[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                   GROWING THE SMALL BUSINESS SUPPLIER BASE 
                           IN GOVERNMENT CONTRACTING

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

                                 HEARING

                               BEFORE THE

                       SUBMITTEE ON CONTRACTING AND
                       
                             INFRASTRUCTURE

                                 OF THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD
                            OCTOBER 13, 2021

                               __________

[GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 

            Small Business Committee Document Number 117-036
             Available via the GPO Website: www.govinfo.gov
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
45-780 PDF                 WASHINGTON : 2022                     
          
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                  HOUSE COMMITTEE ON SMALL BUSINESS

                 NYDIA VELAZQUEZ, New York, Chairwoman
                          JARED GOLDEN, Maine
                          JASON CROW, Colorado
                         SHARICE DAVIDS, Kansas
                         KWEISI MFUME, Maryland
                        DEAN PHILLIPS, Minnesota
                         MARIE NEWMAN, Illinois
                       CAROLYN BOURDEAUX, Georgia
                         TROY CARTER, Louisiana
                          JUDY CHU, California
                       DWIGHT EVANS, Pennsylvania
                       ANTONIO DELGADO, New York
                     CHRISSY HOULAHAN, Pennsylvania
                          ANDY KIM, New Jersey
                         ANGIE CRAIG, Minnesota
              BLAINE LUETKEMEYER, Missouri, Ranking Member
                         ROGER WILLIAMS, Texas
                        JIM HAGEDORN, Minnesota
                        PETE STAUBER, Minnesota
                        DAN MEUSER, Pennsylvania
                        CLAUDIA TENNEY, New York
                       ANDREW GARBARINO, New York
                         YOUNG KIM, California
                         BETH VAN DUYNE, Texas
                         BYRON DONALDS, Florida
                         MARIA SALAZAR, Florida
                      SCOTT FITZGERALD, Wisconsin

                 Melissa Jung, Majority Staff Director
            Ellen Harrington, Majority Deputy Staff Director
                     David Planning, Staff Director
                           
                           
                           C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Kweisi Mfume................................................     1
Hon. Maria Salazar...............................................     3

                               WITNESSES

Ms. Alba Aleman, Chief Executive Officer and Founder, Citizant, 
  Inc., Chantilly, VA, testifying on behalf of the U.S. Women's 
  Chamber of Commerce............................................     5
Ms. Lynn Ann Casey, Chief Executive Officer and Founder, Arc 
  Aspicio, Washington, DC........................................     7
Mr. Victor Holt, Chief Executive Officer and Founder, V-Tech 
  Solutions, Inc., Silver Spring, MD, testifying on behalf of the 
  HUBZone Council................................................     8
Ms. Sophia Tong, Chief Executive Officer and Founder, T and T 
  Consulting Services Inc., Falls Church, VA, testifying on 
  behalf of the Montgomery County Chamber of Commerce............    10

                                APPENDIX

Prepared Statements:
    Ms. Alba Aleman, Chief Executive Officer and Founder, 
      Citizant, Inc., Chantilly, VA, testifying on behalf of the 
      U.S. Women's Chamber of Commerce...........................    26
    Ms. Lynn Ann Casey, Chief Executive Officer and Founder, Arc 
      Aspicio, Washington, DC....................................    32
    Mr. Victor Holt, Chief Executive Officer and Founder, V-Tech 
      Solutions, Inc., Silver Spring, MD, testifying on behalf of 
      the HUBZone Council........................................    36
    Ms. Sophia Tong, Chief Executive Officer and Founder, T and T 
      Consulting Services Inc., Falls Church, VA, testifying on 
      behalf of the Montgomery County Chamber of Commerce........    43
Questions and Answers for the Record:
    Questions from Hon. Fitzgerald and Responses from Ms. Tong...    51
    Question from Hon. Mfume and Response from Ms. Tong..........    55
Additional Material for the Record:
    National Veteran Small Business Coalition....................    56

