[House Hearing, 117 Congress] [From the U.S. Government Publishing Office] THE 8(a) PROGRAM: OVERVIEW AND NEXT STEPS TO PROMOTE SMALL BUSINESS SUCCESS ======================================================================= HEARING BEFORE THE SUBCOMMITTEE ON CONTRACTING AND INFRASTRUCTURE OF THE COMMITTEE ON SMALL BUSINESS UNITED STATES HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTEENTH CONGRESS SECOND SESSION __________ HEARING HELD MARCH 2, 2022 __________ [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Small Business Committee Document Number 117-047 Available via the GPO Website: www.govinfo.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 46-931 WASHINGTON : 2022 ----------------------------------------------------------------------------------- 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 Hon. Kweisi Mfume................................................ 1 Hon. Maria Salazar............................................... 3 WITNESSES Mr. Darryl K. Hairston, Retired, Small Business Advisor, Woodbridge, VA................................................. 5 Ms. Jackie Robinson-Burnette, Chief Executive Officer, Senior Executive Strategic Solutions, Woodbridge, VA.................. 7 Mr. Arshdeep Khurana, President & Chief Executive Officer, Avosys Technology Inc., San Antonio, TX............................... 8 Ms. Qin Li, President, Soliel, LLC, Vienna, VA................... 10 APPENDIX Prepared Statements: Mr. Darryl K. Hairston, Retired, Small Business Advisor, Woodbridge, VA............................................. 23 Ms. Jackie Robinson-Burnette, Chief Executive Officer, Senior Executive Strategic Solutions, Woodbridge, VA.............. 35 Mr. Arshdeep Khurana, President & Chief Executive Officer, Avosys Technology Inc., San Antonio, TX.................... 50 Ms. Qin Li, President, Soliel, LLC, Vienna, VA............... 60 Questions for the Record: None. Answers for the Record: None. Additional Material for the Record: Ho-Chunk Incorporated........................................ 67 THE 8(A) PROGRAM: OVERVIEW AND NEXT STEPS TO PROMOTE SMALL BUSINESS SUCCESS ---------- WEDNESDAY, MARCH 2, 2022 House of Representatives, Committee on Small Business, Subcommittee on Contracting and Infrastructure, Washington, DC. The Subcommittee met, pursuant to call, at 11:00 a.m., in Room 2360 of the Rayburn House Office Building, and via Zoom, Hon. Kweisi Mfume [Chairman of the Subcommittee] presiding. Present: Representatives Mfume, Carter, Salazar, Stauber, Meuser, and Fitzgerald. Chairman MFUME. Good morning, everyone. I would like to officially call this hearing to order. And without objection, the Chair is authorized to declare a recess at any time. I would like to begin by noting some important requirements. Let me begin by saying the standing House and Committee rules and practice will continue to apply during this hybrid proceeding. All Members are reminded that they are expected to adhere to these rules, including decorum. House regulations require Members to be visible through a video connection throughout the proceeding, so please, if you are on a video connection, keep your cameras on. Also, please remember to remain muted until you are recognized to minimize background noise. 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 they have returned to the proceeding. I want to again thank all of our witnesses who are here today. I appreciate your time and your effort to get here and I have a few comments. Throughout our history, small businesses, especially those owned by socially and economically disadvantaged individuals, have faced real challenges when it comes to participating on equal footing in the American economy, and specifically in the federal procurement space. Disadvantaged businesses often navigate obstacles like discriminatory lending practices, and fewer mentorship and business opportunities as they seek to grow their businesses and, of course, to serve their customers. Recognizing the struggles that disadvantaged businesses face, Congress created the Small Business and Capital Ownership Development Program known as 8(a) that was done in 1978. I take particular pride in the landmark program because my predecessor, Parren J. Mitchell was the author of that and we are reminded of him by his picture which hangs down at the far end of this hearing room. The 8(a) program is, as we all know, a 9-year program that offers small businesses owned by ``socially and economically disadvantaged individuals'' training, technical assistance, and contracting opportunities. 8(a) participants are eligible, as we also know, for 7(j) training, which offers valuable counseling and training opportunities in financing, management, accounting, bookkeeping, marketing, and identifying new business opportunities. The federal government has also established a statutory goal of awarding 5 percent of all eligible contracting and subcontracting dollars to small and disadvantaged business concerns, including those that are not currently participants in the 8(a) program where there is still more needed support. That is why I applaud President Biden's goal of increasing the share of contract awards to small and disadvantages from 5 percent to 15 percent by the year 2025. For over 40 years, socially and economically disadvantaged businesses have relied on the 8(a) program to help them compete and innovate in the federal marketplace. When small businesses win federal contracts, they grow, create jobs, and they support our communities. While the 8(a) program helps thousands of small businesses annually, participants have reported and are still reporting ongoing challenges. For example, many business owners have reported concerns with the duration of the 8(a) program. So, when a small firm, as we know, is admitted, it typically takes a couple of years to receive its first award, which hinders the development of program participants and really raises the question of whether or not those enterprises are ready for graduation when they are expected to exit the program. 8(a) businesses have also expressed concern with the program's technical assistance and training through the 7(j) program. And today, we will ask the question of whether the training provided to 8(a) participants is, in fact, adequately preparing small contractors for graduation, in addition to how to improve the 8(a) program to better support disadvantaged businesses. And lastly, we will examine how trends within the contracting space impact small 8(a) firms particularly. For years, the size and scope of contracts have been on the rise. That has excluded, as we know, many 8(a) firms that may not have the capacity to take on larger contracts. At the same time, sole-source contract thresholds have remained unchanged over the years and over time, resulting in fewer 8(a) sole- source contracts. Before this Committee, the Full Committee, we have tackled the question of category management in the past and it is something to keep in mind as we look at reasons as to why there has not been growth in this sole source area. Consolidation in procurement has limited the ability of 8(a) firms to compete for contracts, ensuring a level playing field for small contractors is one of the utmost importance to our economy. So, I hope that today's hearing will allow us to explore actions our Committee can take to improve legislatively and to modernize the 8(a) program, a program that all of us support and many of us are still concerned with as it relates to the challenges that many of you as small business owners and many others who are viewing this hearing still find yourself confronted with. With that said, I would like to yield to the distinguished Ranking Member, the gentlewoman from Florida for her opening statement, Ms. Salazar. Ms. SALAZAR. Thank you, Mr. Chairman. Wonderful to be here for the first time in person right next to each other. And thank you to all the witnesses. As you said, contracting with the federal government is the American dream. And today's hearing is a perfect example of this work this Committee must perform on behalf of America's small business contractors. We owe it to them. Congress is at its best when we are making laws that protect the interests of all small businesses. And let me repeat that. We must help all small businesses. Congress made a point to give special recognition to socially and economically disadvantaged entrepreneurs through the Small Business Act as you mentioned, the Minority Small Business and Capital Ownership Development Program, also known as the 8(a) program. This program creates a space for entrepeneurs to grow, to compete, and to be productive contributors to our nation's workforce. The law mandates that 5 percent of the federal government spending on goods and services must go towards small, disadvantaged businesses. But, according to the SBA, this goal was succeeded in fiscal year 2021 at approximately 10 percent or close to $60 billion. That is what the SBA is saying. But I have doubts about these numbers, and also, we cannot ignore issues that continue to plague the 8(a) program. For instance, unfortunately, we are seeing that fewer small businesses are winning bigger and bigger rewards and that is a very big problem. Let me translate this for you. This means less diversity, less competition, more costs for our taxpayers, and more importantly, less money in the pockets of small business owners. We have to increase participation within all of SBA's contracting programs and enhance diversity of awards so that all small businesses can succeed and not just a few, the selected ones that know how to work the system. And the SBA's role is ensuring the success of its 8(a) participants is key. The SBA has the responsibility to make this program work. Recently, and unfortunately, I need to report that the Inspector General found that the SBA is failing to accurately measure the effectiveness of this program. So that means that we are allocating money but we do not know if that money that is being allocated is doing what it needs to do. It is effectively going to enhance and to help those small business owners. The program is as effective as its ability to root out waste, fraud, and abuse. So, the agency must aggressively tackle potential fraud and abuse within all of its programs. Every dollar going to the wrong firm is an American taxpayer dollar that is wasted and abused. So, what do we need to do? We need to ensure that the SBA is operating the program at optimal levels. That no level of fraud or abuse is acceptable. That the federal government awards the widest range of contracts to as many small firms as possible. That is the American way and that is why I am here and all of us to ensure that this occurs. I thank you. I yield back, Mr. Chairman. Chairman MFUME. The Ranking Member yields back. Thank you very much for your statement. I would like to take an additional moment to explain how we will proceed with the hearing today. Each witness will have 5 minutes to provide a statement, and each Committee Member will have 5 minutes for questions. Please ensure if you are with us through the hybrid setup that your microphone is on when you begin speaking and that you return to mute when finished. I would like to introduce our witnesses beginning with Mr. Darryl K. Hairston. Mr. Hairston serves as a small business advisor. He has assisted small businesses for more than 35 years as a dedicated employee of the Small Business Administration where he has held senior level positions, including acting administrator of the SBA and deputy associate administrator for the Office of Government Contracting and Business Development. Mr. Hairston, again, thank you very much for being with