[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
AN OVERVIEW OF THE DYNAMIC BETWEEN THE DEFENSE PRODUCTION ACT
AND SMALL CONTRACTORS
=======================================================================
HEARING
before the
SUBCOMMITTEE ON CONTRACTING AND INFRASTRUCTURE
OF THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
JUNE 24, 2020
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 116-083
Available via the GPO Website: www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
41-294 WASHINGTON : 2021
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
KWEISI MFUME, Maryland
JUDY CHU, California
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
TROY BALDERSON, Ohio
KEVIN HERN, Oklahoma
JIM HAGEDORN, Minnesota
PETE STAUBER, Minnesota
TIM BURCHETT, Tennessee
ROSS SPANO, Florida
JOHN JOYCE, Pennsylvania
DAN BISHOP, North Carolina
Melissa Jung, Majority Staff Director
Justin Pelletier, 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. Ian Patterson, Attorney-Senior Associate, Koprince Law, LLC,
Lawrence, KS................................................... 4
Mr. David Black, Attorney-Partner, Holland & Knight, LLP, Tysons,
VA............................................................. 7
Ms. Mary Lockhart, President & CEO, PEMDAS Technologies &
Innovations, Alexandria, VA, testifying as the Chair of the
Small Business Division for the National Defense Industrial
Association (NDIA)............................................. 9
Ms. Traci Tapani, Co-President, Wyoming Machine, Inc., Stacy, MN. 11
APPENDIX
Prepared Statements:
Mr. Ian Patterson, Attorney-Senior Associate, Koprince Law,
LLC, Lawrence, KS.......................................... 24
Mr. David Black, Attorney-Partner, Holland & Knight, LLP,
Tysons, VA................................................. 31
Ms. Mary Lockhart, President & CEO, PEMDAS Technologies &
Innovations, Alexandria, VA, testifying as the Chair of the
Small Business Division for the National Defense Industrial
Association (NDIA)......................................... 43
Ms. Traci Tapani, Co-President, Wyoming Machine, Inc., Stacy,
MN......................................................... 45
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
None.
AN OVERVIEW OF THE DYNAMIC BETWEEN THE DEFENSE PRODUCTION ACT AND SMALL
CONTRACTORS
----------
WEDNESDAY, JUNE 24, 2020
House of Representatives,
Committee on Small Business,
Subcommittee on Contracting and Infrastructure,
Washington, DC.
The Subcommittee met, pursuant to call, at 1:00 p.m., via
Webex, Hon. Jared Golden [chairman of the Subcommittee]
presiding.
Present: Representatives Golden, Crow, Davids, Stauber, and
Balderson.
Chairman GOLDEN. So let's get started.
I call this hearing to order. Without objection, the Chair
is authorized to declare a recess at any time.
I want to thank everyone, especially our witnesses, for
joining us today for our Subcommittee's remote hearing. I want
to make sure to note some important requirements.
Let me begin by saying that standing House and Committee
rules and practice will continue to apply during remote
proceedings. All Members are reminded that they are expected to
adhere to these standing rules, including decorum, when they
are participating in any remote event.
With that said, the technology we are utilizing requires us
to make small modifications to ensure that the Members can
fully participate in these proceedings.
During the covered period as designated by the Speaker, the
Committee will operate in accordance with H. Res. 965 and
subsequent guidance from the Rules Committee in a manner that
respects the rights of all Members to participate.
House regulations require Members to be visible through a
video connection throughout the proceeding, so please keep your
cameras on. Also, if you have to participate in another
proceeding, please exit this one and log back in later as soon
as you can.
In the event a Member encounters technical issues that
prevent them from being recognized for their questioning, I
will move to the next available Member of the same party, and I
will recognize that Member at the next appropriate time slot,
provided they have returned.
Should a Member's time be interrupted by technical issues,
I will recognize that Member at the next appropriate spot for
the remainder of their time once their issues have been
resolved.
In the event a witness loses connectivity during testimony
or questioning, I will preserve their time as staff work to
address the technical issue. I may need to recess the
proceedings to provide time for the witness to reconnect.
And, finally, remember to remain muted until you are
recognized to minimize background noise. Having said that, I
will also give everyone a friendly reminder because everyone
who has done one has probably made the mistake of beginning to
speak, without unmuting themselves. So keep that in mind.
In accordance with the rules established under H. Res. 965,
staff have been advised to mute participants only in the event
there is inadvertent background noise. Should a Member wish to
be recognized, they must unmute themselves and seek recognition
at the appropriate time.
I will now give a brief opening statement.
The Defense Production Act, or DPA, was enacted 70 years
ago, after the outbreak of the Korean War, in an effort to spur
industrial production to meet wartime needs. At that time, the
Nation was ill prepared for another war following World War II.
To bolster our country's defense infrastructure, the President
requested authorities to mobilize our domestic industry to
increase production of military equipment and much needed
supplies.
Since then, its authorities have been expanded to include a
number of purposes, including emergency preparedness and
response.
With that said, our country has faced an unprecedented
threat to the life and well-being of its citizens: The COVID-19
pandemic.
In response to the pandemic, and at the urging of
congressional leaders, the President invoked the DPA on
multiple occasions to compel companies to meet the shortfall of
medical equipment and supplies.
And while it has been used mostly as a tool to meet the
skyrocketing demand for personal protective equipment and
ventilators, one thing is clear: There are still more
opportunities to leverage its authorities as part of a
coordinated response to the evolving threat to our Nation.
And with that, we must look for ways to use the DPA and its
authorities to advance our small businesses, an opportunity
other members of this Committee and I have previously
highlighted for the Executive.
Small businesses have been hit especially hard by the
pandemic. From cash flow concerns to availability of materials,
the economic devastation cannot be underestimated.
In particular, DPA Title III authorities provide a series
of economic incentives that seek to maintain, restore, and
expand domestic industrial capabilities. The CARES Act provided
$1 billion to carry out the responsibilities of Title III of
the DPA, specifically to prevent, prepare, and respond to the
COVID-19 pandemic.
It is not only our responsibility but our duty to ensure
that small businesses engaged in the manufacture of medical
supplies, as well as those in the defense industrial base, have
the maximum opportunity to participate in Title III programs.
Access and participation in these programs will supplant
lost revenues due to COVID-19 and guarantee the livelihood of
small businesses.
Moreover, recognizing the ingenuity and nimbleness of our
small businesses, this investment will translate into
innovation and the acquisition of much needed resources for the
Federal Government.
And so today's hearing will serve as an opportunity to
examine the DPA and its main authorities, including those
provisions in the law that establish a preference for small
firms.
Additionally, we hope to discuss potential legislative
measures to strengthen the DPA for small businesses.
Finally, we wish to hear more about the challenges that
small businesses are facing due to COVID-19 and how leveraging
Title III authorities could provide substantial relief.
I look forward to hearing from our distinguished witnesses
today about the DPA, its application to the COVID-19 relief and
response efforts, and the dynamics between the DPA and small
business contractors.
