
Owned Small Business Program. The motivation behind my com-
mitment to ensuring that the Federal Government is providing con-
tracting opportunities for minority- and women-owned businesses
is twofold. First, I want to ensure that the Federal Government is
providing small businesses with the opportunity to compete for
Federal contracts on a level playing field with large corporations.
And secondly, Federal contracting is a vital part of the economy in
my home State of Maryland, where Federal Government con-
tracting spending accounts for 8 percent of our annual GDP and
supports thousands of jobs to help families into the middle class.
Congress passed the Small Business Act to ensure the preserva-
tion and expansion of a level playing field for small businesses be-
cause by doing so it is vital to the security of this Nation. The
COVID–19 pandemic has shown us all how true these words are.
In the past year, the Small Business Administration has delivered
more than $1 trillion in aide to our Nation’s smallest businesses in
order to prevent the dire economic consequences. I am proud that
my amendment to extend the nine-year limit for participation in
the 8(a) program to 10 years was included in the Fiscal Year 2021
NDAA bill. That measure will provide small businesses in the pro-
gram during the pandemic with an additional year of eligibility.
Small businesses are where innovation happens in our economy,
and this committee has discussed many times in the past years
that we must ensure we provide our small businesses with the sup-
port they need to compete in the global marketplace. In 1997, Con-
gress set goals for the Federal Government to spend 23 percent of
all contracting dollars with small businesses. In Fiscal Year 2019,
the Small Business Federal Procurement Scorecard showed that
the Federal Government exceeded its small business contracting
goals during that fiscal year, awarding 26.5 percent of all Federal
contracts to small businesses.
The total value of the contracts was $132.9 billion, representing
a 10 percent increase from the previous fiscal year. The Scorecard
showed that the Federal Government exceeded its goals in three of
the four associated economic categories, including women-owned
small businesses, the second time in the history of the Scorecard
that the Federal Government hit its 5 percent goal for that pro-
gram.
While I’m pleased that the Federal agencies are meeting most of
their contracting goals, I have seen recent concerning data showing
that we are shrinking the number of contractors that are partici-
pating in the program. A recent report by Bloomberg Government
found that the number of Federal contractors working on unclassi-
fied contracts is at a 10-year low despite a steady rise in Federal
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3
Government contracting spending over the same period of time. So
there are less businesses participating even though we have a
growth in small businesses.
In Fiscal Year 2016, for example, more than 120,000 small busi-
nesses contracted with the Federal Government, but in Fiscal Year
2019 that number had dropped to under 103,000 small businesses.
That means that while contracts are getting bigger and bigger, we
are creating an insular club where fewer and fewer businesses suc-
cessfully compete for government contracts, creating a less competi-
tive marketplace in the process.
Predictably, our Nation’s small businesses are bearing the brunt
of the decline. According to the report, the Federal Government did
business with 32 percent less small vendors in Fiscal Year 2018
than it did in Fiscal Year 2009. For a comparison, the number of
large vendors fell by only 4 percent.
So today I am looking forward to hearing from our witnesses.
They’re both Maryland entrepreneurs whose businesses have bene-
fited from the 8(a) and women-owned small business program.
Rosa Caldas is President and Chief Executive Officer of ZemiTek,
an 8(a) and woman-owned certified small business headquartered
in Bethesda, Maryland; and Euripides ‘‘Ruby’’ Rubio is President
and Chief Executive Officer of Ops Tech Alliance, an 8(a) and serv-
ice disabled veteran-owned small business, certified, headquartered
also in Bethesda. Bethesda is getting very well represented here
today.
Mr. Rubio is also a graduate from the Bowie Business Innovation
Center 8(a) Accelerator and the Veterans Institute for Procurement
program, which are both successful programs in Maryland that can
serve as a model for the Nation as we seek to support small busi-
ness contractors.
I do want to acknowledge the work of Barbara Ashe with regards
to the VIP program because it’s a unique program. It was created
under the sponsorship of the Montgomery County Chamber of
Commerce. That’s Montgomery County, Maryland. It was a na-
tional program to help veteran small businesses, and it’s been very
successful, helping over 1,600 veteran-owned small businesses to
date. One of those companies is represented by one of our wit-
nesses today.
So I’m also looking forward to learning from Ms. Caldas and Mr.
Rubio about what aspects of the 8(a) and the woman-owned small
business programs are working well, as well as the areas we need
to improve for more small businesses to successfully compete for
Federal contracts.
President Biden’s American Jobs Plan seeks to invest more than
$2 trillion in our Nation’s infrastructure, so now is the time to im-
prove the 8(a) and woman-owned small business programs so
woman- and minority-owned small businesses have the support
they need to participate in a once-in-a-generation opportunity.
I know that Senator Paul, the ranking Republican member, will
be joining us shortly. He asked us to proceed with the witnesses,
so we’ll do exactly that. We’ll go in the order in which I first ac-
knowledged our witnesses.
So, Ms. Caldas, we’ll start with you.
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STATEMENT OF ROSA Q. CALDAS, PRESIDENT AND CEO,
ZEMITEK, LLC, BETHESDA, MD
Ms. CALDAS. Good afternoon. Good afternoon, Chairman Cardin,
we don’t have here Ranking Member Paul, and members of the
committee. It is an honor to meet you and to be invited to speak
at this committee.
My name is Rosa Caldas. I am the President and CEO of
ZemiTek, an 8(a) and woman-owned small business located in Be-
thesda, Maryland. Thank you for the opportunity to speak at to-
day’s hearing.