 
   GROWING THE SMALL BUSINESS SUPPLIER BASE IN GOVERNMENT CONTRACTING

                              ----------                              


                      WEDNESDAY, OCTOBER 13, 2021

              House of Representatives,    
               Committee on Small Business,
    Subcommittee on Contracting and Infrastructure,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 12:04 p.m., via 
Zoom, Hon. Kweisi Mfume [chairman of the Subcommittee] 
presiding.
    Present: Representatives Mfume, Newman, Andy Kim, Hagedorn, 
Stauber, Meuser, Salazar, and Fitzgerald.
    Chairman MFUME. Good morning, ladies and gentlemen. I want 
to call the Subcommittee to order.
    Without objection, the Chair is authorized to declare a 
recess at any time today.
    I would like to begin by noting some important 
requirements. Let me begin by saying that the standing House 
Committee rules will be in practice today and will apply during 
these remote proceedings. All Members are reminded that they 
are expected to adhere to these standing rules, including 
decorum when they are, in fact, participating in any remote 
event.
    With that said, the technology that we are utilizing today 
requires us to make some small modifications to ensure that 
Members can fully participate in these hearings. House 
regulations require Members to be visible through a video 
connection throughout the proceedings, so please keep your 
cameras on. If you have to participate in another proceeding, 
please exit and then log back in later.
    In the event that a Member encounters technical issues that 
prevent them from being recognized for their questioning, I 
will then move to the next available Member of the same party 
and will recognize that Member at the next appropriate time 
slot provided that is that they have returned to the 
proceedings.
    Should a Member be interrupted by technical issues, I will 
recognize that Member at the next appropriate spot for the 
remainder of their time once those issues have, in fact, been 
resolved. In the event that a witness loses connectivity during 
testimony or questioning, I will preserve their time as staff 
attempts to address whatever technical issue may be at hand. I 
may need to recess the proceedings to provide time for 
witnesses to reconnect. And finally, please remember to remain 
muted until you are recognized to be able to minimize 
background noise.
    In accordance with staff rules, staff has been advised to 
mute participants only in the event that there is inadvertent 
background noise. Should a Member be recognized, they obviously 
then must unmute themselves to seek recognition again at the 
appropriate time.
    I want to thank all of you for participating in this 
meeting, this hearing, and to say that you that I am hoping 
that we make a great deal of progress as we get through the day 
and all that we have to do.
    The United States Government is the largest purchaser of 
goods and services in the world. In fiscal 2020 alone, federal 
agencies obligated more than $650 billion in federal contracts. 
They did that through their buying power because the federal 
government is uniquely positioned to incentivize the economy 
and strengthen the industrial base. Thus, it really is vital 
that small businesses then have ample opportunity to compete in 
this space.
    When small firms have the ability to compete and then win 
federal contracts, American entrepreneurs and the federal 
government all benefit. Unfortunately, the federal small 
business supplier base has shrunk a staggering 40 percent over 
the last decade. This decline means less opportunity then for 
small businesses to support livelihoods and to support the 
communities that they, in fact, serve.
    Now, while this decrease cannot be attributed to any one 
factor, it is safe I think to say that Category Management has 
been a driving force behind the decline of the number of small 
firms serving as federal prime contractors.
    Category Management, or CM as it is known, is a government-
wide procurement initiative that involves buying common goods 
and services as a single enterprise. The intended goal as we 
know of the initiative is to eliminate redundancies, increase 
efficiencies, and deliver more savings by leveraging the 
federal government's buying power.
    Now, these are all worthy goals, but the policy has 
resulted in pushing small businesses in many instances out of 
the federal procurement space. Category Management discourages 
the use of individual contracts and consolidates requirements 
into large contracting vehicles, leading to less competition 
and then ultimately fewer contracting opportunities.
    In 2020, GAO issued a report showing that while dollars and 
contract actions have grown for small businesses within the CM 
initiative, the overall number of small businesses and vendors 
receiving awards had, in fact, declined.
    So to put it mildly, I think it is fair to say that a 
select number of small businesses were able to navigate and 
benefit this complex system, while many others were pushed out 
altogether.
    In fiscal year 2016, 92,000-plus small businesses provided 
common products compared to just 79,114 of those same 
businesses in 3 years, a drop of 17 percent in that 36 month 
period. If this trend persists, it will have a severe 
consequence, both for the federal government and for the small 
business base. Fewer small businesses will lead to less 
innovation, higher costs, and then ultimately a weaker supply 
chain.
    So I think it is not a stretch for me to say that all 
Members of this Committee believe in bringing in more 
efficiency and less redundancy to our procurement system. Yet, 
we cannot advance these goals at the expense of small 
businesses, which are still, and will always be, the backbone 
of our economy.
    That is why we must ensure that the implementation of this 
initiative does not run counter to the protections afforded to 
small businesses under the Small Business Act. And so I look 
forward to the hearing. I look forward to our panel today, to 
be able to talk about the challenges that Category Management 
continues to pose for small businesses and what, in fact, this 
Subcommittee and what Congress can do.
    With that, I would like to yield to the Ranking Minority 
Member, Ms. Salazar of Florida for her opening statement.
    Ms. Salazar?
    Ms. SALAZAR. Yes, thank you, Chairman, for being here with 
us and for giving me the opportunity to talk to the rest of the 
Subcommittee. I appreciate you holding this hearing to support 
greater small business participation in federal government 
contracting.
    As I explained to you, I wanted to do it in person. It is a 
lot more warmer and you can definitely share more thoughts but 
I understand that now is the time to do as we are doing. 
Hopefully, next time we will be able to do it in person in 
Washington.
    So small businesses are critical to our nation's security, 
innovation, and the economy. And because of this, the federal 
government needs a strong small business supplier base. We 
don't have a strong the small business supplier base, and it is 
the federal government's fault.
    In the last decade, the number of small contractors shrank 
by nearly 40 percent. Let me say it again. We have lost over 
one-third of our small contractors in less than 10 years. If 
that does not shock us, let me tell you more. In the last 15 
years, the number of new entrants to the federal marketplace 
declined by nearly 80 percent. Clearly, the federal procurement 
environment has become so hostile to new small businesses that 
they just do not even try.
    We need to act now to stop this axis and we at the federal 
level need to figure out what is happening. For instance, we 
need to reevaluate the government's use of what you call 
contract bundling. That happens when several small contractors 
are combined into one unnecessarily large contract.
    Another problem is what we call Category Management. That 
is when contractors are grouped together in categories, but 
this leads to picking winners and losers and that is not our 
job at the federal level. That is the marketplace job.
    To be fair, Category Management has worked, and as of 
recent, small business contracts can now be classified as a 
Tier 1 contract, an upgrade from before.
    Category Management can also be useful to track federal 
purchasing habits, identify efficiencies, and keep contracting 
costs down.
    With that said, we cannot be naive when it es to how this 
will impact our small business suppliers. I want to give you an 
example. The government is increasing spending towards Best-in-
Class (BIC) contracts, which according to the government are 
the preferred and recommended contracting method. But these 
contracting methods at this hour are only benefitting a few 
contractors from above the rest, stifling competition, and 
reducing opportunities. In other words, the current category's 
management efforts appear to be benefitting the few to the 
detriment of many. And the end result is the federal 
government, while it is desperately looking to save a few 
pennies, is destroying the small business supplier space.
    Let me share another example. The Office of Management and 
Budget, the OMB, eliminated one whole category of contracts 
called the Tier 0 contracts. They celebrated this as a major 
success. They said that it would only impact 5 percent of small 
businesses. But let me tell you something. There was another 
fact check conducted by the Government Accountability Office 
that it said that that new bracket eliminated thousands of 
opportunities for small businesses that had been eliminated by 
the Category Management. In other words, it does not work.
    I promised my constituents in District 27 that one of my 
goals from this office, the Congressional Office, was to make 
thousands and thousands of them, thousands of small business 
owners vendors of the federal government and it has not 
happened.
    So let me conclude with this thought. The decline of small 
business federal contractors to inflate directly to healthy 
competition and innovation. This comes on the heels of another 
staff job report in September, last month. The United States 
economy added only 200,000 new jobs compared to the 500,000 
that were affected. So the federal government must do a lot 
more to provide opportunities for the small businesses in this 
country.
    I thank you. I would like to thank the witnesses for their 
expert testimony today, and I yield back.
    Chairman MFUME. Thank you very much, Ms. Salazar. The 
gentlewoman yields back.
    I would like to take a moment now to explain how this 
hearing will, in fact, proceed. Each witness will have 5 
minutes to provide a statement and each Committee Member will 
have 5 minutes for questions. Please ensure as I mentioned 
earlier that your microphone is on when you begin speaking and 
that you return to mute when you finish.
    With that said, I would like to introduce the order of our 
witnesses.
    Our first witness is Ms. Alba Aleman. And I hope I am 
pronouncing that correctly, the founder and CEO of Citizant, 
Inc., located in Chantilly, Virginia. Citizant is a certified, 
woman-owned business and a former 8(a) firm. The company 
specializes in creating solutions to complex government IT 
challenges, including application development, testing, 
automatization, enterprise, data management, and quality 
process improvement. Ms. Aleman has led Citizant through 22 
years of successful service delivery on mission critical 
government programs. Welcome, Ms. Aleman.
    Our next witness will be Lynn Ann Casey, the founder and 
CEO of Arc Aspicio, a certified woman-owned small business. Arc 
Aspicio is a consulting absolutions company that provides and 
solves problems I should say by applying integrated 
capabilities in strategy, design, data, capital, behavioral 
science, and in technology. Ms. Casey founded Arc Aspicio in 
2004 and has a proud career of driving innovation for 
government agencies. Welcome, Ms. Casey.
    Our third witness today will be Mr. Victor Holt, founder 
and CEO of V-Tech Solutions, Inc. V-tech is a HUBZone 1 
certified former 8(a) veteran-owned small business that offers 
technology, information, and a wide range of professional 
services. Mr. Holt founded V-Tech in 2000 after serving in the 
United States Air Force and working in the private sector for 
Lockheed Martin, Northrop Grumman, and Hewlett Packard. We 
appreciate your time and expertise, Mr. Holt. Welcome to you as 
well.
    I will now yield to the Ranking Member to introduce our 
final witness. Ms. Salazar?
    Ms. SALAZAR. Yes. Thank you, Mr. Chairman.
    Our final witness is Sophia Tong. She is the founder and 
chief executive officer of T&T Consulting Services, Inc., a 
woman-owned small business. Ms. Tong is also a graduate of the 
Small Business Administration's 8(a) program. Under her 
leadership, T&T has grown from a small two-person business in 
2004 to over 100 employees at this time. Under Ms. Tong's 
direction, T&T has achieved numerous, difficult to obtain, 
certifications in both a diverse array of federal government 
and commercial clients. Ms. Tong holds over 15 years of 
experience in software engineering and project manager. She has 
earned a Master of Science in Computer Science from the 
University of Maryland and her Bachelor of Science in Computer 
Science and Information Engineering from the National Chiao 
Tung University in Taiwan. She is a certified project manager 
professional and also information technology infrastructure 
library certificate. Due to her hard work and exemplary 
leadership skills, Ms. Tong has received many accolades, 
including the 2008 American Business Awards Executive of the 
Year Award, the Washington Business Journal 2019 Minority 
Business Leader Award, and the 2019 Small Business 
Administration's Small Businessperson of the Year in Northern 
Virginia. Ms. Tong, I look forward to hearing your testimony 
and I yield back. Welcome.
    Chairman MFUME. Thank you, Ms. Salazar.
    Ms. Aleman, you are now recognized for 5 minutes. Please 
proceed.

STATEMENTS OF ALBA ALEMAN, CHIEF EXECUTIVE OFFICER AND FOUNDER, 
  CITIZANT, INC.; LYNN ANN CASEY, CHIEF EXECUTIVE OFFICER AND 
FOUNDER, ARC ASPICIO; VICTOR HOLT, CHIEF EXECUTIVE OFFICER AND 
 FOUNDER, V-TECH SOLUTIONS, INC.; SOPHIA TONG, CHIEF EXECUTIVE 
     OFFICER AND FOUNDER, T AND T CONSULTING SERVICES, INC.

