[House Hearing, 117 Congress] [From the U.S. Government Publishing Office] GROWING THE SMALL BUSINESS SUPPLIER BASE IN GOVERNMENT CONTRACTING ======================================================================= HEARING BEFORE THE SUBMITTEE ON CONTRACTING AND INFRASTRUCTURE OF THE COMMITTEE ON SMALL BUSINESS UNITED STATES HOUSE OF REPRESENTATIVES ONE HUNDRED SEVENTEENTH CONGRESS FIRST SESSION __________ HEARING HELD OCTOBER 13, 2021 __________ [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Small Business Committee Document Number 117-036 Available via the GPO Website: www.govinfo.gov __________ U.S. GOVERNMENT PUBLISHING OFFICE 45-780 PDF WASHINGTON : 2022 ----------------------------------------------------------------------------------- HOUSE COMMITTEE ON SMALL BUSINESS NYDIA VELAZQUEZ, New York, Chairwoman JARED GOLDEN, Maine JASON CROW, Colorado SHARICE DAVIDS, Kansas KWEISI MFUME, Maryland DEAN PHILLIPS, Minnesota MARIE NEWMAN, Illinois CAROLYN BOURDEAUX, Georgia TROY CARTER, Louisiana JUDY CHU, California DWIGHT EVANS, Pennsylvania ANTONIO DELGADO, New York CHRISSY HOULAHAN, Pennsylvania ANDY KIM, New Jersey ANGIE CRAIG, Minnesota BLAINE LUETKEMEYER, Missouri, Ranking Member ROGER WILLIAMS, Texas JIM HAGEDORN, Minnesota PETE STAUBER, Minnesota DAN MEUSER, Pennsylvania CLAUDIA TENNEY, New York ANDREW GARBARINO, New York YOUNG KIM, California BETH VAN DUYNE, Texas BYRON DONALDS, Florida MARIA SALAZAR, Florida SCOTT FITZGERALD, Wisconsin Melissa Jung, Majority Staff Director Ellen Harrington, Majority Deputy Staff Director David Planning, Staff Director C O N T E N T S OPENING STATEMENTS Page Hon. Kweisi Mfume................................................ 1 Hon. Maria Salazar............................................... 3 WITNESSES Ms. Alba Aleman, Chief Executive Officer and Founder, Citizant, Inc., Chantilly, VA, testifying on behalf of the U.S. Women's Chamber of Commerce............................................ 5 Ms. Lynn Ann Casey, Chief Executive Officer and Founder, Arc Aspicio, Washington, DC........................................ 7 Mr. Victor Holt, Chief Executive Officer and Founder, V-Tech Solutions, Inc., Silver Spring, MD, testifying on behalf of the HUBZone Council................................................ 8 Ms. Sophia Tong, Chief Executive Officer and Founder, T and T Consulting Services Inc., Falls Church, VA, testifying on behalf of the Montgomery County Chamber of Commerce............ 10 APPENDIX Prepared Statements: Ms. Alba Aleman, Chief Executive Officer and Founder, Citizant, Inc., Chantilly, VA, testifying on behalf of the U.S. Women's Chamber of Commerce........................... 26 Ms. Lynn Ann Casey, Chief Executive Officer and Founder, Arc Aspicio, Washington, DC.................................... 32 Mr. Victor Holt, Chief Executive Officer and Founder, V-Tech Solutions, Inc., Silver Spring, MD, testifying on behalf of the HUBZone Council........................................ 36 Ms. Sophia Tong, Chief Executive Officer and Founder, T and T Consulting Services Inc., Falls Church, VA, testifying on behalf of the Montgomery County Chamber of Commerce........ 43 Questions and Answers for the Record: Questions from Hon. Fitzgerald and Responses from Ms. Tong... 51 Question from Hon. Mfume and Response from Ms. Tong.......... 55 Additional Material for the Record: National Veteran Small Business Coalition.................... 56 GROWING THE SMALL BUSINESS SUPPLIER BASE IN GOVERNMENT CONTRACTING ---------- WEDNESDAY, OCTOBER 13, 2021 House of Representatives, Committee on Small Business, Subcommittee on Contracting and Infrastructure, Washington, DC. The Subcommittee met, pursuant to call, at 12:04 p.m., via Zoom, Hon. Kweisi Mfume [chairman of the Subcommittee] presiding. Present: Representatives Mfume, Newman, Andy Kim, Hagedorn, Stauber, Meuser, Salazar, and Fitzgerald. Chairman MFUME. Good morning, ladies and gentlemen. I want to call the Subcommittee to order. Without objection, the Chair is authorized to declare a recess at any time today. I would like to begin by noting some important requirements. Let me begin by saying that the standing House Committee rules will be in practice today and will apply during these remote proceedings. All Members are reminded that they are expected to adhere to these standing rules, including decorum when they are, in fact, participating in any remote event. With that said, the technology that we are utilizing today requires us to make some small modifications to ensure that Members can fully participate in these hearings. House regulations require Members to be visible through a video connection throughout the proceedings, so please keep your cameras on. If you have to participate in another proceeding, please exit and then log back in later. In the event that a Member encounters technical issues that prevent them from being recognized for their questioning, I will then move to the next available Member of the same party and will recognize that Member at the next appropriate time slot provided that is that they have returned to the proceedings. Should a Member be interrupted by technical issues, I will recognize that Member at the next