Again, I want to thank the witnesses for joining us here
today, and I now yield to the Ranking Member, Mr. Stauber, for
his opening statement.
Mr. STAUBER. Thank you, Chairman Golden.
You know, the events of this year have underscored the
fragility of our medical preparedness as a Nation. In times of
unprecedented disasters, it is critical that we come together
to leverage the immense power and capability of the American
workforce to help pull our country through crisis.
Indeed, we have already seen an aggressive ground flow of
volunteer and voluntary activity from businesses, particularly
small businesses leaping at the opportunity to help their
neighbors and frontline healthcare workers during this COVID-19
pandemic.
And while the efforts of these businesses are commendable,
sometimes the needs of the country are so urgent and so great
that it becomes necessary to rapidly mobilize the full power of
the United States industrial base to ensure supplies for our
national defense are produced and distributed appropriately.
This is where the Defense Production Act takes center
stage. Invoking the DPA is not a step to take lightly. Its
authorities upend some of the essential tenets of Federal
contracting principles, such as full and fair competition.
Furthermore, the authorities provided under the DPA can compel
a company to do business with the Federal Government even if it
does not wish to do so and impact its ability to manage its
priorities as it sees fit.
Once the DPA is invoked and a business is tapped, it must
prioritize DPA ordered contracts above all others it may have
in the queue, and it has limited choice but to comply. While
these are significant departures from the typical Federal
contracting framework, Congress has decided time and again,
through dozens of reauthorizations of the DPA, that these
drastic measures can become necessary in times of significant
national strife, times such as now.
When the DPA is activated, businesses tasked with DPA
orders must reshuffle existing priorities and work with their
suppliers and subcontractors to ensure the government's needs
are met first and foremost. DPA orders, therefore, impact an
entire chain of businesses, from the large prime down to the
small subcontractor supplier.
The role small businesses play cannot be overstated.
Without these companies, we would not be able to produce the
ventilators, the masks, and the essential PPE and other medical
equipment necessary to protect healthcare workers at the levels
needed to stifle this pandemic.
The critical role small businesses play applies across the
board to all DPA invocations, whether it be for military
preparedness, natural hazard response, or domestic
preparedness. Indeed, the DPA even contains a special
preference for issuing contracts to small businesses under its
authorities, directing the President to, in quotation marks,
accord a strong preference for small business concerns which
are subcontractors or suppliers.
Regardless of whether the disruption caused by DPA orders
are welcome or not, it is clear that we depend on a vast
network of small business contractors and suppliers to generate
the essential items needed for national defense.
I hope through the insights of our esteemed panelists here,
we will be able to understand how the DPA interacts with small
businesses, learn more about what the actual operation impacts
of the DPA on our small businesses, and understand what
Congress can do to ensure small businesses have the opportunity
to participate and contribute to the national defense through
the DPA.
Mr. Chair, I yield back.
Chairman GOLDEN. Thank you very much, Mr. Stauber.
So I am going to do my best to move on. I understand that
my microphone is muffled, so I am going to quickly make the
introductions for the first panelist, and then I will be
calling in from my phoneline while you are making your first
presentation. I think that is probably the easiest way to move
forward for the time being.
So with that, I am going to introduce our witnesses. Our
first witness is Mr. Ian Patterson.
Mr. Patterson is a senior associate with the law firm
Koprince Law, LLC. He has a wide range of experience with
Federal procurement topics and is a seasoned bid protest
litigator. In this role he has closely followed and written
about procurement issues related to COVID-19 pandemic.
Mr. Patterson, I am going to go ahead and recognize you
right now for 5 minutes while we work on my microphone issues.
STATEMENTS OF IAN PATTERSON, ATTORNEY-SENIOR ASSOCIATE KOPRINCE
LAW, LLC, LAWRENCE, KS; DAVID BLACK, ATTORNEY-PARTNER, HOLLAND
& KNIGHT, LLP, TYSONS, VA; MARY LOCKHART, PRESIDENT & CEO,
PEMDAS TECHNOLOGIES & INNOVATIONS, ALEXANDRIA, VA, TESTIFYING
AS THE CHAIR OF THE SMALL BUSINESS DIVISION FOR THE NATIONAL
DEFENSE INDUSTRIAL ASSOCIATION (NDIA); AND TRACI TAPANI, CO-
PRESIDENT, WYOMING MACHINE, INC., STACY, MN
STATEMENT OF IAN PATTERSON
Mr. PATTERSON. Thank you, Mr. Chairman, Rank Member
Stauber, and members of the Subcommittee.
Thank you for the opportunity to speak to you today
regarding the use of the Defense Production Act to combat
COVID-19 and the inclusion of small businesses in that fight.
As currently enacted, the Defense Production Act includes
three titles that provide the President and his designees with
various authorities to mobilize and augment America's
industrial resources.
The current Defense Production Act titles include Title I,
Title III, and Title VII. The remaining titles have been struck
through various renewals of the Act.
With respect to Title I, it grants the President the
authority to compel private businesses to accept orders and to
prioritize those orders. This so-called prioritization
authority is implemented through rated orders, which is a
mechanism by which agencies can prioritize their orders ahead
of both government procurements and that business's private
interests as well.
Title III, on the other hand, allows the President to
invest in industries that are essential for national defense.
Under Title III authority, the President may issue loans to
businesses. He may guarantee business loans from private
lenders, make purchase commitments, and also sponsor research
and development efforts.
Now, Titles I and III are designed to work together to
address different mobilization needs.
Title I provides immediate contracting authority to be able
to combat instant needs based on whatever the crisis facing the
United States is.
Title III, on the other hand, allows the President to
develop America's industrial resources so that, when necessary,
they are there and available to be mobilized.
Finally, Title VII contains a wide array of provisions that
address a variety of topics, including jurisdiction,
enforcement, things of that nature.
But of particular import to this Committee, that is also
where the small business provision is found within the Act. I
know it has been quoted before, but I will quote it again.
Under this section, small businesses are to be given maximum
practicable opportunity to participate as contractors, as
subcontractors at various tiers, and participate in all
programs to maintain and strengthen the Nation's industrial
base and technology base undertaken pursuant to this Act.
Despite the desire to include these small businesses, the
Defense Production Act does not provide any further instruction
for how small business participation should be accomplished.
Indeed, there are no small business contracting goals that
are stated within the Act. There is no process for including
small businesses in consideration for priority contracts. There
is no cross-reference to other legislation, including the Small
Business Act, to provide direction for how to ensure that small
businesses are able to participate.
Consequently, the [inaudible] Defense Production Act, small
business initiatives are left undefined by the Act itself. And,
indeed, in terms of regulation, they also are not well defined.
With respect to utilization, the Department of Defense has
regularly used the prioritization authorities under Title I. It
anticipates, in at least 2018, that roughly 300,000 orders were
issued using the priority initiatives under Title I.
Title III authorities however, are used with less
frequency. Indeed, it has been nearly three decades since any
of the loan guarantee or loan provisions have been utilized.
Additionally, the Department of Defense indicates it has used
roughly 20 orders in 2018 to leverage Title I authorities.