                    STATEMENT OF ALBA ALEMAN

    Ms. ALEMAN. Good morning, Chairman Mfume, Ranking Member 
Salazar, and Members of the House Small Business Committee, 
Subcommittee on Contracting and Infrastructure. Thank you for 
the opportunity to speak with you today about the topic of 
Category Management.
    My name is Alba Aleman, and I am the founder and CEO of 
Citizant, Inc., a small government services firm based in 
Chantilly, Virginia. We employ nearly 200 professionals who 
support federal agencies in 27 states. I am an active Member of 
the Women's Chamber of Commerce and serve on their Category 
Management Task Force. Citizant has been in business since 1999 
and we have weathered many storms--Y2K, 9-11, Katrina, numerous 
government shutdowns, continuing resolutions, administration 
and policy changes, and the Budget Control Act of 2011. Through 
all of these national emergencies and disruptions, we have 
diligently continued to serve important missions at the IRS, 
Department of Defense, Department of Homeland Security, and the 
Department of Justice, just to name a few.
    The purpose of my testimony today is to share my first-hand 
insights about the detrimental impact that Category Management 
is having on the small business supplier base. Category 
Management has disproportionally stripped small, minority, and 
woman-owned businesses from access to federal contracts. It is 
responsible for the erosion of 30 percent of my own business in 
the last 2 years. It has widened the gap between small and 
large contractors to the detriment of our economy and has 
reduced the availability of innovative cost-effective solutions 
for our government.
    Recent executive orders introduced a concept called 
``Tiered Spending'' under which federal procurement departments 
are forced to use a small handful of government-wide contract 
vehicles, Best-in-Class contract vehicles. These BICs, like 
Alliant 2, VETS 2, and OASIS, account for hundreds of billions 
of dollars of spend among very small groups of prequalified 
contractors. And of these vehicles, only VETS 2 and OASIS 
provide a swimlane for a handful of small, minority, and women-
owned businesses.
    Category Management and Tiered Spending rules create 
significant problems for small businesses. Whereas large 
contractors have the experience and credentials to qualify for 
nearly every single BIC, small businesses are hard-pressed to 
qualify for even one. Competing for these BIC contracts 
requires a small business to have already spent hundreds of 
thousands of dollars on certifications, have tens of millions 
of dollars in prior contracts, and meet dozens of other 
requirements that only the largest businesses would ever have.
    Here is a sobering statistic. Only .0001 percent of small 
businesses--that is, 1 in 100,000--have access to 100 percent 
of the BIC spending. And these ``small businesses'' are not 
small by most industry standards. They sometimes have $100 
million in revenue, have been around for decades, and have 
thousands of employees. Of the tens of thousands of small 
businesses who might want to pursue a BIC contract, only a few 
dozen will ever receive an award. The small businesses that do 
not earn a seat at the table in a BIC contract are effectively 
barred from competing during the 10-year life of that contract.
    At the end of the day, the steering of government spending 
to large businesses results in a loss of millions of small 
business jobs. Large businesses are offshoring many of the jobs 
won on government contracts including BICs. With a 
concentration of contracting in the hands of fewer, larger 
businesses, the government loses the benefit of competition to 
lower prices. Furthermore, when large businesses subcontract to 
small companies, they mark up our services by 25 to 40 percent 
without additional value to the government.
    Innovation is stifled. And let's face it, most of the 
innovation in today's economy comes from small businesses and 
entrepreneurs. And the hollowing out of small businesses in our 
industrial supplier base creates National Security risks in 
countless industry sectors.
    As an immigrant, I am not deterred by hard work or 
challenging times. I view it as my honor and responsibility to 
shoulder and protect the future of a vibrant, small business 
ecosystem in the U.S. And I am encouraged by the protections 
for small businesses included in the National Defense 
Authorization Act, including exemptions from Category 
Management for small business in all socio economic categories. 
Provisions like these are absolutely essential to protecting 
the viability of America's small business contractors who have 
already been pressed to their limits.
    I am immensely grateful for the opportunity to address this 
Subcommittee and for the work that you do to preserve diversity 
and inclusion in our federal government supplier base.
    I will gladly answer any questions. Thank you so very much.
    Chairman MFUME. Thank you very, very much, Ms. Aleman. We 
appreciate your testimony.
    Ms. Casey, you are now recognized for 5 minutes.

                  STATEMENT OF LYNN ANN CASEY

    Ms. CASEY. Chairman Mfume, Ranking Member Salazar, and 
Members of the Committee. Thank you for the invitation.
    My name is Lynn Ann Casey. I am the founder and CEO of Arc 
Aspicio, a woman-owned small business that has provided 
innovative professional services to the federal government 
since 2008.
    I am also a Member of the Board of Directors of the 
Professional Services Council and work often with other small 
businesses who serve the federal government and this topic is 
of particular importance to me.
    Category Management is an urgent issue for my company and 
other small businesses since it is contributing to the trend of 
decreasing the small business supplier base and running counter 
to the purpose of the Small Business Act.
    In my testimony, I plan to offer some ideas and potential 
solutions to help grow the supplier base. All of my remarks 
refer to professional services rather than any items or 
products.
    While Category Management does help increase procurement 
efficiencies, our company has seen it reduce the number of 
small businesses and the number of opportunities that are 
available for companies like mine to compete on. This in turn 
reduces innovation that small businesses bring.
    In terms of the challenges of Category Management, we have 
been competing as a subcontractor and a prime contractor with 
the federal government for 13 years who are very experienced. 
We have been on several Category Management Best-in-Class 
vehicles, and despite our extensive experience and exceptional 
performance, we have only won one of those. And that is after 
spending hundreds of thousands of dollars.
    We are also a mentor to another small business in a Small 
Business Administration Mentor Protege program under an 8(a) 
program. So both Arc Aspicio and our protege, which are very 
different in the stages of maturity in our company, have seen a 
significant reduction in the number and size, as well as the 
scope of opportunities for us available to compete and pursue 
competitively. We love hard work and we love to compete. We 
just want the opportunity to compete.
    Many new and recompete contract opportunities for Arc 
Aspicio have moved to Best-in-Class contract vehicles where we 
were not a prime contractor and therefore, could not pursue the 
work.
    Agencies have raised significant concerns about not being 
able to allow their incumbent small businesses to bid for their 
recompetes competitively. Allowing small businesses to 
recompete on follow-on contracts after successfully delivering 
to the government should be a regular practice in small 
businesses. And yet, Category Management does not allow this 
competition and it prohibits innovation, competition, and it 
does not allow for continuous improvement.
    In addition to fewer opportunities to pursue, it is very 
difficult for small businesses to compete and win Tier 3 BIC 
contracts. You have to have hundreds of thousands of dollars' 
worth of certifications and these BIC contracts often 
disproportionately favor small businesses who have extensive 
experience and certifications with the Department of Defense.
    And yet, many other departments outside of DoD use these 
vehicles but they cannot get access to their current small 
business contractors. As a result, there are fewer small 
businesses, there is less competition, and while the revenue to 
small businesses may be increasing, it is to a much smaller 
base of small businesses. So ultimately, very small businesses 
are getting acquired or are just dropping out of the market and 
we are dramatically reducing the small business supplier base.
    There are four potential ideas that I suggest and provide 
additional information in my written testimony. I would 
encourage the Committee to explore looking at Category 
Management for Spend Under Management (SUM) and exempting small 
business goals from the Spend Under Management to expand the 
opportunities for set-aside contracts.
    Legislation to increase simplified acquisition thresholds 
from $250,000 to $1 million or more is another idea. 
Considering legislation or policy to allow the GSA Multiple 
Award Schedules for professional services contracts to be a BIC 
is another solution.
    Thank you so much for the opportunity to testify today and 
I welcome further questions on my testimony. Thank you to the 
Committee.
    Chairman MFUME. Thank you very much, Ms. Casey. We 
appreciate your testimony.
    Mr. Holt, you are now recognized for 5 minutes.

                    STATEMENT OF VICTOR HOLT

    Mr. HOLT. Thank you, Chair Mfume, Ranking Member Salazar, 
and Members of the Subcommittee. Thank you for the invitation 
to testify today.
    I am Victor P. Holt, president and CEO of V-Tech Solutions, 
Inc. As a minority veteran-owned HUBZone firm, we provide 
health, technology, and professional services. We most recently 
celebrated our 21st anniversary.
    Today, I testify as the Vice Chair of the HUBZone 
Contractors National Council. The Council is a nonprofit trade 
association that provides information and support for companies 
and individuals interested in the HUBZone program. The HUBZone 
program provides economic assistance to historically 
underutilized business zones by awarding federal contracts to 
HUBZone companies that operate and employ workers who live in 
designated HUBZone tracts. We would like to thank the Committee 
for its commitment and support of small government contracting 
businesses. We also thank you for highlighting the topic of 
Category Management.
    This is a topic that the Council continues to be concerned 
about. Council Chair, Shirley Bailey testified in 2018 before 
the Committee on this topic. Today, we are here again facing 
the same bleak outlook as 2018. The cause for concern remains 
simple--small business access to government contracts.
    Small businesses are the engine that fuels the American 
economy. We bring growth, innovation, and employment 
opportunities. We embody the promise, hope, and future of our 
country. However, substantial challenges and barriers still 
exist. The Council continues to believe that Best-in-Class 
contracts create enormous barriers for small businesses. As the 
government moves away from direct award contracts, business 
opportunities decrease for the small business community. The 
large buying contracts used in Category Management require 
substantial resources to bid and win. These contract 
requirements keep small businesses from competing. This 
includes stringent past performance or other requirements that 
are impossible for a small business to beat.
    Subcontracting comes with its own challenges as well. This 
includes small margins and often alignment with a large or mid-
size prime based solely on cost. BIC vehicles also have a 
crippling effect on small business competitive opportunities. 
Approximately 25,000 small businesses provide IT services to 
the government, but for the OASIS Small Business Pool 1, only 
30 slots are available. Additionally, some Best-in-Class 
vehicles do not have on ramps. This restricts the opportunities 
for future on ramping for small businesses. Hence, shutting us 
out from high dollar contract opportunities.
    According to Bloomberg Government, IT spending represented 
more than half of the Best-in-Class market in FY20 with the 
Best-in-Class spending goal of FY21 at approximately $48.4 
billion. With a large portion of IT spending going through 
these Best-in-Class contracts, winning a recompete or direct 
award may be even more challenging than before.
    Category Management, when applied to broad acquisitions, 
does not consider that innovation provides incredible value. 
Best-in-Class should not resemble lowest price technically 
acceptable. We hope the government does not mistake lowest cost 
for best value.
    As to popularity of utilizing Best-in-Class contracts 
increases, HUBZones and other small businesses have pure 
opportunities to compete. In fact, the government has never met 
its goal to obligate 3 percent of the eligible prime contract 
dollars to the HUBZone community. This represents 23 years of 
missed opportunities and unawarded dollars to HUBZone companies 
that can train, employ, and mentor constituents within your 
HUBZone tracts.
    No one would disagree with the goals of efficient 
government by and saving taxpayer money. However, we believe 
Category Management comes at a cost. It can restrict the 
ability of small businesses to grow through federal contracts. 
The Council urges the Committee to exercise its authority to 
ensure the government's procurement policies, specifically 
Category Management, utilize small businesses.
    I thank you for the opportunity to speak today and look 
forward to engaging in continued dialogue.
    Chairman MFUME. Thank you very much, Mr. Holt. We 
appreciate your testimony. We will be back to you, obviously.
    Ms. Tong, you are now recognized for 5 minutes. Please 
proceed.