appropriate spot for the remainder of their time once those issues have, in fact, been resolved. In the event that a witness loses connectivity during testimony or questioning, I will preserve their time as staff attempts to address whatever technical issue may be at hand. I may need to recess the proceedings to provide time for witnesses to reconnect. And finally, please remember to remain muted until you are recognized to be able to minimize background noise. In accordance with staff rules, staff has been advised to mute participants only in the event that there is inadvertent background noise. Should a Member be recognized, they obviously then must unmute themselves to seek recognition again at the appropriate time. I want to thank all of you for participating in this meeting, this hearing, and to say that you that I am hoping that we make a great deal of progress as we get through the day and all that we have to do. The United States Government is the largest purchaser of goods and services in the world. In fiscal 2020 alone, federal agencies obligated more than $650 billion in federal contracts. They did that through their buying power because the federal government is uniquely positioned to incentivize the economy and strengthen the industrial base. Thus, it really is vital that small businesses then have ample opportunity to compete in this space. When small firms have the ability to compete and then win federal contracts, American entrepreneurs and the federal government all benefit. Unfortunately, the federal small business supplier base has shrunk a staggering 40 percent over the last decade. This decline means less opportunity then for small businesses to support livelihoods and to support the communities that they, in fact, serve. Now, while this decrease cannot be attributed to any one factor, it is safe I think to say that Category Management has been a driving force behind the decline of the number of small firms serving as federal prime contractors. Category Management, or CM as it is known, is a government- wide procurement initiative that involves buying common goods and services as a single enterprise. The intended goal as we know of the initiative is to eliminate redundancies, increase efficiencies, and deliver more savings by leveraging the federal government's buying power. Now, these are all worthy goals, but the policy has resulted in pushing small businesses in many instances out of the federal procurement space. Category Management discourages the use of individual contracts and consolidates requirements into large contracting vehicles, leading to less competition and then ultimately fewer contracting opportunities. In 2020, GAO issued a report showing that while dollars and contract actions have grown for small businesses within the CM initiative, the overall number of small businesses and vendors receiving awards had, in fact, declined. So to put it mildly, I think it is fair to say that a select number of small businesses were able to navigate and benefit this complex system, while many others were pushed out altogether. In fiscal year 2016, 92,000-plus small businesses provided common products compared to just 79,114 of those same businesses in 3 years, a drop of 17 percent in that 36 month period. If this trend persists, it will have a severe consequence, both for the federal government and for the small business base. Fewer small businesses will lead to less innovation, higher costs, and then ultimately a weaker supply chain. So I think it is not a stretch for me to say that all Members of this Committee believe in bringing in more efficiency and less redundancy to our procurement system. Yet, we cannot advance these goals at the expense of small businesses, which are still, and will always be, the backbone of our economy. That is why we must ensure that the implementation of this initiative does not run counter to the protections afforded to small businesses under the Small Business Act. And so I look forward to the hearing. I look forward to our panel today, to be able to talk about the challenges that Category Management continues to pose for small businesses and what, in fact, this Subcommittee and what Congress can do. With that, I would like to yield to the Ranking Minority Member, Ms. Salazar of Florida for her opening statement. Ms. Salazar? Ms. SALAZAR. Yes, thank you, Chairman, for being here with us and for giving me the opportunity to talk to the rest of the Subcommittee. I appreciate you holding this hearing to support greater small business participation in federal government contracting. As I explained to you, I wanted to do it in person. It is a lot more warmer and you can definitely share more thoughts but I understand that now is the time to do as we are doing. Hopefully, next time we will be able to do it in person in Washington. So small businesses are critical to our nation's security, innovation, and the economy. And because of this, the federal government needs a strong small business supplier base. We don't have a strong the small business supplier base, and it is the federal government's fault. In the last decade, the number of small contractors shrank by nearly 40 percent. Let