On October 4, the House Small Business Committee held a hearing to consider legislation to update and improve the Small Business Administration (SBA) 8(a), HUBZones (historically underutilized business zones), women’s procurement, and service-disabled veterans contracting programs. The committee held a hearing on this issue on September 19 (see The Source, 9/21/07).
In her opening remarks, Chair Nydia Velázquez (D-NY) indicated that the purpose of the hearing was to examine legislation to address the imbalance of federal contracting with socially or economically disadvantaged businesses. She said, “Each of these efforts plays 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.” Rep. Velázquez noted that the committee’s draft legislation would address the incidences of fraud in the HUBZones program, require prime and subcontracting goals for each SBA contracting program, and implement the Women’s Procurement Program. Of the Women’s Procurement Program, Rep. Velázquez said, “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 underrepresented.”
Ranking Member Steve Chabot (R-OH) said, “Despite extra assistance from the SBA, small businesses owned by socially and economically disadvantaged individuals, women, service-disabled veterans, and those located in historically underutilized business zones do not receive their fair proportion of contracts to sell goods and services to the federal government.” He continued, “If federal contracting is to benefit the entire small business sector, agencies must do better in their dealings with these targeted small business groups. The legislation before us today certainly will rectify some of the problems associated with the operation of these programs. However, I believe that some aspects of this legislation need modification to avoid undue regulatory burdens on small businesses. Furthermore, there are some parts of the legislation that simply need clarification to remove ambiguities that could make implementation difficult.”
Acknowledging that the SBA has not achieved all of its goals for small business federal contracting, SBA Administrator Steven Preston said, “In the past year, SBA has made significant strides in working to improve small business access to federal contracting opportunities. We have worked to provide better data to accurately measure agency progress, and created a new scorecard that clearly and transparently measures agency progress towards small business goals. We have not achieved all goals and SBA plans to use the scorecard as an integral part of our effort to make the small business programs under our authority work in a more coordinated fashion throughout the federal government.”
Mr. Preston continued, “While significant improvement has been made over the last year to create greater transparency within the federal procurement process, we continue to pursue further internal improvements to assist our customers. We have increased training for SBA field staff to enable them to improve outreach to our small business clients and refocused our PCRs [procurement center representatives] on their primary responsibilities identifying small business opportunities. We have also hired additional PCRs to increase our coverage. These improvements are just the beginning and we look forward to continued progress in our government contracting programs as we reengineer and improve our processes.”
Rep. Velázquez asked Mr. Preston to explain, why, seven years after its enactment, the committee should not act to implement the Women’s Procurement Program. Mr. Preston said, “Ma’am, I’m not telling you not to act,” but also noted that “many people [at the SBA] are dedicated to getting it done.”
Rep. Chabot inquired about what, if any, constitutional concerns exist with regard to the federal government releasing a gender-based study to identify industries in which women-owned small business are underrepresented in federal procurement contracting, as is required in the Equity in Contracting for Women Act (P.L. 106-554). Mr. Preston responded that under Adarand Construction, Inc. v. Peña, there are constitutional considerations the SBA must take into account before concluding and releasing the study. Adarand is a 1995 Supreme Court case that held all racial classifications imposed by federal, state, or local governments must be reviewed under the highest level of judicial review, or “strict scrutiny.” Following the ruling, the federal government must ensure that any contracts awarded to racial minorities meet the constitutional requirements set forth in the case, namely that any preferences be applied only to remedy past discrimination. The SBA has argued that it must consider whether the ruling in Adarand also would apply to a gender-based action before concluding and releasing the study.
Rep. Bruce Braley (D-IA) also asked Mr. Preston about the delay in releasing the study, saying that he was under the impression that it would be done by the end of the summer. Mr. Preston responded by saying that he had never committed to releasing the study by the fall, only that he had hoped to do so. When pressed by Rep. Braley, Mr. Preston said, “There’s no higher priority than the implementation of this rule.”
During the second panel, Margot Dorfman, chief executive officer of the U.S. Women’s Chamber of Commerce, commented on the proposed legislation, saying, “Over many years, programs have been implemented with the purpose of assuring broad-based, fair access to federal contracting for all small businesses and to energize certain underserved communities. As these programs are facilitated by the SBA and assessed by this committee, it is critically important that the committee observe three things: the quality and commitment of the implementation by the SBA; the quality of the expected outcomes; and the consequences of the unexpected outcomes.” Ms. Dorfman continued, “The SBA has shown a total lack of commitment to the women’s program that this very committee designed. It has been nearly seven years since the women’s set-aside legislation became law. And we are still waiting for the regulations to be published, the list of underrepresented industries to be published, and the FAR [Federal Acquisition Regulation] [to be] updated so that agency leaders may effectively leverage this program.”
With regard to the 8(a) program (designed to assist small businesses located in socially or economically disadvantaged areas), Ms. Dorfman added that the committee should “increase the net worth provisions and time the businesses may stay in the 8(a) program so that they can reach a level of size and strength and survive as they move out of 8(a).” She also urged the committee to address fraud within the HUBZones program by “tighten[ing] the process for being designated as a HUBZones firm by establishing on-site verification of each…company and limiting the region of work surrounding the HUBZone in which these firms may leverage their…status. This will sustain the integrity of the HUBZone program.”
Joseph Sharpe, Jr., deputy director of economics at the American Legion; Todd McCracken, president of the National Small Business Association; Steven Denlinger, procurement policy consultant at the U.S. Hispanic Chamber of Commerce; and Angela Styles, a partner at Crowell & Moring, also testified.
