[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
OVERSIGHT OF THE SBA'S WOMEN-OWNED SMALL
BUSINESS FEDERAL CONTRACT PROGRAM
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON CONTRACTING AND INFRASTRUCTURE
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
MAY 16, 2019
__________
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Small Business Committee Document Number 116-021
Available via the GPO Website: www.govinfo.gov
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HOUSE COMMITTEE ON SMALL BUSINESS
NYDIA VELAZQUEZ, New York, Chairwoman
ABBY FINKENAUER, Iowa
JARED GOLDEN, Maine
ANDY KIM, New Jersey
JASON CROW, Colorado
SHARICE DAVIDS, Kansas
JUDY CHU, California
MARC VEASEY, Texas
DWIGHT EVANS, Pennsylvania
BRAD SCHNEIDER, Illinois
ADRIANO ESPAILLAT, New York
ANTONIO DELGADO, New York
CHRISSY HOULAHAN, Pennsylvania
ANGIE CRAIG, Minnesota
STEVE CHABOT, Ohio, Ranking Member
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa, Vice Ranking Member
TRENT KELLY, Mississippi
TROY BALDERSON, Ohio
KEVIN HERN, Oklahoma
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
TIM BURCHETT, Tennessee
ROSS SPANO, Florida
JOHN JOYCE, Pennsylvania
Adam Minehardt, Majority Staff Director
Melissa Jung, Majority Deputy Staff Director and Chief Counsel
Kevin Fitzpatrick, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Jared Golden................................................ 1
Hon. Pete Stauber................................................ 3
WITNESSES
Mr. William B. Shear, Director, Financial Markets and Community
Investment, U.S. Government Accountability Office, Washington,
DC............................................................. 5
Mr. Robb N. Wong, Associate Administrator, Office of Government
Contracting and Business Development, U.S. Small Business
Administration, Washington, DC................................. 6
APPENDIX
Prepared Statements:
Mr. William B. Shear, Director, Financial Markets and
Community Investment, U.S. Government Accountability
Office, Washington, DC..................................... 18
Mr. Robb N. Wong, Associate Administrator, Office of
Government Contracting and Business Development, U.S. Small
Business Administration, Washington, DC.................... 38
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
None.
OVERSIGHT OF THE SBA'S WOMEN-OWNED SMALL BUSINESS FEDERAL CONTRACT
PROGRAM
----------
THURSDAY, MAY 16, 2019
House of Representatives,
Committee on Small Business,
Subcommittee on Contracting and Infrastructure,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:08 a.m., in
Room 2360, Rayburn House Office Building, Hon. Jared Golden
[chairman of the Subcommittee] presiding.
Present: Representatives Golden, Veasey, Hagedorn, and
Stauber.
Chairman GOLDEN. Good morning, everyone. The Committee will
come to order. I want to thank everyone for joining us this
morning, and I want to especially thank the witnesses for being
here.
Today, women make up more than 50 percent of the
population. They have grown to be 47 percent of the workforce,
and are increasing their footprint as business owners. As of
last year, surveys indicate that women own 12.3 million
companies, employ more than 9.2 million people, and generate
$1.7 trillion in revenue.
While great progress has been made in the number of women
starting their own businesses, spurring economic growth, and
creating jobs, challenges do remain. We hear from small
businesses that what they need most often are access to markets
and customers. As the largest purchaser of goods and services
in the world, spending nearly $442 billion in fiscal year 2017,
the Federal Government relies on small businesses to provide
high quality goods and services at competitive prices.
Recognizing the importance of women-owned small businesses
and the difficulties they face in accessing Federal contracting
opportunities, Congress created the Women-Owned Small Business
program and the Small Business Reauthorization Act of 2000.
Despite the clear intent of Congress to establish this program,
it did not begin to operate until 2011, more than a decade
after its passage.
This program was designed to provide increased access to
Federal contracting opportunities for women-owned small
businesses, and economically disadvantaged women-owned small
businesses, by allowing contracting officers to set aside
specific contracts for certified firms. Doing so helps agencies
achieve their statutory goal of 5 percent of Federal
contracting dollars awarded to women-owned small businesses.
However, since enactment, that 5 percent goal has only been
met one time since 2013. And, again, we missed the mark in
fiscal year 2017 with $20.8 billion going to women-owned
businesses, about 4.7 percent of contracting dollars. We can,
and simply must do better to hit the mark of 5 percent.
A critical part of doing so is by finally implementing the
changes made in the fiscal year 2015 National Defense
Authorization Act. Legislation authored by Chairwoman Velazquez
amended multiple provisions of the program, paving the way for
much-needed reform.
The first change, and the only one implemented to date,
granted sole-source authority, allowing contracting officers
the ability to award contracts, when appropriate, without a
competitive process. This update put the Women-Owned Small
Business program on a level playing field with all other Small
Business Administration contracting programs.
Secondly, the legislation removed a small business's
ability to self-certify eligibility for the Women-Owned Small
Business program, to address concerns of potential fraud.
Finally, it made clear Congress's intent for the SBA to
certify program participants. These two certification measures
were intended to help prevent fraud and ensure that contracts
are awarded to the intended recipients, women-owned small
businesses. Much like the delayed implementation of the Women-
Owned Small Business program, we have seen, yet again, the SBA
taking, if we want, I think, to be generous, an overly
deliberatively process to implement the very clear intent of
the legislative branch.