us. Our next witness is Ms. Jackie Robinson-Burnette, the CEO of Senior Executive Strategic Solutions, a consulting firm. And she is also a former federal senior executive having served in multiple positions, most recently in the SBA as the deputy associate administrator of the Office of Government Contracting and Business Development in 2016. Prior to joining the SBA, Ms. Robinson-Burnette served more than 20 years in the Department of Defense, both as a contracting officer and leading small business programs. Ms. Robinson-Burnette, thank you again, and welcome. Our third witness is Mr. Arshdeep Khurana, president and CEO of AVOSYS Technology, Inc., located in San Antonio, Texas. AVOSYS Technology is an 8(a) and HUBZone certified small business that offers information technology and management consulting services. Mr. Khurana founded AVOSYS in 1998 and that company will be graduating from the program this year. So, I want to thank you, sir, for your insight in advance because your graduation is a part of the issues that we are talking about. Not yours specifically, but the amount of time and the people who are, in fact, graduating. I would like to yield to the Ranking Member, the gentlewoman from Florida, to introduce our final witness. Ms. Salazar? Ms. SALAZAR. Our final witness is Ms. Qin Li. Welcome. She is the president of Soliel, a small business technology company providing innovative and cutting-edge technical engineering and development services to the United States Government. Ms. Li's work in government contracting began in 2010 out of a need for greater career flexibility. When an opportunity arose to subcontract to a large firm, Ms. Li took it. Good for her. And now the company is celebrating her 12th year and it is in the 7th year in the SBA 8(a) program. Under Ms. Li's leadership, Soliel has invested heavily in technology and quality operations, successfully holding many high level cybersecurity and technological certifications necessary to compete for difficult and complex government contracts. A testament to her success, Soliel has successfully served many government customers such as the United States Navy, the United States Army, and the Defense Counterintelligence and Security Agency. Ms. Li, it is a pleasure having you to testify before this Committee, and I look forward to the valuable insights I know you will provide today. Welcome. I yield back. Chairman MFUME. Thank you. I join with the Ranking Member, Ms. Li, in saying welcome to you also. Thank you for being here. We look forward to your testimony. The Chair would now recognize Mr. Hairston, if you are prepared, and if so, you are recognized for 5 minutes. Go right ahead. STATEMENTS OF DARRYL K. HAIRSTON, RETIRED, SMALL BUSINESS ADVISOR; JACKIE ROBINSON-BURNETTE, CHIEF EXECUTIVE OFFICER, SENIOR EXECUTIVE STRATEGIC SOLUTIONS; ARSHDEEP KHURANA, PRESIDENT & CHIEF EXECUTIVE OFFICER, AVOSYS TECHNOLOGY INC.; QIN LI, PRESIDENT, SOLIEL, LLC STATEMENT OF DARRYL K. HAIRSTON Mr. HAIRSTON. Good morning, Chairman Mfume, Ranking Member Salazar, and other distinguished Members of this Committee. I am pleased to present testimony in support of your examination of how the SBA's 8(a) Business Development Program currently works, the resources it provides, and to identify ways to modernize and improve the program's effectiveness. As noted, Congress enacted Public Law 95-507 in 1978 to provide statutory authority to an existing program that was previously created by Executive Order for socially or economically disadvantaged individuals. The law shifted the program's focus to Business Development and required program participants to be at least 51 percent owned and controlled by socially and economically disadvantaged individuals. Since 1978, there have been several additional amendments to the law aimed at achieving the unfulfilled goals of Public Law 95-507 by addressing abuses and improving its effectiveness. Additionally, the SBA's Office of the Inspector General and the General Accounting Office have also noted instances of fraud and the lack of quality and consistent SBA monitoring and oversight. Based on my experience, I believe the following recommendations for 8(a) business development program improvements will have a significant impact on the program's administration and effectiveness. First, while the associate administrator for 8(a) business development is responsible for the oversight of all matters related to the 8(a) Business Development Program, the business opportunity specialists who are defined by statute are the primary face of the SBA to an 8(a) participant and are responsible for delivering the programs and services of the program to participants. They work in district offices under the supervision of district management who report to SBA's Office of Field Operations. It in my view that this overlapping organizational structure creates programmatic challenges. Without the cooperation and the leadership of the Office of Field Operations, the associate administrator for business development has little to no control over the implementation of program, policies, and procedures, the hiring and selection process and no input into the performance review process. Consequently, I recommend a written agreement should be developed between the Office of the Associate Administrator for Business Development and the Associate Administrator for the Office of Field Operations delineating the roles and responsibilities associated with the district offices and the delivery of the 8(a) program. Additionally, the annual performance goals of the associate administrator for Business Development should be shared by the associate administrator for the Office of Field Operations and should be incorporated in his or her annual performance standards as well as those of the district directors and/or business opportunity specialists. 7(j) resources should be allocated to the development and delivery of specific programs and curriculums for new and transitioning program participants. For new program participants, training should focus on preparing them to compete in the federal acquisition environment as small businesses and 8(a) program participants. Similarly, for transitioning companies, this coursework might include focus on long-term planning and consideration for market expansion and diversification. Such training for new firms in their beginning stage may help alleviate the lag that many experience in receiving their first contract opportunity. Public Law 100-656 amended Section 7(a) of the Small Business Act to include an 8(a) Loan Program. Specifically, the administration was empowered to make loans either directly or in cooperation with banks and other financial institutions. I have no recollection that it was ever implemented. The implementation of this program will provide a source of critical financing for 8(a) program participants. Under Section 8a)(12) of the Act, participants are required to annually prepare and submit to SBA a capability statement. Those statements are to be disseminated to executive agencies and used during their annual contract forecasting to identify simple contracts to support the 8(a) program. I am not aware of adherence to this requirement. Adherence to this requirement would greatly improve the likelihood of a new 8(a) program participant receiving contract assistance earlier in its 8(a) program participation. And finally, there should be a focus on preparing transitional stage firms to become mentors. The Mentor-Protege program is an excellent opportunity for transitional 8(a) participants to continue their growth and development. To ensure the effectiveness of this program and validate that its objectives are being met, SBA must improve its oversight to be certain that both mentors and proteges are adhering to the Mentor-Protege Agreement and that program regulations are being followed. Thank you for the opportunity to testify in connection with this Committee's hearing on SBA's 8(a) program. I am happy to answer any questions you may have. Chairman MFUME. Thank you, sir. Ms. Burnette-Robinson, you are now recognized for 5 minutes. If I can ever get your first name in front of your second name and do this correctly before the hearing is over I will have made a major accomplishment. Ms. Robinson-Burnette, go right ahead. STATEMENT OF JACKIE ROBINSON-BURNETTE Ms. ROBINSON-BURNETTE. Good morning, Chairman Mfume and Ranking Member Salazar and other distinguished Members of the Committee. Thank you for all that you do for citizens like me, giving us a voice and a chance to be heard. I am humbled and honored to be here before you. My husband, this handsome man sitting behind me is a retired Army officer. We have two daughters serving as Army officers and one just signed her Army Cadet Command contract last week. We are a family committed to serving this nation. The 8(a) program expands our ability to easily tap into all the smart people in different corners of our country to help tackle the nation's most pressing challenges as we engage in humanitarian efforts or defend our great country, within our borders and across the globe. In the simplest terms, the 8(a) program offers a small, disadvantaged business a chance to learn how to win a federal government contract or subcontract, perform the work with their own money or an SBA loan, and if the work is deemed acceptable and timely, then expect payment. When I arrived at the SBA in December 2014, I found the pool of firms shrinking. As an inclusive leader, I brought my team around the table and asked for solutions. I wish I could say the excitement and the shift in operations that later led the team to win the highest- ranking award at the SBA was due to how smart I was. But it turns out, if you bring smart people around the table and support them, you have a win. I would like to share my thoughts today. Unfortunately, a considerable amount of 8(a) firms graduate and they struggle to stay in business 5 years after graduation. I recommend giving 8(a) graduate mentors priority with the Mentor-Protege program application process. It is a low-cost and effective way to help them quickly transfer their knowledge to a new 8(a). It would increase the competitiveness of a protege and build longevity for the graduate. For months, the Office of Federal Procurement Policy and GSA and contracting executives from multiple federal agencies met to create and implement category management. However, there were no small business executives at the table with an equivalent seat. The SBA had a seat but no voice and SBA regulations lagged behind for years without inclusion in the federal acquisition regulation like the similarly situated rule. I would suggest that Congress require OFPPs for our counsel to consider its regulations in tandem with the SBA's rulemaking. I also recommend a full-time senior executive at the Office of OFPP who understands contracting and values the contributions of small businesses. They would have a seat at the table where the discussion is category management, priorities for updates to the FAR or the next acquisition reform. I ran into a retired Army Lieutenant Colonel West Point graduate and he said he has tried unsuccessfully since 2016 to get 8(a) certification. He was a Special Forces officer. He trained Army and Foreign Services. He won a 5-year contract with the Special Operations Command. He shared with me his letter of rejection. One, his Board of Directors meeting minutes where he elected himself as president, treasurer, and secretary had errors in it. The other, he had 93 percent of his revenues from Special Operations Command. These issues are irrelevant to eligibility. I am not advocating for dismissing eligibility rules, but there