[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]





THE PUERTO RICO OVERSIGHT, MANAGEMENT AND ECONOMIC STABILITY ACT: STATE 
                     OF SMALL BUSINESS CONTRACTING

=======================================================================

                                HEARING

                               before the

 SUBCOMMITTEES ON CONTRACTING AND WORKFORCE AND ECONOMIC GROWTH, TAX, 
                           AND CAPITAL ACCESS

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                             JULY 13, 2017

                               __________

                               
             
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                  

            Small Business Committee Document Number 115-029
              Available via the GPO Website: www.fdsys.gov
              
                                   ______

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                      STEVE CHABOT, Ohio, Chairman
                            STEVE KING, Iowa
                      BLAINE LUETKEMEYER, Missouri
                          DAVE BRAT, Virginia
             AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
                        STEVE KNIGHT, California
                        TRENT KELLY, Mississippi
                             ROD BLUM, Iowa
                         JAMES COMER, Kentucky
                 JENNIFFER GONZALEZ-COLON, Puerto Rico
                          DON BACON, Nebraska
                    BRIAN FITZPATRICK, Pennsylvania
                         ROGER MARSHALL, Kansas
                      RALPH NORMAN, South Carolina
               NYDIA VELAZQUEZ, New York, Ranking Member
                       DWIGHT EVANS, Pennsylvania
                       STEPHANIE MURPHY, Florida
                        AL LAWSON, JR., Florida
                         YVETTE CLARK, New York
                          JUDY CHU, California
                       ALMA ADAMS, North Carolina
                      ADRIANO ESPAILLAT, New York
                        BRAD SCHNEIDER, Illinois
                                 VACANT

               Kevin Fitzpatrick, Majority Staff Director
      Jan Oliver, Majority Deputy Staff Director and Chief Counsel
                     Adam Minehardt, Staff Director
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                     
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Steve Knight................................................     1
Hon. Stephanie Murphy............................................     2
Hon. Dave Brat...................................................     3
Hon. Dwight Evans................................................     4
Hon. Nydia Velazquez.............................................     5

                               WITNESSES

Mr. William Shear, Director, Financial Markets and Community 
  Investment, United States Government Accountability Office, 
  Washington, DC.................................................     7
Mr. Robb N. Wong, Associate Administrator, Office of Government 
  Contracting and Business Development, United States Small 
  Business Administration, Washington, DC........................     8

                                APPENDIX

Prepared Statements:
    Mr. William Shear, Director, Financial Markets and Community 
      Investment, United States Government Accountability Office, 
      Washington, DC.............................................    25
    Mr. Robb N. Wong, Associate Administrator, Office of 
      Government Contracting and Business Development, United 
      States Small Business Administration, Washington, DC.......    39
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    GAO Report...................................................    43
    Statement of Mr. Kenneth D. McClintock, President, Puerto 
      Rico Equality Forum........................................    98

 
THE PUERTO RICO OVERSIGHT, MANAGEMENT AND ECONOMIC STABILITY ACT: STATE 
                     OF SMALL BUSINESS CONTRACTING