In light of these implementation delays in 2017, the
members of this committee requested GAO to review the program,
and today's hearing gives us the opportunity to discuss their
findings and recommendations. The report echoes the finding of
prior GAO reports and those of the SBA Inspector General that
the SBA has still not addressed ongoing oversight issues.
For example, GAO previously recommended that SBA establish
procedures to assess the performance of four third-party
certifiers, private entities approved by SBA to certify the
eligibility of women-owned small firms. While SBA conducted a
compliance review of the certifiers in 2016, it has no plans to
regularly monitor them. Thus, SBA cannot ensure that certifiers
are fulfilling the requirements of their agreements as
stipulated by the parties, and it is missing the opportunity to
gain valuable information that could help improve the program's
processes.
By not improving its oversight of the program, SBA is
limiting its ability to ensure third-party certifiers are
following program requirements. Most troublesome is the lack of
a certification process. After nearly 5 years, the agency has
yet to implement its own certification program or implement
self-certification, which increases the likelihood for fraud in
the program. This is unacceptable.
While I am glad to see SBA is taking this matter seriously
by publishing a proposed rule for implementing the
certification program on Tuesday of this week, I remain
concerned about the duration of this process. It is difficult
for me not to wonder when we would have seen this rule issued,
had we not scheduled this hearing.
It is encouraging to see that SBA plans to apply consistent
certification standards across the programs and establish a
free, electronic application process. Yet the fact that SBA
relies so heavily on third-party certifiers who charge fees,
raises some questions, despite the agency stating in the rule
that it intends to perform compliance reviews of the
certifiers. This flies in the face of the GAO's findings that
SBA had no plans to regularly monitor them.
With all this said, I look forward to working with SBA on
this matter to ensure that a new certification program is
promptly established and meets our objectives. We know that
when it comes to Federal procurement, women-owned companies too
often face an uphill battle to winning their fair share of
contracts. That is precisely why the program was created in the
first place--to create greater opportunity for female
entrepreneurs and a fairer procurement process.
This hearing gives us a chance to have an open dialogue so
that we can work together to guarantee women have a seat at the
table when it comes to doing business with the government.
I thank both our witnesses for their attendance and
insights into this important topic, and I would now like to
yield to the Ranking Member, Mr. Stauber, for an opening
statement.
Mr. STAUBER. Well, thank you, Mr. Chairman.
The Federal Government recognizes a long-standing policy
that the government should aid, counsel, assist, and protect
the interests of small business concerns, and that the Small
Business Administration, along with other Federal agencies, do
their utmost to promote this directive.
To increase competition and encourage a diverse makeup of
small businesses participating in the Federal marketplace, the
Small Business Administration manages a variety of procurement
programs that are exclusive to small business. These small
business programs allow a protective space for small entities
to flourish and thrive, so that they may later rise to compete
in the open market.
Among these programs is the Women-Owned Small Business
program, designed specifically to encourage growth in
industries where women-owned small businesses are
underrepresented. The purpose of the program is a noble one.
However, in order to ensure that the goals of the program are
fully realized, the Federal Government must make certain the
integrity of the program is intact.
Unfortunately, government watchdogs have discovered that
this may not be the case. The Government Accountability Office
and the SBA Office of Inspector General identified several
deficiencies in SBA's oversight of the Women-Owned Small
Business program.
First, the SBA significantly delayed adoption of two of the
three critical changes to the Women-Owned Small Business
program that were mandated by the fiscal year 2015 National
Defense Authorization Act. The GAO pointed out that the SBA's
enactment of the sole-source authority without implementing the
front-end certification program, or eliminating the self-
certification option, may have exacerbated SBA's existing
oversight deficiencies. Given that the law was passed nearly 4
years ago, and the SBA just issued its proposed rule for the
remaining changes 2 days ago, this egregious delay cannot be
overstated.
Let me be clear, the issuance of the proposed rule on May
14th does not absolve the SBA. The will of Congress was clear,
and the SBA's postponement is inexcusable.
Furthermore, the GAO found that the SBA does not have
adequate procedures in place to regularly monitor and assess
the performance of third-party certifiers. This includes a lack
of consistent compliance reviews and regular utilization of
certifiers' monthly reports. This lack of oversight may create
situations where ineligible, or fraudulent firms participate in
the Women-Owned Small Business program.
The GAO has also found that the agency conducted few
examinations assessing a firm's eligibility in the Women-Owned
Small Business program, and lacked a mechanism for evaluating
its findings. This limits the agency's ability to detect and
prevent potential fraud.
The SBA continues to rely heavily on competitors utilizing
the protest process to identify potential fraud, as opposed to
actively rooting out ineligible firms themselves, which is
inadequate to protect the integrity of the Women-Owned Small
Business program.
Lastly, the GAO concurred with the previous SBA Office of
Inspector General report that women-owned small businesses set-
aside contracts were awarded using improper industry codes.
Unfortunately, the agency seems to take this matter lightly,
stating that this issue has a minimal impact on the program's
purpose.
While there are numerous deficiencies in the program,
stakeholders did note positive aspects, specifically, that the
program offers greater opportunities for women-owned small
businesses.