must be a shift in the SBA culture to ensure that the program is accessible for eligible firms. I also recommend the SBA develop justification to significantly increase their 7(j) budget, and I know that Congress historically provides the funds based on it and I would ask you to support the increase. The 8(a) program typically has vacant positions for the 8(a) BOS and the business development specialists. I know that the SBA is considering virtual support and I would recommend that the SBA also bring on an HR professional from another agency under detail to help assist objectively look at the allocations. I also think the 8(a) sole source threshold should be raised from $8 million for services and $10 million for manufacturing. I understand the simplified acquisition threshold is not within your jurisdiction but I would like it to be increased. I would recommend an increase from $250,000 to $1 million. Finally, I know that the smart SBA employees in our federal agencies will raise the bar and support President Biden's goal of increasing contracts to small, disadvantaged businesses. His goal is bold but it is very achievable. I urge you to take my suggestions today to further strengthen the program. Thank you. Chairman MFUME. Thank you, very much, Ms. Robinson- Burnette. And Mr. Burnette, welcome to you also. Mr. Khurana, you are recognized for 5 minutes, sir. STATEMENT OF ARSHDEEP KHURANA Mr. KHURANA. Chair Mfume, Ranking Member Salazar, and Members of the Subcommittee, thank you for the opportunity to testify before you today. My name is Arshdeep Khurana, and?I am the president and CEO of AVOSYS Technology, headquartered in San Antonio, Texas. AVOSYS provides enterprise IT support, information assurance, software development, healthcare staffing, biomedical research and support services to the federal government's clients. Established in 1998, I have grown the company from a one-man operation, to currently servicing over 50 commercial and government contracts across 14 states. When I immigrated to United States, I was in pursuit of higher education and had the American dream of becoming an entrepreneur. After naturalization, I started my business from my apartment with a single dial-up server connection with a server. For over a decade, I serviced several small and mid- sized businesses as a trusted chief information officer. My business was 100 percent commercial when I was accepted to the SBA's 8(a) program in 2011. Through the program, my company has been able to grow and become highly successful in the federal marketplace. I am particularly proud of the multimillion dollar competitive contract I was awarded to provide clinical healthcare support services to the Air Force base clinic to service our men and women in uniform. It is an incredible honor to provide these services, and my company would not have been here today without the 8(a) program, tremendous support from my family, and the ever gracious, the Almighty Lord. The past 2 years have been difficult for small businesses, and 8(a) firms are no exception. I was thrilled when this Committee added an extra year to the 8(a) program as part of the pandemic response. This lifeline helped companies like mine save jobs and stay afloat. While this extension was incredibly impactful, the pandemic has unfortunately impacted operations not just for 1, but for 2 years. Recovery did not truly begin until the current fiscal quarter, leaving many 8(a) companies approaching graduation without feeling like they had their full time in the program. For companies like mine to truly succeed, adding an additional year extension would make all the difference. Given the increasingly complex and competitive procurement environment, I also recommend extending the 8(a) program to 10 years permanently. The decline in the number of 8(a) firms has caused concerns across the program. According to the SBA, in August 2021, there were about 4,906 program participants, while in 2010, there were about roughly about 7,000. I believe this is happening for a number of reasons and I suggest the following changes to the 8(a) program in order to increase the number of successful participants and dollars flowing to small, disadvantaged businesses. First, limiting the sole source awards to individually owned 8(a) firms and other socioeconomic set asides are too small. I suggest the Committee to increase the sole source threshold as you did in the 116th Congress by eliminating the option years and allowing the amount of $4.5 million and $7.5 million each year for services and manufacturing, respectively. Group-owned 8(a) firms have seen huge success with the raising of their sole source threshold five times to $100 million without justification. Therefore, individual firms would also welcome this important change with similar five times increase from the current threshold amount. Second, multiple 8(a) procurements are being bundled and consolidated with scope additions making their follow-on contracts too large for the individual 8(a) companies' current direct award threshold level. Data on these awards remains too broad; therefore, I suggest SBA break down their annual scorecard spend into four subcategories. Mapping of the impact of these dollars would assist the administration in identifying contracts that could be set aside or directly awarded to individually owned 8(a) firms. Third, changing the business activity target requirements is necessary to the developmental stage of the program. It should start with the award of the first contract instead of right away. Additionally, 8(a) competitive dollars should be considered as small business competitive dollars meaning the Business Activity Target (BAT) restrictions would only apply to sole source revenue. Similarly, other program continuity ratios including the audit requirement threshold should be at least adjusted two to three times. I cannot express the appreciation I have for the 8(a) program and how it has dramatically changed my business after a tough survival in both the 2001 and 2008 recessions. I am sincerely thankful for the excellent support obtained from the San Antonio Small Business Administration office and the many SBA specialists on officers who are working hard for the thousands of 8(a) business like myself. Not only does AVOSYS's success impact me but it also impacts more than 200 employees I have hired around the country as a result. Thank you for holding this important hearing and I look forward to answering your questions. Chairman MFUME. Thank you, sir. We will get to questions in just a moment, but I want to make sure that we go to Ms. Li for her 5 minutes of testimony and to say welcome again. Thank you. STATEMENT OF QIN LI Ms. LI. Thank you, Chair Mfume, Ranking Member Salazar, and other Members of the Subcommittee. I am really thrilled to be here to testify today. My name is Qin Li. I am the president of Soliel, LLC. Soliel is headquartered in the D.C. area in Vienna, Virginia, and we bring innovative technical solutions to our customers to help them develop and transform and modernize their IT systems and infrastructure. So originally from China, I came here and got my Master of Science degree from George Washington University 25 years ago. And I have called the D.C. area home since then. Soliel's adventure into the government contracting is also out of necessity. When I was seeking treatment for my middle child, who has a very rare chromosome abnormality. So, when the opportunity to subcontract arose, I took that risk and that is how Soliel started in government contracting. And 12 years later, today, we very proudly support a number of DoD agencies, including DISA, Army, Navy, and DCSA. And that success is really a testimony to our commitment and investment in innovation and technology, as well as the contributions from our team. It is also remarkable if you think about only 9 percent of women-owned businesses are Asian American owned, and only 6 percent of the science and engineering employees in the United States are Asian. So, it is really a remarkable and very humbling experience for me. And again, I want to really thank this Committee to advance policies that will further advance the interests for this Committee, especially the 8(a) program. So, Soliel started in 2010 as a second-tier subcontractor as I mentioned earlier. And then we became a first-tier subcontractor. Gradually, we started bidding for small business prime contracts. So, we received our 8(a) designation in June of 2015. That is 5 years after we started our government contracting business. So, the first 5 years we were subcontractors and really building up our performance and qualifications. The 8(a) program is really a game changer that provided Soliel a critical, if not the only contract to really prime and be successful. So, I am very passionate and I am sincerely grateful for the program. While it has allowed me to find a successful way forward, I also just want to outline some thoughts on specific elements of the program that can be further improved. So, one of the challenges as mentioned earlier is for the graduating and successful 8(a) companies to minimize the potential loss in revenue once they graduate from the program and they are no longer an 8(a). So, I believe greater assistance from the SBA is much needed in this transition period out of the program. For example, it would be very helpful for the SBA to consider allowing contracts performed by a graduated woman-owned or HUBZone company after they graduate for that contract to be solicited as either a HUBZone or woman- owned instead of just an 8(a) contract. This way, it aligns with the SBA's overall goal as the Ranking Member has mentioned to really advocate for the entire small business community, not just 8(a) or HUBZone or woman-owned. So, it is fully aligned with that if the graduating 8(a) is still a small business. But it also allows the graduating 8(a) companies to minimize the revenue loss and still retain their revenue. The other thing that we could use a lot of help from the SBA is oversight of the Mentor-Protege program. It is a very powerful program and Soliel has been in that since the second year we were admitted to the 8(a) program. While there is a lot of structured paperwork and very good oversight during the initial formation of the JV, there is not as much SBA supervision in the later stage, especially in the execution stage of the JV. So, there is also very limited recourse if the mentor is not fulfilling its commitment. And so, giving the SBA greater power with respect to the enforcement of the JV will really help 8(a) companies like ours, the Mentor-Protege program greatly. So again, I really appreciate the opportunity to be here today. It is very much an honor and I look forward to answering questions. Chairman MFUME. Ms. Li, thank you very, very much. And my thanks to all of the witnesses who are with us this morning. I would like to call your attention to the fact that we have been joined by the distinguished gentleman from Pennsylvania, Mr. Meuser, and welcome him, obviously, to this hearing as well. We have got some questions. You have all had great comments and great suggestions. One of the things I know I can say on behalf of myself and the distinguished gentleman from Florida, our Ranking Member, is that we passionately want to make the 8(a) program much better. It is not something that divides us. It is something that unites us. And I think beyond this hearing, we have got to go directly to the administrator of the SBA to figure out what can be done in the time that we have. And I tell you, I speak out of a little bit of frustration. I joined this Committee in 1987 when I first got elected to the Congress. Served for 