These have typically been used to try and invest in metallurgy
and things of that nature.
Despite these examples, one of the immediate challenges
with evaluating the Defense Production Act is the absence of
available data. As the Congressional Research Service noted, as
recently as April of this year, quote, Public reporting and
congressional oversight of Defense Production Act activities is
fragmented and irregular.
Now, this is likely due in part to the various delegations
of authority that have been provided to agency secretaries by
the President. As it currently stands, data, or the lack
thereof, represents one of the greatest challenges to
evaluating the use of small business in the Defense Production
Act.
Ultimately, the Defense Production Act establishes a series
of tools to mobilize America's industrial resources, as well as
investment and development of those resources. Unfortunately,
however, it is very possible that small businesses are getting
left behind.
Without data, it is impossible to know, with any degree of
certainty, the extent to which small businesses are or are not
participating.
Accordingly, I encourage this Committee to work to develop
a better reporting system for Defense Production Act
procurements. This will provide the data necessary to guide
policymaking and ensure that small businesses are not being
left behind in this fight.
Thank you, Mr. Chairman, and I look forward to your
questions.
Chairman GOLDEN. Thank you.
And how is this audio working for you all? Is this better?
I see some heads nodding. All right. Great.
Steve, how are you doing on time?
Mr. STAUBER. We are good, Jared. I think we are good right
now.
Chairman GOLDEN. All right.
So our second witness is Mr. David Black. He is a partner
with the law firm of Holland & Knight, LLP, in Tysons,
Virginia, and Co-Chair of Holland & Knight's National
Government Contracts Group.
Mr. Black's practice involves serving as a trusted advisor,
problem-solver, and advocate for Federal contractors, awardees,
and subcontractors in every stage of growth. He provides legal
advice and representation to help his clients secure
opportunities, enhance performance, mitigate risk, and respond
to threats.
Mr. Black serves contractors and awardees in a broad array
of industries, with an emphasis on innovative technology,
cutting edge products, professional services, healthcare, and
research and development.
Welcome, Mr. Black.
Before I have you go, I am going to quickly move to our
third witness introduction, Ms. Mary Lockhart. She is the
founder of PEMDAS Technologies & Innovations, a woman-owned,
service-disabled veteran-owned small business, that develops
high technology hardware and software environmental
intelligence products and services for the Department of
Defense.
Through her extensive career in the public and private
sector, Ms. Lockhart has held vital research in leadership
positions across multiple Federal agencies, to include the
Department of Defense and NASA.
In 2013, she retired from a 30-year career as a colonel in
the United States Air Force Reserves. Ms. Lockhart has served
as the President for Women-in-Defense Washington, DC, Chapter
and is currently the Small Business Chair for the National
Defense Industrial Association.
Welcome, Ms. Lockhart.
And I will now yield to our Ranking Member, Mr. Stauber, to
introduce our final witness.
Mr. STAUBER. Thank you, Chairman Golden.
And I would like to welcome our final witness. It is a
pleasure for me to do so. She is from my district, Ms. Traci
Tapani.
Ms. Tapani is the co-president of Wyoming Machine,
Incorporated, a precision sheet metal fabrication company
located in Stacy, Minnesota. Wyoming Machine is a woman
business enterprise, National Council certified women-owned
family manufacturing business, run by sisters Traci and Lori
Tapani. Under their leadership spanning 25 years, Wyoming
Machine has become a thriving, successful small business in a
brutally competitive industry.
Ms. Tapani's considerable expertise led her to serve a 3-
year term as an appointee to the Minnesota Governor's Work
Force Development Board and a 6-year term on the Board of the
Minnesota Chamber of Commerce. She serves as Board Chair of the
Minnesota Initiative Foundation and is a member of the United
States Chamber of Commerce Small Business Policy Council.
She has won numerous accolades and awards, including in
2014, the STEP Award for demonstrating excellence in leadership
and manufacturing and the Minnesota National Association of
Women Business Owners Lifetime Achievement Award.
In addition to being a savvy small business owner and a
public servant, Ms. Tapani actively volunteers in our local
community focusing on issues such as workforce development and
narrowing the skills gap and helping women gain access to
nontraditional careers such as in manufacturing.
Thank you for all that you do for our district and for your
participation today, and I look forward to your testimony and I
yield back.
Chairman GOLDEN. Thank you, Mr. Stauber. And I have gone a
little bit out of order. I apologize, that is unusual but I had
to fix the audio issue there. It is the adapt and overcome
approach. So having heard from Mr. Patterson. We are now going
to recognize Mr. Black for 5 minutes.
STATEMENT OF DAVID BLACK
Mr. BLACK. Thank you, Chairman Golden, Ranking Member
Stauber, members of the Subcommittee.
I think we are all doing things a little unusually these
days, so we are all adjusting. I really appreciate the
opportunity to be here today to help the Subcommittee
understand and address the dynamic between the DPA and small
business contractors.
As Mr. Patterson said the purpose of the DPA is to mobilize
domestic industry and the service of the National Defense and
emergency preparedness, and there are provisions in the DPA
that show it has long been Congress' intention to include
domestic small businesses in that effort. But when you look at
them, there is an underutilization of what exists and it is
probably time for some reforms to help those pieces move
together.
So just to build on what Mr. Patterson did, I want to focus
on really five provisions in the DPA that address small
business. Under 50 USC 4518, that is where there is the strong
preference for small businesses, for consideration of small
businesses when making awards under Title III of the DPA.
Under Section 4551(a), that is where there is a maximum--
agencies are supposed to give. The President is supposed to
give maximum practicable opportunity to small businesses to
participate as contractors and subcontractors. So, again, that
is the one-two punch of making DPA investments in small
business and then providing opportunities as primes and subs to
meet the government's needs.
Also under 4551 subsection (c), there is authority to
include small businesses in advisory committees established
under the DPA. Under 4551 subsection (d), agencies are supposed
to provide information about DPA activities to small business.
And then Congress has created the DPA Committee, which
makes an annual report and annual policy recommendations to
Congress. And what you see, and if you look at the current use,
these pieces exist, but they are either not being utilized,
they are being underutilized, the DPA committee is not, you
know, taking--making the most of these authorities, and things
really are not working to the extent that they could to bring
in small businesses into DPA investment and DPA opportunities.
When you look under this strong preference under Title III,
as Mr. Patterson noted, there really are no procedures in place
other than the statute about how are agencies, when they are
considering making a Title III award, a Title III investment,
how are they supposed to consider small business, how are they
given the preference. There is really nothing in the books in
terms of procedure and operation.
There is no data currently being collected and reported to
Congress about Title III awards. It is sort of a mishmash. You
could probably find it through FOIA, but it is not being
centralized and recorded, and Congress would probably benefit
from that information for both small business awards and March
business awards under Title III.
Regarding the maximum practicable opportunity, this is
where I think the whole community is missing a big opportunity.