Today, I hope to understand the reasons why the SBA has not
resolved its weakness and work with the administration to
ensure that the program is operating efficiently, effectively,
and with the utmost integrity moving forward.
Thank you, Mr. Chairman, and I yield back.
Chairman GOLDEN. Thank you, Mr. Stauber. The gentleman
yields back. And if committee members have opening statements
prepared, we would ask that they be submitted for the record.
I would now like to introduce our witnesses. The first
witness is Mr. William Shear, Director of GAO's Financial
Markets and Community Investment Team. He leads GAO's work on
community and economic development, small business, and Native
American housing issues. As part of his portfolio, he oversees
evaluations of the Small Business Administration's contracting
disaster assistance, credit and counseling programs. Mr. Shear
joined GAO more than 20 years ago. He has a master's degree in
public policy and a Ph.D. in economics, both from the
University of Chicago. He also served as an adjunct faculty
member in the graduate program in city and regional planning at
the University of Pennsylvania. Welcome, Mr. Shear.
Our second witness is Mr. Robb Wong, Associate
Administrator of SBA's Office of Government Contracting and
Business Development since March of 2017. He has held multiple
positions within the SBA. He started his career as an SBA
attorney in the Office of the General Counsel, then was a
Special Assistant U.S. Attorney in the Houston district office,
and later was the SBA Acting District Director Counsel in the
Lubbock district office--did I get that right?
Mr. WONG. Lubbock.
Chairman GOLDEN. Lubbock.
Mr. WONG. Good enough.
Chairman GOLDEN. All right. From 1996 to 2017, he was CEO
for several small businesses that successfully use SBA's
products and programs to enhance growth. Mr. Wong is a graduate
of Georgetown University Law Center. Welcome, Mr. Wong.
Mr. Shear, you are now recognized for 5 minutes.
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. Chairman Golden, Ranking Member
Stauber, and members of the subcommittee, I am pleased to be
here this morning to discuss our recent work on SBA's Women-
Owned Small Business program. Congress authorized the program
in 2000, allowing contracting offices to set-aside procurements
to women-owned small businesses in industries in which they are
substantially underrepresented.
The 2015 National Defense Authorization Act changed the
program by: one, authorizing SBA to implement sole-source
authority; two, eliminating the option for firms to self-
certify as being eligible for the program; and three, allowing
SBA to implement a new certification process.
Today, I will discuss: first, the extent to which SBA has
implemented changes to the program, made by the 2015 NDAA;
second, the extent to which SBA has implemented changes to
address previously identified oversight deficiencies, including
those we identified in our October 2014 report; and third,
changes in the program's use since 2011, including since the
2015 implementation of sole-source authority.
First, SBA has implemented one of the three changes to the
Women-Owned Small Business program authorized in the 2015 NDAA.
As of early May 2019, SBA had not eliminated the option for
program participants to self-certify that they are eligible to
participate as required by the 2015 NDAA.
In October 2017, SBA officials stated that SBA was
publishing a proposed rule. However, the following year, in
June 2018, SBA officials state that a cost analysis would be
necessary before the draft rule could be sent to the Office of
Management and Budget for review. Two days ago, on May 14th,
SBA published a proposed rule, as part of its process, to
eliminate self-certification and implement a new certification
process.
Second, SBA has not addressed program oversight
deficiencies and recommendations in our October 2014 report.
For example, we recommended that SBA establish procedures to
assess the performance of the four third-party certifiers in
accord with the requirements of the third-party certifier
agreement and program regulations.
We also made a recommendation to enhance eligibility
examinations of businesses that register to participate in the
program. While SBA generally agreed with our recommendations
and conducted a compliance review of certifiers in 2016, it has
not conducted another review of the certifiers since.
Further, the implementation of sole-source authority, in
light of these continued oversight deficiencies, can increase
program risk. We maintain that our recommendations aimed at
improving oversight should be addressed.
In addition, our March 2019 report found that about 3.5
percent of contracts using a program set-aside were awarded for
ineligible goods or services from April 2011 through June 2018.
Moving to the third part of my discussion on changes in the
program's use since 2011, while Federal contractual obligations
to all women-owned small businesses and program set-asides have
increased since fiscal year 2012, WOSB program set-asides
remain a small percentage.
In fiscal year 2017, program contract obligations had grown
to 3.8 percent of contract obligations to all women-owned small
businesses for program-eligible goods or services. This was
about $713 million.
Chairman Golden, Ranking Member Stauber, and members of the
subcommittee, this completes my prepared statement. I would be
pleased to answer any questions that you may have.
Chairman GOLDEN. Thank you, Mr. Shear.
Mr. Wong, you are now recognized for opening statements for
5 minutes.
STATEMENT OF ROBB N. WONG
Mr. WONG. Thank you. Mr. Chairman, Mr. Ranking Member,
subcommittee members, thank you for the opportunity to testify
today about the status of SBA's compliance with GAO's directive
from my colleague, Mr. Shear, regarding the NDAA 15 and our
compliance with the WOSB. On behalf of Mr. Chris Pilkerton, our
Acting Administrator at SBA, we appreciate the opportunity to
brief you on our progress.
Some background first about our office. U.S. Government is
the largest purchaser of goods and services. Spends about $450
to $500 billion a year. We work collaboratively with all
branches of government and small business professionals to make
sure the opportunities for small business are present. We make
sure that 23 percent of the money spent by government goes to
small business.
