Opening Statement
of the
Honorable Nydia M. Velazquez, Chairwoman
House Committee on Small Business
Full Committee Legislative Hearing on SBA’s Contracting Programs
October 4, 2007

Today’s hearing will review legislation to strengthen small firm’s ability to secure federal contracts.  Action to update and modernize these initiatives is long overdue.  In fiscal year 2006, the federal government purchased a record $410 billion in goods and services.  Unfortunately, the reality is that little was purchased from small businesses.  Government buyers continue to turn to just 3 percent of the nation’s companies – large corporations – for nearly 80 percent of their work.

This makes little sense when it is small businesses that provide the best value for the taxpayer’s dollar.  In an effort to rectify this imbalance, SBA’s contracting programs were developed to give newer, less established businesses an entry point into the federal market.  However a number of these initiatives have not been modernized for decades, and as result, small firms are falling behind.

The purpose of today’s hearing is to examine legislation that will start to turn this around.  There are four critical programs that we intend to address:  8(a), HUBZones, the women’s procurement program, and the service-disabled veterans contracting initiative.  Each of these efforts play a vital role in helping various segments of the small business community to break into the federal marketplace.  And it is clear that as they stand today, these programs are failing to accomplish this intended mission.

It is my goal to ensure that this legislation accomplishes two primary purposes:  First, these programs must operate in a way that maximizes taxpayer’s value.  Second, each initiative must be implemented in a manner that increases the efficiency of the federal procurement marketplace. 

To ensure that taxpayer’s interests are protected, the proposed legislation takes several important steps.  Given recent occurrences of fraud, this bill prohibits the award of a contract if the business owner lacks integrity.   It also requires that there are both prime and subcontracting goals for each SBA contracting program, as well as annual reporting on employment and income for all participants.  Together, these changes will enhance the quality of participants, and weed out any bad actors, in SBA’s contracting programs.

In an effort to maximize the efficiency of each of these initiatives, the bill standardizes several key elements. The most important area this is accomplished is with regard to the sole source limitation – the level at which contracts can be awarded without competition.  Above this, companies will be required to compete for contracts.   This will provide much-needed clarity to the agencies employing these programs.

Another major issue is the need to modernize these programs. Right now, there is concern that many of the companies that have graduated from the 8(a) company are not actually receiving work.  In order to reverse this, we’ve required the SBA to get back into the contracting process.  The proposal also updates the net worth limitation, so that companies can continue to grow stronger while maintaining their 8(a) status. 

At long last, the Women’s Procurement Program will be implemented.  We propose that the SBA has 90 more days to finish its studies – and studies of studies.  Until such time as the SBA finishes, agencies will be able to determine what industries are under-represented.  Further, we suggest that the SBA should use a broader definition of under-representation so that the program is not so narrow as to only help an estimated 500 businesses.

During our September 19th hearing, the SBA concurred that the HUBZone program is flawed and subject to widespread fraud.  We’ve proposed a number of actions to mitigate this problem including on-site verification of businesses, limitation on offices outside of HUBZones, and ensuring that the benefits of contracts awarded through the program go to low-income areas.   

We have also heard the concerns of the veterans’ community, and are proposing to require the SBA to implement its responsibilities under Executive Order 13360.  Little action has been taken to date, and these businesses deserve more.  We’ve also suggested that companies that falsely represent to be owned by service-disabled veterans are subject to civil penalties.  This is no different than what is in current law for every other business that misrepresents itself.

With this legislation, I am confident that we’re taking an important and long overdue step to modernize the SBA’s contracting programs.  These initiatives all have record levels of participation, and these business owners deserve more than they’re getting.