My experience supporting the Federal Government dates back to
1995, when I began managing projects for Federal contractors. I
founded ZemiTek in 2007 because I felt I could do a better job sup-
porting the government and providing a better and more nurturing
environment for my employees.
In 2008, ZemiTek was accepted as part of the Montgomery Coun-
ty Business Innovation Center, and I briefly entered the HUBZone
program. During our first eight years, most of our work was
through small purchase orders and subcontract work. During this
period, we experienced difficulties in gaining access to funding, lim-
iting our ability to grow.
In 2015, we won our first significant prime contract award by
leveraging a partnership with a more experienced large business.
In 2017, we secured our GSA schedules, entered the SBA Mentor–
Protégé program, and formed a joint venture with our mentor. We
obtained a GSA Best-in-Class OASIS schedule in 2020 through our
joint venture. We now have over 70 employees, as well as many
consultants.
The small business set-aside programs are critical for the devel-
opment of small businesses, for economic development, and for pro-
viding innovation and flexibility to the Federal Government buyers.
We sincerely believe the small business contracting goals are due
for upward revision.
The Federal Government small business goals have not been in-
creased in over 24 years, and the WSB goal has not been increased
since its inception.
Goals are important and effective in keeping the Federal Govern-
ment accountable. We are grateful for ZemiTek’s opportunity to
participate in the 8(a) program. It is important for potential par-
ticipants to make sure they fully understand the Federal con-
tracting landscape to fully benefit from the limited timeframe of
the program. ZemiTek made a conscious decision to delay submit-
ting our application until we were ready.
The 8(a) program does have some challenges. For example, the
sole source cap is long overdue for an increase. It needs to be ad-
justed for the increasing average size of contracts. The maximum
total contract value for a sole-source 8(a) award is $4 million. Mak-
ing it an annual cap of $4 million will be preferable. But at the
very least, the cap should be doubled.
More resources need to be provided to the SBA, its three offices.
Business Opportunity especially carries an overwhelming workload
and often focuses more on compliance rather than business devel-
opment. SBA district offices could benefit from an increase in staff-
ing, as well as more consistent training.
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We are very grateful to the Small Business Committee in allow-
ing for a one-year extension in the 8(a) program. Twenty-twenty
was a challenging year for all of us, as well as for small businesses.
Normal business development, client engagement, and networking
opportunities were reduced, and growth was difficult. We support
the Mentor–Protégé program and have benefited from participa-
tion. These formalized relationships allow us to benefit from our
mentor’s guidance and improve our ability to pursue prime con-
tracts. Protégés are limited to two mentors for the company, and
we believe that allowing more than two mentors will help small
businesses maximize their learning opportunities prior to gradua-
tion.
Category management poses serious and significant challenges
for the small business community. Fewer and fewer requirements
are being issued as a stand-alone contract, meaning fewer opportu-
nities for small businesses. Consolidation and bundling of simple
requirements and placing them on BICs further erodes the com-
petitiveness of small businesses, as they often lack the capability
to bid on the size and complex nature of the consolidated contract.
With respect to the WSB program, we have found the certifi-
cation process to be cumbersome, and we recommend increasing re-
sources to the SBA to ensure that they are able to successfully
manage the certification process. We also recommend implementing
reciprocity between the 8(a) and WSB programs.
Thank you so much for the opportunity to share my experience
with you. I look forward to answering any questions you may have.
[The prepared statement of Ms. Caldas follows:]
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Chairman CARDIN. Ms. Caldas, thank you very much for your
testimony.
We will now hear from Mr. Rubio from Bowie, Maryland, not Be-
thesda, Maryland. I want to correct the record to make sure the
great city of Bowie—the mayor is going to be with me tomorrow—
got the right credit for Bowie.
Mr. Rubio?
STATEMENT OF EURIPIDES ‘‘RUBY’’ RUBIO, PRESIDENT AND
CEO, OPS TECH ALLIANCE, LLC, BOWIE, MD
Mr. RUBIO. Good afternoon, Chairman Cardin and distinguished
members of the committee. My name is Euripides Rubio, and I am
the President and CEO of Ops Tech Alliance—OTA—a 100 percent
Hispanic and service-disabled veteran-owned business located in
Bowie, Maryland. As a minority and an advocate for service-dis-
abled veterans in business, I thank you for the opportunity to con-
tribute to the discussion of how we can best tap the incredible po-
tential of our country’s minority and women contractors.
My company, OTA, was formed to bridge the gap between oper-
ations and technology. We provide training, cybersecurity products
and services. With the increase of cyber threats to our Nation,
OTA’s background enabled us to consistently produce excellent re-
sults for our clients, and we’re very proud of that fact.
We also made the Inc. 5000 list for fastest growing companies
the last three years in a row. So we are moving at a good pace.
I grew up poor with a strong mother who got us out of the
projects and kept us on track. She got me to college, but because
of financial constraints I had to drop out. So I was that one guy
who went to the Army recruiter. He offered me $50 a month to
jump out of planes, and I said ‘‘Where do I sign?’’ So I spent 23
years in the Army with a career in Intelligence and Special Oper-
ations.
After my retirement I was eager to do something challenging, so
in 2012 I registered OTA as a business. I invested all my retire-
ment savings into this company. I even survived the 2013 govern-
ment shutdown. But statistically, I was expected to fail.