So--I also have some goals in that the goals in general are
to make sure that our certifications are more useful to both
small businesses and to government. And if we do that, then you
will drive demand for the certifications, and you will increase
contract awards to small business.
Most importantly, we hold the public trust that when a
contract is awarded to an SBA-certified small business, that
they are qualified to receive it. We appreciate the assistance
from GAO, and particularly Mr. Shear, who has been our
colleague working with us to improve our quality control and
compliance. In both 2017 and 2018, due to the improvements in
policy and processes in our programs, we have exceeded the 23
percent goal for the fifth and sixth consecutive years.
More importantly, government has increased its spending
with small businesses by almost 22 percent more than ever in
history. This has meant more contracts for small businesses,
and more importantly, more jobs for Americans. There has never
been a better time to be a small business, government
contractor.
Our small business certifications are effectively our
products. Business demands them, and government wants to use
SBA-certified companies to solve their challenges.
My office administers four socioeconomic programs: the 8(a)
program, which you may know, which has been the backbone of our
office, it is a 30-year-old program for socially and
economically disadvantaged individuals.
We have the HUBZone program which is also--it is for
historically underutilized business zones. It is more or less
like an economic development program. So it is not only
designed to help the business but also a poor area. This
program has historically also been broken. We have tried to fix
that.
Finally, I should also mention that the 8(a) program and
the HUBZone program have certification processes whereby we do
two things: We certify people when they get into the program,
but more importantly, we continue to evaluate their
qualifications after they get in, okay? I will get into the
volume in a second.
The WOSB program and the Service-Disabled Veteran programs
are also what we look at. Those are self-certification programs
which have, for lack of--we have significantly less oversight
of those programs. Okay. Compared to 8(a) and HUBZone, I think
the WOSB program, as it stands today, and prior to 2017 when I
came in, as well as the SDVOSB program are more or less on the
honor system. Okay. As you found and as you have alluded to,
some people don't follow that, and I get that.
Just to back up for a minute, I have been aware of these
programs since I have been 15 years old. I worked with the SBA.
One of the SBA's first 8(a) programs, okay, I packed the things
in the warehouse, okay? Then I ran my own companies, went to
school. I came to SBA for 10 years. I wrote regulations for
these programs, and I administered these programs earlier. Then
for the last 20 years, I had my own company, and I supported up
to 15 other companies, growing them, growing jobs through these
programs. I take my job very, very seriously.
Within the first month after I was briefed on the current
state of the programs, I was advised and immediately concerned
that the NDAA 15 had directed us to implement a formal
certification for WOSB. I learned essentially that nothing had
been done.
I also learned that while the responsibility had been
directed, no funding was appropriated. As I testified before
here at the HSBC, I am a lawyer, and I believe that we must
comply with the law. After some analysis of size and volume, I
learned that WOSB was about three times the size of our
existing 8(a) and HUBZone programs.
Concurrently, we were also being asked at the time to bring
on--possibly bring on the VA's SDVOSB program, also a formal
certification, and to combine it with our own. And the size of
that program was similar to WOSB, three times what we were
already doing with 8(a) or with HUBZone. I testified about this
earlier last year.
In short, the problem is one of scale. And so, when we look
at things, why haven't we complied with Mr. Shear's directives,
the answer was, based on the way that we were operating, we
couldn't. So in general, it was a problem of scale. We were
faced with a predicament that our volume of processing
presently, with 8(a) and HUBZone, was 3,500 applications a
year, and it was also 10,000 annual reviews.
So it is 3,000--2,000 applications, as an example, for
8(a), but you have 5,000 active companies that are already in
the program. So we have to approve the applications, and once
you are in, we have to continue to certify your eligibility, to
make sure again, with the public trust, that when SBA-certified
company receives a contract, they are qualified.
So, the volume we were faced was 3,500 applications in,
with 10,000 annual reviews. And we had to figure out, if we had
to add both WOSB and NVA, we would move to a volume of 35,000
applications, and up to 40,000 annual reviews. I should note
that we also didn't get any funding, and we also--and we were
also not getting any more staff.
What we also realized was that status quo was not an
option, but to me, neither was standing still. I can't tell you
what happened before, but I can tell you what I did ever since
I have been in office. We decided to get to work. We decided to
reengineer our process using 8(a) as the backbone for all
certifications because it has been our best tested program, it
has been the most used program by government, and it has been
the most helpful to government.
We decided that the first thing we needed to do, before we
did anything, was to come up with a blueprint, or a plan of
action, for staffing, funding, that would serve us today and in
the future. The blueprint emphasized unifying the common
elements of eligibility and standardizing their processes and
analysis.
We could process all applications as similarly as possible,
and reduce their variation as much as possible. It would retain
their quality and help to ensure the public trust.
Good news. The main part of the blueprint has recently been
completed. It will soon be finished entirely. But with that bit
of completion, we were able to, again, attack the questions and
concerns that Mr. Shear has raised. This necessary blueprint
was the first step for giving us clarity about our present
state, and also for future funding and staffing and production
needs. It would have been irresponsible, prior to this point,
to have made any such requests for staffing or funding without
this blueprint. Most importantly, the blueprint has also guided
us in establishing how we would address the concerns of NDAA 15
and the best way to address Mr. Shear's concerns.