                              ----------                              


                        THURSDAY, JULY 13, 2017

                  House of Representatives,
               Committee on Small Business,
         Subcommittee on Contracting and Workforce,
                                     joint with the
  Subcommittee on Economic Growth, Tax, and Capital Access,
                                                    Washington, DC.
    The Subcommittees met, pursuant to call, at 10:00 a.m., in 
Room 2360, Rayburn House Office Building, Hon. Steve Knight 
[chairman of the Subcommittee on Contracting and Workforce] 
presiding.
    Present: Representatives Chabot, Brat, Knight, Kelly, 
Gonzalez-Colon, Velazquez, Evans, Murphy, Lawson, Chu, and 
Espaillat.
    Chairman KNIGHT. This hearing will come to order. Trent 
Kelly is here so we are ready.
    I would like to thank our witnesses for taking time to come 
and share their thoughts with us today, and I look forward to 
your testimony.
    Today's joint hearing on the Subcommittee on Contracting 
and Workforce and the Subcommittee on Economic Growth, Tax, and 
Capital Access will focus on findings by the Government 
Accountability Office, GAO, report mandated by section 408 of 
the Puerto Rico Oversight Management and Economic Stability 
Act, also known as PROMESA. This report takes a close look and 
evaluates the Small Business Administration's contracting 
activities in Puerto Rico.
    According to SBA size standards, 99 percent of all 
businesses on the island are considered small, but only a 
limited number of these firms are actually engaged in federal 
contracting activities. We often say on this Committee that 
small businesses are the backbone of this country. This is 
especially true in Puerto Rico. Therefore, it is important that 
small businesses are given every opportunity to ensure their 
success. The SBA's federal contracting programs strive to do 
just that. These programs provide contracting preferences to 
small businesses based on specific socioeconomic designations 
such as service, disabled veteran, or woman-owned. This is done 
to ensure small businesses are given opportunities to access 
and compete fairly for federal contracts.
    The island itself is dominated by small businesses, and 
thus, presents an excellent case study examining the 
effectiveness of SBA's federal contracting programs on the 
small business community. For example, the GAO found that small 
businesses in Puerto Rico are winning a significant portion of 
federal prime contract obligations, roughly twice the national 
average. While the findings appear promising, the report also 
states that most contract obligations were not won through 
SBA's federal contract programs, so this raises the question: 
are SBA small business contracting programs effective or 
influential? Additionally, the result of PROMESA's expansion of 
the SBA's historically underutilized Business Zone or HUBZone 
program in Puerto Rico also provides important insights into 
the program and small business contracting in general.
    The lessons we take from today's GAO report will help in 
our understanding of how the SBA's federal contracting programs 
impact small businesses in the United States territories and 
nationwide.
    I look forward to hearing from our witnesses. We will 
benefit from your perspective, and I thank you for being here 
today.
    I would now like to yield time to the ranking member, Ms. 
Murphy, for her opening statement.
    Ms. MURPHY. Thank you, Mr. Chairman.
    I am pleased that we are holding this hearing on the small 
business provisions contained in PROMESA on the GAO report that 
was produced as a result of one of those provisions, and on the 
possible steps this Committee and the SBA can take to empower 
small businesses in Puerto Rico and to help the U.S. territory 
address its economic challenges.
    I want to thank Ranking Member Velazquez, who is a 
tremendous champion for the island. I also want to thank my 
colleague, Congresswoman Jennifer Gonzalez, who represents 
Puerto Rico in this chamber with skill and determination.
    There are 3.4 million American citizens living in Puerto 
Rico. Because of the migration of Puerto Ricans from the island 
to the mainland, especially in recent years, there are now 5.4 
million individuals of Puerto Rican heritage living in the 
States. The Puerto Rican population in Florida has increased by 
over 120 percent since the year 2000, and now stands at 1.1 
million, running neck and neck with New York.
    My district in Central Florida is home to about 100,000 
Puerto Ricans, the second highest of any district in the 
Sunshine State. Many of my constituents have family and friends 
still living in Puerto Rico. They care deeply about the island, 
and so I care deeply about the island.
    My view on Puerto Rico is simple: I believe the American 
citizens that live on the island should be able to vote for 
their president, should have a full delegation in the House and 
the Senate, so that Congresswoman Gonzalez does not need to do 
the work of seven people, and should be treated equally under 
all federal spending and tax programs. Our fellow citizens in 
Puerto Rico ought to have the same rights and the same 
responsibilities as residents of Florida or any other State.
    Until Puerto Rico is treated equally in all respects, 
however, federal policymakers should be exploring both 
straightforward and creative ways to improve quality of life 
and spur economic growth on the island.
    To that end, Congresswoman Velazquez and Congresswoman 
Gonzalez have introduced the Puerto Rico Small Business 
Assistance Act, which I am proud to cosponsor. This bill 
incorporates recommendations made by the bipartisan, bicameral 
Congressional Task Force on Economic Growth in Puerto Rico, 
which was established by PROMESA and which issued a 
comprehensive report in December 2016. I hope Congress acts 
swiftly on this legislation.
    As the ranking member of the Subcommittee that oversees 
contracting, I will have specific questions for the two 
witnesses regarding the conclusions in the GAO report and the 
specific steps SBA can take at the agency level to better 
assist Puerto Rico's 44,000 small businesses.
    For now, I want to close by expressing a general concern. 
Puerto Rico firms, whether they are small, medium, or large, 
receive relatively few federal government contracts. As 
discussed in the report issued by the Congressional Task Force 
on Economic Growth in Puerto Rico, the territory ranks nearly 
last when it comes to the total dollar value of federal 
contracts performed within each State and dead last when 
considered on a per capita basis.
    Compounding the problem, according to the Federal 
Procurement Data System, of the 571 federal contracts that were 
performed in Puerto Rico in fiscal year 2015, 346, which is 
approximately 61 percent, were awarded to firms located outside 
of Puerto Rico. That is a very high percentage compared to 
other jurisdictions. And in short, very few federal contracts 
are performed in Puerto Rico, and those that are performed in 
Puerto Rico are more often than not awarded to firms located 
off the island. That is an impediment to economic growth and 
job creation.
    I hope the witnesses will address this broader point during 
the hearing. Thank you, and I yield back.
    Chairman KNIGHT. Thank you very much.
    And now we are going to yield time to Chairman Brat, as 
this is a joint hearing, for his opening statement.
    Chairman BRAT. Thank you, Mr. Chairman. I would also like 
to thank our witnesses, first of all, for your willingness to 
be with us and speak to us today, and I look forward to your 
testimony.
    I think we can all agree on both sides of the aisle that 
achieving and sustaining long-term economic growth is the key 
to unlocking Puerto Rico's full potential. Unfortunately, the 
island has been, and continues to be, embroiled in economic 
crisis. I hope through our discussion today we can identify 
pro-growth policies and solutions from the GAO's report.
    As the chairman noted, the vast majority of businesses in 
Puerto Rico are considered small, but not many of these firms 
actually operate in the federal contracting space. Even fewer 
hold SBA certifications, which would allow them to receive 
federal contracting preferences. The GAO report also makes 
clear that less than a handful of government agencies actually 
award contracts to firms in Puerto Rico, and only in a few 
select industries. Having a strong, healthy, and diversified 
small business base has been critical to this country and is 
critical to Puerto Rico's economic stability and financial 
independence.
    We can start by taking steps to harness the power of the 
small business workforce in Puerto Rico. I look forward to 
hearing from our witnesses on ways this Committee can help 
small businesses in Puerto Rico succeed.
    Mr. Chairman, I yield back the balance of my time.
    Chairman KNIGHT. Thank you very much.
    And now we would like to hear from the ranking member, Mr. 
Evans, the ranking member on Economic Growth, Tax, and Capital 
Access.
    Mr. EVANS. Thank you, Mr. Chairman. And also, I would like 
to thank my colleague Congresswoman Velazquez for her long 
history of working to help Puerto Rico.
    Today is an opportunity for us to consider the dire 
economic situation facing Puerto Rico. While the cause of 
decline are debatable and outside the purview of today's 
hearing, what is very clear is the harm being done to Puerto 
Rico's small business community. More private sector workers in 
Puerto Rico are employed by small firms than here on the 
mainland, yet their needs are overlooked, their economic 
contribution unappreciated. Rather than bickering over the 
issues not under our control, we should be working together to 
improve the lending, contracting, and entrepreneurship 
development landscape on the island.
    The Small Business Administration offers a wide variety of 
programs to support entrepreneurs in exactly those areas, yet 
the GAO report concludes that much more can be done, 
specifically as it relates to contracting. The GAO spoke with a 
number of stakeholders that identified challenges that small 
businesses in Puerto Rico may face in obtaining federal 
contracting opportunities. These include increasing use of 
contracting bundling or consolidation, difficulty in meeting 
contract procurement requirements, and a lack of knowledge 
about the federal procurement process. These barriers are 
compounded by challenges created by the island's geographic 
location and economic condition. Along those lines, I am 
greatly concerned about the lack of access to contracting 
officials for Puerto Rican entities. GAO referenced the uphill 
circumstances the island businesses face in forging 
relationships with agency representatives. These 
representatives are meant to be advocates for small 
contractors, but Puerto Rico does not have the same access as 
the mainland firms.
    Small businesses in Puerto Rico also lack the knowledge 
about the federal contracting process. Despite SBA efforts to 
train them, GAO concludes that the small firms do not know how 
to complete proposals or even basic information about the 
existence of the small SBA federal contracting programs.
    But most disappointing is the lack of access to capital and 
financing. In light of the fiscal realities facing the island, 
it comes as no surprise that small businesses cannot meet 
financial standards of surety companies and other lenders. The 
gap in financing reduces the ability of small contractors and 
small firms to generally do their part in rebuilding Puerto 
Rico's economy. While I applaud the approval of the first 
Puerto Rican surety company to be approved to participate in 
the Small Business Surety Bond Guarantee program, I believe 
more must be done to attract lenders and other programs' 
resources to partner to our own.
    Doing nothing is no longer an option in that regard. I am 
encouraged to learn that the SBA is serious about its duty to 
Puerto Rican entrepreneurs. I look forward to working with my 
Committee colleagues and with the SBA to move legislation 
forward to help small businesses in Puerto Rico because they 
are the engine needed to promote growth, drive stability, and 
achieve economic revitalization.
    I thank the witnesses for testifying today and hope to 
learn more about how we can use the federal marketplace as a 
building block to help Puerto Rico.
    Thank you. I yield back the balance of my time.
    Chairman KNIGHT. Thank you, Mr. Evans.
    And I am pleased to see the ranking member from the full 
Committee, and I would like to yield her some time for an 
opening comment from Ms. Velazquez.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman. I am very grateful 
for your indulgence.
    I am very proud of the island, not only because it is where 
I was born, but because despite all the fiscal ailments it is 
facing, young entrepreneurs are leading its economic 
renaissance. While the bankruptcy process slowly unfolds, there 
is a degree of uncertainty that has forced banks to cut back 
markedly on their small business lending. When small businesses 
employ more than 80 percent of all private sector workers, this 
becomes particularly challenging. Yet, in the face of 
adversity, entrepreneurs are rolling up their sleeves and 
getting to work. They are harvesting the land and building upon 
their strong human capital to get out of their economic hole. 
Just last week, I learned of a small 50-person 8(a) technology 
company that secured a contract with a large federal agency. I 
also learned of virtual office spaces and business incubators 
that are encouraging collaboration with likeminded businesses 
and supplying entrepreneurs scalable solutions for their 
particular needs.
    The truth is that the people of Puerto Rico want and need 
jobs. I believe small businesses will be the driving force 
behind the island's vitality. I commend Administrator McMahon 
for traveling to the island and hearing from small businesses. 
Understanding their challenges is vital to restoring economic 
growth. Assisting small businesses in Puerto Rico is not only 
good for entrepreneurs on the island; it is the right thing to 
do. We must remember that as citizens of the United States, 
Puerto Ricans have fought, shed blood, and given their lives in 
nearly every major American war. We owe it to the island to 
provide them the help and resources to jumpstart their economy.
    In the agriculture space alone, Puerto Rico can become the 
leader in organic, tropical, and specialty crops. It has a 
year-round growing season, abundant rainfall, and it abides by 
the same legal structure and regulatory standards as crops in 
the mainland United States. Their universities graduate over 
18,000 students annually in engineering and technology. I want 
for those students, for those engineers, to have the option to 
stay in Puerto Rico. I do not want for them to face the reality 
that the only option they have for themselves and their 
families is to leave the island.
    The potential to increase agribusiness in the often 
overlooked territory is wide-ranging. Leveraging the existing 
assets can be as simple as increasing education. In fact, last 
year, the Federal Reserve Bank of New York released a report on 
a small business survey in Puerto Rico and found that 19 
percent of respondents cited a need for training on federal 
government contracts. To that end, I welcome the GAO analysis 
of the trends and challenges in the federal contracting space. 
I take very seriously the responsibility of examining the 
effectiveness of SBA programs, both nationwide and in Puerto 
Rico, and that is why I introduced H.R. 2488, the Puerto Rico 
Small Business Assistance Act. It comprehensively addresses the 
needs of small firms on the island by expanding lending, 
contracting, and entrepreneurial development services and 
resources to Puerto Rico. I hope we will have the opportunity 
to move it through Congress as the first step towards the 
revitalization of the island's economy.
    And let me make a last point. We owe it to the people of 
Puerto Rico to have a final resolution to the political limbo 
that they find themselves. Puerto Rico is a colony and we need 
to resolve that issue. But it is not for these members of 
Congress who happen to be Puerto Rican to decide what is the 
best political situation for Puerto Rico; that is up to the 
people of Puerto Rico. And so our responsibility in the U.S. 
Congress is to provide for a fair, open, inclusive process that 
will allow for the people of Puerto Rico to resolve that issue 
once and for all.
    And with that, Mr. Chairman, I yield back. Thank you.
    Chairman KNIGHT. Thank you very much.
    And I would like to say welcome to the chairman of the full 
Committee, Mr. Chabot is here, and we started off the day with 
the SBA secretary. And it was a nice morning, and she has got a 
lot of energy and is doing a great job so far.
    So if Committee members have an opening statement prepared, 
I ask that they be submitted for the record.
    I would like to take a moment to explain the timing. I 
think that both of our witnesses understand this, but you have 
5 minutes. As the lights come on, you will be green until you 
get down to 4 minutes. You will go yellow and then you will go 
red. And when you get to red, either try to wrap it up or we 
will wrap it up. But it has been pretty easy so far, and both 
of you are veterans, so we are good to go. Okay.
    Okay. I would like to introduce our witnesses today. Mr. 
Shear is a friendly face, been in front of this Committee many 
times. And our first witness is Mr. Shear, director of 
Financial Markets and Community Investment at the United States 
Accountability Office, or GAO. Mr. Shear has engaged with this 
Committee on a wide range of small business topics and having 
testified before the Committee on a number of occasions. We 
welcome you back today.
    Our second witness today is Mr. Robb Wong. Mr. Wong serves 
as the associate administrator for the United States Small 
Business Administration Office of Government Contracting and 
Business Development. He recently rejoined the SBA in his role 
in March of 2017. Mr. Wong is responsible for overseeing more 
than $500 billion in total federal spending within the federal 
marketplace and ensures small businesses can compete for 
federal contracting opportunities. Mr. Wong is returning to his 
roots at SBA, having started his career there as an attorney 
with the Office of General Counsel and as SBA acting district 
director and counsel in the Lubbock District Office. We look 
forward to your testimony.
    So we will start with Mr. Shear. And Mr. Shear, we welcome 
you back, and you have 5 minutes. Thank you, sir.