There is an information system called the Federal Procurement
Data System, FPDS, that collects a tremendous amount of data
about procurement actions, and it has dozens of fields that
contracting specialists have to fill in to report contracting
actions. And Congress initiated this to help determine is the
government meeting small business goals.
Right now there is no field for whether an order or a
contract is priority rated, and simply adding that information
to see when agencies are using priority rating for both large
and small would really lift the veil and let Congress and
agencies see how that priority rating authority is being used
for small business.
Currently there is authority to have a Small Business
Advisory Committee, but in my research, I am not aware of one
that exists. And then for the DPA Committee, the Small Business
Administration is not currently designated as a member.
Regarding the information provided to--by DPA activities,
the Congress wants provided to small business and that is in
the statute, but there is a lot of information, you know, on
the websites of government agencies about the DPA, but nothing
is really geared towards small business. Nothing has really
indicated, hey, this is how we are meeting Congress'
requirement to provide small business specific information
about the DPA.
So, you know, when you look at what could be done, this is
really, I think, belt-and-suspenders fixes. This is about
taking the existing provisions and making them work together,
and it is, you know, just basic stuff, the basic work of the
government of collecting better information, making that
information accessible to agencies and Congress.
Requiring that procedures be established so that these
small business authorities and responsibilities are considered,
are addressed by agencies exercising DPA authority and then
connecting the decisionmakers to small business stakeholders
really through the DPA Committee.
So things that I think Congress could do that I think would
be low impact but high value for the strong preferences is to
have the DPA Committee----
Chairman GOLDEN. Mr. Black, if I could jump in, I
apologize. We have gone through 5 minutes here, and in the
interests of preserving a little time, I am going to cut you
off there.
Thank you for your opening statement, and we will certainly
be able to work through the rest of your recommendations
through the Q and A, I have no doubt, and I will be sure to
give you more opportunities to continue.
With that, I am now going to give 5 minutes to Ms.
Lockhart.
STATEMENT OF MARY LOCKHART
Ms. LOCKHART. Chairman Golden, Ranking Member Stauber, and
the members of the Subcommittee. Thank you for the opportunity
to testify here this afternoon and for your consistent efforts
in supporting America's small business community.
First of all, Chairman Golden, thank you very much for the
introductions. My small business, PEMDAS, provides high-value
engineering services and innovative hardware and software
products to the Department of Defense.
But today I am honored to be representing the Small
Business Division of the National Defense Industrial
Association, NDIA, the Nation's oldest and largest defense
industry association, comprised of over 1,650 corporate and
over 70,000 individual members. My testimony this afternoon
will focus on leveraging Title III authorities to support the
small business preference in the Defense Production Act. This
will help to preserve America's small business industrial base
during this very challenging pandemic.
My small business colleagues and I support all efforts to
make government procurement more efficient, streamlined, and
cost effective. Unfortunately, COVID-19 has created unforeseen
challenges to small businesses that are eclipsing the recent
beneficial changes to the defense procurement systems.
An NDIA survey that was published 2 months ago in April,
consisting of over 750 members from the small business
industrial base, found that 60 percent of the respondents
experienced a serious cash flow disruption due to the crisis.
51 percent reported that shelter-in-place orders negatively
impacted their ability to execute contracts. Sixty percent
expected to have long-term financial and cash flow issues
resulting from COVID-19.
The underlying reasons cited were cuts to billable hours,
delays in payments due to government shutdown and telework
requirements for both prime contractors and the government, and
a lack of telework options or contract schedule flexibility.
Now, granted this survey went out in March. We have a second
survey that has gone out, and those results will be available
next month.
Unsurprisingly, the brunt of these impacts fall hardest on
those small businesses with fewer than 50 employees because of
their limited resources. These businesses are often new to the
defense industrial base and represent a vulnerable, but vital,
part of the national security procurement apparatus.
Congress recently appropriated the $1 billion for DPA Title
III in the CARES Act. This Act, as has been discussed, provides
provisions relevant to small businesses that support our
national security. It is important that these provisions and
the investments reach small businesses as they are proven
innovators of technology to strengthen military readiness.
Small business also generates thousands of local jobs.
Ensuring the vitality of small businesses will help America's
preparedness, response, and recovery from this pandemic.
It is important, therefore, to strongly emphasize the small
business preference and to maximize opportunities to the extent
possible, especially in areas of high unemployment and ones
that demonstrate a continuing pattern of economic decline.
In closing, I offer, on behalf of NDIA, the following
suggestions: Use DPA Title III to maximize small business
participation; accelerate, and streamline the acquisition
process for small businesses; establish a centralized office
for DPA implementation reporting and coordination; ensure DPA
has ample funding for small business; use supplemental
appropriations if DPA fund is exhausted; and allow small and
medium size manufacturing enterprises to use Title III funds
that are intended by DPA.
This Act provides for guaranteeing the purchase or lease of
advance manufacturing equipment and, subject to meeting certain
requirements, to replace key equipment that supports the
defense industrial base.
Chairman Golden, Ranking Member Stauber, and the members of
this Subcommittee, thank you very much for the opportunity to
speak this afternoon, and I would be pleased to respond to any
of your questions.
Chairman GOLDEN. Thank you, Ms. Lockhart.
And we would now recognize Ms. Tapani for 5 minutes.
STATEMENT OF TRACI TAPANI
Ms. TAPANI. Thank you.
Chairman Golden and Ranking Member Stauber, thank you for
the opportunity to be here today. I want to thank all the
members of the Subcommittee for your service in support of
small business.
As you have already heard, I am Traci Tapani, an owner of
Wyoming Machine in Stacy, Minnesota. Our company was founded by
my father, Thomas Tapani, in 1974, and I have owned and
operated the company with my sister for the past 26 years.
Small business ownership and strong leadership by women are
part of our family DNA.
Many of you may have been working remotely due to the
COVID-19 pandemic. At Wyoming Machine we are part of America's
critical manufacturing sector, and as an essential business, we
have been reporting to work since the start of the pandemic,
and I am joining you today from my office at Wyoming Machine.
My apologies if you hear any unexpected noise. Sometimes it can
be difficult to do manufacturing quietly.
We are proud of our workforce for continuing to report to
work even when most workers have been urged to stay at home. I
am happy to share that so far everyone in our company has
remained healthy and safe.
Our purpose today is to discuss the interaction between the
Defense Production Act and small contractors. It will be
helpful for you to know that over time my company has
participated in fulfilling defense contracts and other
government orders. While I would not describe myself as an
expert in the DPA, I hope to share useful information, and I
look forward to answering any questions.
The DPA is undoubtedly a valuable tool in times of
emergency, but that doesn't mean that the DPA is the driving
force that compels small contractors to act. Following the
attack on Pearl Harbor, my great aunt, Magdalene Hallady, left
her office job in Chicago and headed for shipbuilding yards in
Sturgeon Bay, Wisconsin. When she arrived, she asked, ``What
can I do to help?'' She soon joined many others who stepped up
to ensure that the necessary goods were produced for our
military.
Magdalene stepped up not because she was ordered to do so
or because she was paid a lot of money. She did so--or she was
only paid 25 cents an hour, but she would have worked for free
because it was the right thing to do.