                    STATEMENT OF SOPHIA TONG

    Ms. TONG. Chairman Mfume, Ranking Member Salazar, and 
Members of the Subcommittee, I thank you for the opportunity to 
testify before you today. My name is Sophia Tong. I am founder 
and CEO of T and T Consulting Services, Inc. (T&T). We are 
located in Falls Church, Virginia. T&T is a woman-owned small 
business. We specialize in providing strategic IT solutions to 
the federal government that allow them to successfully achieve 
their mission objectives on time and within budget.
    I am testifying today on behalf of the Montgomery County 
Chamber of Commerce (MCCC) in Montgomery County, Maryland.
    Today's topic is very important for the small business 
contracting community. The impact of Category Management is 
increasingly evident in my industry and affecting our company. 
Agencies are bundling contracts that were previously performed 
successfully by small businesses, rolling them into large 
contracts and awarding them to large businesses. The outcome of 
this action is killing small suppliers like ours. There are 
countless examples of this in the IT field.
    For example, in August of this year, the Defense Health 
Agency (DHA) awarded a large business a single award 10-year, 
$2 billion blanket purchase agreement (BPA) to support the 
Military Health System's Enterprise IT Services Integrator 
requirement. By taking this work and bundling it into a massive 
single award contract, a monopoly is created, allowing the 
large business to control (and raise) prices on the worked 
performed for the government. Large businesses always claim 
there is no harm to the small business supplier base as 
contract consolidation happens, because they will hire the 
small businesses as subcontractors.
    However, the fact is large firms often take substantial 
cuts. Small businesses are usually given unrealistically low 
rates and it makes it difficult to meet requirements, recruit, 
and retain resources--the margins are too thin. Additionally, 
small business lost the close relationship we had with the 
government client when we were prime and now we have become 
subcontractors.
    Another example, large businesses also use high rates they 
receive from the government to steal the workforce from small 
businesses. There are numerous instances where Members of my 
team have been hired by large business that were awarded my 
previous contract, all due to the consolidation efforts. 
Unfortunately, my experience is that government clients are 
unable to help in resolving those disputes.
    And the third one, primes have also bullied small 
businesses, leveraging their existing network and relationships 
with government clients to try to steal contracts from 
successfully performing smalls. For example, we received a sole 
source contract to create a minimum viable product (MVP) for an 
organization under DHA. The contract is still ongoing, and the 
customers are very satisfied with our performance. But, because 
the contract is very important and could potentially become a 
very large contract, we were contacted by many large businesses 
wanting to be a part of this effort. One of them is Google. 
When Google found out we were not able to bring them on the 
team, Google wrote a ``letter of concern'' to DHA complaining 
that DHA awarded this contract to a small business. This type 
of behavior is common and increasingly concerning.
    Although we have grown to a larger small business, newer 
and smaller entrants are particularly hard-hit with Category 
Management. Even for mature, well-established small businesses 
with a diverse portfolio, like us, contract bundling and 
consolidation is hurting these businesses. The cost of getting 
on a Best-in-Class contract is substantial and requires 
significant investments just to get a slot. Category Management 
continues to shift an increasing number of dollars to large 
contract vehicles. Additionally, Category Management has 
accelerated a decline in diversity of vendors with large dollar 
amounts held only by a few companies.
    The Chamber applauds inclusion of provision in the FY2022 
NDAA by the Committee to combat the effects of Category 
Management and any future bundling strategies. MCCC also 
understands additional factors are contributing to the supplier 
base decline, in addition to Category Management: increasing 
transparency and accountability in subcontracting, as well as 
increasing R&D investment to maintaining and growing the small 
business supplier base.
    In conclusion, small businesses are asking for equity, a 
fair chance to compete for contracts. We are asking for actions 
from this Committee to change the trajectory of contract 
consolidation which in our view creates opportunities for large 
businesses but results in fewer opportunities for a small 
business like us. We need your help and appreciate the 
opportunity to bring these issues before you today. Thank you.
    Chairman MFUME. Thank you very much, Ms. Tong.
    We are going to begin our questioning in just a minute. I 
want to again thank all of the witnesses. I know you have much 
more to say and hopefully you will get that opportunity as we 
go around the table so to speak and have Members join in with 
questions.
    I will now recognize myself for 5 minutes.
    Ms. Aleman, I would like to really just start with you. We 
all know that the ultimate goal of Category Management is to 
increase efficiencies and to decrease duplication and things 
that harm the process. And yet, what we see as we have all 
heard today and which many of you have given in your 
testimonies, has been an adverse effect on small businesses.
    Now, I know some of you, and I want to come to you in just 
a moment, had some specific suggestions, but Ms. Aleman, what 
do you think we can do to strike the right balance as the 
Congress with oversight between the goals of Category 
Management and ensuring that we still have a robust small 
business base?
    Ms. ALEMAN. Thank you. I think that the actions already 
taken in the house version of the National Defense 
Authorization Act already addresses some of the important 
topics that we have been testifying on. For example, an 
amendment to the Small Business Act included in the NDA states 
that all contracts awarded under the relevant sections of the 
Small Business Act will be classified as Tier 0. In essence, 
they will not be aligned to Category Management principles and 
not be required to be enforced under Category Management rules. 
And it further stipulates that these Tier 0 contracts shall not 
be included in metrics related to Category Management rules and 
that federal agencies shall not re-classify Tier 0 contracts to 
Tier 1, 2, or 3 without approval from the SBA administrator. 
This is a really important step to preventing future small 
business awards from being rolled up into massive procurements 
for large businesses as is currently being done with several of 
our own task orders at the IRS.
    As a metrics person, as a person who lives for numbers, I 
can tell you that people will do what they are measured 
against. If you measure them against what percentages they do 
in each of these tiers, and Tier 0 is not an option for them, 
guess what? They are not going to use Tier 0.
    Chairman MFUME. Okay. Ms. Casey, you were specific in your 
written testimony. You have four recommendations. Is it fair to 
assume that all of these recommendations that you listed are 
still very much needed and necessary? And if you would, could 
you kind of prioritize them and let the Committee know what is 
the most important or the second most important issue?
    Ms. CASEY. Yes, of course. As Ms. Aleman just said, the 
number one item would be to consider the language that allows 
small businesses and small business to be considered in 
Category Management such that they would not get count against 
the metrics. And so that would allow more small businesses to 
compete. So I agree with that recommendation. And if that 
cannot be done, considering that for professional services 
contracts, considering the GSA schedules which are very 
successful for both new entrants and current small businesses 
to win prime contracts should be considered because they are 
competitively awarded under GSA. And so they should be 
considered under Category Management.
    I would also strongly consider that you look at not only 
current SBA increases in small business size standards but 
future increases that keep the small business supplier base 
very healthy or very important.
    Chairman MFUME. Okay. I am going to quickly go to you, Mr. 
Holt. You talked specifically about loss of competition, 
smaller margins. I think I also heard you say that someone from 
your firm or that you associated with came before a similar 
hearing back in 2018 and that nothing has changed in many 
respects. Any specific ideas? You have heard both Ms. Aleman 
and Ms. Casey. What are your thoughts on what we can do and 
should do to be able to turn this around?
    Mr. HOLT. I echo what they say as far as more language as 
it relates to the NDA for inclusion. One of the biggest 
challenges that we face as small businesses, especially as it 
relates to Category Management, Best-in-Class type contracts as 
a subcontractor is playing with very, very razor thin margins 
where we are asked to do a lot with a little. And it is sort of 
like sometimes just going down the line to whatever company 
will sign up for that.
    So what we are looking at is how do we hold these primes 
that we work with more accountable, understanding their pricing 
structure that you see on the procurement side and being able 
to say this is fair and justified what they are doing with 
their small businesses, that small businesses will be able to 
perform. There will not be any false starts on onboarding a 
small business, a subcontractor in getting underway and showing 
good service delivery to the federal government.
    Chairman MFUME. Thank you very much, Mr. Holt.