 STATEMENTS OF WILLIAM SHEAR, DIRECTOR, FINANCIAL MARKETS AND 
 COMMUNITY INVESTMENT, UNITED STATES GOVERNMENT ACCOUNTABILITY 
   OFFICE; ROBB N. WONG, ASSOCIATE ADMINISTRATOR, OFFICE OF 
GOVERNMENT CONTRACTING AND BUSINESS DEVELOPMENT, UNITED STATES 
                 SMALL BUSINESS ADMINISTRATION

                   STATEMENT OF WILLIAM SHEAR

    Mr. SHEAR. Thank you very much.
    Chairmen Knight and Brat, Ranking Members Murphy and Evans, 
and members of the Subcommittee, and I also have to add that I 
am very honored that Chairman Chabot and Ranking Member 
Velazquez are also in attendance.
    I am pleased to be here today to discuss, first, trends in 
small business contracting and the use of SBA programs in 
Puerto Rico that provide contracting preferences to small 
businesses, and second, stakeholder views on any challenges 
that small businesses in Puerto Rico face in obtaining federal 
contracting opportunities.
    First, in discussing trends in small business contracting, 
we use nationwide statistics as a reference point. For fiscal 
years 2006 through 2017, a higher percentage of federal 
contracting obligations was awarded to small businesses within 
Puerto Rico for contracts performed there compared to the 
percentage for small businesses nationwide, particularly in the 
last fiscal years of the period. In fiscal year 2016, small 
businesses in Puerto Rico received about 47 percent of federal 
contracting obligations to Puerto Rico, compared to 23 percent 
of federal obligations awarded to small businesses nationwide.
    As our mandate directed, we evaluated the utilization of 
four SBA programs that provide contracting preferences based on 
socioeconomic designations that can help small businesses 
obtain contracts. Of the four SBA programs that provide 
contracting preferences, a higher percentage of obligations was 
awarded in Puerto Rico through the 8(a) Business Development 
program, compared to the HUBZone, women-owned, and service-
disabled, veteran-owned small business programs combined. More 
generally, full and open competition and the 8(a) program were 
the most prevalent basis for awards, and I certainly hope in 
Q&A we can talk about the success in full and open competition. 
I think it is a major point from what we found.
    In June 2016, for its HUBZone program, SBA eliminated the 
cap on qualified census tracks for Puerto Rico and nationwide. 
Nearly all of Puerto Rico now qualifies as a HUBZone. We found 
that the number of applications submitted to the HUBZone 
program increased in Puerto Rico after this expansion. The 
number of certified HUBZone businesses in Puerto Rico increased 
from 25 to 40 for the first 6 months of fiscal year 2017.
    As to our second objective, stakeholders GAO interviewed 
identified several challenges small businesses in Puerto Rico 
may face in obtaining federal contracting opportunities. 
Challenges identified include a lack of knowledge about the 
federal contracting process, difficulty meeting procurement 
requirements, and difficulty accessing bonding, financing, and 
capital. Many of these challenges are similar to those we had 
identified in a 2012 report on challenges faced by small, 
minority-owned businesses in obtaining federal contracts. In 
our discussions with SBA, DOD, GSA, and VA, the officials 
identified examples of conducting outreach, providing training 
and seminars, coordinating with local organizations, and other 
efforts intended to help Puerto Rican small businesses obtain 
federal contracting opportunities.
    Chairman Knight and Brat, Ranking Members Murphy and Evans, 
this concludes my prepared statement. I would be happy to 
answer any questions.
    Chairman KNIGHT. Thank you very much.
    And we will go to Mr. Wong for your 5-minute opening 
statement.