In that regard, a proposed rule, establishing the formal
certification program, was filed on May 9th, and it was
published a couple days ago. Based on the rulemaking process,
we estimate June of 2021 before the actual implementation of
the certification program. We have begun the process of meeting
with third-party certifiers, and we have established a schedule
to meet with them regularly and periodically.
We are moving in the right direction, as quickly and
responsibly as we can, and certainly within the first month of
me taking office. We will continue to work diligently and to
comply with the law, and with you and--with your and Mr.
Shear's directions.
This has not been a fast process, admittedly, but it is
necessary. It is the smart thing to do. If we are making good
progress--we are making good progress. It has and will remain
top of mind for me until it is done. There is a lot of work
still to be done.
I have been blessed to work with a strong leader, Mrs.
McMahon, and now Mr. Chris Pilkerton, who support our actions,
with our deputy, Barb Carson, whose support and co-leadership
is invaluable to our team, now and in the future, and to our
agency. And with a team of coworkers who has believed in our
vision, and upon whose experience and efforts are the backbone
of our office, we have made significant progress in advancing
policy, processes, to deliver a more effective program to small
businesses and government.
This is just a brief glimpse of where we are and what we
have been doing over the last 2 years, to the WOSB program, and
to all of our programs, and I am ready to answer any questions
you may have.
Chairman GOLDEN. Thank you very much, Mr. Wong, for that
opening testimony. And we will now move to questions from the
committee, and I will begin by recognizing myself for the first
5 minutes.
Mr. Wong, I appreciate what you had to say here in laying
out how you have been working on implementation of this
requirement from Congress since you came into this role in
2017. One of my favorite leaders that I have followed closely,
Colin Powell, has this wonderful saying that I try and stick
by, which is, after 30 days in a new position, you own it. That
is the departure line from which you don't get to make excuses
for the problems that were left for you to take over. So I was
encouraged to hear you say, within a month, that you were
beginning to try and move forward with these changes and
reviewing some of the recommendations of GAO as well.
You can't necessarily speak for the decisions of your
predecessor. I make the assumption that a decision was made at
SBA to go ahead and move forward with the first part, which was
allowing for the sole-source authority in order to maximize the
economic opportunities for women-owned small businesses as
quickly as possible, and then to look secondly at the self-
certification piece.
I think the problem being that it has taken so long. It has
left quite a wide window there where we are increasing
opportunities. You know, we are also leaving the program and
the integrity of the program at risk. And I understand you are
trying to find the right balance to not push people away from
trying to get that certification and participate and bid,
while, you know, at the same time, trying to find ways to make
sure that the program is not being abused is very important.
My gut instinct would be that this--some of these problems
that we have talked about, whether it be oversight of third-
party certifiers, oversight of program participants, or use of
the WOSB program, under ineligible NAICS codes, in many ways,
had to do with staffing shortages, with funding shortages, with
a lack of technology and the resources needed to upgrade them,
and things of that nature. So I appreciate that you are saying
that you had to take time to look and see what those resources
were. I would have encouraged SBA to try and move more quickly
on that.
And with that, I would just open it up to you to maybe lay
out, in your opinion, having done that review, what are the
staffing needs? What are the technology upgrade needs, or
challenges that you face? And what additional funding do you
need to successfully move forward with the intent of the law
passed by Congress in 2015, under the NDAA, and what resources
do you need to do it, as best as possible?
Mr. WONG. Thank you for the opportunity, and I am going to
probably disappoint you. I don't know. We have to--we have to
generally look, what we try to do--it isn't a flippant answer.
We have come up with the blueprint of how we want to do this in
general. In general, what I tried to do is to satisfy--is to
comply with the law, with the amount of people that we have,
and within the budget that we have, okay? The utopian scenario
would be that we have perfect--we have perfect intakes of all
qualified small businesses, and that we can give everyone an
annual review, just as rigorously each time every year. With
the existing staffing levels that we have, we cannot.
So we are doing additional things. We are doing risk-based
analysis. We are trying, again, to do as much quality as we
can. We are not making a sacrifice to quality. Okay? That may
happen. We can be criticized on the amount that we are doing
and the vigilance that we are doing, but I can guarantee that
we are trying to do everything we can without asking for help.
We will use the blueprint which we have, the original one. So
we are getting staffing levels and we are getting what I think
are more responsible requests for budget together.
To put it a different way, I think that the law, based on
how it looked, it assumed we would just simply set up another
silo. So in our office, as an example--we have roughly 50
people within our office--we utilize up to--with the entire
process for 8(a), we probably use close to--more than 100,
including people in the field, just to administer a program for
5,000 active applicants, okay? That is the one that is the
best, where we have a rigorous intake process, and then we have
a rigorous annual recertification--or excuse me--it is a
continuing eligibility.
We are faced with, if it was only setting up a silo, again,
for the WOSB program, based on the volume, and based on the
number of common elements that are common in terms of
eligibility for WOSB and for the 8(a) program, we would have to
increase the staff, and we would--by three times, okay? I was
quickly apprised by our CFO, no. So I think that the easy thing
would have said, Well, what can we do? Well, I am not like
normal people. I figured we will find a way, or we will make
one. And that is why I am so grateful for the team that we
have, because they are willing to accept that vision, I said,
we can't do nothing.