    Ms. Tong, I do not have any time left so I will try to hold 
off my comments and questions for our next round. But thank you 
very much for your patience.
    As I said, my time is expired, so the Ranking Member, Ms. 
Salazar of Florida, is now recognized for 5 minutes.
    Ms. SALAZAR. Thank you, Mr. Chairman. And thank you to all 
the witnesses.
    I wanted to start with Ms. Tong. You mentioned, you said 
two key words. That you were being bullied and that Google had 
written a letter to an agency which I am sorry that I did not--
maybe I did not write the name correctly and I wanted you to 
expand on the bullying situation. Who has been bullying you? 
And number two, if you could expand on that initiative taken by 
Google, and to what agency and what did the letter contain? 
Thank you, Ms. Tong.
    Ms. TONG. Thank you for the opportunity to talk about this 
issue.
    Yes, it was Google, the giant. This is a very important 
initiative taken by DHA for an organization called Joint 
Pathology Center. So DHA had conducted initiatives before and 
identified the solutions they want for this effort. And we were 
picked to be the integrator for this work. So Google called us 
and said we have talked to the executive in DHA and they like 
our solution. So I told them the solution was picked by DHA. 
All we have to do is to follow the instruction they want and 
put together the team to perform this work. So I told them. I 
said I will try to help them look for the future but I just 
cannot take them to the team. So Google turned around and sent 
a letter of concern to DHA complaining that why did DHA award 
this contract to an 8(a) company? I do not know the details of 
the letter because it was directly sent to a lawyer of DHA. All 
I know is that the customer asked us what we had disclosed to 
Google, which I did not because we signed an NDA.
    This is a very----
    Ms. SALAZAR. So you signed an NDA but nonetheless, Google 
had the information that it should have not had?
    Ms. TONG. They got the information--and also, I think they 
know something from their connection in the network in DHA. So 
they come to me.
    Ms. SALAZAR. Oh.
    Ms. TONG. I just tell them I cannot tell them.
    Ms. SALAZAR. DHA is working for Google then?
    Ms. TONG. They did not get that for the effort. So this is 
the way that DHA find out what could be possible solutions out 
there for them. And then based on their response, they will 
decide what are the solutions they would like to use for this 
effort. So Google participated but was not selected.
    Ms. SALAZAR. All right. And besides what you just described 
as Google's way of conducting itself against your interests, 
what other bullying incidents have you felt or have you 
experienced in the last while conducting your business as a 
small business owner?
    Ms. TONG. So I have another contract as an example. We 
created software that was very successful at the regional 
level. I was able to convince the CIO to bring it to 
enterprise-wide and they are very happy about it and would 
support this idea. But unfortunately, they were told by the 
contracting and one of the organizations that managed the 
money, they told them, they say, no, we cannot have more 
contracts. And I cannot say it is bullying but I think they 
have connections with the large businesses. So the award 
actually got pushed through a large business vehicle and it is 
not even an IT contract vehicle. So our customer told them, say 
we are the ones who create software and they were hoping that 
they could leverage us for this effort. But the large business 
just turned around and used the money to hire our people.
    Ms. SALAZAR. All right. Very, very insightful information 
that I am sure our Chairman is understanding that we definitely 
need to do something about this and continue protecting people 
like you all over the country that are being stolen not only 
their intellectual property but their employees, people that 
you have invested time and effort and energy into training for 
now to be then just stolen away by the bigger guy.
    Thank you. I think that my time is coming to an end. I will 
get back to you in the second round. Thank you very much for 
sharing that with us. I am sure that is not an experience that 
you have only felt. I am sure there are thousands of other 
small business owners all over the country that are 
experiencing the same thing. Thank you, Ms. Tong.
    Ms. TONG. Thank you.
    Chairman MFUME. Thank you. The gentlewoman's time is 
expired.
    The Chair recognizes the gentleman from New Jersey, Mr. Kim 
for 5 minutes.
    Mr. KIM. Thank you, Mr. Chair. I really appreciate it.
    Mr. Holt, I wanted to start with you. In your testimony, 
you noted that ``with larger contracts being utilized by the 
federal government, subcontracting is more important than 
ever.'' You identified better oversight of prime contractors' 
compliance with subcontracting plans as one solution. I have a 
legislation I am trying to put forward called the Put Our 
Neighbors to Work Act, which was also included in the House 
passed--which would require upcoming DoD subcontracting 
opportunities to be posted publicly so local small businesses 
have a better chance to compete.
    One thing that we have come across that we feel like has 
been helpful, for instance, are the procurement technical 
assistance centers (PTACs), like the one at the New Jersey 
Institute of Technology, which provides one-on-one counseling 
to help small businesses become subcontractors.
    I wanted to ask your thoughts. What other strategies should 
we be using to get more small businesses started in 
contracting? Because trying to figure out how to demystify the 
process and help them understand what might be feasible. So I 
wanted to see if you had other thoughts about the PTACs or 
about other opportunities.
    Mr. HOLT. We happen to work with the PTAC, specifically DC 
PTAC. And they are a great resource for what we have been able 
to do and they have been instrumental with our growth as it 
relates to having entry points into federal government 
introductions as well as understanding certain programs that 
are out there. So I would definitely push the PTAC as one of 
those resources for you.
    In addition, the Putting Our Neighbors to Work, when you 
said that I smiled because I always think of our neighbors as 
many different neighborhoods but me, as a HUBZone company, that 
is something that I really embrace and the HUBZone Council 
embraces that where we are always looking at how do we get 
subcontracting and prime opportunities put into the HUBZone 
arena.
    HUBZone companies, and I say this probably more than 
anyone, knows how to find these individuals, these neighbors 
that you speak of that we can identify, train, employ, coach, 
and mentor along their career journey and get them into gainful 
employment. Currently, I have about 120 employees in Alabama 
with the majority of them, 80 percent plus of them are in 
HUBZone communities. And so when I think about that, working 
with various local agencies, the Department of Employment 
Services, working with PTACs, working with veteran 
organizations who they are always looking at how do we find our 
returning heroes and our warfighters employment. So those are 
some that come to mind.
    Mr. KIM. Yeah, thank you. I appreciate that, Mr. Holt.
    I wanted to just open this up for anyone who might want to 
respond. But another issue that I keep hearing over and over 
again is about how small businesses often have fewer resources 
than larger businesses in terms of navigating red tape and the 
bureaucracy that comes with contracting with federal gvernment. 
And that obviously creates these barriers to entry for many 
qualified small businesses from the very start. So I wanted to 
ask if any one of you had any thoughts about whether or not 
there were targeted reforms that could be made to 
administrative burdens that would allow accessibility for small 
businesses to enter the market and whether or not you have any 
thoughts or some concrete thoughts here about what it is that 
we can do.
    So I will just kind of open that up if anybody has any 
thoughts here.
    Mr. HOLT. I will speak up real quickly. The HUBZone program 
has never met its 3 percent goal requirements since inception, 
23 years. There is a lot that can be done there. And I would 
offer to work with you on that. The HUBZone Council would offer 
to work with you on that.
    Mr. KIM. Ms. Tong?
    Ms. TONG. Yeah. I would like to suggest can we remove the 
J&A requirement for HUBZone, women-owned and SDVOSB sole 
source? Because right now, every time we try to do sole source 
for those three categories, the contracting officer refuses to 
do so because it has to go through the lawyer for legal review 
and it takes a long time. So even though we have the FAR saying 
that we are allowed to get a sole source but no one is doing 
that. Or very few of them.
    Mr. KIM. Great. Thank you.
    Mr. Chair, I yield back.
    Chairman MFUME. Thank you very much. The gentleman yields 
back.
    The Chair recognizes Mr. Stauber, the gentleman from 
Minnesota, for 5 minutes.
    Mr. STAUBER. Thank you very much, Mr. Chair. And thanks to 
all the witnesses.
    This is for anyone on the panel. What hurdles must small 
businesses, particularly new small businesses that are just 
starting out in the federal marketplace have to overcome to 
successfully participate in government contracts under Category 
Management? This is for anybody on the panel.
    Ms. CASEY. I am happy to take that, Mr. Stauber.
    Gosh, to be a small business entry in the market and 
telling the federal government is almost impossible. So to 
actually even learn about all of the contract peoples and the 
experience that you need to start applying for those contracts, 
it starts as a subcontractor. So you need to find out 
opportunities to subcontract. But then you need opportunities 
to prime contract. And there are fewer and fewer opportunities 