                   STATEMENT OF ROBB N. WONG

    Mr. WONG. Good morning. Esteemed members of Congress, on 
behalf of the U.S. Small Business Administration, our 
inspirational administrator, Mrs. Linda McMahon, and the 
longstanding and dedicated team in the Office of Government 
Contracts and Business Development, thank you very much for the 
opportunity to meet with you today.
    At SBA, Mrs. McMahon has encouraged us all to be efficient, 
effective, and customer-centric in executing our 
responsibilities; and so I will try to do that right now.
    Our team has previously provided a much lengthier testimony 
that I understand is already included in the record. Therefore, 
instead of repeating something that you may have already read, 
I want to focus on your questions about SBA and how we can best 
serve the people of Puerto Rico. I will do my best to provide 
meaningful responses to you today or, if necessary, I will get 
the response to you as soon as possible. I look forward to 
working together so that the SBA can continue to help 
strengthen small businesses and to improve the opportunities 
for them.
    I respectfully yield back the balance of my time, and I am 
ready for your questions.
    Chairman KNIGHT. Mr. Chairman, my witnesses used 6 of their 
10 minutes. This should be an example for what witnesses come 
in and yield back time.
    I think that everyone has got many questions for what is 
coming. And I have read through the report and it is 
interesting. But I want to go to Mr. Shear on a couple of the 
things that you said.
    One of them, and we see this with small businesses, whether 
it be in Puerto Rico, whether it be here in the States or 
wherever, access to capital and the requirements to go through 
to get what you need to do to expand your business and expand 
the ability to contract and make your business bigger is all 
part of what you are trying to do, and it is very difficult. It 
is very difficult for small businesses to kind of work through 
that system and to make sure that they can dot all the I's and 
cross all the T's.
    So as you said in your opening statement, you want a little 
time, so I am going to give you a little time to go through 
that, and then I will shut you down because I have got other 
questions.
    Mr. SHEAR. Okay, thank you. First, I am very glad that you 
asked questions about the challenges. And I will also make 
reference to Representative Chu as one of the requesters of our 
2012 report addressing challenges. And what we find many times 
is that--as the Small Business Act and all the tools available 
recognize, and I think SBA and other agencies recognize--there 
is a need to reach out to small businesses to help them access 
the federal marketplace.
    So what do we have? SBA has its Procurement Center 
Representatives that are intended to try to look at contracting 
and to try to develop contracts that are more accessible to 
small businesses. You have offices of small and disadvantaged 
business utilization that are part of the federal framework 
across 24 agencies to try to reach out, to have matchmaking 
events, things of that nature. You have the Department of 
Defense that funds PTACs to provide assistance and the regional 
centers that basically reach out to have matchmaking and other 
events. But what we find is that it is very difficult to get 
into the federal marketplace, and many times it can take small 
businesses years of concerted effort and working to get access 
to contracting officials and of getting the right types of 
financing to do that. So we found very much the challenges 
identified in Puerto Rico are very similar. There are a couple 
of others that had to do with building standards and past 
performance on contracts, but for now I will end there. I am 
happy to address follow-up questions.
    Chairman KNIGHT. Mr. Wong, we talked to Mrs. McMahon this 
morning and we talked about WBCs and SCORE and all kinds of 
things that SBA does or performs that help small businesses. 
Can you kind of help us out with that, of how small businesses 
have the abilities and the different agencies to help them, and 
sometimes that they might not know what is out there to help 
them and how we can reach out to them?
    Mr. WONG. Thank you very much for that question. This is 
actually an industry that I was in immediately prior to coming 
here. And one of the things I would just say is that one of the 
main challenges, particularly with a lot of the set-aside 
programs that we offer, there is a misperception, I believe, 
that having the license itself is going to be the key to the 
future. Sadly, it is not. I wish that it were so, but sadly it 
is not. It is an amazing tool to help. But there is no shortcut 
to educating and being an educated business so that they can 
learn about the federal procurement process. Something as 
simple as understanding what they can sell and being able to 
annunciate that to a client very clearly. Some of the things 
that I tell businesses when I have done this through SBA 
training, you know, first and foremost, do not lead with your 
certification, lead with quality. And tell people very simply 
what you are very good at. That will start a conversation with 
a contracting officer.
    My secret weapon used to be I could tell you something that 
this is what I do very well in 15 seconds, and then you lean in 
and say, but what are three things that you need and how can I 
help? And I guarantee you that that will start a conversation.
    So what is the answer that SBA can do? We can teach those 
things to the small businesses. We have those resources 
available. I believe that we have up to 20 resource partners 
located in Puerto Rico that have all sorts of different ways 
that people can educate people about the federal procurement 
process, as well as how to do business and how to grow your 
business.
    Chairman KNIGHT. And I think that is one of the challenges, 
is getting out the information of what SBA does and all of the 
resources that SBA has. And sometimes businesses do not think 
of that. They think of, well, how do I get from A to B, and I 
have got to do it myself instead of saying there are resources 
out there that can help me. And sometimes that is an education 
issue. Sometimes that is just an advertisement of us telling 
you, hey, there are resources out there that can help you on 
these challenges.
    I am out of time, so I am going to now ask Ms. Murphy for 
her questions.
    Ms. MURPHY. Thank you, Mr. Chairman. And thank you to the 
witnesses for being here. It is great to see you again, Mr. 
Shear, and nice to meet you, Mr. Wong.
    I would like to start with something that I mentioned in my 
opening statement. GAO concluded that 47 percent of federal 
contracting awards to be performed in Puerto Rico go to small 
firms, which is twice the national average. That is encouraging 
but it obscures a larger problem, which namely is that Puerto 
Rico receives relatively few federal contracts compared to the 
States, and 6 of the 10 of those awards are made to off-island 
firms. Do you have any views on why this is the case?
    Mr. SHEAR. We find that the number that you reference is a 
fairly high share, but it is hard to say what a fairly high 
share is, like we refer to nationwide as a reference point. We 
really do not have a benchmark. What I will point out, which I 
think is trying to be informative here, is we have in the 
appendix to our underlying report State by State and territory 
by territory, how those contracts break out. And so you will 
see a wide range of variation. But as far as contracts 
performed elsewhere and what we found, we focus on contract 
obligations. We are looking at dollars. And what we find is 
those dollars that are going to small businesses are, for the 
most part, going to small businesses that are located in Puerto 
Rico; in terms of the contract obligations, going to small 
businesses. We focus on contract obligations. So in that sense 
you could say they are doing fairly well.
    As far as how big is the base in terms of how much 
contracting is going on that is performed in Puerto Rico, we do 
not address that question. But one of the things that we 
observe is that that total has actually declined over time, 
over the last few years. One of the reasons the small business 
share went up since 2012 is just because the denominator fell 
as far as the total size of contracting, but I think our 
findings point, to some degree, some successes of small 
businesses in Puerto Rico of being able to compete for 
contracts.
    Ms. MURPHY. Great. And my next question is for Mr. Wong. 
The GAO reports that the federal agency use of the 8(a) 
contracting program is higher in Puerto Rico than other SBA 
designations. You also reported that certified small businesses 
receive more contract opportunities through full and open 
competition than the set-asides. This nullifies the effect of 
any certification and price preference. Given the recent 
increase in HUBZone eligibility, is SBA advocating for federal 
agency use of HUBZone contracting preference to the same extent 
that they are for the 8(a) program?
    Mr. WONG. With respect, Congresswoman Murphy, I am not 
sure, but it would match my hope. I am responsible for four 
programs and I want them all to do well.
    Ms. MURPHY. Well, how are the other contracting programs 
doing given the high number of eligible veterans and women-
owned businesses on the island?
    Mr. WONG. That is a good question. I think first and 
foremost, if I can explain some of the differences between the 
programs. Our first program and our priority program, in my 
opinion, the longest standing program, has been the 8(a) 
program. It is so old that I actually helped to write some of 
the regulations in 1990. So, it has been a tried and true 
vehicle and I think that what we are trying to do, I think that 
every other program is basically based off of that program. It 
has been around the longest so it is not a surprise to me that 
it does better than others. But I think that my personal belief 
is with the HUBZone program, I think that it is an equally 
strong program. We have to do a better job of highlighting a 
lot of its capabilities because I think that it has the 
potential to have equal, if not wider, effect.
    Ms. MURPHY. And given the large number of veterans on the 
island, what do you think the SBA can do to increase the 
presence of veteran-owned small businesses?
    Mr. WONG. I am sorry for missing that part of the question. 
We do have a service-disabled veteran-owned program. One of the 
things I wanted to say, though, is that compared to the 8(a) 
program, the 8(a) program is a program that we internally have 
to approve. It is an analysis process. It is an eight-step 
analysis process to qualify for the program. The service-
disabled veteran program is a self-certification program. So in 
that regard, we have less to do with the certifications. I do 
not know why more companies may not participate in that, but if 
they do both are qualified to do contracts. Again, it does go 
back to the number of contracts, the number of opportunities 
really is based upon the firm's ability to go out, market, and 
to find contracts.
    Ms. MURPHY. Great. Thank you both. It looks like I am out 
of time so I yield back.
    Chairman KNIGHT. Thank you, Ms. Murphy.
    And we will go to Chairman Brat for his questions.
    Chairman BRAT. All right. I was going to ask a certain set 
of questions more narrowly targeted, but then you guys got my 
economic juices going.
    James Madison is from my country and Adam Smith is overseas 
a little bit. And if you follow those two, together you might 
get sustained economic growth over the long run. And so we are 
all talking about economics, and we want the best for 
everybody, and in my reading of economic history, a society has 
to choose a free market system or you will not get growth.
    And so I heard you mention a few themes that struck my ear. 
Central governments do not work too good. We set up a control 
board. Control boards do not have a good history of producing 
long run, sustained economic growth. You said you need to lead 
with quality, and that caught my ear. That is good, right? And 
you have got to lead with quality that is demanded by somebody, 
right? And so we are all struggling right now to compete, 
right?
    The Indian economy is doing well. The Chinese economy has 
2.5 billion people. They are now globally competitive. We are 
asleep at the wheel growing at 1 percent last quarter, et 
cetera. And it seems to me we all need to capture this free 
market logic. So I just kind of want to hear your comments.
    I worked at the World Bank about 25 years ago and they 
propped up every economic variable except the one that 
mattered; right? They were concerned about secondary education, 