Magdalene's story illustrates my belief that small
contractors and small businesses mobilize and act during times
of crisis out of necessity and desire to support and provide
for our Nation, our communities, and our employees.
In March 2020, Wyoming Machine received an order to produce
a part for a medical ventilator. We have been producing this
part for about 15 years, but until just recently, we did not
even know the part went into a medical ventilator. Over a 2-
month period, we produced a quantity of almost 60,000 parts or
12 times our normal annual volume.
You might be surprised to hear that the DPA was not part of
the contract under which we produced these parts. When the
production orders were released to our shop floor, they were
accompanied by a note that told our employees three things:
These parts are used in the production of a medical ventilator,
you are an essential worker, and your work during the COVID-19
pandemic has the potential to save lives, and we are proud of
you and thankful for the work that you are doing at Wyoming
Machine.
Our workforce organized and mobilized among themselves to
ensure that parts were produced quickly and accurately. When we
were asked to deliver at a faster pace, our workers made it
happen.
So if it wasn't the DPA that compelled us, why did we
mobilize and respond to the need for medical ventilator parts
as quickly as we did? Wyoming Machine and many other small
contractors operate under a business model that allows them to
respond quickly to change in demand. We can produce many types
of products and serve a wide array of industries
simultaneously.
The COVID-19 pandemic is both an economic crisis and a
health crisis. Small businesses in the United States employ
nearly half of all workers. As an employer, I feel a personal
responsibility to ensure that my employees continue to have a
place to work and that they can support themselves and their
families. During the crisis our ability to be flexible in
responding to demand for production of essential parts and
products is just part of what we do. Author Simon Sinek wrote
that working hard for something we don't care about is called
stress; working hard for something we love is called passion.
Wyoming Machine employees were told about the opportunity
to help during the pandemic, and they were inspired and
motivated. Our company passion for manufacturing, combined with
our desire to help in a time of need, made our work feel almost
effortless.
My testimony before this Committee is not to argue for or
against the merits of the DPA but rather to share a small
business perspective during a time when the DPA has been used
to direct private sector business to produce medical
ventilators and other supplies needed during the pandemic.
There will always be American businesses ready and willing to
respond in a time of need, and I believe that the small
businesses have a special role to play due to their agility and
ability to quickly mobilize.
Thank you.
Chairman GOLDEN. Thank you, ma'am. I appreciate that
testimony.
And thank you to all of you for your opening remarks. I
look forward to continuing the conversation through the
question-and-answer phase of the hearing.
Understanding that Mr. Stauber needs to testify with the
Rules Committee shortly, I am going to begin by recognizing the
Ranking Member for 5 minutes.
Mr. STAUBER. Thank you very much, Chair Golden.
And, Traci, as you are reading your story, if there is
nobody that didn't get a lump in your throat, I want to check
your pulse. That was very inspiring.
But I do want to start out with you. You know, the job shop
model exercised by Wyoming Machine that you describe in your
testimony seems to be perfectly positioned in responding
quickly in times of national emergency, you know, such as this
pandemic.
Can you tell us more about this model, like, is there
something only small manufacturing or business practice as
opposed to a large manufacturing facility?
Ms. TAPANI. So thank you for your question, Representative
Stauber.
I believe that the job shop model is most common among
smaller businesses. Part of the reason for that is that we
ultimately supply larger businesses. So throughout Minnesota,
we are supplying many different companies that are producing
equipment. We need to bulk buy parts and assemblies in order to
complete final pieces of equipment.
So it is pretty common to the small business model to work
in that type of environment and allows us to be successful by
[inaudible] and that diversity is what helps us stay in
business and keep people employed.
Mr. STAUBER. Thank you.
And then I appreciate you sharing your story about your
great aunt.
I want to know what it is like and I would like to hear
more from you about some comments or concerns, if any, that
your employees had during this time, obviously, helping the
country in making the ventilators, keeping us safe. Can you
describe to us the sentiment of your employees coming to work
during the pandemic, being essential?
Ms. TAPANI. Yes. Thank you for that question.
You know, I think that when we knew that the State of
Minnesota was likely to be ordering a stay-at-home order from
our Governor, you know, many people's initial concern was what
are we going to do and how are we going to get paid, and I
think that would be a common concern among employees.
We were happy to find out that we were considered an
essential business and that we would be allowed to continue to
report to Wyoming Machine and do our jobs every day.
I think the most difficult part of this for people has been
that early on in the pandemic, the information was changing
rapidly, new information kept coming out, and trying to develop
those plans and protocols to keep our workforce safe was
probably the most difficult thing and I think the thing that
people were most alarmed about.
As time has gone on, and no one here has become ill at this
point, and as we continue to improve the protocols that we have
in place, I think people's comfort level has increased. But,
honestly, they are very happy that they have been allowed to
continue to come to work.
And I tell people I think the reason for that is for people
to maintain their well-being during a crisis like this, staying
attached to your employer is critically important. They know
that as of right now, no matter what happens, they are still
working and they have an employer. Once they are released from
their employer, it creates a whole other level of anxiety for
them.
Mr. STAUBER. I really appreciate those comments.
And we are so proud of you. You are leading our State, and
I can't say enough about Wyoming Machine, and it is a privilege
and a pleasure to have you here.
Thank you for those comments.
Mr. Chair, I have one more comment for--one more question
for Mr. Patterson. And that is, Ian, given the DPA's strong
preference for small businesses, what role, if any, do you
think that SBA should have in DPA-related efforts?
Mr. PATTERSON. Thank you, Representative.
I think that is a very good question. The SBA plays a very
large role, and it is a little outside the scope of this; but
they have a very large responsibility with respect to
administering small business preferences in the traditional
Federal acquisition regulation style of procurement. There is a
lot of regulations that I deal with on a daily basis that are
designed to try and provide opportunities for a wide variety of
small businesses and then socioeconomic groups as well.
These are well developed, and the SBA has a large
background of experience to be able to implement these things.
I think that leveraging that experience makes total sense,
particularly given the DPA's stated desire to include small
businesses.
Mr. STAUBER. Thank you very much.
And, Mr. Chair, I yield back. I do have to leave to get up
to Rules.
I appreciate all of the expert testimony. Thank you.
Chairman GOLDEN. Thank you very much, Mr. Stauber, for
yielding back. Thanks for your participation and enjoy the
Rules Committee.
So I will now recognize myself for 5 minutes, and I may end
up asking a second round of questions.
So, Mr. Black, having cut you off a little bit right in the
middle of some of your recommendations, I wanted to come back
to you first.
Having read through your opening statement in advance, I
know that one of your recommendations was to direct DPAC to
establish a small business participation advisory subcommittee
to provide annual recommendations on how to increase small
business participation in DPA authorities and funding.
I wanted to know, do you think that Congress would need to
broaden DPA's scope so that the Subcommittee could provide
those recommendations on how to include small business
participation given what we know right now about their current
scope and, you know, how effective they are under Title I
authorities? But, please, in answering that question, feel free
to use the remainder of the time if you have it to continue
with your other recommendations.