10 years, Chaired the Subcommittee, went away for 24 years, came back, and many of the problems and the issues and the suggestions that we were listening to then have languished. They are still before us today. So, it is a passion and there is absolute unanimity between the Ranking Member and myself to try to find a way to get something done legislatively with every bit of strength that we have. So let me recognize myself for 5 minutes and we will proceed with the Ranking Member and the order of Members as they appear. Mr. Hairston, we all know the 8(a) program is a 9-year program divided into two phases--an initial 4-year development stage and a final 5-year transition stage. You have heard from some of our witnesses today with respect to changing that, restructuring it because 9 years is not enough. Can you speak to this 9-year timeframe? Give us from your own experience a sense as to whether or not you believe, like many do, that it is just not enough time for a small firm to develop the skills needed to adequately compete in this economy, and by the time they do they are out the door. Mr. HAIRSTON. Thank you for that question. I listened to those comments with interest. Several years ago, we developed a proposal to redesign the 8(a) program along the lines that were mentioned by the witnesses. One of the things that we talked about was the fact that most firms coming into the program were truly eligible for the program, had little experience in the federal marketplace, and found it difficult to navigate the federal system early on and their ability to achieve contact assistance was hampered to an extent and sometimes they were 3 or 4 years in the program before they actually realized some success in achieving that. The question around whether or not 9 years is long enough, I think the timeframe is highly dependent upon how successful firms are coming into the program and how well they take off with the benefits that are available to them in the program. My thinking along those lines is that the program should be a 9-year program. I think the way it is structured though and how that term is implemented is what is important. I honestly believe that when a firm first comes into the program it should be provided targeted resources for learning how to do business in the federal environment. They should be given assistance in understanding acquisition trends, understanding how to respond to solicitations, understanding how to develop relationships and market themselves. And when I think of marketing, I do not speak of marketing generally. I speak of marketing and how that is actually done effectively in the federal system. I think a firm's term should be dedicated to receiving assistance under the 7(j) program targeted to developing its ability to do business in the federal government. If after that 1 year it does not receive a contract, its term may start. Or, if it receives a contract during that 1 year, maybe its term starts in that 1 year. I would look at structuring a program in phases that allow for business development to lead the way to success in the program. Chairman MFUME. Okay. Thank you, Mr. Hairston. Ms. Robinson-Burnette, I would like to just turn to you quickly before yielding. As was previously mentioned, the president has a goal of increasing the share of federal contracting dollars to small and disadvantaged firms from 5 to 15 percent by 2025. In your experience, are there any specific steps that the SBA should be taking and that we should be holding them accountable for to ensure that the initiative results in agencies reserving more opportunities for the 8(a) program and not less? Ms. ROBINSON-BURNETTE. Thank you, Chairman, for that question. When I was a contracting officer years ago, in accordance with the Federal Acquisition Regulation and my contract training, my first step was to conduct market research for any acquisition that came across my desk to determine if the rule of two could be met. Can two or more small businesses do the work? And if so, I would set the work aside for small businesses or I would find an indefinite delivery contract or GWAC, one of these multiple award contracts that would allow set-asides for small businesses. With the shrinking acquisition workforce and the new increase in use of GWACs and category management, contracting officers are picking a contract vehicle first, bypassing the small business staff, and saying that contract does not require them to set aside for small business. Even if an incumbent is the small business that would be devastated with the loss of this work, or if the program was in the 8(a) program, they pull it out and put it into these contracts, I think the SBA must get more depth and more depth engaged with the OSDIBU and the small business directors at these agencies to learn what is really happening at their level in terms of the challenges they have with getting contracting officials to abide by the rule of two. The OFPP memo, the White House Memo M2203, Advancing Equity and Procurement, now requires OFPP and SBA and the OSDIBUs to work together on category management. I think it is important that they look across the government and engage in every level. Our contracting officials abiding by the rule of two. When small businesses can do the work, is the work going to small business? Thank you. Chairman MFUME. Thank you, very much. My time has expired. I want to yield to the Ranking Member, the gentlewoman from Florida, Ms. Salazar, and I want to call your attention to the fact that we have been joined by the gentleman from Wisconsin, Mr. Fitzgerald, who is also a Member of this Committee. Thank you, sir. Ms. Salazar? Ms. SALAZAR. Thank you, Mr. Chairman. And I agree with you that we have the bipartisan spirit in trying to find solutions for this program because we are all, at least I consider myself part of the American dream. And Ms. Li said it specifically and the other witnesses as well. And thank you, Ms. Robinson- Burnette, for your service. Not only yours but the handsome husband behind you and the children that are joining the Armed Forces of the United States. Very laudable. So, thank you. I think I have a question for all of you but I am going to start with Ms. Li. In very simple terms, if there is something that you need to fix with the 8(a) program that you are saying that helped you so much and it put you where you are right now, what would it be? What would you do if you had the power to fix that 8(a) program? Ms. LI. Number one, thank you for that question. Thank you. Number one would be to raise the threshold as echoed by my fellow witnesses. The current threshold of $4 million for services is way too small. Time has moved on. Contracting has moved on. Everything has moved on but that threshold stayed. And what that does is it really is an impairment to regular individual 8(a) companies. And Soliel, my company, had multiple times for our 8(a) contracts to be taken away because there is not enough threshold. Either they were given to 8(a) companies that can attain or support $100 million threshold or they were being put on other contract vehicles due to the consolidation, category management, all those reason to be put on an IDIQ contract as a task order. So that is our number one. Ms. SALAZAR. Number one. Okay. Okay. Let me give the opportunity to Mr. Khurana. One thing that you would do, that you would fix with this program? Mr. KHURANA. Ma'am, I would echo Ms. Li's comments as well. The threshold is way too limiting. It deserves the same increase as the group-owned 8(a)s, up to at least $22 million for the individual 8(a) owned. This will make a significant impact on the competitiveness for the business as they get ready for the competitive non-8(a) small business awards as well. The second would be to really enhance measures to the scorecard goals that is set for the agencies to recognize what really makes the bottom line difference to more than 99 percent of the companies like myself, which is identifying the trackability as you mentioned, ma'am, earlier, if the dollars being spent on the direct awards is indeed going to the individually-owned 8(a)s. And what the recent trend contrary has been unfortunately that the threshold has shifted predominantly to the group-owned 8(a)s in the recent years because of their unique capability to get awards at a much higher threshold value. Ms. SALAZAR. All right. Ms. Robinson? Ms. ROBINSON-BURNETTE. Thank you for that question. Some federal agencies have started decreasing their contracts going to the 8(a) program because the pool was shrinking and they did not want their contracts tied into the 8(a) program and not have enough firms to perform the work. I would make sure that the SBA shift their focus to include every firm that is eligible. The SBA can provide statistics on their applications, but when I was at the SBA, I though the issue with the declining pool was we were not receiving enough applications. Then I found we were receiving 2,300 applications a year and certifying 300. Ms. SALAZAR. You said something about shifting the SBA's culture. Ms. ROBINSON-BURNETTE. Yes. Ms. SALAZAR. What do you mean by that? Ms. ROBINSON-BURNETTE. Right now the focus is making sure they mitigate the risk of firms getting into the program that should not be in the program. Focusing on the fraud and really, that is the 1 or 2 percent of firms that apply. And so, the other 90-plus percent of firms are struggling to get in, like this lieutenant colonel that I talked about, because the SBA is focused on the wrong thing. Ms. SALAZAR. And I would like to hear your opinion. We have a problem where the SBA is allocating those funds but is not tracking if those funds are being successful. Meaning, like at a university. We are paying for the tuition but we do not know if the student receiving it is getting good grades, if it is attending classes, or if it is graduating. So, the money is not being, I believe that is just, we do not know if it is being well used. So, do you feel the same way? Do you think that is your impression? Ms. Li? Ms. LI. Yes, I tend to agree. And one of the questions we always ask is how do you measure a program's success? Is it by how many new 8(a) companies are being admitted or how many 8(a) contracting dollars that went into individual firms like ours? Or is it by how many are graduating and how many are still in business 5 years after? Ms. SALAZAR. Which one do you think should be the right answer? Ms. LI. I think it should be number one, the dollars that actually go to individual 8(a) firms. And number two, are they still in business 5 years after graduation? Ms. SALAZAR. What do you say, Mr. Khurana? Mr. KHURANA. I would echo exactly the same, ma'am. Ms. SALAZAR. Ms. Robinson? Ms. ROBINSON-BURNETTE. Yes. The number of dollars---- Ms. SALAZAR. What should be the guidelines? Ms. ROBINSON-BURNETTE. The number of dollars going to eligible, to firms. And not just the super 8(a)s but the individually-owned small businesses. The number of firms. And then how many firms graduate and can stay in business after 5 years. I would also like to add, how many firms graduate and can actually sell their company to a new 8(a) that comes in. It is important that we reduce the burdens on that. A woman-owned can sell to another woman-owned and their contracts stay. A veteran to a veteran. If an 8(a) sells to another 8(a), a graduate 8(a) sells to a new 8(a) and transitions, those contracts are slated to be terminated. And that is unique only to the 8(a) program. Ms. SALAZAR. Mr. Hairston, I am going to give you the last word. I think he is muted. Chairman MFUME. Mr. Hairston, we cannot hear you. Mr. HAIRSTON. I apologize. I agree with the issues around measuring