caloric intake, infrastructure, the environment, et cetera. But 
if you do not choose a free market economy in the first place, 
you can invest in all those secondary variables and you will 
not get good performance.
    And so when you said you have got to educate small 
businesses, how is it going? And you also have to think 
business is morally good. If you think business is morally bad 
and you are trying to educate small business that this is the 
way forward, I am just interested in both your commentary on 
how are we doing on educating that there is some hope that 
people want to get in this small business entrepreneurial 
space.
    And Mr. Wong, sorry for the liberal arts sermon, but what 
have you got for me?
    Mr. WONG. Congressman, that is okay. I am a liberal arts 
major myself. Do you know what the great thing about that is? 
What they teach you in liberal arts school, it does not teach 
you anything like a trade school, but what it teaches you, I 
learned, is not to be afraid of new things, right? Within 1 to 
2 weeks, if you look at a 5-credit course and a 3-credit 
course, take 1 to 2 weeks and you will be able to learn 
anything. So it teaches you the wide and the deep. So I will 
take a liberal arts education from anybody all the time.
    My feeling is this, and I do not mean to sound critical, 
but I believe that it is the analogy that you can lead a horse 
to water, but you cannot make him drink. We can provide the 
resources. We do not have the authority to make people learn, 
but the best thing that we can do, we can advocate. And to that 
degree, I think I have given 11 lectures within 4 months. I 
have been traveling constantly trying to educate people and 
tell the new things that we are trying to do. Overall, I am 
trying to take our programs that are a little bit dusty and I 
would like to make them simpler to apply for and much more 
effective to use in 2017 and beyond.
    One of the things that I cannot do is I cannot force people 
to believe me. I cannot force them to take the courses, but I 
can make them available. So, what I do try to do, as an 
example, I try to be a little bit different. So, for example, 
when I speak, I give out my email address and I give out my 
phone number. And I return every single email and I return 
every single phone call. Hopefully, by demonstrating, leading 
by example, it shows that I am going to be different. But at 
the end of the day, as you are saying, not everybody believes 
what you and I believe. But we can certainly try to help them.
    Mr. SHEAR. I do not want to repeat what I just said before 
about challenges and the need to outreach, and Robb Wong just 
gave a very good answer as far as addressing that issue. But I 
will just say that I do not know if you are trying to wind me 
up or not. As it happens, I am an economist with a Ph.D. in 
economics, so I can get carried away with these issues.
    So at any rate, the one issue that I will raise, and I 
think it is very pertinent to this hearing and to the 
expansion, the elimination of the cap for qualified census 
tracks, is that going back to 2008, I testified before this 
Committee on the HUBZone program. I said it is a pretty 
complicated program. It is an economic development program 
meant to serve depressed economic areas. And really what is 
needed is an economics framework to evaluate how well that 
program is working. That was one recommendation from that 
report that SBA did not implement. And I think we are still in 
a situation where we are trying to say, how can you use the 
HUBZone program to try to increase opportunities for low-income 
areas, whether they be in Puerto Rico or elsewhere, or to help 
to encourage small businesses that are located in depressed 
economic areas? And I think that is part of what is kind of 
missing here in terms of how to move forward with that program.
    Chairman KNIGHT. Thank you, Chairman. I give out my 
personal cell phone, too, and as a congressman that is a 
thrill. Every day, let me tell you. Responding to those texts I 
get every day. But it is part of leadership, being there and 
being available. You are right, you can lead a horse to water, 
but you cannot make him drink. A thirsty horse will drink, and 
businesses that do not know about the resources do not know, 
but if you show them the resource, they will use it. And so I 
think that that is a big part of this. And we talk about this 
in small business all the time. If something is not working, 
stop doing it. And either reverse course or change course or do 
something else to make sure that your business can be 
successful. And if you do not have the resource, that is what 
we are trying to get you to. Some people know something other 
than you and the resources can help you. So I think that that 
is a big part.
    Mr. Evans, we will go to you for your 5 minutes of 
questions.
    Mr. EVANS. Thank you, Mr. Chairman.
    Mr. Wong, it appears that some businesses in Puerto Rico 
have trouble meeting certain procurement requirements. From 
your experience, do you feel that these requirements need to be 
modified in terms of location specific?
    Mr. WONG. Congressman, if you could be more clear it would 
be helpful.
    Mr. EVANS. Basically, my understanding from listening is 
the question about procurement requirements, and the question 
is, particularly for the island of Puerto Rico, should they be 
modified relating to specifically Puerto Rico because of the 
location?
    Mr. WONG. Well, at this point I would be hazarding a guess. 
I probably would want additional information. But in general, 
this is the way that I would look at things. If you do not have 
a result that you like, you have to look at what the potential 
causes are. So the procurement requirements could mean a 
thousand different things to me, and I apologize, I am a lawyer 
by trade so, you know, I make things difficult for myself.
    But in general, one of the things, I think that you might 
asking is, you know, part of the thing that we are dealing with 
in federal procurement is a changing environment. For example, 
with 8(a) set-asides, there were lots of them because there 
were not very many competitive vehicles. What happens when you 
make a rule or a law? People start to pivot. People start to 
become tactical, right? People get smarter, right? And people 
start changing their behaviors.
    So where we are in procurement right now, one of the things 
that I think that we are talking about is bundling and we are 
talking about category management and making things more 
condensed. The problem is that what happens is that makes it 
more difficult for small businesses, and particularly newer 
small businesses, to compete.
    So one of the resources that we have with SBA is the PCRs. 
And we work in tandem with the OSDBUs. Are you familiar with 
them? Okay. So the OSDBUs, the analogy that I would look at is, 
they go into that $500 million federal spend and they do the 
dirty work. They do the enforcement. They go in there and they 
grab things for small business and they fight with their 
agencies. And the PCRs fight with their agencies to make sure 
that small businesses get their share. And I am proud to say 
that we have achieved the 23 percent goal for at least 4 years 
running. Can we do better? We are analyzing that, and I always 
think you can do better. But it is going to take some analysis 
first.
    Mr. EVANS. I want to go to Mr. Shear and then what I want 
to do is sort of come back to you because I really would like a 
yes or a no on the modification of the location. I heard what 
you just said but this is what I want to say, Mr. Shear. If you 
were on the ground in Puerto Rico on a day-to-day basis, what 
type of advice would you give to officials there who would like 
to increase the number of small businesses to engage with the 
SBA? Hearing what Mr. Wong said and understanding what we are 
trying to accomplish in terms of procurement to achieve a 
certain objective, I am interested in your reaction, your 
comments.
    Mr. SHEAR. Let me go to a very specific case that we found 
based on our work in Puerto Rico that gets to very much the 
role of PCRs.
    Very relevant to that. There are different building 
standards in Puerto Rico than there are in the 48 States. And 
the question is, so you have small businesses, construction 
businesses in Puerto Rico that feel that they are being 
disadvantaged because their construction standards are 
different than mainland standards. So, for example, SBA 
acknowledged that can be a problem. GSA, one of the three 
contracting agencies that we met with said that they try to 
strike a balance between what is appropriate for the territory 
with the requirements that tend to be part of kind of like the 
cloth that they come out of. But this is, to me, it is like 
regardless of where the PCRs are located, whether they be in 
Boston or they be in Puerto Rico, this, to me, is begging for 
involvement by PCRs to try to look at are there ways that we 
can come up with changes in requirements for construction 
contracts that make sense for Puerto Rico and expand 
opportunities for small businesses in Puerto Rico to compete.
    Mr. EVANS. That is the key point I am making because I do 
not have much time. So did I hear you say that you think it 
should be modified?
    Mr. SHEAR. I am saying that GSA in particular said we try 
to modify, but this is really a role for PCRs to ask are they 
modifying? How much are they modifying? How engaged are the 
PCRs from SBA in terms of looking for opportunities? We did not 
have the chance to drill down exactly what are the PCRs doing 
in Puerto Rico? We could observe where they are located, but 
this to me would represent a real opportunity. It seems that 
PCRs, if they are not heavily involved now, they should be 
heavily involved.
    Mr. EVANS. Thank you, Mr. Chairman. I yield back the 
balance of my time.
    Chairman KNIGHT. Thank you very much.
    And we will now go to Mr. Kelly for his questions.
    Mr. KELLY. Thank you, Mr. Chairman and the ranking members, 
for this important hearing.
    Over my 32-year career in the Mississippi Army National 
Guard, I have had the pleasure of serving with many soldiers 
from Puerto Rico National Guard. As citizen soldiers, many of 
these men and women that I have served with owned small 
businesses in Puerto Rico. Starting with basic training in 1985 
and the officer basic course in 1989 and Iraq in 2005, let me 
just tell you, Mississippi and Puerto Rico are a lot alike. We 
are very patriotic. A larger number than usual serve in the 
military services. So that being said, I think there is a lot 
of similarities and we both are poorer States or areas.
    So Mr. Shear, in your testimony you state that stakeholders 
are complaining of a lack of access to agency contracting 
officials. I know how hard it can be, being from Mississippi, 
for service-disabled veterans from rural areas to connect with 
government officials, like federal contracting officers. Can 
you talk to me about what the SBA, the Department of Defense, 
and VA can do to increase access to service-disabled veterans?
    Mr. SHEAR. Thank you for the question. I will start out 
first with VA is one of the three agencies that we interacted 
with because it is one of the three agencies that conduct the 
most contracting activity in Puerto Rico: the VA, along with 
GSA and DOD, obviously. VA has different statutory provisions, 
and what is often called Vet First for its contracting, and VA 
for its own contracting you have to have verification. So what 
I can observe from other work we have done for this Committee 
is that VA works with the PTACs, the Procurement Technical 
Assistance Centers, in trying to reach out to the veteran-owned 
small business community and the service-disabled, veteran-
owned small business community.
    And again, on this work, we did not have the opportunity to 
drill down exactly what they are doing in Puerto Rico, but this 
gives a certain framework for certain things that are going on 
in the VA contracting space that is leading to greater 
opportunities for service-disabled veterans to participate at 
least in VA contracting. And I would hope that with the veteran 
centers, whatever interactions there are with these other tools 
that are available through Small Business Act provisions such 
as the PTACs, that SBA would explore looking for greater 
opportunities. I realize that they are already doing some, but 
I would hope that they could explore doing more.
    Mr. KELLY. And I just think that is so important. Listen, 
these guys choose to serve our Nation, and I think they ought 
to get a leg up and be ahead of everybody else because they 
have chosen to serve this Nation and their patriotism.
    Mr. Wong, I think everyone can agree that Puerto Rico has 