Mr. BLACK. Thank you, Chairman, I appreciate that. I
appreciate your courtesy.
Yeah, there is a--in the statute 4567 that establishes the
DPAC, there is a list of things that are supposed to report on,
and adding one section to ask it--because it already is
supposed to make policy recommendations about how to improve
the DPA. Arguably, it already could encompass a small business,
but it hasn't been doing it. So showing that is important to
Congress and adding a provision to ask it to report would
certainly give a purpose and meaning to an advisory committee
and potentially adding someone from SBA to the DPA Committee,
which is something Mr. Patterson was talking about.
You know, and the other provision, the DPA Committee really
is the focal point for what Congress could do to strengthen
this. Just starting to talk about how they could report
annually on Title III awards, that could be the mechanism.
The DPA Committee has representation from everyone who has
been delegated Title I authority by the President, those are
the agencies that are interested in building up capacity, so it
has access to the information. It has got the people on its
committee. It could probably easily collect that information
and provide it to Congress.
It could ask its members to establish procedures to have
you consider small business in making Title III decisions. That
would at least make the consideration happen. Right now there
is nothing on the books. That would be an improvement, and you
would see agencies having to at least have to wrestle with
that.
I was talking a little bit about the FPDS, the Federal
Procurement Data System, adding simple fields to understand not
only the total small business spend and large business spend,
but run our DPA rated orders would provide amazing
transparency.
I think Congress would find that small businesses already
participate and that to the extent there is concern about small
businesses being able to respond to rated orders, you could
probably bust that myth. And it would also help with
identifying small business resources to help provide the
maximum practicable opportunity to participate in the future;
who are the small businesses already performing DPA rated
orders.
We talked about the Small Business Advisory Committee, and
then having the DPA Committee--you know, there is this
provision to consolidate information for small businesses about
DPA activities. There ought to be a clearinghouse somewhere. No
one is doing it at this time. It is sort of scattered. Congress
wanted it done. And maybe making that the responsibility,
appointing the DPA Committee to put up a website, consolidate
that information would be helpful.
Thank you.
Chairman GOLDEN. Thank you very much, Mr. Black.
And I had lined up another question, but you pretty much
answered it in your testimony discussing some of the lack of
data that is out there and what could be gained by getting our
hands on it, in particular or perhaps even feeling reassured
that small businesses are, in fact, already participating as
you have suggested; but the problem being right now, we have an
oversight responsibility, but a lack of data and information.
So you and Mr. Patterson have shared some ideas already
about how we could address that. And so rather than try and
squeeze in like a quick last-minute question and knowing that I
will have more time to come back to people, I wanted to go
ahead and yield and recognize Congresswoman Sharice Davids for
5 minutes.
Ms. DAVIDS. Thank you, Chairman Golden. And I know Ranking
Member Stauber had to head out, but I definitely appreciate the
two of you holding this hearing on what is an incredible
important topic.
And it is definitely good to see a fellow Kansan on the
panel today, Mr. Patterson.
And so I want to--you know, I think that we have seen this
since the beginning of this pandemic, our frontline workers
haven't had enough of the personal protective equipment and
testing supplies that they need to fight the virus, keep
themselves safe and depending on which types of frontline
workers we are talking about, keep the folks that they are
helping safe.
And I think that, you know, seeing that our national
stockpile ran out of supplies so quickly and the global supply
just could not keep up with the demand and then the
interruptions we saw in supply chain, you know, we really need
to be forward thinking on all of this and make sure that we
don't allow our supply of PPE and testing materials to run so
low again. And I think that most of us are in agreement that
this is definitely a matter of national security and certainly
one of public safety.
You know, I was one of the folks who early on urged the
administration to fully utilize the Defense Production Act to
ramp up the domestic manufacturing of PPE and testing supplies.
And then, of course, that is not the only thing that we need to
be thinking about, but it is certainly a key tool in our
toolbox, you know.
And part of the reason that I became so familiar with this
is because Dentec which is a local manufacturing company here
in the 3rd District in Lenexa, Kansas, had previously produced
N95 masks, and then they were forced out of the market or
priced out of the market, you know, with overseas competitors.
And so, you know, right now they make other types of masks;
but Dentec attempted to get into contact with the CDC, with HHS
about contracting to produce N95 masks for this current crisis,
and they registered with the system for award management, and
they just never heard back from anybody.
And, you know, I think we have companies like Dentec out
there, and not just Dentec but other companies, and that is why
I introduced the Supplies Act. It is a bill that would provide
capital for small businesses to help them shift manufacturing
to produce some of the critical PPE that we are seeing needs
for.
And, you know, I think it also will help promote American
manufacturing, domestic manufacturing here, and eliminate some
of the price gouging that we have seen.
So, you know, Ms. Tapani, I really appreciate you sharing
your family's story about your manufacturing company, and I
would love to start with you.
I am curious, from your perspective--I know you mentioned
that you had been producing a piece that was useful for
ventilators. Hearing about Dentec and other companies that
might not already--that might be able to maybe retool and get
to that place, what do you think about how we can, you know,
better utilize small businesses, better utilize manufacturers
that are able to quickly get up and going?
Ms. TAPANI. Thank you for your question.
You know, I think that one of the things, as a
manufacturer, it is hard for me not to think about the root
cause of a problem, so what caused the problem that we are
experiencing right now with the shortness of PPE and difficulty
getting businesses up and running to produce something
different. And I don't fully understand what the causes are.
What I can tell you is that in Minnesota, I have heard from
a number of people in the industry that businesses were working
on ramping up to produce ventilators starting as early as
December and certainly in early 2020.
So it wasn't the Defense Production Act that caused
necessarily that to happen, but I think a better understanding
of how supply chains work for people that are in decisionmaking
positions would also be beneficial because they are far more
complex, and they are global, global in nature, and so it is
more complicated than just ordering someone to do something.
Even I had to look at--you know, for example, I saw stories
of Ford Motor Company and General Motors ramping up to do
ventilators, which I think is wonderful and I am so happy that
they did that, but as a manufacturer, I had to look at that and
say, how are they securing the supplies that they need because
typically there are lead times for those.
So I think finding out more about what the root cause of
the current situation was will help us understand what we need
to do differently.
Ms. DAVIDS. Yeah. And that is an interesting point. I also
think that one of the things that we need to be cognizant of is
for the manufacturers who are able to produce but, you know,
might end up having to push their customers down the list, they
might run into contract issues without use of the Defense
Production Act.
But if I am here for the second set of questions, I might
get into that with Mr. Patterson.
Chairman GOLDEN. Thank you.
We will now go to Congressman Troy Balderson from Ohio.
Mr. BALDERSON. Mr. Chairman, good afternoon, and thank you,
and bear with me one second. Don't start my timer yet. My thing
went away there.
There we go.
Ms. Tapani, thank you again for testifying. My question for
you would be, what can we do to leverage the ability and
capability of small business companies like yours to meet the
country's needs in time of crisis? And do you think we can or
should use the DPA to achieve this?