success, but I think you also have to consider the motivation of the entrepreneur coming in and what constitutes success to that entrepreneur. I think measuring based on dollars received is a fair measure, but we cannot forget that this is a business development program and it has basically survived based on the notion that it is a business development program. So, anything measuring success also has to be attributed to the business development assistance that has been provided to the firm. Chairman MFUME. Mr. Hairston, I am going to ask you to begin to conclude. Mr. HAIRSTON. Okay. But I would agree with the comments of the other panelists. Chairman MFUME. Thank you very much. Ms. SALAZAR. I yield back. Chairman MFUME. The gentlewoman yields back. The Chair recognizes the gentleman from Pennsylvania, Mr. Meuser, for 5 minutes. Mr. MEUSER. Thank you very much, Mr. Chairman. And thank you to our Ranking Member as well. Thank you to all of you. Very important subject. I can see it in your eyes. You are living this and it is very essential to your business livelihood. So, the questioning that is taking place here is specific, and boy, that is what we need to do. And as the Chairman stated earlier, that he has been dealing with such bureaucracy and less than business efficiencies in these requirements for many, many years. And I am hearing all that. So, my first question would be to Ms. Robinson-Burnette, and I think I already know the answer. But do you have a white paper outlining some strong suggestions of what would be in the interest of the contracting that we could have and we could work on to actually try to implement? Do you have such a plan already written? Ms. ROBINSON-BURNETTE. Thank you, Congressman, for the question. I do not have a white paper, but my written testimony is 15 pages long that goes in-depth about the recommendations that I have offered today. Mr. MEUSER. Beautiful. I summarized it. I am sorry. I did not read the whole thing but that will suffice. Okay. So next, the administrative burdens the government placed on small businesses that everybody is agreeing we want to reduce, the fraud end of it, you say that is 1 to 2 percent, and I agree with that. I think a little bit of a phone call and a little bit of data analysis in today's information age should not be all that difficult to determine whether it is a real company or a phony-baloney company. Now, on the same note, we just came off of EIDL and we had some really rush initiatives which we are very familiar with that did have some significant fraud in them. So, it has got to be a concern. Quickly, Ms. Li, let me go to you, if you would. What can be eliminated from that so as we can have integrity and efficiency? Ms. LI. Thank you. From my own experience, the individual 8(a) program seems to be administered better than the 8(a) Mentor-Protege Joint Venture program. Soliel has been in the JV program for 6 years now. There is a lot of opportunity for the SBA to really exert oversight and improve its oversight to stop the abuse from the mentors to its small business proteges. That is where my personal experience has been focused on. Mr. MEUSER. Okay. So, you all must be aware of some companies, and you have experienced it yourself, engage in the contracting, 4-year eligibility for the contracted self and just run into barriers that do not make a lot of sense to you but you need to overcome anyway because it is a very important contract. Does that happen regularly? And do you know other companies that just give up because it seems too burdensome? Ms. LI. Yes, I do. Mr. MEUSER. Go ahead, Mr. Khurana. Go ahead. Mr. KHURANA. Thank you for the question, sir. Absolutely. Through the 9-year journey, the first 3 years I almost gave up hope. This is after surviving two recessions, surviving in commercial for 14 years, and still facing the challenges. I mean, I thought 8(a) would be to the rescue but of course, in the third year I got blessed with the first U.S. Air Force contract. Then I started to foresee a few other challenges which are roadblocks, clearly distinguishing them as such on why they are there. What I started to notice is the consolidation efforts, the bundling efforts, scope creeps on the existing requirements just to make them above the direct award threshold by the agencies so that they could make it competitive or be awarded to the super 8(a)s. And that was at a big loss of the development dollars which are much essentially needed for the development firms like myself. Another common one seen is the category management, and once we are graduating, those 8(a) requirements are being removed from the 8(a) to small business or some other category; I believe requires strengthening the PCRs of the SBA which are procurement representatives. They are our guardians. Protecting the program and the requirements within the 8(a) program. They need to be empowered, should have the influence on the agencies and the additional scorecard mechanisms, as I have highlighted a few options in my 10-page testimony. Mr. MEUSER. Lastly, and I have very limited time, do you find that ineligible companies are gaming the system and gaining the contracts more in an unfair manner? Mr. KHURANA. Sir, within the 8(a) program, I believe it is very well vetted, at least the 8(a) part. The other socioeconomic I am not too privy about but there may be some. Mr. MEUSER. Okay. And are there any reasons that businesses do not apply because the payment is not there, the requirements are too costly? And I know I am over my time, Chairman, but a quick answer to that. Do some small businesses not apply because it is simply not worth it? Please, Ms. Robinson-Burnette. Ms. ROBINSON-BURNETTE. As I said, over 2,300 firms apply every year. They are applying. Only 300 are being brought in. Firms are paying advisors $4,000 to $10,000 to do applications for them. So, they are interested. It is just very difficult to get through the cumbersome process at the SBA, not relative to eligibility but mistakes or in the application. It has nothing to do with are they eligible. Mr. MEUSER. We will certainly work on this. And thank you. And thanks for your indulgence, Mr. Chairman, for being over. Chairman MFUME. The gentleman yields back. The Chair recognizes the gentleman from Wisconsin, Mr. Fitzgerald, for 5 minutes. Mr. FITZGERALD. Thank you, Mr. Chair. My colleague on this Committee, Mr. Evans and I introduced H.R. 5861, which is the Waiver Authorization Streamline Act. It seeks to reduce the regulatory burden on the 8(a) transferring its contract to another 8(a) company. So, I know that was kind of discussed here. And after acquisitions or simply just being gobbled up by the other company, instead of going through the multi-level review process, which could span months as was brought up earlier again, SBA administration, being the authority to waive the approval process so long as the 8(a) company is absorbing the contract can perform the work. So, I am going to ask Ms. Robinson-Burnette. So before serving as the CEO of the consulting firm you served as senior exec to the SBA Office of Government Contracting, so I appreciate your experience. Based on your experience, do you believe streamlining the approval process for transferring the 8(a) contract after acquisition would help keep more small businesses in the program? Ms. ROBINSON-BURNETTE. Thank you, Congressman, for that question. The SBA administrator on a nondelegable authority is the approving authority for transferring the 8(a) contracts when an 8(a) graduate is acquired. And I believe that that authority should remain at that level. But the contract should not be automatically slated for termination without that. I believe that the only time those contracts should be terminated is if the company is going to a non-8(a), or if with the consolidation of the company that acquires it the company now becomes other than a small business. Because once you join those two companies, they could now exceed the size standards. But if they are still small, what a great way for a new 8(a) to start out with contracts, customers, and possibly the mentorship of the firm that released the company. Mr. FITZGERALD. Yeah, I do not want to overgeneralize, but sometimes those mergers are either because there is a stress on one of the two, financially, or in some instances, I mean, it makes sense because both entities kind of say, you know, we are competitors now. We should kind of unite and be more competitive in the market; right? Ms. ROBINSON-BURNETTE. Yes. Also, after a 9-year term, sometimes--one real example I had, and it was the first time I encountered this, I was actually the associate administrator of the 8(a) program, an 8(a) participant died. And now his contracts had to go to another company. And if the company was sold to another 8(a), then, of course, his family that helped him build this company could benefit but then transition the company and the employees to a new 8(a) so the company could continue to go instead of the company having to shut down, employees lose their jobs and all the contracts be terminated. So it could be because of illness, a desire to retire after 20 years in the business, or the company just wants to sell for other reasons. Mr. FITZGERALD. Gotcha. Very good. Very good. Thank you. Just real quick, Ms. Li, Wisconsin, my home state, our big three are tourism, agriculture, and manufacturing. And for the most part, light manufacturing. So, you have got kind of these smaller factories and then you have got the transportation component, and then you might have a tool and dye shop down the road. So, they are all integrated. In my experience, not only personal experience because of interacting with some of the small businesses and my father-in-law that was in manufacturing for years, but oftentimes, I mean, they would tell the story that the federal contracts would come, they would land on the desk, and they would put their best person on it. But by the time they got done bidding it and going through kind of what the standards and specs are, it just was not worth their time. So, they eventually would just give up on any of those types of contracts. The reason I bring it up is because I think there is a misnomer that, oh, my gosh, we cannot wait to get government contracts because it is just the best thing in the world and that is not always the case, I think, especially for medium to small businesspeople. And I am just wondering if you could comment on that and what your experience on that front is. Ms. LI. I would agree. Especially if you think about it, a lot of the acquisitions, even though it is a direct award or a small business set-aside, they require a huge amount of certification, especially with the cyber risk and supply chain risk for the DoD community that we support. It is a legitimate requirement, but to what extent for a small business that you need to require the same level of certification as those billion dollar companies that have resources to go through, you know, years of certification and investing hundreds of thousands of dollars to acquire those. So that is a legitimate concern and I share that. Mr. FITZGERALD. Very good. Thank you, Mr. Chair, and I yield back. Chairman MFUME. The gentleman yields back. The Chair is happy to recognize and to welcome Mr. Stauber, the gentleman from Minnesota who has joined us. Mr. STAUBER. Thank you very much, Mr. Chair. While we can all agree that increasing contracting goals of the federal government, especially of the disadvantaged small businesses, it is a laudable goal, I think we need our agencies to be more transparent. It seems to me that agencies are picking a few of their favorite small businesses, dumping all their money