some unique geographical and economic challenges, as 
Mississippi has some of those same economic challenges. 
However, I believe that some of the challenges of small 
business contracting that affect Puerto Rico also affect areas 
like Mississippi. Only three agencies awarded contract 
obligations to firms in Puerto Rico and only three sector: 
manufacturing, construction, and professional services. Do you 
see this trend in other economically depressed areas, like 
Mississippi, as well as Puerto Rico?
    Mr. WONG. With respect, Congressman, I am not sure at this 
point. I am still learning. I have been here 90 days, but it is 
something that if it is important to you, then it is important 
to me and I can take a look at it.
    Mr. KELLY. Mr. Shear, do you have any comments on that?
    Mr. SHEAR. I would just go back to what I just answered 
your previous question. Thank you.
    Mr. KELLY. I thank you for saying. And Mr. Shear, you said 
at the very first, it was a program that I did not get it, I 
was not listening as well as I should have been, that you 
wanted to talk about the successes of. If you would address 
that in the last minute we have left I would appreciate it. In 
your opening comments you said there was a program that you 
wanted to talk about the success of.
    Mr. SHEAR. I think one of the things I wanted to talk about 
was that you did have small businesses in Puerto Rico that, at 
least a fair number of them, that are successful with small 
business set-asides, outside of the four SBA programs, as being 
able to compete for small business set-asides and, also, 
competing in full and open competition. And to me that just 
points to the idea that there are at least some businesses in 
Puerto Rico that basically have found a way to manage even 
without preferences, or with just the small business set-asides 
in Puerto Rico. And hopefully, it means that if there is 
greater outreach by the agencies and other things that that 
could be something that could be leveraged.
    Mr. KELLY. And with that I yield back, Mr. Chairman.
    Chairman KNIGHT. Thank you very much. And we will now go to 
Mr. Lawson for his questions.
    Mr. LAWSON. Thank you very much, Mr. Chairman. And welcome 
to the Committee.
    Mr. Shear, we are all aware of the economic challenges that 
Puerto Rico has faced over the past several years. Do you think 
it could be helpful for GAO to study the impact that our 
overall economic market in the mainland U.S. has on the growth 
or the lack of growth of the Puerto Rico economy?
    Mr. SHEAR. I feel like, I want to become an economics 
professor again, but I would just say that you raise a very 
good issue. And I think probably the best thing to do in 
response to that issue, which happens with Committee staff all 
the time, which is there are ideas for GAO work and I and 
others on our team are always glad to come up and talk about 
work you might be interested in. So it sounds promising, but 
beyond that I am not that good at thinking on the fly.
    Mr. LAWSON. Okay.
    Mr. SHEAR. Okay.
    Mr. LAWSON. My next question was, as you know, there are 
more small businesses in this country than any other type of 
business, and these businesses provide large support for the 
local economy. It appears that SBA has worked at its fully 
capacity in support of small business in Puerto Rico, 
particularly with regard to contracting. Can you describe SBA's 
past effort in Puerto Rico, as well as SBA plans moving forward 
to build a stronger small business industry?
    Mr. WONG. In Puerto Rico, sir?
    Mr. LAWSON. Yes, sir.
    Mr. WONG. I am unfamiliar with the efforts with the agency 
prior to PROMESA, but I do know that after PROMESA we are doing 
everything allowed under the law to maximize the participation 
of Puerto Rico firms, for example, for HUBZones. Mrs. McMahon 
has made this a priority. She has gone down to Puerto Rico for 
a week. She is debriefing me on the issues. Her priorities are 
my priorities, and so I am thankful for today's meeting. I am 
taking a look at the strategies that we employ. I am looking at 
the education that we can provide. And I am looking at the 
outreach that we could provide as well. If what we were doing 
previously is not meeting with satisfaction, then I am looking 
for ways to improve that.
    Mr. LAWSON. Okay. And from my research on some of the 
economic issues with Puerto Rico, it seems that Puerto Rico has 
a lack of access to a lot of resources, including agency 
officials' knowledge, financing, and adequate communication 
with SBA. And I guess this might have a little bit to do with 
your statement about you can take a horse to the water, but you 
cannot make them drink. And so with that disconnect, how do you 
think that that can be improved in order to guarantee full 
accessibility to SBA resources?
    Mr. WONG. And let me please clarify, I did not mean that at 
all in a disrespectful or pejorative way. I know Janette 
Fasano, who is the Area Director for Puerto Rico, and I know 
that she does a great job. She has been with the agency for 
forever. I know that we deal with issues and I think our 
district office down there is bilingual, so we know we have the 
capability. And if that is not true, that is something easily 
that we can fix. You have my commitment that I will look into 
that. I apologize.
    But again, I am still in the analysis phase of what we can 
do. If this will help, what I used to do is I used to help fix 
businesses, and what I tend to look at is their processes and 
their procedures and things like that. And in this case here, 
if we are looking at a specific market, then I am going to take 
a look at that as a business person and I am going to see what 
is working, what is not working, those things. To Chairman 
Knight's admonition, if it is not working, we are going to stop 
doing it. But I do believe that going forward we can always 
make improvements.
    Mr. LAWSON. Okay. Thanks for your answer.
    Mr. Chairman, just before I yield back, I was talking about 
a business roundtable that I did in Jacksonville, Florida, and 
it still is a lot of disconnect, especially in a minority 
community in the U.S., and I can imagine what the disconnect 
might be from the distance of being in Puerto Rico and that is 
some gap that we ought to fill.
    With that, Mr. Chairman, I yield back.
    Chairman KNIGHT. Thank you very much.
    And we are going to,--well, I am going to take a little 
latitude and I am going to give Ms. Gonzalez-Colon a little 
extra time if you would like, and we would like to hear from 
you.
    Ms. GONZALEZ-COLON. Thank you, Mr. Chairman. And I want to 
really thank Chairman Chabot and Ranking Member Velazquez and 
the chairmen of the Subcommittee and ranking member for 
allowing this hearing today regarding the island.
    As you may know, the situation of the economic crisis in 
Puerto Rico, it is very important to fix, and having small 
business empowered to do that I think is the key to solve part 
of that situation. So thank you again to the members of the 
Subcommittee and the Committee for having this hearing. And 
thank you, Mr. Shear, for having been in my office for more 
than 2 hours discussing these same aspects of the methodology 
of the report that you are issuing regarding the SBA.
    As you may know, I have got a lot of questions and a lot of 
recommendations. And one of them is the continuous situation 
with contracting bundling and assuming most of the contracts 
there have been awarded to companies on the island are in the 
lesser amount. Most of them have already been rewarded or the 
requests for proposal are not directed from the district 
office. They have already been requested from Washington, D.C., 
or an original office in the States and not in Puerto Rico. So 
when the award is already granted, even the local office, they 
never know what is going on between that process.
    That is the official process to award those kinds of 
contracts with small businesses? I know we got 2 weeks ago SBA 
administrator Linda McMahon, and I was so happy we got a lot of 
roundtables with her, with the SBA, with the private sector, 
with the lending sector on the island. But we think we should 
improve the way Puerto Rico businesses are making contracts 
directly for their government. I want your input on both ideas 
and I have got other questions.
    Mr. Wong? Contracting bundling.
    Mr. WONG. Yes. The contracting volume, as I look at this, 
and sometimes I think it helps to be new to the process. So the 
tool that SBA has is again to advocate. So, for example, with 
Puerto Rico being the priority for Mrs. McMahon, there are two 
things that we can do. We can certainly help to improve our 
programs so that they will increase education and outreach and 
things like that going forward to Puerto Rican small 
businesses.
    The other thing we can do in terms of contract volume is, 
again, using the PCRs, and also here in Washington, go to, some 
of the procuring activities and highlight the importance of 
Puerto Rico; ask them and advocate to them that when thinking 
about Puerto Rico maybe should not bundle as much. And if I 
could work with you to help to annunciate the concerns that you 
have, I mean, at the end of the day, contracting officers, 
PTACs, OSDBUs, they are all people. I get an opportunity to 
meet them and they are very nice. But I am very persuasive.
    Ms. GONZALEZ-COLON. That is good to hear. And I will tell 
you, in that matter, that we filed H.R. 2429, which is a bill, 
a bipartisan bill that has a lot of ideas regarding small 
business on the island. And one of the ideas is having on the 
island a full-time procurement center. We do not have that. So 
if we got a procurement center based on the island, I think 
that may improve the situation we are having. The same thing 
with the veteran outreach center in the island. And I want to 
thank Congressman Kelly for his statement regarding our people 
in the military. And that situation, our people in the 
military, they cannot even vote for the commander in chief, but 
we do serve proudly, but we do not have even a veteran outreach 
center for SBA. That, I request for you that you take a look at 
H.R. 2429. It has got a lot of provisions regarding SBA.
    And there is another bill that we filed and that bill is 
bipartisan. Actually, the ranking member is a cosponsor of that 
bill. And there is another bill, H.R. 2488, which has similar 
amendments and try to fix those problems we are having. For 
example, and I do not know if the chairman is letting me have--
thank you.
    One of the situations we had with the SBA administrator 2 
weeks ago, there was a vet owner, an IT contractor, highly 
experienced with excellent references, and what happened is 
that contractors from the mainland win prime contracts only to 
turn around and subcontract them. And that is happening all 
over again: IT, communications, construction. So if they even 
have a lower bid and they are going to be the final of the 
process doing the job, that contract went for $1.7 million and 
his original bid was $900,000. So what is going on? The bid has 
already been awarded in D.C., not in the district or not in the 
regional office. And those are the kind of things that are 
happening every time, not only in Puerto Rico, but I think in 
other territories.
    With this situation, I do not want to extend the indulgence 
of the chairman of the Committee, but I do want to have SBA and 
the panel to come up with new ideas in terms of having pilot 
programs being implemented on the island regarding this. And we 
discussed that in our meeting, Mr. Shear, and I know you are 
very committed to this, and identify prime contractors located 
on the mainland--I am sorry, local contractors on the island 
can compete against contract bundling. So we need to fix that 
problem at the source.
    Thank you, Mr. Chairman, and I yield back.
    Chairman KNIGHT. Thank you very much. And we will now go to 
the ranking member of the full Committee, Ms. Velazquez, for 
her comments.
    Ms. VELAZQUEZ. Mr. Chairman, if I could ask that Ms. Chu be 
recognized before me because she has been there waiting. Thank 
you.
    Chairman KNIGHT. Absolutely. We will go to Ms. Chu for her 
questions.
    Ms. CHU. Well, actually, I would like to just ask one 
question, then yield to Ms. Velazquez.
    And my question is on language barriers. I saw that 
stakeholders that were interviewed by GAO identified that 
language was an issue facing small businesses on the island and 
it may hinder the ability of these firms to complete the 
applications, to become certified, or to access the 
opportunities once certified. So, actually, I wanted to ask Mr. 
Wong, given that we have seen that agencies like the General 
Services Administration successfully staffed their Puerto Rico 