me say it again. We have lost over one-third of our small contractors in less than 10 years. If that does not shock us, let me tell you more. In the last 15 years, the number of new entrants to the federal marketplace declined by nearly 80 percent. Clearly, the federal procurement environment has become so hostile to new small businesses that they just do not even try. We need to act now to stop this axis and we at the federal level need to figure out what is happening. For instance, we need to reevaluate the government's use of what you call contract bundling. That happens when several small contractors are combined into one unnecessarily large contract. Another problem is what we call Category Management. That is when contractors are grouped together in categories, but this leads to picking winners and losers and that is not our job at the federal level. That is the marketplace job. To be fair, Category Management has worked, and as of recent, small business contracts can now be classified as a Tier 1 contract, an upgrade from before. Category Management can also be useful to track federal purchasing habits, identify efficiencies, and keep contracting costs down. With that said, we cannot be naive when it es to how this will impact our small business suppliers. I want to give you an example. The government is increasing spending towards Best-in- Class (BIC) contracts, which according to the government are the preferred and recommended contracting method. But these contracting methods at this hour are only benefitting a few contractors from above the rest, stifling competition, and reducing opportunities. In other words, the current category's management efforts appear to be benefitting the few to the detriment of many. And the end result is the federal government, while it is desperately looking to save a few pennies, is destroying the small business supplier space. Let me share another example. The Office of Management and Budget, the OMB, eliminated one whole category of contracts called the Tier 0 contracts. They celebrated this as a major success. They said that it would only impact 5 percent of small businesses. But let me tell you something. There was another fact check conducted by the Government Accountability Office that it said that that new bracket eliminated thousands of opportunities for small businesses that had been eliminated by the Category Management. In other words, it does not work. I promised my constituents in District 27 that one of my goals from this office, the Congressional Office, was to make thousands and thousands of them, thousands of small business owners vendors of the federal government and it has not happened. So let me conclude with this thought. The decline of small business federal contractors to inflate directly to healthy competition and innovation. This comes on the heels of another staff job report in September, last month. The United States economy added only 200,000 new jobs compared to the 500,000 that were affected. So the federal government must do a lot more to provide opportunities for the small businesses in this country. I thank you. I would like to thank the witnesses for their expert testimony today, and I yield back. Chairman MFUME. Thank you very much, Ms. Salazar. The gentlewoman yields back. I would like to take a moment now to explain how this hearing will, in fact, proceed. Each witness will have 5 minutes to provide a statement and each Committee Member will have 5 minutes for questions. Please ensure as I mentioned earlier that your microphone is on when you begin speaking and that you return to mute when you finish. With that said, I would like to introduce the order of our witnesses. Our first witness is Ms. Alba Aleman. And I hope I am pronouncing that correctly, the founder and CEO of Citizant, Inc., located in Chantilly, Virginia. Citizant is a certified, woman-owned business and a former 8(a) firm. The company specializes in creating solutions to complex government IT challenges, including application development, testing, automatization, enterprise, data management, and quality process improvement. Ms. Aleman has led Citizant through 22 years of successful service delivery on mission critical government programs. Welcome, Ms. Aleman. Our next witness will be Lynn Ann Casey, the founder and CEO of Arc Aspicio, a certified woman-owned small business. Arc Aspicio is a consulting absolutions company that provides and solves problems I should say by applying integrated capabilities in strategy, design, data, capital, behavioral science, and in technology. Ms. Casey founded Arc Aspicio in 2004 and has a proud career of driving innovation for government agencies. Welcome, Ms. Casey. Our third witness today will be Mr. Victor Holt, founder and CEO of V-Tech Solutions, Inc. V-tech is a HUBZone 1 certified former 8(a) veteran-owned small business that offers technology, information, and a wide range of professional services. Mr. Holt founded V-Tech in 2000 after serving in the United States Air Force and working in the private sector for Lockheed Martin, Northrop Grumman, and Hewlett Packard. We appreciate your time and expertise, Mr. Holt. Welcome to you as well. I will