You know, the American public needs our certifications. Put
a different way, if we don't hold the public trust, they will
take the programs away. What good are they? And, so, we need to
make sure, again, maybe as a lawyer, but we need to make sure,
just like with 8(a), we want to turn all of our programs in
with that same standard.
But we are trying to do everything that you are asking us
to do. Most of the things you are asking us to do, as an
example, are already in the 8(a) program. The challenge, again,
is to move basically for something that is anywhere from six to
10 times larger than what we are doing with the people we have,
and that is what the blueprint is helping us to do. We are
going--effectively, instead of horizontal silos, we have turned
it into a processing shop, so that the people that we have, and
the analysts that we have, and the different levels of analyst
that we have, can process all applications. And they can do it
today with HUBZone and 8(a), but then as we take on WOSB or--
and if we take on Service-Disabled Veterans, we should be okay.
At that point, though, we don't have a number, and we don't
have staffing. But initially, I remember that when we had
originally asked, in the previous hearing, for how we would
look at all of the processing, it was a very, very large----
Chairman GOLDEN. I will stop you there, sir. Knowing that
we got a few other members that are going to want to ask some
questions, and not knowing what their timeline is, I am going
to go ahead and turn it right over to the Ranking Member, Mr.
Stauber. Thank you.
Mr. STAUBER. I thank you, Mr. Chair.
Mr. Shear, Mr. Wong, thanks for your testimony. You both
have a lot of experience. There is no doubt about it.
So, Mr. Wong, you have only been in this position for a
couple years. Couple of questions. The GAO report indicates the
new certification process will be in place by January 1, of
2020. Did you just say 2021?
Mr. WONG. Yes, sir.
Mr. STAUBER. Okay. I want you to look from the women-owned
businesses across this country. This is the frustrating thing
that they are seeing. Because all it takes, Mr. Wong, is one or
two fraudulent businesses to take the legitimacy out of a
woman-owned business for contracts, et cetera. It is just
purely unacceptable. And I am not blaming you. I like when your
boss says, ``make it happen.'' And I think you have articulated
kind of how you are going to get there. But 5 years later,
after Congress asked you to put this forward, this is a
problem. And I am glad you are in your position right now, to
be able to say, ``we are going to do something.'' But to me, it
is unacceptable. From northern Minnesota, this is simply
unacceptable, the timeline, that when Congress enacts that
legislation, we ask that the small business folks, take it and
bring it across the country.
As we always talk in this committee, Mr. Wong, that small
businesses are the engine of our economy, we need this quicker.
Because I don't want any businesses owned--legitimately owned
by women, to go out of business because of inaction by you or
anybody else in your office.
So I am disappointed that it is--you gave the answer 2021.
I believe it is the truthful answer, but I want you to know
that the women-owned business across this country are not going
to be happy about that. And to me, it is unacceptable. I am not
putting blame on you.
The second thing is, has the Small Business conducted a
cost analysis of the 2015 NDAA SB women-owned, small business
certification program, and if so, what did the agency find?
Mr. WONG. Okay. So to your second point first, this is--we
will just get the bad news out of the way. In operating a
business--it is what I know how to do--we have got to be able
to, first, understand how to define success, and then how to
measure it, right? And so that is why this blueprint has been
so important. We have had to basically take--based on the
volume that we are getting--and I want to make this clear, it
is not an excuse, it is an explanation--we can't use the
mechanisms that we--we can't use the processes that we have
been doing before.
Mr. STAUBER. And so to that, are you going to explain the
changes?
Mr. WONG. Yes.
Mr. STAUBER. Go ahead.
Mr. WONG. So we have kind of had to, you know, at least on
the blueprint, we have to tear down what we have done before.
We have to break down those silos. We have to take people--for
example, you have common elements. In 8(a), you have roughly
nine elements of eligibility; WOSB has eight of those same
elements. So, in my opinion, if you look at ownership and
control as two of the elements which are critical for, are you
the person that you say you are, and are you qualified? We need
to get the same answer. We need to get it quickly from the same
analyst. But we have an analyst sitting over here that doesn't
talk to an analyst over here.
But so what I think in general--and then we have people
that, the process we would do is, they do it from start to
finish. There are different grade levels, different abilities.
Well, some people are good at handling, you know, I am a fat
guy, so I will just use this example. I am really good at
eating dessert, okay? But if you gave me a full meal, I will
take 10 hours because I can't get through the vegetables. All
right? If you break these teams up into what they are good at,
and if you make it common as possible, and you can set up a
system, so that they can look and see what they have to do for
the analysis, it goes much better. None of that was here.
So I had to--you know, with our team, we had to come up
with that, okay? So, God bless Barb Carson. She is the one that
is shepherding through this blueprint. The blueprint will be
here while I am here and in the future for all of our SBA
employees. We have people there that have devoted their careers
to this, more than 20 years each for this. That is how long
they been there with a broken system. We are trying to rebuild
this system in a new way that is more efficient and help them
so that we can get this volume.
So to your point, we are doing the cost analysis and the
staffing analysis. I would love another opportunity to come
back and make an ask, and I would love to have your support.