office with bilingual staffers, why does SBA struggle to hire 
an appropriate number of bilingual staff members in the Puerto 
Rico district office?
    Mr. WONG. Thank you for that question, Madam Congresswoman.
    All I can tell you is that now that I know that that is the 
issue, I will do my best to fix that. I think that language 
barriers is something that should--I agree, that should not be 
an issue in 2017, and that has been a failure in our office and 
I will do my best to rectify that.
    Ms. CHU. That is good to hear.
    And now I would like to yield to Ms. Velazquez.
    Ms. VELAZQUEZ. Thank you, Ms. Chu.
    Mr. Wong, Ms. Murphy asked a question earlier about 
veterans and I want to follow up. There are many veterans on 
the island who have and still are fighting American wars. What 
specific resources are present on the island dedicated to 
meeting veterans' needs for contracting, lending, and technical 
assistance?
    Mr. WONG. I will be honest with you; at this point, if you 
are asking for specific resources, I do not know them, but I 
can certainly educate myself on them and be prepared next time 
when you ask that question.
    Ms. VELAZQUEZ. Well, Mr. Wong, it is really disappointing 
that you come here, and I know you have been in the job for 90 
days, but this issue from PROMESA was enacted a year ago. And 
so you are going to come here and you will not have information 
to provide to me. You know, this is an issue that is too 
important for American citizens who live in Puerto Rico. For 
veterans, who even are willing to make the ultimate sacrifice 
for this nation, that is an unacceptable answer.
    And on the issue that Ms. Chu raised, I do know that GSA 
has bilingual staff all the time in Puerto Rico. We cannot say 
the same with SBA, and I want and I beg for the SBA to really 
address this issue because it is important. You just made a 
reference about taking a horse to the water and teaching them, 
but if you teach them in a language where they cannot 
comprehend, then what good does it do?
    I do not want for the people of Puerto Rico, American 
citizens, to be given preferences. I expect fairness. And when 
it comes to prime contractors, most of those prime contractors 
are from the mainland, and then they are going to sub, provide 
subs to people in Puerto Rico who will perform the jobs. That 
is not right. When contractors in Puerto Rico come to Ohio and 
develop public housing for the federal government with federal 
funding, but they cannot do the same in Puerto Rico, that does 
not make sense. So we need to address those issues.
    And then we need to have--I would like Mr. Shear, to tell 
me what nonlegislative fixes can be done that will help the 
people of Puerto Rico and the small businesses on the island 
based on your research, based on your communications with GSA, 
veterans, DOD.
    Mr. SHEAR. I think there has to be a lot of focus, first of 
all, on just the small business community. And, you know, I 
have had the pleasure over the last month or so of meeting, 
Robb Wong, and he is showing an interest in looking into the 
situation, but it is something that I point to. I do not mean 
this to be marketing a request, but we have not looked at the 
role of PCRs in a number of years, generally, much less in 
Puerto Rico. And the question is, what is the involvement of 
the PCR in trying to improve opportunities?
    We are looking at what lessons can be learned about the use 
of small business set-asides? What can be learned about just 
generally as far as outreach and working--I know that SBA works 
with what I call the OSDBUs and DOD's Office of Small Business 
Programs, but the question is that the level of commitment, it 
just is not that clear. So I am glad it is at least on Mr. 
Wong's agenda to be looking into this situation.
    Ms. VELAZQUEZ. So let me just make it clear for the record. 
You know, I truly believe that the administrator, Linda 
McMahon, genuinelly cares about what is going on in Puerto 
Rico, but there is a culture that we need to deal with within 
the SBA and many other federal agencies. And I can tell you and 
the people who sit on this committee will tell you that I have 
raised the same issue, whether it is a Republican or Democratic 
administration, I went after the administrator that was there 
for many years, in previous years, whether they were one or the 
other. We want to make sure that the resources are there to 
assist the small businesses and that we will do everything 
within our power to make sure that happens.
    But Mr. Shear, in your testimony, you indicated that GAO 
analyzed data from the Federal Procurement Data System Next 
Gen. What data is not covered in FPDS that could be valuable to 
seeing the whole picture?
    Mr. SHEAR. It is a really good question and it is a very 
difficult question. There are certain efforts to try to bring 
small businesses, reaching out to small businesses generally. 
Some of them deal with programs that work through 
subcontracting. Some of them work with mentor-protege programs. 
I will point to the pilot Mentor-Protege Program that DOD has 
where we have raised issues as far as the lack of measures of 
how well those programs are working. But you are asking a very 
good question where I do not really have a good answer for you, 
but those are some of the things that come to mind.
    Ms. VELAZQUEZ. Do you agree with me that maybe it does not 
really reflect the real scope of what is going on in Puerto 
Rico when it comes to federal procurement?
    Mr. SHEAR. I think that we were focused on contracting 
obligations, which I would argue that we were focused on the 
right thing. It is what revenues are being generated for small 
businesses in Puerto Rico that can help them succeed and can 
help facilitate economic development. So I think we were 
focused on the right things, but there are other things that 
are going on, part of the dynamic that would include 
subcontracting which we did not look at and some other aspects 
that I think would be important to look at. And then the more 
general question as far as how do agencies decide what should 
be procured for performance in Puerto Rico, and that is 
something we did not look at.
    Ms. VELAZQUEZ. Thank you.
    Mr. Wong, going forward, are you planning to make sure that 
there is going to be all kinds of events that will provide 
information in terms of federal procurement with the different 
agencies? What kind of things are you planning to do to make 
sure that we provide a level playing field for businesses in 
Puerto Rico to be able to compete and win? Win contracts that 
are not only subs, but prime contracts?
    Mr. WONG. Thank you for----
    Ms. VELAZQUEZ. Such as the FBI building that is being built 
in Puerto Rico and where there were a lot of Puerto Rican 
contractors that bid as prime contractors, but none of them, 
even when Ms. Gonzalez explained the case of someone who bid 
with a lower number, and yet not even that gave him an 
opportunity?
    Mr. WONG. Thank you for the question, Congresswoman.
    If I could go back. I apologize for going backwards, but I 
just want to let you know, my own wife is not a native English 
speaker so I am very sensitive. When we met, I proposed to her 
on our first date. We just hit 20 years of marriage, but one of 
the things that I did was I had to educate myself. I took 8 
weeks of a 12-week Japanese course just to be able to ask for 
her hand in marriage, so I am very sensitive to the needs of 
people who are not English speakers, and I apologize if my 
first comment was taken as pejorative. It certainly was not.
    As for the veterans, we have one individual in our office 
who I believe is an American hero. On Memorial Day, he said 
that he had to say goodbye to 34 of his friends who were killed 
in action in his unit. I see him every day and I try to get to 
know my staff very, very well, and that has affected me. So 
veterans are extremely important to me. I see them.
    I like police officers and firefighters. When there is 
danger, we run away from danger. When they see danger, they run 
to it. That is a job that I would not ordinarily accept, and I 
applaud anyone who has done that, and I have deep abiding 
respect for anyone who has lost their life. So in that regard, 
you have my sincere commitment to address those problems.
    As to your last question, my job is to represent all 
businesses fairly. By the same token, when Mrs. McMahon has 
made Puerto Rico a concern and a priority, and I understand the 
concern raised in your testimony as well, my commitment to you 
is that I will analyze and I will evaluate, and if there is a 
need, if we could work together to do this, I believe that we 
can work together and address your concerns.
    Ms. VELAZQUEZ. Thank you. I yield back, Mr. Chairman.
    Chairman KNIGHT. Thank you very much.
    Well, as this hearing comes to a close, I would first like 
to thank every Committee member for being here. And I would 
like to recognize my co-chairman, Chairman Brat, for any 
closing statement he might have.
    Chairman BRAT. Thank you, Mr. Chairman. And to our guests 
today, thank you all for being here.
    I am going to yield my time to Ms. Gonzalez-Colon for 
closing remarks.
    Ms. GONZALEZ-COLON. Thank you, Chairman Brat, for letting 
me use your time and your leadership. First, I want to thank, 
again, Chairman Chabot, Ranking Member Velazquez, and Chairmen 
Brat and Knight, and ranking members for having this hearing 
that is so important for the Puerto Rican community and 
businesses on the island.
    Second, I think it is most important to acknowledge and 
recognize that under PROMESA, we are looking forward to have 
the tools to improve our economy. And those tools are going to 
be in the private sector. So if we do not have the small 
business area working in the right direction we will never 
accomplish that. In that area, the bundling contracting 
problems are I think one of the main issues. The second one, we 
do not have a veteran outreach center on the island, and that 
is one of the provisions that are included in H.R. 2429, and in 
H.R. 2488, both bills in this Committee.
    Second, we need to have a procurement center on the island. 
I think that will solve a lot of the issues regarding the 
federal contracting situations that the island is facing, but 
it has got to be on the island, on site, not on the mainland, 
because we are facing that kind of problem.
    Third, a similar situation that occurs with the SBA is 
occurring with the General Service Administration. Suppliers, 
such as HP, will win the contractor bid, a GSA supplier, and 
then simply subcontract local companies to do the hands-on 
service. And as a result, Puerto Rican companies will never get 
a chance to get listed as a contractor. And that is a problem 
we are having every time.
    So I want to thank SBA Administrator Linda McMahon for her 
commitment and her leadership regarding and facing these 
issues. We discussed that. We had several roundtables. We even 
visited the VA Hospital in San Juan where she got the 
opportunity to see those same problems with veterans telling 
her directly the problems with the contracting services on the 
island, and I think the SBA now may face that in a more quickly 
way.
    And a fifth point I may say regarding the General 
Contracting Office report, that I am leading an effort with the 
local SBA office for Puerto Rico and the Virgin Islands to 
improve and to make more seminars, more orientation and 
education to our businesses and to our people about the 
services of the SBA locally. And that includes an alliance with 
not only the universities or the outreach centers, but the 78 
municipalities on the island. And we just began that process in 
July and it is going to be through the next year.
    So I want to thank you again. And thanks to the chairman 
and the Committee for having this hearing. I yield back.
    Chairman KNIGHT. Thank you very much.
    And I want to thank our witnesses. Thank you, Mr. Wong, for 
your coming here today and willingness to understand and to 
work on some of the problems that we see today. And also 
understand that we appreciate what Mrs. McMahon is bringing to 
the table and her enthusiasm and her commitment to small 
business. And we appreciate everything that you are doing.
    Mr. Shear, we appreciate your report, as always, and your 
candor, in this Committee. It is always fun and interesting to 
hear your opinion on what is going on in the small business 
world.
    I ask unanimous consent that members have 5 legislative 
days to submit statements and supporting materials for the 
record.
    Without objection, so ordered.
    This hearing is now adjourned.
    [Whereupon, at 11:26 a.m., the Subommittees were 
adjourned.]