into those very select few, and then reporting that they are far exceeding their contracting goals year after year. So, without competition, we are guaranteed to see an increase in prices for taxpayers in the long run. Ms. Li, can you explain how contract consolidation practices has harmed more competition amongst 8(a) businesses? Ms. LI. Thank you. I would be very happy to. As mentioned by my fellow witnesses earlier, this category management---- Chairman MFUME. Ms. Li, would you speak into the microphone? Thank you. Ms. LI. Oh, I am sorry. Chairman MFUME. That is okay. Ms. LI. I would be happy to. And that is what we live with as individual 8(a) companies on a daily basis because there is the group 8(a)s that have now a threshold of $100 million. So even when there is an 8(a) opportunity that is being solicited or directly awarded and Soliel was on the receiving side of that multiple times, the question for a contracting officer is very realistically, if you have a requirement that is $4 million a year but a 5-year requirement totaling $20 million or above, so what do you do? Would you give to an individual 8(a) company that you need to then subsequently, if you are even allowed to reissue that same contract five times or four more times? Or would you give it to another 8(a) company, group 8(a) company that has a much higher threshold? So, it is really a challenge. And one of the contracts that Soliel performed, we lost that because of the real consideration, very practical considerations. It went to a group-owned 8(a) company but I cannot say the performance was up to the level, so it was subsequently recompeted. So, to your question, I am really saying one of the ways to address that is to raise the threshold so there is more a level playing field among 8(a) companies and also extending that to all small business. You have HUBZone, woman-owned, veteran-owned, SDVOSB. So that would really help the small business. Thank you. Mr. FITZGERALD. Thank you very much. That was the only questions I have. And I yield back, Mr. Chair. Chairman MFUME. Thank you very much. The gentleman yields back. The Chair recognizes the gentleman from Louisiana, Mr. Carter, for 5 minutes. Mr. CARTER. Mr. Chairman, thank you very much. I greatly appreciate the opportunity to ask questions. Let me ask a question very basically. When we talk about 8(a) contractors, we know that the issues that impacted those contractors during COVID have been somewhat adjusted by advancing an additional year. We know that many of those contractors suffered beyond that 1 calendar year. What are your thoughts on some additional time and/or assistance that can be given to those people that were graduating out of the 8(a) program but lost significant time because of the pandemic? Mr. KHURANA. Thank you for the question, sir. As a graduating 8(a), the recent addition has made a decent impact but it is not yet just enough. I will give an example. The last year, our own follow-on contract from the United States Air Force for the clinical healthcare services came up for Avosys to be able to recompete on and that was only made possible because of the 1-year extension given. However, there are many other large government vehicles which are delayed through the pandemic response in getting reprocured and I feel that I will be losing that once in an 8(a) lifetime chance to bid on them. So, I humbly request another year of extension which will make a real big difference to many graduating 8(a)s like myself. Mr. CARTER. Anyone else want to add on that? Ms. ROBINSON-BURNETTE. Thank you, Congressman. I think an additional year would significantly benefit the 8(a)s that are in the program right now. Also, I think it is incumbent on the SBA to really push the Mentor-Protege Program which allows a graduating 8(a) to joint venture with a new 8(a) and transition the contracts and continue to perform on 60 percent of the work. And this is a real legitimate way that an 8(a) that is graduating can maintain their work and their customer base. Mr. CARTER. How much of that actually happens? I hear about the Mentor-Protege Program. I hear varying thoughts on some that work, some that do not work as well. What is your general experience on the availability of willing mentors? Ms. ROBINSON-BURNETTE. Thank you for that question. I think the SBA's Mentor-Protege Program is one of the most successful programs that has come out of the SBA. The director of that program is Mr. Stanley Jones, Jr., I think one of the smartest leaders at the SBA. It is work exceptionally well and the SBA has a Mentor-Protege Program conference every year. They had one before COVID-19. And this is a great place to do matchmaking between graduated 8(a)s and new 8(a)s and allowed them to meet and connect at that event. Mr. CARTER. Can some body speak to the reverse of that, becoming and finding a protege? How successful has that been and are there seamless opportunities to create that linkage? Mr. KHURANA. Sir, I would like to add there are elements which can be implemented to come in line with the mentor- protege intention and the success which can be achieved through it. First, the sole source threshold, if it comes close to the four or five times the capacity it is, it will help directly give the empowerment to the prime contractor or the 8(a) contractor to compete for the real world awards which are generally on an average of $20 to $25 million. Two, the SBA lending program could be empowered with working with the banks to provide the line of credit which is much needed on the financial support rather than reliance on just the mentors. Three, empowering SBA with the additional PCRs for the support, they can then further help us in providing the contract legal HR negotiation support which is much needed. These are all elements which a mentor would typically provide to the proteges and SBA has been instrumental in giving many of those but more could be done. Thank you. Mr. CARTER. Mr. Chairman, unless there is somebody else that wanted to weigh in? I am sorry; did I hear someone jump in? Chairman MFUME. None of the witnesses unless it is Mr. Hairston, who is not here. Mr. CARTER. Okay, in that case, Mr. Chairman, I would like to, first of all, thank you, and thank all of our witnesses. Mr. Chairman, I ask at a later date if we can revisit the possibility of visiting with SBA to see what the likelihood and ability for us to advance discussion to consider an additional year of resources for those 8(a)s who were undoubtedly significantly harmed by the pandemic. Chairman MFUME. Thank you very much. It is so noted and I appreciate your comments. One of the things we really I think are committed to doing in this Committee is to find a way to start being able to mark some progress so that 5 years from now this is still not the discussion. And I want to take a moment just to thank again all of our witnesses, Mr. Hairston, Ms. Li, Mr. Khurana, and Ms. Robinson- Burnette. I have to say I am a little troubled to hear though, and I was not aware of this and maybe it is my own fault, that if you are an 8(a) contractor and you die or you retire after 25 years or something else happens and your business is sold to me, that all of the contracts that are in place are considered null and void. I mean, that really, really disturbs me, particularly I think as you said, Ms. Robinson-Burnette, that that is not the case with any other category of business. There are a lot of good ideas and suggestions from all of you that I hope we will find our way to make into legislation. The Ranking Member and I as I have said before are committed to real change and change that is verifiable so that we are able to mark progress. But again, I want to thank all of you. I want to thank Ms. Salazar. She was kidding earlier when she was not really kidding. This is the first time we have sat together on a Committee because we have been in a hybrid virtual situation. But here we are, the A Team. My thanks to all of you and this hearing now stands adjourned. Thank you. [Whereupon, at 12:14 p.m., the subcommittee was adjourned.] A P P E N D I X [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] TESTIMONY OF QIN LI PRESIDENT, SOLIEL LLC HOUSE COMMITTEE ON SMALL BUSINESS SUBCOMMITTEE ON CONTRACTING AND INFRASTRUCTURE ``THE 8(A) PROGRAM: OVERVIEW AND NEXT STEPS TO PROMOTE SMALL BUSINESS SUCCESS'' MARCH 2, 2022 Chair Mfume, Ranking Member Salazar, and Members of the Subcommittee, thank you for the opportunity to testify before you today. My name is Qin Li, and I am the President of Soliel LLC, located in Vienna, VA. Soliel brings innovative solutions and capabilities to help its customers develop and transform its IT systems and infrastructure. We provide technical and functional engineering, development expertise in IT modernization, cloud migration, DevSecOps, software engineering, data analytics, and cybersecurity. Bringing the same innovation and cutting-edge solutions that I worked with in the private sector to the government sector, I steered Soliel into government contracting in 2010. Soliel, a woman-owned, 8(a) company provides technical engineering and development services to the U.S. Government. We have built an impressive team of subject matter experts that have extensive expertise in computing, networking, data, and cloud. We serve many U.S. Government customers, which include the Defense Information Systems Agency (DISA), Army, Navy, and the Defense Counterintelligence and Security Agency (DCSA). Originally from China, I got my Master of Science degree from the George Washington University and have called the Washington D.C. metro area home ever since. Soliel's adventure into government contracting was also out of a need for flexibility and taking advantage of opportunity. Seeking treatment for my middle child with a rare chromosome abnormality requires more flexibility than full time employment offers. When the opportunity to subcontract to a large firm presented itself, I took the risk. Soliel's success is remarkable given that only 9% of all women-owned companies are Asian American owned, and Asian women account for only 6% of science and engineering employees in the United States.\1\ Navigating the complex acquisition process and competitive federal contracting industry is a daunting task for any company. We have invested heavily to build our own innovation lab to stay on the forefront of new ideas and technologies-- before bringing them to our customers. I am always looking for opportunities to empower other women to pursue careers in technology or start a business, as well as participate in acquisition and small business policy discussions. --------------------------------------------------------------------------- \1\ The 2019 State of Women-Owned Businesses Report: Summary of Key Trends. American Express, 2019. https://s1.q4cdn.com/692158879/files/ doc--library/file/2019-state-of-women-owned-businesses- report.pdf I would like to start by thanking the Committee for its commitment to small businesses and for advancing policies that support small businesses doing business with federal government. Soliel started in government contracting in 2010, as a 2nd tier subcontractor in support of DISA. We then became a 1st tier subcontractor, and gradually started bidding for small business prime contracts. Soliel received its 8(a) designation in June 2015, and it provided Soliel a critical contract vehicle to accelerate our growth. I would like to outline my thoughts on some specific elements of --------------------------------------------------------------------------- the 8(a) program. While the 8(a) program has allowed me to find a successful path forward, I know many companies have not had the same experience. For example, one of the downfalls for any company is relying on 8(a) awards as the majority of their business. So, when it is time to graduate, companies do not have exit strategies to transition out of the program. One of the ways the Small Business Administration (SBA) is trying to tackle this issue is through the 7(j) Management and Technical Assistance program. According to the SBA, the 7(j) program provides assistance in a wide range of business activities, including marketing, accounting, opportunity development and capture, contract management, compliance, and financial analysis. When I attended a 7(j) training, I found it was geared more towards businesses just starting out, instead of those who were newer 8(a) program participants but more developed contractors. Although training for companies new to contracting is necessary, it would be beneficial for the SBA to consider having two tracks--one for businesses who are in the beginning phases of the program and one that is more advanced. Utilizing this existing resource could be a way to tackle the issue of businesses struggling to succeed after graduation. SBA resource partners and 7(j) training would benefit from information shared from Business Opportunity Specialists (BOS) who counsel firms like mine, so that more relevant resources could be provided to 8(a) program participants.