Mr. STAUBER. Mr. Wong, that brings me to my second
question. Does the SBA know what staff resource levels are
necessary to fully operate this program?
Mr. WONG. We are getting there.
Mr. STAUBER. Okay.
Mr. WONG. And to the point, just so that you know, with the
current level we have, we are basically trying to increase
their workload by six times, okay, with a thank you very much,
I appreciate you, okay? We are going to try and do as much as
we can. We can't do all of it, but we will get some of it done,
ever mindful of the responsibilities we have to the women
business owners, to the minority business owners, to the
historically underutilized business owners, and the public
trust, okay? It is a slow process, and I am sorry to say, but
it is my best estimate. I would rather have you flay me in
public, because I am strong enough, I can take it. I think the
system will work.
Mr. STAUBER. Thank you, Mr. Wong.
Mr. Chair, I yield back.
Chairman GOLDEN. Thank you, Mr. Stauber.
I would now go ahead and recognize Mr. Marc Veasey for 5
minutes.
Mr. VEASEY. I thank you, Mr. Chairman.
I wanted to ask about women and the loans that they
receive. I know that, obviously, that that is a big deal with
SBA, women being able to receive loans and have access to
capital. When you ask women entrepreneurs one of the reasons
why they can't expand their business, it is access to capital,
with lots of smaller, minority-owned businesses. I believe that
women received about--women make up about 30 percent of small
businesses in the country, but received about 17 percent of the
SBA-backed conventional loans. What are you all trying to do to
help that number out a little bit? And I believe out of the
total dollars that were given out, that women-owned businesses
only received about 4.4 percent of those with SBA conventional
loans, and I was just curious what you all were doing to
address that issue?
Mr. WONG. Thank you for that question, sir. The loan
policies and programs--I can give you an anecdotal answer. The
loan policies and programs are handled by OCA, Mr. Manger. But
I can tell you that the way that we would help women to get
loans is by getting more contracts for them, and more
opportunities, okay?
So, what I told the committee previously, and I will
reiterate here, with my team's efforts while we are doing all
of these things together, over the last 2 years, I am very
proud to say that through their efforts, we have grown small
business opportunities by 22 percent. By any measure of a
market, I think that is a great job.
Mr. VEASEY. Twenty-two percent for women?
Mr. WONG. No, 22 percent overall. So, historically, before
I came to office, historically, the government had spent about
$99.9 billion with small business, I believe in 2013 or 2014.
In 2017, we raised that historical number to $105 billion, and
last year, 2018, we raised it again to $121 billion.
So there are more opportunities for small businesses, and,
particularly, for women-owned small businesses, but if--
generally, how I would run a business is that if you can get
these contracts you are more creditworthy, and then you have
more access to loans.
Mr. VEASEY. Do you have any way to break down exactly what
percentage that you just pointed out, of those moneys were
received by women?
Mr. WONG. I could ask. I don't carry--we don't calculate
that in our office, but I can certainly get that information.
Mr. VEASEY. And in areas where you all have had success in
working with women businesses, like with the MicroLoan Program
that the SBA runs, I believe that women-owned businesses
received about 57.4 percent, according to one study that I saw,
of the successful MicroLoan Program that you guys run. Have you
looked at ways how you could expand those sorts of programs
where women have--women-owned businesses have shown to be very
successful?
Mr. WONG. In general, that is a great idea. We haven't
looked at it that specifically, but I can tell you that we have
looked at--we have looked at loans, we have looked at
counseling, and we have looked at contracting. And I think that
we need to do--we are doing a better job of cross-pollinating
our areas together, because I think that SBA as a whole, if you
look at us as a community, you know, in theory, you get
counseling, you go into business, get contracts, and then you
use loans to continue to grow, okay?
Mr. VEASEY. I would ask in, you know, the last minute that
I have if, you know, when you come back, or if you could get
back to the committee at a future date, with something in
writing on the feasibility of being able to expand those
programs where women are already doing well, I think that would
be really great. I think that would be good data for the
committee to see. I know I would like to see it.
Mr. WONG. Okay.
Mr. VEASEY. Thank you.
Mr. Chairman, I yield back.
Chairman GOLDEN. Thank you very much. I wanted to go ahead
and shift gears a little bit in a second round of questions.
Mr. Shear, could you just talk a little bit, from your
perspective and the work that you did, reviewing this program
at the request of this committee. What are some of the
difficulties that you think have led to the delay in moving
forward with these new requirements of SBA?
Mr. SHEAR. You are asking an excellent question, and I am
going to do my best to answer, but some of it is a mystery to
me and our team members. We were told, now almost 2 years ago,
that SBA was about 1 or 2 months away from having a proposed
rule. And we couldn't see how much progress had been made
within the agency on that. We also knew that the person who was
the director of Government Contracting and Business Development
had taken actions, such as the review of the--the one-time
review of the third-party certifiers, and certainly stated the
intent to make that an ongoing process, and to try to address
our recommendations.
So in a sense, when we were looking--like, in 2017, we saw
a situation where the agency was moving forward. Then--so the
idea that a month or two might have been too ambitious, but
then we were told it is going to take the agency longer to do
that and there is a new director of the program. And when we
were told it is going to take longer, we asked for simple
things like, Do you have a project plan? Do you have a project
plan with timelines?