to prime contract on GSA schedules than there used to be. The 
GSA schedules used to provide a great opportunity to 
subcontract to get you ready to bid on things like a GWAC or a 
Best-in-Class vehicle. And so allowing more opportunities on 
the schedules so that small businesses can get the prime 
contract experience they need to then be a credible prime for 
the Best-in-Class vehicles is a critical pathway and very 
important.
    Mr. STAUBER. Thank you very much.
    Is there anybody else on the panel that would like to 
tackle that question or have comments on the question?
    Ms. TONG. From my experience I found was very helpful for 
the new entrants. They can enter into a Joint Venture with a 
larger company and then through the large company they can get 
sole source contracts or they can get subcontract opportunities 
to help them to get started. That is how I helped my proteges.
    Mr. STAUBER. Thank you very much.
    And Ms. Aleman, did you want to respond?
    Ms. ALEMAN. So the thing that I am look for today is the 
opportunity to create opportunities for small emerging 
companies. So one of those is through mentorships. 
Historically, and we benefitted from large businesses under the 
Department of Defense's Mentor-Protege program. And SAIC at 
that time was our mentor. We learned so much. They helped us 
with our certifications. But the DoD Mentor-Protege program 
funds those large businesses. Provides dollars for them to have 
staff to help us. So they are incented to. That does not exist 
in the civilian space. So for those that are working civilian, 
there is no funding for that. And quite frankly, as a mentor to 
other small businesses in the Women's Chamber of Commerce, I 
find that our smalls are larger smalls, like the ones 
represented here today, make better mentors to the small smalls 
than the big companies because we get them. We are there every 
Saturday and Sunday writing the proposal. We can hit each other 
up on Teams. We are talking 24/7. We understand the world they 
are living in and we are still facing some of those challenges. 
So we are closer to the fire and we have a better shot at 
really helping them. So providing funding for mentors would be 
ideal.
    Mr. STAUBER. Thank you very much.
    Mr. Chair, how much time do I have left?
    Chairman MFUME. Let's see. It looks like you have got a 
minute and one second.
    Mr. STAUBER. Okay. You know, I think that the cost savings 
for taxpayers, it is absolutely laudable. But it is clear that 
Category Management is and has a punishing effect on some of 
our small businesses. And so I would ask any of the panelists 
real quick, what suggestions do you have to make our federal 
marketplace more accessible for small business participation? 
And just give me one or two quick examples all three of you 
with the time remaining. Thank you.
    Ms. CASEY. I would suggest mandating that all of the 
agencies use a forecast system to project out what their 
requirements are so small businesses can pursue both 
subcontracting and prime opportunities and that is not 
consistent across agencies.
    Mr. STAUBER. Thank you.
    Sophia?
    Ms. TONG. So I would suggest to stop counting by the quota 
of the sole source and set aside for small businesses for the 
Category Management. And increase more sole source, more small 
business set aside for us.
    Mr. STAUBER. Thank you.
    Ms. Aleman, real quick.
    Ms. ALEMAN. Yeah. So for BICs like Alliant 2 that got 
canceled for the small businesses, they only offered 80 seats 
at the table for the 400 small business bidders. Percentage-
wise, the 50 larges that got it out of the 80 that bid does not 
make any sense. And why GSA stuck to their ground on 80 when 
they had the opportunity through the federal procurement 
process and the protest process to increase the ceiling to 120 
and they refused. They just canceled it and they essentially 
locked out small businesses from that BIC vehicle forever 
because they canceled the procurement. It is only open for the 
larges.
    Mr. STAUBER. Well, thank you very much.
    Back to you, Mr. Chair. Thank you.
    Chairman MFUME. Thank you. The gentleman from Minnesota 
yields back.
    The Chair recognizes the gentleman from Pennsylvania, Mr. 
Meuser, for 5 minutes.
    Mr. MEUSER. Thank you, Mr. Chairman. Thank you to our 
witnesses very much. This is quite an important hearing. I have 
many small businesses in my district throughout Pennsylvania 
going through much of what you are all discussing and 
revealing. And it is appreciated. And it matters. So hopefully 
we can take this information and do something with it. That is 
what our role should be. Oversight but also effectuate some 
improvements.
    And Mr. Stauber's last question on what we can do for you 
to make contracting more accessible, efficient, transparent is 
a key question here. So I noted that well.
    I would ask Lynn Ann Casey, in your original testimony or 
your testimony here losing contracts, you have lost contracts, 
or all of you have difficulty retaining contracts due to 
changes in class requirements. And sometimes that happens sort 
of late in the game or during the contracting process. Can you 
illustrate that a little more and tell us, that just sounds 
like a very challenging situation should a contract requirement 
change late in the game.
    Ms. CASEY. Yes. Often we find out, we would like to compete 
on a contract. We want to do that fairly. We are not asking to 
be rewarded a contract without a competition. But we are 
finding out later and later that our agencies are at the very 
end moving our recompetes to these Best-in-Class vehicles 
without even clearly communicating that to us. So we do not 
know where those opportunities are going sometimes and we have 
to scramble at the last minute to become a subcontractor to 
someone who is on those vehicles. And that has happened to us 
multiple times, mostly because of the department and agency-
level procurement policies that require mandatory use for 
vehicles and for Category Management vehicles. And so often we 
see those switching vehicles all the time so we cannot even 
track them. We have had multiple contracts go to large business 
instead of small on Category Management or to just go onto a 
Category Management where we are not a prime contractor and it 
does not happen all the time.
    Mr. MEUSER. Is it explained to you why that occurs? Like 
the agent that you are working with, they explain to you 
anything?
    Ms. CASEY. No. Actually, at the department level, they will 
not even publish what their policy is so we only find out about 
it by talking to a contracting officer who says very little. 
They say they cannot share a copy of the policy with us and 
they would like to get an exception for the policy but they 
actually are afraid to put their neck out and go talk to a fair 
exception process in their agencies and they really do not have 
the information to explain it. They just have to blindly follow 
the policy from their agencies.
    Mr. MEUSER. Mr. Holt, does this seem like a fair process to 
you?
    Mr. HOLT. No, it is not. And it is a process that I have 
been affected by. We had a Best-in-Class vehicle be a Stars 2--
where we were doing cybersecurity work with the Navy and there 
was a contract that we enjoyed for almost 8 years. When the 
option period was coming up they took it down to the wire. They 
did put it on the street. There was no recompete and that week 
we were informed that the small business work was no longer 
needed and I saw 75 percent of my team absorbed in a prime who 
was already doing work with that program office and they just 
took them on. So, this is something that has affected us 
personally. And what that did, that hit us, that was worth 
about $2.8 million a year in revenue that walked out the door.
    Mr. MEUSER. Okay. I am glad to hear this. Sorry it 
occurred, but glad to hear it.
    I want to change subjects a little bit and ask about 
vaccine guidance for federal contractors, both from those who 
provide product and service. Have you in your view received 
guidance that is to go into effect by December 8th, clear, 
understandable, comprehendible guidance on what type of 
vaccines or level of vaccination and all that your employees 
must have in order to keep your contracts?
    Ms. ALEMAN. So we have already published a policy for our 
employees regarding that and provided them with timelines, 
options, the path for obtaining legitimate exemptions. We have 
engaged once the Executive Order was signed, within 2 weeks we 
engaged legal counsel to develop how we would roll that out 
into our organization. We have been on all-hands calls with our 
employees. Everyone that is vaccinated has uploaded their 
vaccine cards to a private HR portal. And there are folks that 
will not get vaccinated that are not exempt and they know that 
their last day with us will be December 8th.
    Mr. MEUSER. Okay. And I yield back, Mr. Chairman.
    I will say though that I do hear from many small businesses 
that have federal contracts that they do not understand clearly 
the vaccine requirements which they want to abide by but they 
do not have the precise requirements.
    I yield back. Thank you.
    Chairman MFUME. Thank you very much. The gentleman from 
Pennsylvania yields back.
    The Chair recognizes the gentleman from Wisconsin, Mr. 
Fitzgerald, for 5 minutes.
    Mr. FITZGERALD. Thank you, Mr. Chairman.
    As somebody that was a former small business owner and a 
veteran, you know, a lot of the questions today kind of nibble 
on the edges of what is the big frustration. And it is the same 
today as I think it has been for many years and that is having 
the technical assistance available to navigate the federal 
system. And I know personally, and I think if you talk to 
specifically a couple of industries, for the most part the 
sector, light manufacturing or certainly, I was very familiar 
with the printing industry. And if you want a federal contract, 
you either need to hire out professional services that can 