\2\ Tracking success of 8(a) participants throughout their time in the program is important for all of these programs to best support small, disadvantaged businesses (SDBs). --------------------------------------------------------------------------- \2\ See Finding 2: SBA Needs Improved Procedures for Providing Business Development Assistance. https://www.oversight.gov/sites/ default/files/oig-reports/SBA/SBA-OIG-Report-22-08.pdf It is also important to assess how participant firms are performing once they have left the program. I have heard many stories of fellow program participants struggling to continue after their 9 years have ended. A recent report from the SBA's Office of Inspector General (OIG) suggested tracking whether the program achieved business development objectives, including the number of graduated 8(a) firms.\3\ I think it is important that the Committee examine ways to ensure better success of program graduates. Additionally, greater assistance from the SBA is needed in the transition out of the program. For example, it would be helpful for the SBA to consider allowing contracts performed by a graduating 8(a) women-owned small business (WOSB) to be solicited and awarded as a WOSB contract instead of 8(a). This approach fully aligns with the goal of promoting small business success and provides graduating 8(a) small businesses additional opportunities to perform their contracts, especially when requirements were introduced into the 8(a) program by the graduating small business. Currently, all graduating 8(a) small businesses will not be able to prime for their work once they are no longer an 8(a), losing a significant portion of their revenue. --------------------------------------------------------------------------- \3\ Id. There have been some issues with SBA oversight with respect to the joint venture (JV) program, which has directly impacted my company. While there is a lot of paperwork and scrutiny in the initial stages of a JV, there is not much SBA oversight beyond that stage, and there is limited recourse if the mentor is not fulfilling its commitment. In many instances, small businesses are being taken advantage of by large companies in these arrangements. For example, Soliel's large business mentor used their ``negative control'' / ``veto'' to block the JV from responding to opportunities that they did not want to pursue, despite them being viable for the JV. This action, taken by the mentor solely out of self-interest, significantly impaired the JV's success and breaches its fiduciary responsibility as a mentor and shareholder of the JV. The issue was brought to the SBA district office, but it was not clear what recourse the SBA can give to enforce a correction of the mentor's behavior. Giving the SBA greater power with respect to enforcement of these agreements would help assist 8(a) companies, as well as --------------------------------------------------------------------------- all small businesses, when mentors take these type of actions. Further, there are additional policies that impact not just 8(a) firms, but all small businesses doing business with the federal government. Small business contractors are currently facing unprecedented economic and workforce challenges due to the ongoing COVID-19 crisis. According to the survey by the National Defense Industrial Association, 60% of small business respondents expect to have long-term financial and cash-flow issues.\4\ Additionally, the small business industrial base has been shrinking over the past 10 years. Analysis of agency data reported in the Federal Procurement Data System (FPDS) finds similar trends regarding the small business supplier base at large, including a loss of 49,000 small businesses (or 38% of small businesses) in the Federal supplier base since 2010.\5\ --------------------------------------------------------------------------- \4\ NDIA COVID-19 Small-Business Impacts Survey Summary (2020). Available at: https://www.ndia.org/-/media/sites/ndia/policy/documents/ covid-19-small-business-impacts-survey-summary.ashx. \5\ Memorandum from Executive Office of the President Office of Management and Budget M-22-03, Advancing Equity in Federal Procurement (December 2, 2021). I. Bring sole source thresholds in line with current --------------------------------------------------------------------------- government buying Since the 8(a) program has a time limit of 9 years, it is important to me that other socioeconomic set-aside programs at the SBA can be utilized after graduation, such as WOSB. One area that needs to be changed is the current sole source thresholds for individual 8(a), WOSB, service-disabled veteran- owned (SDVOSB) and Historically Underutilized Business Zones (HUBZone) certified firms. Both the House and Senate Small Business Committees have attempted to increase sole source thresholds and bring them more in line with government buying. The House passed H.R. 190 in the 116th Congress, which eliminated option years and would have allowed for the current threshold amounts per contract year. A draft of the Senate Small Business Committee SBA Reauthorization bill in the 116th Congress also made changes to the thresholds--raising them to $8/$10 million per year by eliminating option years. Included in the 2021 House passed version of the National Defense Authorization Act (NDAA) was H.R. 3065, Expanding Contracting Opportunities for Small Businesses Act of 2021. This bill raised the sole source thresholds to $8/$10 million per year but did not eliminate option years. I would like to thank the Committee for their tireless work to achieve this increase over the past two Congresses, especially Ranking Member of this Subcommittee, Representative Salazar, as well as Ranking Member of the Committee, Representative Luetkemeyer and his staff. Soliel has had multiple 8(a) direct awards where our team performed extremely well. However, because some of the requirements had a higher dollar amount than the $4 million threshold, the work was awarded other contract vehicles that have a higher ceiling threshold. In one case, Soliel's work was consolidated into another 8(a) sole source award to a community-owned 8(a) contractor because they can be awarded up to $100 million without justification. In another case, instead of making a direct award to Soliel, since the threshold was too low, our work was instead competed on a large existing indefinite delivery/indefinite quantity (IDIQ) and awarded as a task order. Broad bipartisan support for increasing small business participation in the federal marketplace dictates changes are needed to bolster awards to these businesses. Increasing these thresholds is a necessary change to acquisition policy given the average size of contracts. By making these programs more accessible for federal agencies to use such as the 8(a) program, many more small businesses will benefit. II. Strengthen subcontracting transparency and accountability Since subcontracting was so integral to my long-term federal contracting success, I want to discuss how the Committee could improve this process. Subcontracting serves as an important avenue for small businesses to enter the federal marketplace and build past performance and often the only way to win work. With larger contract being utilized by the federal government, subcontracting is more important than ever. It is critical that prime contractors are rewarded for adhering to subcontracting plans and penalized if they do not. Presently, there is little to no recourse for prime contractors that fail to meet their small business subcontracting goals. Soliel started out its federal work as a 2nd tier subcontractor. We worked as a subcontractor in the first four years of our operation. Our first competitive contract win was in our 4th year as a contractor. However, it was protested, which delayed our ability to perform. Thankfully this protest was defined by the Government Accountability Office (GAO), and Soliel was able to resume support. Subcontracting was the critical to Soliel's survival and success as a contractor, as I know it is to many other small businesses. The FY2021 NDAA included language to require large primes with subcontracting plan requirements to provide past performance evaluations when requested. However, many small businesses have faced issues when requesting this information. Creating a streamlined framework for large primes to provide this information to small businesses would greatly assist businesses trying to enter the prime contracting arena. Although reports by federal agencies show that dollars are being awarded to small businesses at consistent levels in best in class (BIC) contracting vehicles, the number of small business concerns being awarded prime contracts is shrinking drastically. Category management undoubtedly plays a role. Consequently, subcontracting is now incredibly important for small business concerns. Many small businesses are not prime awardees of BIC vehicles, and many may not have the qualifications to even bid on these large contract vehicles. Transparency should include whether prime contractors have aggressive small business goals in their subcontracting plans. It would be extremely beneficial to small businesses if data existed on three fronts: (1) the number of subcontractors on BICs broken down by small businesses and the socio-economic set-aside programs listed under the Small Business Act; (2) compliance of primes in achieving goals set forward in subcontracting plans; and (3) the percentage of subcontracting work performed by small business concerns on taskorders. A 2020 GAO report on subcontracting compliance \6\ found that agencies did not consistently follow all required procedures for oversight of small business subcontracting plans, both before and after contracts were awarded. GAO reviewed 26 contracts with a subcontracting plan at 4 agencies and found that of the reviewed contracts, about half of the agencies could not demonstrate that procedures for Procurement Center Representative (PCR) reviews were followed. PCRs are critical for ensuring small business success in federal agencies--they have been shown to increase the small business share of Federal procurement awards through their work. PCRs initiate small business set-asides, provide small business sources to identified opportunities and counsel small firms. However, there are currently a limited number of PCRs available to do this important work. Increasing the number of these positions would assist the success of 8(a) firms, both during their time in the program and after they graduate. --------------------------------------------------------------------------- \6\ U.S. Gov't Accountability Off., GAO-20-464, Small Business Subcontracting: Oversight of Contractor Compliance with Subcontracting Plans Needs Improvement (2020). Further, category management shuts out any small or midsize companies from competing for the work--the requirements were structured for very large businesses. Subcontracting is becoming an increasingly important tool for small businesses to enter the federal market. I encourage the Committee to look at incentives that would spur subcontracting plan compliance, --------------------------------------------------------------------------- transparency, and accountability. III. Align rulemaking between SBA and the FAR Council Each year, SBA issues a procurement scorecard, which indicates how agencies performed in meeting their small business goals.