By 2014 I hired our first employee, and we got into our first con-
tract. By the end of the year I was responsible for four families,
not to mention my own. Our biggest problem was a delayed pay-
ment by large prime companies. Of course, my employees could not
wait 45 to 60 days to get paid, nor my bills.
The current law doesn’t enforce oversight to ensure small busi-
nesses are receiving prompt payment within 15 days. Faster pay-
ment will not burden a large business, but it will make a world of
difference for small companies.
In 2015 we applied for the 8(a) program and got accepted, but
I found that the reality was not what I expected. Our current cli-
ents were not familiar with the program, and there was a lack of
awareness and result to use the 8(a), at least in my line of work.
So I ended up in the same position where I started from.
It wasn’t until 2017 where we were searching for a business in-
cubator, and that’s how we connected with Lisa Smith from the
Bowie Innovation Center. They provided us with many resources,
but more importantly the Bowie BIC 8(a) Accelerator program,
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which included training, mentoring, and many resources to use the
8(a) more efficiently.
In the same year we were accepted to the Veterans Institute Pro-
curement, the VIP, which was another great program, managed by
Barbara Ashe, where we received very valuable training and net-
working with veteran-owned companies.
Without question, these two programs gave us a lot of insights
in areas of business and client landscape that I couldn’t find any-
where else.
As a minority and a veteran-owned business, we have more grit
and experience overcoming obstacles. However, the competitive
landscape is extremely unpredictable. And, of course, I’m not even
addressing the devastating effects that COVID–19 had on small
businesses. If it weren’t for the PPP loan, I would not be sitting
here talking to you today.
In conclusion, I believe the following key steps, if implemented
by the committee, will have the greatest impact.
First, increase and enforce the contracting goals of the Federal
Government and large prime contractors for minority small busi-
nesses.
Next, increase training for all government agencies on the actual
process utilizing minority small businesses.
Expand access and require minority businesses to graduate from
programs like the Bowie BIC 8(a) Accelerator and VIP.
Establish oversight to ensure that Federal agencies and prime
contractors are paying minority small businesses within 15 days.
And lastly, change the protest process. Protests are devastating
the procurement system and wasting money and opportunities for
minority small businesses.
Thank you, distinguished members of the committee, for your
time and attention to these issues. Minorities and women are clear-
ly in the spotlight now, and I recommend focus on these matters
more than ever. I’m honored to be here to speak on their behalf,
and I’m ready for any questions you might have.
[The prepared statement of Mr. Rubio follows:]
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Chairman CARDIN. Let me thank both of you for your testimony,
and let me make this observation.
The American Jobs Plan is really a once-in-a-generation oppor-
tunity to make a significant investment in the infrastructure of our
Nation. But we also have to make sure it’s opportunities for all
businesses to participate in that infrastructure. So we need to oper-
ate from the beginning with the opportunities for small businesses,
particularly in the underserved communities, in the minority com-
munities and women-owned small businesses.
That’s one of the reasons for this hearing. You’ve made a lot of
suggestions. We’re going to be looking at those suggestions. We’re
in discussions with the Biden administration and with our House
counterparts as to how we can ensure that the investment in infra-
structure will be used to advance these goals, and I think you’ve
given us a lot of good suggestions.
I want to talk for just a moment about the Bowie Accelerator
program. We’re very proud of what they do at Bowie. It’s one of the
great examples, and it’s been extremely helpful. The VIP program
that Barbara Ashe heads is one that I brag about all the time. It
started with the resources of the local Chamber of Commerce in
Maryland, in Montgomery County. It became a national model be-
cause it served the national community of veterans, got a partner-
ship with the Small Business Administration. We were pleased to
promote that, and now it is truly the template for how we can pro-
vide services to veterans in our Nation.
So we’re proud of both of the programs that you all have referred
to.
I want to deal with raising the caps that you’ve talked about, so
let me start with the sole source, because sole source is one of the
great tools that allows for the contract really to be made with mi-
nority businesses and women-owned businesses.
Today, the cap on a multi-year contract is about $900,000 on sole
source, which really takes you out of the prime contract area exclu-
sively. So you deal with the abuses you’re talking about on prompt
payment and all the other challenges you have in dealing with
prime contractors.
So just elaborate a little bit more for me how important it is in
reality, what types of contracts are we talking about that you all
could qualify for under sole source if that cap was raised.
Either one who wants to start.
Mr. RUBIO. Well, I can tell you, sir, Senator, that we missed op-
portunities because of that cap. Like Ms. Caldas mentioned, it
should be increased even yearly, because when you look at those
numbers and the opportunities that are out there, the numbers are
not keeping up with inflation, with the economy. So it definitely
should be increased. When you look at these numbers, they haven’t
changed in a long time, over 20 years. So I think it’s time.
Chairman CARDIN. And when the contracting agency is limited
by the size, they can’t put these contracts up for sole source even
though they may be ideal for the sort of special attention that Con-
gress intended.
Ms. Caldas, do you want to add anything to that?
Ms. CALDAS. Yes. I’m just going to provide a couple of examples.
We have received a couple of sole source 8(a) contracts. The limit
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was $4 million. And this is just to illustrate how important it is
to increase the cap. One of our coding contracts is providing tech-
nical support services to USAID and the Mission in Haiti. Because
of all the security problems they have had in that country, they
have had to rely more and more on contractors to provide service
support.