navigate the federal system and the technical aspects of all 
the specs that need to be met, or you need to hire somebody 
that is full-time on staff that can work and navigate, like I 
said, the entire system. So that is a frustration that has 
existed for many years.
    I would just say there is a couple of different angles I 
think that could be helpful, and I would like maybe Ms. Tong 
could comment on this and Mr. Holt for sure. If there were 
larger contractors that were granted kind of a larger scope of 
what they could enter into or what they could actually bid on 
and then the ancillary smaller businesses, whether it is a tool 
and die shop down the street or certainly transportation 
services, if there was some way of enhancing the synergy 
between those two entities, do you think that would be helpful? 
Because that seems to be still missing out there in this whole 
discussion. And I would offer that to Ms. Tong first.
    Ms. TONG. Thank you. So I think the challenge for us to 
working with large businesses actually, they take a big cut on 
pass through when they give it to us which makes it difficult 
for us. Yes, they constantly engage small businesses but they 
just did not give us the good rate to recruit talents to be 
able to have margin or to work efficiently. And like us, T&T, 
we actually have like 15 contract vehicles. We are able to bid 
and we see all the opportunities. But challenge is more like 
some of the opportunities get consolidated, become a super huge 
contract and it is just not something small business or even 
midsize companies can bid. That is the main issue.
    Mr. FITZGERALD. Mr. Holt, do you have any comment on that?
    Mr. HOLT. Yes, sir. We actually have played on both sides 
of the field. Right now we are working with a large, coming up 
on a year, it has been a very enjoyable, enjoyable opportunity 
where they have given us custodial responsibility for the 
services that we deliver with the appropriate rates. And that 
is an anomaly. That is usually not the norm. And what the norm 
is is that depending on the health and the needs of the prime, 
a lot of times when the task order comes up for renewal or a 
recompete, they are going to ask you to lower your rate. They 
are going to ask you how do you lower your rate? And we have 
had it happen at mid-contract before where I call it the 
bullying effect where the prime will come and say, hey, is 
there any room? We need you to go down by X percent. And, you 
know, we have held our ground on some and we have had 
opportunities where we just have to walk away because we could 
not do the business. So, you know, if there was a way to have 
more compliance as it relates to the prime and how the 
government looked into how they treated their subcontractors, I 
think it would go a long way as it relates to compliance and 
oversight and ensuring proper revenue shift as far as the 
pricing that is being pushed down to us.
    Mr. FITZGERALD. Very good. Thank you. Thank you.
    In the limited amount of time that I have left, I just 
wanted to touch on something that Congressman Meuser brought up 
earlier and that is, Mr. Chairman, I think there is kind of a 
storm brewing out there on the vaccination. There are so many 
different tentacles that are kind of reaching in to the smaller 
businesses that do work or are associated with specific types 
of sectors, whether they utilize the U.S. Mail or they may have 
obviously DoD ties. And you know, what was presented I think by 
the Biden Administration as something that was only going to 
affect corporations with 100 employees or more, we are starting 
to hear, I am back in the district, that this is reaching down 
much further than that and I would hope that this Committee 
would use its voice to make sure we reach out to the 
administration and make them aware of that because, like I 
said, I think it is a storm that is brewing that could become a 
big problem down the road.
    So, and I would yield back. Thank you, Mr. Chair.
    Chairman MFUME. The gentleman from Wisconsin yields back. 
The gentleman's points are well taken and I will share them 
with the larger Committee on Small Business that might want to 
pursue that going forward.
    We are going to pursue a second round of questioning and I 
will recognize myself for 5 minutes.
    Can any of you or all of you talk to the fact about whether 
or not you were not allowed to recompete at some point in time 
on a contract and what was that like and how did you make out? 
Anyone?
    Ms. CASEY. I can speak to that, Mr. Mfume.
    Over the past 3 years, we have not been allowed to 
recompete on at least seven different contracts worth probably 
well over $15 million of work where we were getting exceptional 
ratings from the government on our performance. So it is really 
significantly affecting us. It has been many, many contracts. 
What ultimately ends up happening----
    Mr. FITZGERALD. I am going to have to jump off now, so.
    Chairman MFUME. Okay. So you will skip the second round?
    Ms. CASEY. What ends up happening is we have to give up the 
work and then our people who are doing work at that agency then 
get hired by either the large contractor or the company on 
Category Management that run the work. So it is hurting our 
long-term workforce and it is hurting our long-term revenue, 
and it is places where we were doing excellent performance. I 
am sure my fellow panelists have seen similar things.
    Chairman MFUME. And was there any effort to move you into a 
Best-in-Class situation?
    Ms. CASEY. Yes. Most of those were because they were moving 
it from say a GSA schedule to a Best-in-Class vehicle or they 
were moving it from a department-wide vehicle into a Best-in-
Class vehicle. So, yes, it was because of Category Management 
and Best-in-Class.
    Chairman MFUME. Now, I have heard the term ``bullying'' a 
couple times today and it is interesting because I think what I 
am really hearing is something that Mr. Holt referenced earlier 
and that is the way primes treat subs and that there is 
apparently a lack of best practices or a lack of guidelines. I 
mean, we put in place a number of guidelines. If you are a 
prime in order to get a sub you must do this, you must do that. 
There are a number of things that have to be complied with.
    Mr. Holt, am I talking out of school? Are you suggesting 
here that there ought to be some sort of standards that we can 
put in place even if we do it through report language? That 
would give primes some sense that they are being watched in 
terms of how they are treating subs to make sure this 
``bullying'' phenomena does not continue?
    Mr. HOLT. Yes, sir. That is exactly what I am saying.
    Chairman MFUME. And do you have any suggestions of what 
those standards or guidelines should encompass?
    Mr. HOLT. I think it should be part of their service level 
deliveries being transparent with the government, as well as 
being transparent with the subs that are supporting the primes, 
understanding what the expected revenue share is up front where 
a lot of times primes, they will say, hey, we want you on this 
particular opportunity. Give us your pricing. Give us this. 
Give us that. And when you go to talk about workshare, they do 
not want to have that conversation. That is taboo. And what 
usually can come out of that is that they start using us as 
staff augmentation as opposed to solutionists where we can 
really come in and provide something that is of value, if you 
will, that we can create more effect from this, more 
efficiency. And on the other side of the coin is for the primes 
to partner with us as opposed to just push work down to us that 
they may not want to do and that the margin may not be big 
enough for them to put their own employees in.
    Chairman MFUME. Okay. My time is short.
    Ms. Tong, you had mentioned also your not so pleasant 
experience with Google and you heard Mr. Holt. Any suggestions 
you may have also to kind of prevent that from occurring in the 
future?
    Ms. TONG. Yes. So I think right now, government only look 
at the percentage they sub out to the sub or small business but 
they never look at the financial numbers in terms of how much 
will the money pass down to small business. Or do they even 
offer to pass down the escalation to the subs? For some cases, 
we cannot ask escalation for rate adjustment, our rate over the 
year remains the same but you know that people's salaries are 
going to increase over a year. So things like that. If 
government can look at more numbers, or even use cost plus type 
of contract i.e. base on what is the actual cost they hire the 
sub and then they just give them incentives or the profit, I 
think it will help so they do not have to cut our rate in order 
to meet their financial goal.
    Chairman MFUME. Okay. Thank you very much. My time has 
expired.
    The Chair recognizes the Ranking Member, Ms. Salazar of 
Florida, for 5 minutes.
    Ms. SALAZAR. Thank you, Mr. Chairman. And this goes for any 
of the witnesses and any of the speakers. I would like to hear 
your experiences. I have heard from some of you this term of 
``buying your staff and intellectual property for pennies on 
the dollar.'' I know that Ms. Tong spoke about it but I would 
like to hear Ms. Aleman or Ms. Casey, if there are any examples 
that you want to share with us specifically when another bigger 
contractor stole from you precious employees after you had 
trained them and invested money, time, and energy in keeping 
them.
    So, Ms. Aleman or Ms. Casey or Ms. Tong. Let's start with 
you, Ms. Aleman. I am not sure if you want to share with us. Do 
you have examples where we can illustrate this practice is 
happening right now? Please do so.
    Ms. ALEMAN. Yes. This is a very recent example at the IRS. 
We have developed an award-winning solution for Dev Sec Ops, 
CICD pipeline, onboarding, saving the IRS 27,000 to 30,000 
hours a year for the automation we have done and we have 
accelerated that with a patent pending unique solution that we 