\7\ The governmentwide goal of contracting with WOSBs is 5%. Despite this small number, the federal government has only met this goal twice. However, fewer contracts have likely gone to WOSBs due to inaccurate reporting. Agencies often count the same dollar value towards multiple socioeconomic program goals, even though the contract was not explicitly a set-aside for more than one program. For example, if a contract is set-aside for the WOSB program, and the winning company is also a certified HUBZone and SDVOSB, those contract dollars count toward the agency's goals in each of the 3 programs. This practice ultimately inflates the data reported on small business contracting awards. It would be beneficial to the small business contracting community if agencies reported progress toward small business based on how the contract was solicited. In other words, if an agency set a contract aside for the WOSB program, then the dollars should only count as a WOSB award. This change would hold agencies accountable for truly awarding 5%, for example, to WOSBs, and result in an increase in the number of awards to small businesses. --------------------------------------------------------------------------- \7\ SBA FY2020 Small Business Procurement Scorecard, available at https://www.sba.gov/sites/default/files/2021-07/GW-508.pdf (last visited Feb. 24, 2022). Further, pervading inconsistencies exist in government contracting due to discrepancies between final rules issued by the SBA and the Federal Acquisition Regulatory (FAR) Council. This causes confusion for both companies and federal agencies on which guidance they should ultimately follow. Many in the acquisition workforce do not follow changes in small business rules unless it is in the FAR, despite the fact that final rulemaking by SBA is sufficient. The time lapse between FAR Council action and final rules promulgated by the SBA can span many years. For example, in 2016, the SBA updated its regulations pertaining to limitations on subcontracting. It took until August 11, 2021, 5 years later, for the FAR Council to finally publish two final rules that largely mirrored the SBA's. To remedy this problem, I suggest requiring the FAR --------------------------------------------------------------------------- Council issue its rulemaking simultaneously with SBA. As mentioned in the beginning of my testimony, I credit the 8(a) program to accelerating my company's success. I believe in the value of this program and thank the Committee for holding this hearing to ensure it is helping SDBs to the fullest extent possible. Thank you again for the opportunity to speak today about my experience, and I look forward to answering any questions. HO-CHUNK INCORPORATED VIA EMAIL TO: [email protected] March 14, 2022 The Honorable Kweisi Mfume, Chairman Subcommittee on Contracting and Infrastructure Committee on Small Business 2361 Rayburn House Office Building Washington, DC 20515-6315 Dear Chairman Mfume: On behalf of Ho-Chunk Inc. (Ho-Chunk), I am pleased to submit this response to the hearing held on March 2, 2022, by the Subcommittee entitled ``The 8(a) Program: Overview and Next Steps to Promote Small Business Success.'' The hearing examined how the 8(a) Program currently works as well as the resources it provides to small businesses. Members heard from stakeholders about ways to modernize the program and improve its effectiveness. We would like to thank you and other members of the Subcommittee for carefully considering the impact the Small Business Administration's (SBA's) 8(a) Business Development Program has had on small business. We would also like to expand on the information provided by the witnesses during the hearing and detail the economic opportunities the Program has provided for entity-owned companies such as ours. Background: The designation of Indian tribes as socially disadvantaged for purposes of the 8(a) program arose due to the high levels of unemployment across Indian Country, often in excess of 60%. Like other governments, tribal governments are responsible for the health and welfare of their tribal citizens. But relocation to remote areas of the Country, along with failed federal policies, led to disparate treatment of tribal governments and their citizens in areas such as healthcare, education, and home ownership. Removal and relocation left few opportunities for economic development. Acknowledging the need to create entrepreneurship and economic development opportunities for tribal governments and their citizens, tribes were included in the 8(a) Program to spur economic opportunity. Ho-Chunk believes the 8(a) Program has been one of the most successful and consistent federal programs aimed at creating economic opportunities and affecting generational change in Indian Country. We wish the Subcommittee to understand that the role of 8(a) corporations in Native Communities differs from other non-tribal small businesses. Our letter details some of the requirements for entity-owned firms in the 8(a) Program, and we make some recommendations for improvement. In 1986, Indian tribes, as owner-groups, became eligible for the 8(a) program when Congress passed legislation providing that firms owned by Indian tribes were to be deemed socially disadvantaged for 8(a) Program purposes. During the 1980s, other owner-groups became eligible for the Program, including Community Development Corporations (CDCs), Alaska Native Corporations (ANCs), and Native Hawaiian Organizations (NHOs). There are several exceptions to the 8(a) program rules for entity-owned participants based on the acknowledged lack of economic resources and access to capital. These exceptions to federal regulations allow entity-owned companies to provide revenue to their tribes that is used for health care, infrastructure for very rural communities, education, housing, language and cultural retention and revitalization, and other important tribal initiatives. The 8(a) Business Development Program certification and participation is governed by regulations contained in 13 CFR 124. These regulations are primarily the same for both individual and tribally-owned corporations, with some exceptions for ``group'' or entity-owned firms. All 8(a) companies, including tribally owned, must meet strict certification qualifications, are restricted to nine years in the Program, must be small, must report on their progress in the program annually, and must meet the limitations on subcontracting, among other CFR and FAR, contracting rules. The primary exceptions for entity-owned firms are the ability for tribes to own multiple firms in the 8(a) program and the exemption from competitive thresholds for sole source awards. These few exceptions to the Program allow entity-owned firms to provide profits to benefit communities, sometimes numbering in the hundreds of thousands of tribal citizens, as opposed to individually-owned firms that provide benefits to only the owner. Entity-owned firms, however, are the only 8(a) Participants that have a regulatory requirement that they must report on the benefits they provide to their communities during each required annual update. In addition to the requirements of an individual applicant, tribally owned firms must submit documentation with their applications that they are included on the official Bureau of Indian Affairs list of federally acknowledged Indian Tribes in the contiguous 48 states and Alaska. Tribes must also show that the applicant companies are owned and controlled by the tribe. If a non-tribal person is managing the 8(a) company, the tribe must retain control of the company and have a management plan in place that shows how the tribe is mentoring and developing tribal members to manage its companies in the future. Recommendations: SBA Systems: The SBA has modernized the 8(a) application and annual reporting process through the SBA.Certify system. The system was designed for an individual applicant and not entity-owned applicants. The Administration has tried to address the system deficiencies through training and some workarounds, however, the additional documentation required for entity-owned firms is difficult to fit into the system as it is currently designed. Ho-Chunk, Inc.'s experience has shown that the SBA analysts also have a difficult time finding submitted documentation in the system. There is a lack of communication between the SBA and applicant companies regarding the submitted applications, and a lack of transparency in the system. We recommend that SBA improve the existing system to allow for entity-owned differences and require less personal information from the managers of the companies, or create a new system that tracks the regulatory requirements of tribally certification. We support SBA's efforts in trying to modernize the reporting process. SBA Hubzone Program: We applaud SBA's efforts in recent years to improve the Hubzone Program such as allowing an employee that was living in a Hubzone at the time of certification to remain counted as living in a Hubzone if they subsequently moved outside a Hubzone, and allowing firms a one- year certification. However, Hubzone status is very difficult to maintain when performing service contracts for the federal government. Often the employees on a government contract can be in very disparate locations, most of which are not in Hubzone areas. We would like to recommend that the SBA consider a two- year certification period. Conclusion: The Native 8(a) program at the Small Business Administration has been one of the most successful economic opportunities for Tribes. In many cases, this program is the only economic opportunity available--especially for tribes who are in rural areas. Ho-Chunk Inc. through its government contracting businesses and other subsidiaries has been able to create jobs for tribal members and members of the local community, has raised the median household income of Reservation residents and has started to reverse hundreds of years of poverty on the Reservation. The 8(a) program at the Small Administration is a model of self-determination, allowing tribal governments to determine what type of businesses best suit the needs of their citizens and how to enter a market that is local, national, and international. The program musts be protected and encouraged to grow to take into account the capacity and infrastructure that tribally-owned entities now have so the gains of the corporations can be returned to the tribal governments and citizens. Please do not hesitate to contact us if you would like any further information. Sincerely, Annette Hamilton COO - Ho-Chunk, Inc. [all]