We received the contract sole source award, and because of this
situation, we started deploying and providing technical assistance
and staff, and this contract is less than a year old, and they al-
ready have committed to around 80 percent of the ceiling of that
contract. It takes time for the agencies to identify companies like
us that have the technical expertise and have the knowledge to de-
liver those services. They establish, they award the contract, and
then they get themselves in a situation where they are reaching
the cap and the ceiling very quickly, and they don’t have the flexi-
bility to increase that ceiling.
I think it’s very obvious that whatever—the contracts that were
$4 million so many years ago, you cannot buy the same amount of
services as you do today. But the reason for the sole source allows
for an easier expedited process to issue these contracts, and it is
not very straightforward for the agencies to understand if they
have any flexibility to increase it and what is the next step.
So I just wanted to illustrate one of the examples. That is the
type of services that we provide, and it would be beneficial for 8(a)
companies, but also beneficial for the Federal Government buyers.
Chairman CARDIN. Let me ask one additional question, and that
is that I was pleased, and you acknowledged in your testimony,
that we extended the 8(a) program for an additional year as a re-
sult of COVID–19 in the NDAA bill. But I want to talk about grad-
uating out of the 8(a) and your ability to compete once you have
completed the number of years of eligibility.
We had the 7(j) technical assistance that’s supposed to be helping
you transition off of the preference under the 8(a) program. Should
we be looking at ways to strengthen the ability to deal with the
transition off of 8(a)? Are there other issues that we should be look-
ing at? Are there things that we can do to make it more resilient
for small businesses that were 8(a) that no longer are?
Ms. CALDAS. Absolutely. Prior to forming my company, I sup-
ported a small business, mid-size businesses, and I was also an em-
ployee of large companies. The type of resources that large compa-
nies have to compete for work cannot even compare to what a
small business can do. So what happens is many of our small busi-
ness company owners start worrying about the situation where you
go from being a small business to other than small. Other than
small could be a company that just graduated from their NIC code.
It is a very difficult environment where a lot of small businesses
don’t survive, or they start finding ways to stay small so they don’t
enter the ‘‘valley of death,’’ like some companies mentioned, or they
look for opportunities to be acquired because they know that they
may not be able to compete in that environment.
So there are several things that could be done. One of them is
revising the size standard under NIC codes so a small business
could take advantage of staying small a little bit longer while they
strengthen their capabilities to graduate from that NIC code.
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Allowing more mentors in the Mentor–Protégé. As I mentioned
in my testimony, small businesses can only have two through the
life of the company, when mentors, and most of them are large
businesses, can have three Protégés at the same time. So allowing
for more mentors also gives the opportunity for small businesses to
grow and learn more through the advice of those companies.
So there are many, many other options out there that should be
considered. Training is always good. But at the end, when you fin-
ish the training, you need to find ways to have resources to com-
pete in an environment where it’s just very, very hard to compete.
Chairman CARDIN. Thank you. I appreciate that.
Senator Hawley and Senator Scott have passed on questioning,
so we’re up to Senator Marshall.
Senator MARSHALL. Okay. Well, thank you so much, Chairman.
Glad to be here, and welcome to our witnesses this afternoon as
well.
In today’s hearing we’re supposed to be talking about the
HUBZone service, disabled and veteran-owned and woman-owned
small business programs. Our staff and myself, we made a huge ef-
fort to reach out to our minority Chambers, to small business own-
ers, small business wannabe owners in economically distressed
communities, and I certainly have not solved the puzzle yet.
And as I interviewed people and listened, two big issues remain,
among others, two that I’ve identified: access to capital, and really
financial literacy. So I want to talk about access to capital for a
second.
What advice would you be giving to me to give to future small
business owners when it comes to accessing capital? And in par-
ticular, I want to know if you’ve had any experience with the CDFI,
the Community Development Financial Institutions.
I’ll ask each of you first, and ladies first, Ms. Caldas, please.
Ms. CALDAS. Having access to capital is imperative. When we
started and we reached out to one of the banks that we were work-
ing with, the first thing they tell you is we want you to be in busi-
ness for two years. Then you go back and knock at the door, it’s
been two years and, oh, it just depends on how many contracts you
have. When you have contracts, come back and show the bank, and
the bank said, well, we want you to have multiple years.
And in the meantime you have payroll, you have benefits to pay
for your employees, and many of us do a couple of things: one,
cashing in retirement and mortgage the house, just to make sure
to keep the company moving; or using some services where you sell
your invoices and pay very high interest so you can manage your
cash.
It has been helpful when we started winning prime contract
work because some of the Federal agencies do pay us quickly. It
is completely different when you are a subcontractor to large
primes. Sometimes you get paid 60 days, 90 days, and payroll
needs to be paid before the invoice goes out.
So definitely there should be more resources dedicated to either
some of these financial banks, working with the SBA and providing
some ability for smaller companies to start being able to have ac-
cess to borrow based on the work that they are doing and making
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it easier to tap that capital. It is not that easy, and we all as small
business owners have gone through that.
Senator MARSHALL. Right. Mr. Rubio, I certainly understand it’s
a challenge. That’s what I’m trying to get at. Have you had any ex-
perience with CDFIs? And where are people getting access to cap-
ital, woman-owned businesses, minority-owned businesses? Any ad-
vice?
Mr. RUBIO. In my case, when I first started, I had to borrow
money from friends and family, and a lot of people do that. Like
she said, you show up to a bank and they say great story, great
company, great contract, but you just got a contract, we’re not giv-
ing you money.