have actually patented and won a national and international 
award for. It was so critical to their filing season that they 
gave us, they issued us under the women-owned procurement 
preference, they issued us a sole source contract last year to 
continue our work because our large agency-wide vehicle got 
shut down by a BIC. And that was full and open and it got shut 
down by the BICs. So they issued us this wonderful 2-year 
contract, sole source, base and option. Come September at the 
end of our base year, we still had an option where they did not 
need to reprocure. Instead of exercising our option year which 
they need the support we provide, they bundled a series of 
large contracts into something like a $120, $200 million 
contract. So they bundled it and they said, ``No, no. 
Everything goes under that now. So you have got to go talk to 
them.'' So we did. We went to the prime, Maximus, who said, 
``Oh, no, we do not have space for you on our team.'' This is 
after award, knowing that our work would be shut down. Then 
they sent us, they batted us over, this is the bullying part 
but it is almost like collusion. They batted us over to their 
key subcontractor which we all know Deloitte is not a small. So 
Maximus and Deloitte, both of them telling each other in the 
background, ``no, no, no, do not hire them.'' Meanwhile, 
calling every single one of our employees on that contract and 
now the government is calling our employees. The government. 
The federal employees are calling our employees saying, ``Go, 
please go. We cannot shut down your work. We need it.'' We have 
been off the contract for 3 weeks and the pipeline has been 
shut down.
    So I am looking forward to January when filing season kicks 
off and they are not able to launch this because my employees 
refused to go. So they are sitting on my bench now which is 
totally fine because that is on me. That is the kind of 
decisions we small business owners make. We choose where our 
money goes. We choose to invest our profits in our people. And 
that is why they do not leave during a shutdown, during COVID, 
during contract transitions. They do not go because of that. So 
that is not only predatory but they are also positioned to 
steal our intellectual property.
    Ms. SALAZAR. Absolutely. This cannot happen and I thank you 
very much for sharing this testimony.
    Chairman, you have been listening to this. We have got to 
stop this somehow. That is what we are here for. The government 
cannot be stealing away from the private sector. So thank you, 
Ms. Aleman.
    I think I have a couple of more minutes. Ms. Casey, would 
you like to share some of your experiences with us?
    Ms. CASEY. I, too, have had similar experiences where large 
businesses have signed subcontracts with us and have given us a 
workshare. Say 30 percent of the work is supposed to be 
performed by Arc Aspicio. And if we are lucky, we will get 5 to 
10 percent of that revenue and nobody holds the prime 
accountable. And there is no way, you know, they have a lot of 
lawyers and there is no way we can kind of argue with them 
about standing forward with their teaming agreements. But they 
use our teaming agreements to actually win the contracts in the 
first place. So they say we are going to team with Arc Aspicio. 
They are going to do all this work and then afterwards they do 
not do that and I, too, have had similar experiences where a 
large prime contractor has literally taken one of my employees, 
given that employee to one of the other small businesses on the 
contract, and on Friday they leave us and they say that person 
will not work there and on Monday they are there working on the 
same contract for another small business.
    Ms. SALAZAR. Incredible.
    Ms. CASEY. Unbelievable.
    Ms. SALAZAR. Unbelievable.
    Thank you very much for sharing, both of you, and I am sure 
that we will, we are going to take action into this. And thanks 
once again. I have to yield back. I do not have any more time.
    Chairman MFUME. The gentlewoman yields back.
    The Chair recognizes again the gentleman from Pennsylvania, 
Mr. Meuser, for 5 minutes.
    Mr. MEUSER. Thank you again, Mr. Chairman. Thanks, 
everyone, again, for all this important information. I agree 
with Ms. Salazar. We certainly need to help them and act upon 
it.
    So in a couple of the testimonies and in the discussion 
that just took place, you know, Ms. Aleman referred to as 
predatory Joint Ventures between large and small firms and that 
has been discussed. But I want to delve into that a little bit 
further here where these larger firms will set up subsidiaries 
or just new companies and set up Joint Ventures. And therefore, 
are able to capture contracts that they would not normally be 
able to capture. So large companies can do that and then 
perhaps undercut along the way. I mean, that is capitalism to 
an extent; right? I mean, if you can do something better you 
are going to be able to sell it for less, but when you are 
engaged in a deliberate, truly manipulative manner that is not 
outlined in a contract. It does not state, hey, if you want to 
get a small business contract or a minority-owned contract or a 
veteran-owned contract, you cannot just set up a company with 
those people as owners and therefore now you are eligible. I 
mean, that is just clearly against the grain and inappropriate 
and should not be done and perhaps should be illegal.
    Is that something that, now, you have all been mentioning 
it but I will go to Lynn Ann Casey. Ms. Casey, is that 
something that small businesses experience related to federal 
contracts?
    Ms. CASEY. I would say that there are certain situations 
where large business prims enter into Joint Ventures. And I 
would call them serial Joint Ventures where they do it over and 
over and over. I think Joint Ventures are a good thing for 
small businesses, especially under the mentoring programs but I 
would look to maybe limit how often a large business can enter 
into those Joint Ventures and whether they are serial Joint 
Ventures and therefore, preventing other small businesses from 
benefitting.
    Mr. MEUSER. Yes. It has to be a legitimate Joint Venture, 
not just a spinoff.
    Would someone else like to comment on that?
    Ms. TONG. Yeah, can I? So my situation is my mentor, they 
actually have so many proteges which makes our Joint Venture 
was not as fruitful as I wish it would be because just with us 
it is a food fight within us. So I want to echo what Ms. Casey 
said. Limit the number of proteges they can have because we can 
only have two mentors but they can have at a minimum three at 
the same time within SBA and not to mention other agencies like 
DoD or Treasury.
    Mr. MEUSER. Thank you.
    Ms. Aleman or anyone else care to comment?
    Ms. ALEMAN. So I am a big fan of capitalism. I am a Cuban-
American immigrant. This is what my parents brought me here to 
this country to do. I believe in America, freedom, the 
opportunities it provides. I will live and die by that. And I 
can tell you that I hear the pain in Lynn Ann and Victor and 
Sophia's voice because we have all been there. And any small 
business owner that you put in front of a room and you say, oh, 
has this ever happened to you, the intent of Joint Ventures is 
a good one. Just like Category Management. It is a good one. It 
is to relieve the pressure of procurement offices.
    The reason smalls, ultra-smalls, are gravitating towards 
them knowing that they are still vulnerable is because they do 
not have a choice. So I think it is our responsibility, mutual 
responsibility, you as our elected representatives and us with 
a voice in our communities and in the organizations we belong, 
to create that opportunity for them. Let's give them the 
choice. Let's give them the choice to get work so that they can 
put other human beings to work, which is what we spend our 
money on is other human beings. So I just say create more 
opportunity. Do not shut down capitalism. That is not what this 
is about. I promise you all the small business owners I deal 
with and these on this call, we are not looking for handouts. 
We are looking for fair competition, that is all.
    Mr. MEUSER. Perfectly well said.
    Mr. Holt, last word? You have about 25 seconds.
    Mr. HOLT. I agree with everything that has been said. I 
think Joint Ventures is a good thing when done correctly. A lot 
of times we see that it can become predator where companies 
come together to capitalize and create an unfair marketplace. 
So as long as it is done correctly, I am 100 percent 
supportive.
    Mr. MEUSER. Great. Thank you.
    Mr. Chairman, I yield back. And thanks again to all of our 
witnesses.
    Chairman MFUME. The gentleman yields back. The gentleman's 
time is expired. All time has expired.
    And on behalf of the Ranking Member, I want to thank all of 
our witnesses for being here today. Your testimonies showcase 
the obstacles and many of the frustrations that Category 
Management has created for small businesses like yours across 
the country. And the longer we allow these issues to persist 
for small firms, they will be pushed out of the federal 
supplier base.
    This would be bad news, obviously, for businesses, but it 
would also be bad news for our government. So I look forward to 
working with Committee Members to find ways to improve our 
federal procurement systems while ensuring abundant 
opportunities for all small businesses.
    I would ask unanimous consent that Members have 5 
legislative days to submit statements and supporting materials 
for the record.
    And without objection, so ordered.
    And if there is no further business before the Committee, 
we stand adjourned. Thank you all very much.
    [Responses to Questions by Mr. Victor Holt were not 
received in a timely manner.]
    [Whereupon, at 1:34 p.m., the subcommittee was adjourned.]
                           
                           
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