                            A P P E N D I X




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    Chairman Brat, Chairman Knight, Ranking Member Evans, 
Ranking Member Murphy, and other distinguished members of this 
Committee. Thank you for inviting me here to speak with you 
today. It is truly an honor to speak before you today and I 
thank you for this opportunity to discuss the trends and 
challenges facing small businesses on the island of Puerto 
Rico. I stand ready to work with you and the committee to 
improve the future for small businesses.

    My name is Robb Wong. I am the Associate Administrator for 
Government Contracting and Business Development (GCBD) at the 
U.S. Small Business Administration (SBA). I have been a 
lifelong entrepreneur and small business advocate. I have had a 
small business since the age of 11. After my education, I have 
been blessed to spend a majority of my 30-year career focused 
on small business federal contracting. I have personally seen 
SBA programs positively impact small businesses around the 
country. I started my career at the SBA years ago as an 
attorney in SBA's Office of General Counsel; I also spent 
several years working in both the SBA Houston and Lubbock 
district offices, and 6 months in GCBD in the early 90s. I left 
government and spent the past 20 years in several leadership 
positions within several small businesses that successfully 
relied on SBA products and programs to enhance their growth. I 
am a personal testament to the power and importance of the 
SBA's effectiveness in helping small business. I am blessed and 
fortunate to be back at an Agency that I love and to work with 
our Administrator Linda McMahon who is inspirational leader. I 
hope to help them to strengthen the SBA both now and for the 
future to help ALL small businesses.

    Administrator McMahon has asked the new leadership at the 
SBA to make our programs as efficient and effective as possible 
to empower the further success of small businesses in the US. 
In that regard--my team's mission is to assure that small 
businesses continue to receive their fair share of federal 
government contracts; to optimize the present-state of the SBA 
certifications; and advocate on behalf of the small business 
community. We want businesses to spend less time applying for 
certification, and more time USING them to grow their 
businesses. I hope to increase opportunities for small 
businesses as well as enhance their abilities to grow and 
compete by (1) reducing or eliminating regulations that are 
unnecessary and burdensome; (2) improving our processes without 
sacrificing quality; and (3) becoming more customer-centric. 
Finally, I will work hard to advocate on their behalf for their 
inclusion government-wide as often as possible.

    I am here today to talk about trends and challenges to 
Small Business contracting on the island of Puerto Rico. Within 
the past two weeks, Administrator McMahon visited the island to 
learn about how the SBA can best assist Puerto Rico in its 
economic recovery. She spent several days meeting small 
businesses and talking to local government officials--including 
Congresswoman Gonzalez-Colon--to learn about economic 
conditions and challenges the island is facing.

    GAO recently released a report detailing the challenges and 
trends in government contracting on the island of Puerto Rico. 
GAO noted that a high percentage of Puerto Rican small 
businesses use the 8(a), HUBZone, Service Disabled Veteran-
Owned, and Women-Owned Small Business programs. However, we 
know that Puerto Rico faces unique challenges due to its 
economy and geography. Small businesses confront a number of 
challenges when they attempt to contract with the Federal 
Government including lack of knowledge about the federal 
contracting process; difficulty meeting procurement 
requirements; and minimal access to bonding, financing and 
capital. GAO found that small businesses in Puerto Rico feel 
these challenges more acutely than their counterparts off the 
island. The SBA appreciates GAO's work in this area.

    While Puerto Rican small businesses are participating in 
Federal Contracting, more work needs to be done to increase 
their numbers. According to the Congressional Task Force on 
Economic Growth in Puerto Rico, Puerto Rico ranks 55th (out of 
the 50 states, D.C., and 5 major U.S. territories) by total 
dollar value of federal contracts performed in each 
jurisdiction per capita at $430.6 million. Further, 53% of 
federal contracts performed in Puerto Rico were awarded to 
firms located outside the island. We know that in order for 
firms on the island to grow and thrive, more federal 
contracting needs to stay with local firms. Part of that effort 
will be to educate our Federal buying partners about the 
capabilities of Puerto Rican firms to do quality work--both on 
the island and off. We look forward to working with Congress to 
do that.

    Administrator McMahon and I are committed to improving the 
delivery of our programs. Improving the programs as a whole 
will specifically benefit small businesses in Puerto Rico.

    Businesses have an expectation that obtaining SBA 8(a) or 
HUBZone certifications will immediately and significantly 
improve their businesses and allow them to quickly win 
government contracts. Although we recognize that not all firms' 
expectations can be realized, we remain committed to help firms 
to better understand the procurement process and to utilize our 
many resource partners to gain needed business development 
assistance.

    SBA provides assistance to firms at all phases of the 
procurement process. Our District Office in Puerto Rico 
conducts small business outreach activities throughout the 
island including training and seminars to promote participation 
in the SBA's small business programs. The District Office has 
developed crucial relationships with local governments, 
nonprofits, chambers of commerce as well as resource partners 
with local governments, nonprofits, chambers of commerce as 
well as resource partners such as SCORE, SBDC and Women 
Business Centers to provide a referral and training network for 
SBA programs. We are discussing with the Administrator ways to 
provide enhanced SBA support to Puerto Rico, such as revised 
HUBZone rules, suggestions to pending legislation, and enhanced 
procurement support.

    The staff of Office of Government Contracting and Business 
Development continues to improve the implementation of the 
SBA's federal government contracting programs through improved 
application and certifications processes. With the expansion of 
eligible HUBZone census tracts in Puerto Rico, SBA continues to 
focus on online accessibility to the HUBZone program through 
improvement to our HUBZone maps and application process.

    The small businesses of Puerto Rico are essential to the 
economic recovery and future of the island; they are the 
island's innovators and job creators. Administrator McMahon and 
I, along with the SBA staff are committed to help the small 
businesses of Puerto Rico grow, innovate, and create jobs 
through the efficient and effective delivery of the SBA's 
federal contracting programs. This creates meaningful and 
sustainable jobs, and promotes economic growth in the 
community.

    I reaffirm my commitment to work together with you and the 
Committee to improve the future for small businesses.

    Thank you for the opportunity to speak with you today. I am 
happy to take your questions.


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