There was this thing we did not know about, the 7(a) SBA loan,
and we actually got that. One bank, actually—we ended up with
Sandy Spring, and they’re the ones that actually told us, hey, by
the way, there’s an SBA-backed 7(a) program, and that saved our
lives, actually. I got my first loan there. Of course, you also had
to put in your house, your life insurance. I had to put everything
in it, but that actually helped us a lot.
Senator MARSHALL. Was that like a 5 percent down? Is that what
that type of loan was?
Mr. RUBIO. Yes, there were some fees there, and since I was a
veteran too, there were some things that were waived. But it was
an easy—well, not an easy process, but definitely once we found
out that that was available, we’re still in it today. The deal with
that is there was no education. I had no idea that it existed.
Going back to education, things like the VIP, the 8(a) Accel-
erator—actually, I found out after the fact. I went to this course,
this training, years into when I started the company, and I wish
I would have done all that before even getting my certification. I
regretted getting my 8(a) so early, and I was already three years
into it. I wish I would have had this training before I did this.
And the same thing with the money, the education. They brought
the banks, they brought folks, CPAs who came in and talked to us.
The deal with these programs is you actually have to sit there, and
all these folks come in, and you can mentorship, you can ask ques-
tions. It’s different from me sitting online and going through a
class. It was more interactive, right? And you have folks who have
actually done it.
Senator MARSHALL. All right.
Thank you, Chairman. I yield back.
Chairman CARDIN. Senator Shaheen?
Senator SHAHEEN. Thank you, Mr. Chairman.
And thank you both very much for being here and for your in-
sights into what we could do to make these programs more effec-
tive.
One of the concerns that I’ve heard from a number of small busi-
nesses in New Hampshire is the challenge of getting into Federal
contracting. It requires a lot of paperwork, there’s bureaucracy, and
they find it really challenging. I’ve also heard that they feel like
the agencies that they may be talking to have businesses that
they’ve done business with over the years, and so they’re not that
welcoming to new small businesses that want to do work for them.
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So I wonder, I think you talked a little bit about how you got into
the programs, the SBA programs. But can you talk a little bit
about what your experience was getting into Federal contracting
and what was the break that allowed you to do that?
Either one or both of you.
Mr. RUBIO. It helped me that I was already in the government.
I was retired, so I understood the system, I was used to it. Net-
working is a big, big piece to it, of course, for any business.
The issue for me was that when I first came in I had to develop
a business plan. And it’s not their fault, but when I went to the
SBA office, the sample they gave me was actually a hot dog stand,
and they were trying to simplify it for me. But that doesn’t com-
pare to what you have to do in a Federal—Federal contracting is
a different animal. I mean, the financials alone, when I first start-
ed the company, you had to be DCAA compliant. Okay, what does
that mean? There is actually a whole agency that does that.
So there are a lot of things, a lot of rules and policies that you
have to establish, for good reasons, but I don’t think the SBA is
prepared—they don’t have, at least in my case, they didn’t have
anybody that was actually Federal contracting experts. And again,
going back to the training that we received, those guys that were
there, those folks were important for me, in my experience.
Senator SHAHEEN. Ms. Caldas?
Ms. CALDAS. Yes. Similarly, before I formed ZemiTek, I sup-
ported the Federal Government as an employee of a small, mid-
size, and large contractors. So I knew enough how to deliver work
and understood the Federal contracting environment to an extent,
because as a manager we didn’t have access to certain information.
It was challenging. For the reasons he was mentioning, we saw a
lot of 8(a) companies apply, but by the time they figured things out
they were already three or four years into the program. So that’s
why we decided to wait through our infrastructure, our accounting
system, before we applied for the 8(a) program.
Now, with regard to something you mentioned that helped us
break into some of the agencies, because it is true, sometimes you
are trying to provide support to some agencies and you don’t under-
stand how they work. They have different language, and they have
different missions. What worked for ZemiTek was looking for op-
portunities where we could bring our experience as a subcontractor,
and it gave us the opportunity to learn how that agency worked be-
fore we tried to pursue work in that agency as a prime contractor.
It would have been very difficult for us to win the work without
having an understanding not only of the Federal contracting land-
scape but specifically understanding of that Federal agency, what
they buy, what are the rules and regulations, because besides the
Federal regulations, each agency has some regulations that you
just have to understand.
So those two things worked for ZemiTek trying to tap into Fed-
eral contracting.
Senator SHAHEEN. Thank you. Can I ask you, too, about your cer-
tification as a woman-owned small business? The rules are chang-
ing, and as of October you’re no longer able to self-certify. I also
understand that that’s off to a relatively slow start in terms of
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helping women-owned small businesses understand how the new
process is going to work.
Part of the problem is you have something called the Rule of
Two, where there have to be two women-owned small businesses
who can compete for whatever the contract is, and part of the chal-
lenge is we don’t have that many women-owned small businesses.
So it’s sort of a Catch–22. Have you experienced anything similar
to that?
Ms. CALDAS. I’m going to answer your question in two parts, the
certification, and opportunities for the women-owned.
The certification process has changed, and the new system is
cumbersome and is difficult to navigate. I have been applying to
certifications since 2008. You go from the paper process, to a sys-
tem process. When you had Certify it was working, and we got cer-
tified in September 2020, and now they have a new system, and
there is not a lot of support sometimes from the SBA to navigate
the certification process to complete the new procedures that we
need to do before our first year. When we certified in September
with the Certify process, we have one year to then jump to the new
system.