Ms. TAPANI. Thank you for your question.
I think that one of the opportunities that we have with
small businesses is, with or without the DPA, I think that
there is a willingness to mobilize and volunteer to step in
when times are difficult. Oftentimes when DPA needs to be used,
we are also in an economic crisis, and small businesses feel
that, I think, in a different way than large businesses. While
certainly everyone in the economy feels a downturn, small
businesses have shallower pockets and less resources to get
funding during down times.
So I think that we are standing at the ready and ready to
jump in and do whenever we can to help, simply to keep our
people employed and our businesses running, and, again, that is
a little bit different than what we see with larger companies.
But recognizing and finding a way to involve more small
businesses on an ongoing basis so that there is more knowledge
in the market amongst small businesses and through small
business organizations for how we can be connected, how we can
raise our hand and say that we have the capability and we are
ready to help, often you hear from larger businesses when they
are looking for smaller suppliers to work with that there is no
one out there who could do the work.
My personal experience is that that is not true; it is just
that there is still a lot of difficulty in the marketplace for
our larger suppliers, like our primes, to identify small
businesses that have the capabilities that they are looking
for.
Mr. BALDERSON. Okay. Thank you for that answer.
And I do want to say we talked about the PPE. I, along with
a couple of other members of this Small Business Committee,
introduced legislation last week for a tax credit up to $25,000
for PPP--or PPE, excuse me, I am all PPP--PPE, so I hope that
you will take time to look at that and hopefully that is
something that can work for you.
Mr. Black, my question to you, given that the SBA does not
issue many DPA rated orders itself, what can the SBA currently
do to further the statutory goal of providing small business
opportunities under the DPA?
Mr. BLACK. I think they can share techniques for other
agencies. Agencies already have offices of small business
utilization. The DPA--or sorry, the SBA has process and
procedures for what we will call normal procurements for the
research, market research, collecting information about sources
that contracting officers can easily consult.
You know, we all--I think many of us know about the Rule of
Two, which is basically market research to look for small
businesses. And so, you know, they are experts in those
procedures. They develop the procedures that end up being in
the Federal acquisition regulation.
And so having that insight into the DPA process for rated
orders I think could add value. And so even though they are not
the ones issuing the orders, they would be teaching, funding
best practices for the agencies that are.
Mr. BALDERSON. [Inaudible] Are you aware of--a small
business preference for Title III awards?
Mr. BLACK. I am sorry, I didn't hear the question.
Mr. BALDERSON. Excuse me. Are you aware of any Federal
agency that has--I had to look and make sure I wasn't muted.
Are you aware of any Federal agency that has issued any
regulation pertaining to a small business preference for Title
III awards?
Mr. BLACK. I am not. The agency that is most active--and
this really probably ties to the national defense purpose of
the DPA going back many decades--is DOD. They have an Office of
Industrial Policy that has a DPA Title III program, and they
pose solicitations for companies to respond to.
So they have kind of an active ongoing solicitation and
award of Title III investments. But I am not aware of any
regulations. They are sort of run on a full and open basis, the
ones I have looked at, and I am not aware of any regulation or
process or practice that that office has, which seems to be the
most active one in the Executive Branch, to give life to the
small business preference.
Mr. BALDERSON. Okay. Thank you very much.
Mr. Chairman, thank you very much, and I yield back my
remaining time.
Chairman GOLDEN. Thank you, Congressman.
We are going to do a second round. I know I have still got
plenty of questions and, you know, I don't know who else will
be sticking with it, but I will certainly recognize them as
well if they do have more questions.
Ms. Tapani, could you just quickly confirm for me so I
understand, were you, prior to the coronavirus pandemic,
already--you had a preexisting relationship with the company
you are making a part for.
Were you also already a government contractor?
Ms. TAPANI. So, yes, we are not directly supplying the U.S.
Government, but we are a supplier to a number of prime
contractors and have done work in support of those. We are also
an ITAR registered company doing work in that realm as well.
And the company that we were making the ventilator part
for, we were already doing business with them, and we had about
a 15-year history of making that particular part already.
Chairman GOLDEN. Thank you. And, you know, I think that
possibly that might be something that we can learn from is that
where we have companies that have preexisting conditions who
are already experienced in working with the Federal Government
in the midst of a crisis where there is a need, they might be
well suited to more quickly transition if necessary.
Congresswoman Davids shared kind of a different example
with a company that had previous experience, but the
relationship was no longer there and they probably would have
needed some help in order to, you know, step in and start doing
that work that they wanted to be a part of making N95 masks.
I was going to ask Mr. Patterson, DPA authorities enabled
the small business in my congressional district up in Maine,
Puritan Medical Products in Guilford to respond to the COVID-19
pandemic and this was a company that was already making a
product swabs, which we need more of in the United States, but
they needed help in order to achieve ramping up production.
And, you know, the unique thing that took place there is,
the government helped connect them with another employer in
Maine, Bath Iron Works and working together Bath Iron Works was
able to make machines that could then be used to stand up a
whole new second production site for Puritan Medical Products
so that they could essentially triple or more their production
capacity of swabs.
It is a great example. The President of the United States
came to my congressional district to highlight this very thing.
I think it is a good example of how the DPA can work with a
small business to help them meet the needs of the United States
in the midst of a crisis, and so I wanted to ask, you present
other examples from the last few months, such as this and how
can we find out how many small businesses have been
participating in these efforts?
Mr. PATTERSON. Mr. Chairman, those are both excellent
questions. You know, the first one is kind of a theme that
myself and Mr. Black have hit on and it is that the data
reporting when it comes to the Defense Production Act is
spotty.
And so finding discreet instances of small business
participation really depends on whether or not there was a
published press release, or press report, or something that
that I could find because much of this is not readily reported
and that is not to say there aren't ways to find certain
information, but in terms of a holistic way to do it, it just
isn't there.
I certainly think that also there is ways to--like you
mentioned--to definitely utilize the small business base to get
involved, but to my knowledge, I am unaware of anyone--of any
other small business who have had that and the other point I
wanted to get to also was that, the prime level is one thing,
but we also need to think about the supply chains. I know that
a couple of my fellow witnesses talked about this as well.
Getting small businesses involved in supply chains is a
very important consideration and that is even harder to get
data on. I know that Mr. Black had mentioned FPDS. That is a
great tool. I also know that the Ranking Member had mentioned
SBA involvement.
One of the things that the SBA requires is for large
businesses to enact a small business subcontracting plan. That
is a tool that is pretty well accepted in other procurements
and could also be utilized to try and get additional data about
what is the depth of small business penetration on some of
these Defense Production Act procurements.
Chairman GOLDEN. Thank you. I only see 20 seconds left. I
do have other questions but first I have to be polite in
thinking about Congressman Balderson's time.
Do you have more questions that you would like to ask,
Congressman?
Mr. BALDERSON. No Mr. Chairman, I am fine, thank you.
Chairman GOLDEN. All right. Thank you.
I am going to go ahead then and, you know, we have had Ms.