Because the steps in rulemaking are pretty straightforward.
We did a report 2 years ago on this office and the rulemaking
process and the steps that go into it and how much time it
takes. So why couldn't the agency give us timelines? So, I
don't know what was going on behind the scenes and weather
there were any disagreements within the agency, so I can't
speak to that.
Now, I first saw the proposed rule in draft form last
Wednesday and read through it, as did members of my team. In
looking at it, I am not going to comment directly on the
proposed rule, because the public-comment process is a very
important one, and we don't interfere with that. But in reading
it, I am still at a loss to try to figure out why this proposed
rule took so long to complete. And part of it is the failure of
SBA just to say to us, What steps are you going through to
complete this rule? That is like bread-and-butter type
questions we always ask, especially when timelines are
involved. So the agency really hasn't been responsive to us.
And so it is a mystery.
Chairman GOLDEN. Thank you for that.
I am going to go ahead and recognize Mr. Stauber.
Mr. STAUBER. I thank you, Mr. Chair.
Mr. Shear, you just reiterated the frustration in what
greater America has in some of the inadequacy of our
government.
Mr. Wong, the SBA operates programs that are authorized--
unauthorized by Congress. Given the lack of funding and
resources you have referenced, can the SBA go back and try to
reallocate some of the resources which are going to
unauthorized programs, to congressionally mandated programs,
like WOSB?
Mr. WONG. At least as regards WOSB, we went to our CFO, and
the answer was that they could not provide the level of funding
that at the time, when we had asked them about setting up
another silo, they said Absolutely not, we don't have that
funding. Whether it can be reallocated, I don't know. I leave
that up to the CFO. He, generally, had been somebody that if we
needed help and he could do it--I don't know what he does, but,
you know, I don't know. But I know that we asked, and I know
that the answer was no.
Mr. STAUBER. I yield back.
Chairman GOLDEN. So, just listening to all this, Mr. Wong,
I just want to, you know, state, and maybe ask--and I think we
can follow up with some of this in writing--I would just make
note that you pointed out in your testimony, in some of your
responses to the questions, it sounds to me that there are
concerns about new requirements, without additional resources
and funding. And, you know, I think that you are a mission-
oriented person. You want to get the job done, you want to do
it right, you want to do it the very best that you can.
Congress told SBA to go ahead and do something, and you
were trying to do it within existing resources without asking
for more of them, which I understand. And I think Mr. Stauber
was spot on when he talked about the concerns about the damage
that can be done when something like this takes too long, to
the integrity of the program, and the impact it can have on the
women-owned small businesses who should be competing, and
should be winning these opportunities to contract with the
government. I would just point out that, from my perspective,
at some point, there is a responsibility for SBA to provide,
back to Congress, whatever issues there are that are holding
them back from moving forward with implementation in a timely
manner.
You know, it seems you are describing an interaction
internally within SBA where people are saying no. Certainly, it
is dependent upon us to ask these questions to give you the
opportunity to come back to and tell us what you need, and that
is what we are doing right now.
So, I would ask that we get something back in writing,
detailing exactly what is the cost in moving forward with the
self-certification, with the certification, you know, process
that is required of third-party certifiers? What resources do
you need in order to move forward and do so, you know,
appropriately?
So, you know, we will follow up with something in writing
and ask for that back, but, really, I think that is, you know,
the politics of what something costs in taxpayer dollars, I
think, belongs rightfully up here among these members and in
Congress, to talk about whether or not we should be spending
more to move forward with something like this. And so, you
know, I appreciate the feedback.
Mr. STAUBER. Thank you, Mr. Chair. Just wanted to say thank
you to you both. Mr. Wong, it is not a great seat to sit in
today, you know, but with your experience, and I really
appreciate your honesty, and that is the feedback we need. But
please know that the concerns for women-owned small business is
a priority for us, and please, as Chairman Golden talked about,
please come back with those written statements on how we are
going to go forward in a manner that is extremely timely, and
your--you know, I have faith in your experience that you will
come back and break down those silos and make it work. So I
thank you to you both.
I yield back.
Chairman GOLDEN. I think I would add to that, too, Mr.
Wong, if we could--and I think we may have already requested
this, but just in case, as well, we would request in writing a
timeline for implementation of the program, how you intend to
complete this work by January of 2021. I think we noted
originally in the committee information that it was January of
2020. I don't know if that is, you know, incorrect information.
It slid a year. That is fine, but let's see the timeline on
paper so we can continue to do the oversight that is necessary.
And we want to work with you to make this work.
With that, I would just go ahead with a closing statement.
The Women-Owned Small Business program aims to expand
contracting opportunities for women, but as we have heard
today, untimely implementation of reforms, coupled, at times,
with nonexistent oversight, threatens to defeat congressional
intent. Women entrepreneurs and the business they own have
been, and will continue to be, a driving force in our economy.
Competing in the Federal marketplace is an integral part of
the role that they play. And as we seek for ways to improve
this program, we look forward to working with SBA to ensure
that these and future reforms are implemented.
I would ask unanimous consent that members have 5
legislative days to submit statements and supporting materials
for the record. Without objection, so ordered. And if there is
no further business to come before the committee, we are
adjourned. Thank you.
[Whereupon, at 11:02 p.m., the Subcommittee was adjourned.]
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