So the process is difficult, and there is not a phone number of
somebody you can call. You keep on sending emails and just trying
to resolve the problems by yourself. So one is the certification.
Regarding opportunities, I have seen a lot more opportunities for
women-owned small business in the last couple of years, and there
are so many years that we have supported the Federal contracting.
One thing that we are dedicating resources and, as you mentioned,
they need to do the research and prove that a small business can
do the work. I do believe there are a lot of woman-owned small
businesses that can do the work. Sometimes I think the agencies,
it’s hard for them to find it, and it is also our responsibility as
woman-owned small business to make the agencies know that we
are out there.
So one of the things that we are doing is any time an agency has
a requirement that we think we can do the work and they have a
request for information release, we are dedicating the resources to
respond to that and to let them know we can do the work, and by
the way, we are 8(a) and woman-owned. We have seen good results
on that. Last year we pursued and won a contract that was a set-
aside woman-owned using the GSA schedule, and this year we
have seen one or two in the last few weeks that have been re-
leased, set-aside woman-owned, using the GSA Best-in-Class
OASIS.
So something is happening. Things are changing. We are seeing
more than we have seen before. But I just wanted to address the
two things, the certification process and the number of opportuni-
ties that are starting to go up for woman-owned small business set-
aside.
Senator SHAHEEN. Thank you. That’s very encouraging.
Thank you, Mr. Chairman.
Chairman CARDIN. We’ll now go to Senator Hirono, who is with
us through Webex. I understand she was here when the gavel was
brought down, so I thank her for her patience.
Senator HIRONO. Don’t let it happen again, Mr. Chairman.
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[Laughter.]
Senator HIRONO. Thank you very much.
Have both of you gotten sole-source contracts?
[Pause.]
Senator HIRONO. Hello? Can you hear me?
Mr. RUBIO. Sole source you said?
Senator HIRONO. Yes. Have both of you gotten sole-source con-
tracts as 8(a)?
Mr. RUBIO. I have.
Ms. CALDAS. Yes, I have.
Senator HIRONO. Both of you. So, how does a company—for ex-
ample, you’re just starting out, you’re in an 8(a), you have no track
record. How do you qualify? How do you get the attention of SBA
or any of the contracting entities if you don’t have a track record
as a sole-source provider? I think, Ms. Caldas, you touched on that
a little bit. How did you gain the attention of the contracting entity
so that they could do a sole-source contract with you when you just
started out?
Ms. CALDAS. Yes. As I mentioned before, we understood that
challenge, so we did not enter the 8(a) program when we qualified.
We only needed to be in business for two years when we applied
for the program, and we were in our eighth year when we sub-
mitted our application. So in the moment when we submitted for
the 8(a) program, we already had some experience doing work as
a subcontractor that we could pull forward when we were trying to
pursue work to demonstrate that we could do that work.
It took us several years more to get our—we have gotten three
sole-source contracts, one really small with the Defense Innovation
Unit of DOD, and two others providing technical assistance over-
seas. But at the time that we were pursuing those, we had enough
past performance and past experience to demonstrate that we could
do the work.
It is a little more difficult for new companies entering the 8(a)
that don’t have that track record to be able to demonstrate that
they can perform the work, so it makes it difficult for them to pur-
sue 8(a) sole-source contracts.
Senator HIRONO. So is the path you followed to be in getting sub-
contracts so that you did have a track record, is that the usual
path for 8(a)s who want to obtain sole-source contracts, Ms.
Caldas?
Ms. CALDAS. I don’t know if it is the usual path. I think the 8(a)
is intended for 8(a) companies to be able to pursue those sole
source when they are starting. But the reality is that when you are
trying to pursue that work, you need to be able to demonstrate that
you can do the work and that you have the capacity and the infra-
structure to do the work. So I think it is a big mismatch in what
is expected versus reality, and I think a lot of small businesses that
join the 8(a) program think, okay, now I have 8(a), I can get a sole-
source contract, and then find it difficult, taking several years, to
be able to gain the experience that they need to pursue it. So that’s
the reality.
Senator HIRONO. That makes a lot of sense to me that a small
business should have a track record if they hope to compete for a
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sole-source contract. It’s probably something that the SBA should
inform the 8(a) participants that that’s the reality of things.
So how many years are you into the 8(a) program, Ms. Caldas?
Ms. CALDAS. Five years. We entered the year in 2016, but just
so you can compare, the company is going to be 14 years old in a
few months, and we’ve only been in the program for five years.
Senator HIRONO. Yes. So I think that you are probably quite
unique in how you have very strategically managed your company
so that you are able to maximize your participation in the 8(a) pro-
gram, so I commend you. And you have obviously grown your busi-
ness to 70 employees. When you started, how many employees did
you have?
Ms. CALDAS. One, me.
[Laughter.]
Ms. CALDAS. The first year was me, and then I had a second per-
son part-time.
Senator HIRONO. You should be a mentor. I think you said men-
tors would be good.
You mentioned the concern about the category management con-
tracting model, and I’ve heard from other companies, other minor-
ity-owned businesses that are concerned about the category man-
agement contracting model because it means that there are fewer
contracts to go around, which means fewer opportunities for minor-
ity-owned businesses, particularly small businesses, of course. You
have expressed some concerns about it. What should we be doing?
Should we be getting away from this sort of contracting model?