Lockhart join us. We haven't had any more additional time to
hear from you. And I thought I would ask, Congress appropriated
a billion dollars for DPA Title 3 authorities in response to
the pandemic. A spend report said that DOD intends to invest
quite a substantial amount into the defense industrial base
addressing impacts caused by the COVID-19 pandemic.
Are you aware, has DOD shared anything about how it intends
to apply the small business preference when spending of all of
these funds? And in addition, why would it be of particular
importance, in your opinion, to ensure small business
preference is applied?
Ms. LOCKHART. Chairman, thank you very much for that
question. I am not aware of a formal document or anything at
all. I am not sure there is such a document that states what
defense is planning to do. However, what I will say is that, on
the onset of this crisis, the Office of Small Business under
the direction of Amy Murray has been phenomenal.
NDIA and the other industrial associations have been
meeting weekly and the lines of communication are there. The
website for the small business has been updated and it is
extremely valuable. Now, combine that with an increase of
communications and then the ability to leverage DPA Title 3 to
maximize opportunities for our small businesses is a win-win.
We have seen an increase in communications. Ms. Murray has
been phenomenal. She has been reactive, and then combine that.
There was discussion about SBA. Well, I think the Office of
Small Business is also a very important agency to be involved
in this when it comes to the small business participation as
well.
So I hope that helps answer your question, but for right
now cash flow is critical. Cash flow is and when you--to be
able to do that, it is going to really make a difference.
Chairman GOLDEN. Yeah. That is great. You just led me right
into my other question for you. You talked about your small
business survey and one of the biggest problems was cash flow
issues.
I happen to also serve on the House Armed Services
Committee and I know this is something that we were hearing
about down the supply chain was concerns that we were hearing
from, let's say, a business like Bath Iron Works about problems
that were occurring with their subcontractors, with the supply
chain where cash flow was a concern for them.
They didn't have reserves to float them through this
pandemic and the loss of revenue coming in. And there were
discussions about what DOD could do to help keep them afloat.
I wanted to give you an opportunity to continue down this
vein how Title 3 authorities might be used to help important
small firms in the supply chain to make sure that we are not
losing important assets.
Ms. LOCKHART. Thank you, Chairman. Again, another excellent
question. There has been some changes that were done for
progress payments, so increases for the small business supply
chain to increase up to the 90 percent, which has been a help.
Also for those small businesses that are primed, there had
been a big disruption. It was turbulent, right with the
transition from the Government working, and telecommuting, so
obviously cash flow became a problem because you were
transitioning into a home office environment, so there were
delays in payments. The accelerated payment is crucial for
small businesses. That is absolutely essential because we need
the cash.
Small businesses as Ms. Tapani very eloquently answered, we
do not carry the reserves like other businesses do because what
we do is we invest right back into the company. And we also
have to carry our very talented workforce, our cleared
workforce that also is very important. We don't want to lose
that expertise.
So DPA Title 3 will be able to give more opportunities for
small businesses to continue to maintain our warfighter
readiness.
Chairman GOLDEN. Well, thank you for that feedback. And
interestingly, the Ranking Member, Mr. Stauber, is the sponsor
of legislation that comes out of the work that we have had in
previous hearings where we were seeing government change order,
you know, in packages that was ultimately delaying payment to
primes and, just as importantly, to subprimes in ways--you
know, these small businesses sometimes getting paid, you know,
quickly enough for their work is critical.
And he is actually--I am working with him right now not
only as the Chair of this Subcommittee, but as a member of the
House Armed Services Committee to try and help him successfully
get his legislation into the National Defense Authorization Act
this year.
Which would ensure that when the government makes a change,
that small businesses are not negatively impacted by ensuring
that, at least, a portion of the payment is sped up on the
front end of that change and they could receive the rest when
they deliver the work.
And now I am hopeful that I will be able to help Mr.
Stauber in successfully getting that through.
Just to close things up here with a final question. Ms.
Tapani, I think it is always a good opportunity to hear from a
small business owner who has experience working with the
Federal Government.
What is the biggest obstacle that you had to overcome in
order to enter into the Federal procurement marketplace and
what advice do you have out there for other small businesses
who haven't had that experience yet, but would like the
opportunity?
Ms. TAPANI. Thank you. That is a great question. You know,
I think that just understanding the rules and the regulations
and the jargon that goes along with working in this space is a
challenge, but I would tell other small businesses that if you
take the time to try to read the information that you are given
or read the contracts or read the codes that you have----
You know, I am a business person with a degree in business,
not a manufacturing expert, but I have been able to
successfully learn to read the technical nature of a welding
code, for example, and understand it so that I can lead my
business down the right paths so that we are successful in
doing that business.
So don't give up and just try to be patient and teach
yourself what you can. I think the importance for this
Committee and others to consider is that often times as a small
business, when you talk about cash flow issues and what not. If
you are not the prime and you are somewhere farther down the
supply chain still playing a critical role in whatever needs to
be manufactured or delivered, you often don't have the full set
of information and so you might not be getting paid but you
don't know why.
An order may be delayed, but you don't know why. An order
may be canceled and you don't know why. And so I think doing a
better job from a Federal standpoint of being able to flow
information through the entire supply chain would be really
helpful because, you know, sometimes you are in the dark and
you don't know. Is it something that I did or is there some
other forces at play here that I don't fully understand?
But, you know, if I get to say nothing else today, just
know that from my perspective as a small business person who
knows lots of small businesses, we want to help and we want to
participate and we are here to do whatever we can to step up
and do what is needed.
So if nothing else, remember that.
Chairman GOLDEN. Thank you very much. That is great
feedback. I know my office has heard from businesses in that
situation of just not knowing and needing clarity and this is
what every business needs is certainty in information to make
the best decision with that they can.
Congressman Balderson, give me a thumbs up if you are all
set. If you want to ask, you are good.
All right. Thank you all very much. This has been a good
hearing, informative, and helpful to the members of the
Committee and the staff of the Small Business Committee.
So I will quickly close things off by stating what you all
know. Small businesses play an important role in the economy in
the creation of jobs. Haven't we seen that demonstrated in the
last several months as so many small businesses have been put
in tough positions and jobs have been lost.
Far too many. And thankfully through the work of this
committee, in the House, and in the United States Senate, we
had things like the Paycheck Protection Program to step in and
keep as many people connected to their employer as we could and
keep those paychecks flowing.
Small businesses are an important part of the innovation
that is going to lead the country forward into a better future.
Now more than ever, ensuring that we do everything we can to
preserve these businesses in these trying times should be a
priority.
I would like to thank all the witnesses for taking time out
of your schedules to be with us today and for providing
expertise and insight relative to this conversation about the
DPA, the challenges faced by small businesses, and the actions
that Congress can consider taking to preserve and guarantee the
vitality of our small business industrial base.
I would now ask unanimous consent that members have 5
legislative days to submit statements, 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 all very much for joining us.
[Whereupon, at 2:13 p.m., the subcommittee was adjourned.]
A P P E N D I X
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