Ms. CALDAS. I think with the category management and the
Best-in-Class, it’s a combination of issues. One, it is really hard to
get in as a small business because, again, for you to be able to be
successful and have one of those contract vehicles, everything is
based on the scoring, and the scoring depends on how many con-
tracts you have, what type of certifications you have. And the other
thing is that those contracts don’t have a full open enrollment, so
they are every five years, a small window for you to try to apply
and enter.
So a lot of companies are doing, and we were successful just by
partnering with a large business. So we as a team, who score high
enough to enter—to gain the vehicle. So that’s one thing.
I think more agencies need to be educated about what is ex-
pected to be done with category management, because what we
have personally seen is that we need to meet our category manage-
ment goals, and certain requirements that were performed by small
businesses are being moved to either the unrestricted pool or
they—and we have seen this a couple of times. I don’t know if it’s
something that is happening frequently. They release the same re-
quirement at the same time for the small business pool and the un-
restricted pool, and at that point you are really not competing. It
is really just too hard to compete when you know that the large
business is also going for the same work.
So it is challenging because then a lot of the newer small busi-
nesses that don’t have that experience, it’s almost impossible to get
into those vehicles. So it’s either facilitating that some small busi-
nesses can really be part of it and opening the enrollment so we
are not—I mean, we made an effort and we knew we only had one
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chance, we have to do it with a large business because if we don’t
do it now, we need to wait five more years. And then a lot of the
requirements started to be consolidated and bundled. And because
they are consolidated and bundled, they bundle a lot of small busi-
ness requirements into a large requirement that they then release
in the unrestricted pool.
So I think it needs to be more visibility and oversight in how
these plans are being implemented, because this is just reducing
the contracts that are available for small businesses to pursue.
Senator HIRONO. Mr. Rubio, do you share that perspective re-
garding this kind of model for contracting?
Mr. RUBIO. Yes, and I was also—it’s interesting because we had
different experiences. I was in the JV also, in the mentorship pro-
gram, and that was another lesson learned because there was not
a match, and I wish I would have known a lot of things before I
got into that. It’s kind of like a marriage. You get married. You see
each other’s culture and financials and everything. So that did not
work as well.
As far as going back to the sole source piece, I just wanted to
mention something, that I did have some issues with that, and it
was that our clients—the deal with 8(a)s is that you have 8(a)s in
specific areas, like I was supporting a very specific client in DOD,
the Department of Defense, and they were not familiar with 8(a)s.
They had no other 8(a). I was the first 8(a) that showed up, and
I actually had a relationship with this client as far as doing other
work for them. When it came to the point where we had to do a—
we said, hey, let’s go, we’re an 8(a) now, and that’s what happened
back in 2015. I got my 8(a) and said, okay, we have an 8(a), and
they said we have no idea how to use you like that, let’s just keep
doing what we were doing before. And we couldn’t actually grow
any business we were doing with them because of that. So edu-
cation on the government side definitely was an issue for us, and
even for us, because I didn’t know how to tell them until years
later, when I learned.
So I did not wait, like you did. I should have.
Senator HIRONO. Considering that——
Chairman CARDIN. Thank you.
Senator HIRONO. Oh, I’m sorry. Considering that all contracting
agencies I thought were supposed to have certain goals regarding
minority-owned business contracting, the fact that some entities
still don’t seem to know that, never heard of 8(a), that’s pretty as-
tounding.
Mr. Chairman, I think this idea, this concern about the category
management contracting model, I hope that we can ask further
questions about how that is being implemented and the impact on
8(a)s and small businesses.
Thank you, Mr. Chairman.
Chairman CARDIN. Thank you, Senator Hirono.
Senator Rosen by Webex.
Senator ROSEN. Thank you, Chairman Cardin. I appreciate you
holding this important hearing on Federal contracting for minority
and women-owned businesses.
I really want to thank the witnesses here today, too, for your in-
sightful testimony, for your hard work to build your business and
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mentor others. What I want to say is that 99 percent of businesses
in Nevada are small businesses, and so we understand their impor-
tance not just to our community and to our families but, of course,
to our states and country.
Congress has historically worked to enhance the integration of
our small businesses in the Federal contracting process. In Fiscal
Year 2020, Nevada small businesses received over $500 million in
Federal contracting dollars. More than $220 million was awarded
to small disadvantaged businesses, minority-owned businesses that
are also economically disadvantaged, but $157 million awarded to
woman-owned small businesses.
So I’m pleased that in recent years the Federal Government has
met its goals on small business contracting; but, of course, there’s
always room to improve minority- and women-owned businesses in
Nevada and across the country.
Ms. Caldas, can you tell me what you think we could do to im-
prove not just the process but increase opportunities for women-
owned businesses and just really increase the awareness that these
things exist? And also do you think the resources that you needed
were available to you through the process of seeking your opportu-
nities? And what might you add, future resources that you think
SBA could put in to help women and minorities and others in their
quest to get their own small business going?
Ms. CALDAS. Several things regarding the woman-owned small
business. I think the process of getting certified should be stream-
lined and should be easier. I mentioned in my testimony that we
go through the process, for example, 8(a), we have proven that we
are a U.S. citizen, that we belong to these groups, and that we
have control of the business, and then we need to go through the
same process to prove that we are woman-owned, controlled by a
woman.
So reciprocity between the 8(a) and the WSB. If we submit an
application for the 8(a) and I already have proven that I am the
sole owner, that you can get the WSB certification without having
to go through the process is one thing.
I think woman-owned small businesses need to receive some edu-
cation in how to market to some of the agencies and have the re-
sources available to respond to the requirements that agencies
have to at least demonstrate that woman-owned small businesses
out there are capable of doing that work.
And I think at the same time agencies and government buyers
and the contracting officers need to have a better understanding of
setting aside work for woman-owned small businesses. Some agen-
cies are doing better than others, and I think it’s just a matter of
some education and training and understanding.
Just playing devil’s advocate, sometimes the buyer needs to buy
the services quickly, and they are going to go the fastest and easi-
est way to do that. So if they have an ability and they have an un-
derstanding of how to tap into the woman-owned small businesses
out there, I think it’s just going to benefit both the agencies and
also the companies that are owned by women.
Senator ROSEN. Thank you. I think you’re right about improving
outreach and awareness. That’s always an important factor.
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Mr. Rubio, I want to thank you for your service to our country.
Of course, in Nevada we’re proud to be home to over 225,000 vet-
erans, and one in eight of our small businesses are veteran-owned.
We also have one of the largest Latino populations per capita in
the U.S., so really part of our small business ecosystem.
So what do you think Congress can do to improve Federal Gov-
ernment’s contracting numbers for veterans like yourself and being
sure that there’s outreach and awareness? What do you think you
can add in the short time I have left? Thank you.
Mr. RUBIO. Thank you, thank you. It’s basically the same thing.
Also with the certification, after going through the 8(a) process, I
had to get certified as a WSB, and we had to go through exactly
the same process, although you can self-certify. But in order to get
that CVE, you had to go through the process.
It’s education, going back to the same thing. The programs like
VIP and the 8(a) Accelerator are things that we need. You need to
get training like that before you get your certification because, like
Ms. Caldas mentioned, you get your 8(a) or CVE and you go, okay,
I’m ready, and crickets. Nobody comes or calls. You think that the
phone is going to be ringing off the hook.
And I get the part where we have to do marketing, we have to
reach out to clients, but it’s education on both sides, because your
clients, the clients you’ve been dealing with, they don’t even know
how to use it.
Senator ROSEN. Well, thank you. I think this has been really in-
formative. Outreach and training on both sides, streamlining, du-
plication in the process, that’s going to make it easier for everyone,
and then hopefully more effective for small businesses to move for-
ward.
Thank you, Mr. Chairman.
Chairman CARDIN. Thank you, Senator Rosen.
You all have really put a lot before us, and we’re going to be tak-
ing that into consideration. We did talk about the mentorship pro-
grams and the limitations that are there with the way that it has
been merged with the Protégé program, so we will be taking a look
at that.
We haven’t had a chance yet to talk about HUBZones. I under-
stand, Ms. Caldas, you did participate in a HUBZone. I don’t know
if you have any suggestions on how we could improve that program
to make it more effective. We know it’s important, but we do get
concerns as to whether that’s being most effectively designed in
order to help underserved communities.
Ms. CALDAS. Yes. We were HUBZone very briefly. We entered
the HUBZone program in 2009. It is very difficult to qualify in the
HUBZone and maintain it because of the requirement that 35 per-
cent of your employees should also live in a HUBZone, and you
cannot dictate where your employees are or where they’re going to
move to.
And then with the Census of 2010, a lot of companies like mine,
zones change, and we lost the certification.
So making it easier to maintain with the HUBZone would be one
thing to take a look at.
Also, make more opportunities available for HUBZone compa-
nies. When we were in the HUBZone program, a lot of the require-
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ments that were released under that program, we couldn’t find
enough technical work aligned with what we were doing that we
could pursue. What helped us was to be part of being a subcon-
tractor because the large companies had to meet the goals of hav-
ing a certain percentage of work contracted to HUBZone. So that’s
the only thing that we were able to take advantage of when we had
the HUBZone.
So looking for opportunities for HUBZone companies that are
really good opportunities for the companies to do the work. You
don’t find a lot of IT work under HUBZone. I think I saw one a
few months ago, and even though we were not HUBZone, I was
just so happy to see that something real and tangible was really
good work. More opportunities released under the HUBZone, but
also facilitate the certification process. I know that there have been
some changes lately in the HUBZone, but still the opportunities
that are set aside for the HUBZone are very limited.
Chairman CARDIN. Thank you.
I know that Senator Hickenlooper was attempting to be here. He
may have an opportunity to ask questions for the record if they’re
asked.
I want to thank both of you again for your testimonies. I can as-
sure you we’re going to be following up on the points that you have
raised, and I think we will have opportunities during this Congress
to respond to many of the points that you brought to our com-
mittee.
So, in the legacy of Parren J. Mitchell, we’re going to be doing
everything we can to make sure that the tools available to the SBA
are there to serve the underserved communities, minority busi-
nesses, woman-owned businesses, veteran-owned businesses, which
Congress has intended to make sure it’s carried out to its fullest.
And with that, the committee will stand adjourned. Thank you
very much.
Ms. CALDAS. Thank you.
Mr. RUBIO. Thank you, Senator.
[Whereupon, at 3:32 p.m., the hearing was adjourned.]
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APPENDIX MATERIAL SUBMITTED
(31)
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Æ
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File and source
- File
- CHRG-117shrg46998.pdf
- Size
- 9,671,511 bytes
- SHA-256
- 83eb817f480fc6d0ce94f96ed24a8c075b0cf6bb115468c61f477aeb7c7e52b8
- Our copy
- CHRG-117shrg46998.pdf
- Original
- www.govinfo.gov