now yield to the Ranking Member to introduce our final witness. Ms. Salazar? Ms. SALAZAR. Yes. Thank you, Mr. Chairman. Our final witness is Sophia Tong. She is the founder and chief executive officer of T&T Consulting Services, Inc., a woman-owned small business. Ms. Tong is also a graduate of the Small Business Administration's 8(a) program. Under her leadership, T&T has grown from a small two-person business in 2004 to over 100 employees at this time. Under Ms. Tong's direction, T&T has achieved numerous, difficult to obtain, certifications in both a diverse array of federal government and commercial clients. Ms. Tong holds over 15 years of experience in software engineering and project manager. She has earned a Master of Science in Computer Science from the University of Maryland and her Bachelor of Science in Computer Science and Information Engineering from the National Chiao Tung University in Taiwan. She is a certified project manager professional and also information technology infrastructure library certificate. Due to her hard work and exemplary leadership skills, Ms. Tong has received many accolades, including the 2008 American Business Awards Executive of the Year Award, the Washington Business Journal 2019 Minority Business Leader Award, and the 2019 Small Business Administration's Small Businessperson of the Year in Northern Virginia. Ms. Tong, I look forward to hearing your testimony and I yield back. Welcome. Chairman MFUME. Thank you, Ms. Salazar. Ms. Aleman, you are now recognized for 5 minutes. Please proceed. STATEMENTS OF ALBA ALEMAN, CHIEF EXECUTIVE OFFICER AND FOUNDER, CITIZANT, INC.; LYNN ANN CASEY, CHIEF EXECUTIVE OFFICER AND FOUNDER, ARC ASPICIO; VICTOR HOLT, CHIEF EXECUTIVE OFFICER AND FOUNDER, V-TECH SOLUTIONS, INC.; SOPHIA TONG, CHIEF EXECUTIVE OFFICER AND FOUNDER, T AND T CONSULTING SERVICES, INC. STATEMENT OF ALBA ALEMAN Ms. ALEMAN. Good morning, Chairman Mfume, Ranking Member Salazar, and Members of the House Small Business Committee, Subcommittee on Contracting and Infrastructure. Thank you for the opportunity to speak with you today about the topic of Category Management. My name is Alba Aleman, and I am the founder and CEO of Citizant, Inc., a small government services firm based in Chantilly, Virginia. We employ nearly 200 professionals who support federal agencies in 27 states. I am an active Member of the Women's Chamber of Commerce and serve on their Category Management Task Force. Citizant has been in business since 1999 and we have weathered many storms--Y2K, 9-11, Katrina, numerous government shutdowns, continuing resolutions, administration and policy changes, and the Budget Control Act of 2011. Through all of these national emergencies and disruptions, we have diligently continued to serve important missions at the IRS, Department of Defense, Department of Homeland Security, and the Department of Justice, just to name a few. The purpose of my testimony today is to share my first-hand insights about the detrimental impact that Category Management is having on the small business supplier base. Category Management has disproportionally stripped small, minority, and woman-owned businesses from access to federal contracts. It is responsible for the erosion of 30 percent of my own business in the last 2 years. It has widened the gap between small and large contractors to the detriment of our economy and has reduced the availability of innovative cost-effective solutions for our government. Recent executive orders introduced a concept called ``Tiered Spending'' under which federal procurement departments are forced to use a small handful of government-wide contract vehicles, Best-in-Class contract vehicles. These BICs, like Alliant 2, VETS 2, and OASIS, account for hundreds of billions of dollars of spend among very small groups of prequalified contractors. And of these vehicles, only VETS 2 and OASIS provide a swimlane for a handful of small, minority, and women- owned businesses. Category Management and Tiered Spending rules create significant problems for small businesses. Whereas large contractors have the experience and credentials to qualify for nearly every single BIC, small businesses are hard-pressed to qualify for even one. Competing for these BIC contracts requires a small business to have already spent hundreds of thousands of dollars on certifications, have tens of millions of dollars in prior contracts, and meet dozens of other requirements that only the largest businesses would ever have. Here is a sobering statistic. Only .0001 percent of small businesses--that is, 1 in 100,000--have access to 100 percent of the BIC spending. And these ``small businesses'' are not small by most industry standards. They sometimes have $100 million in revenue, have been around for decades, and have thousands of employees. Of the tens of thousands of small businesses who might want to pursue a BIC contract, only a few dozen will ever receive an award. The small businesses that do not earn a seat at the table in a BIC contract are effectively barred from competing during the 10-year life of that contract. At the end of the day, the steering of government spending to large businesses results in a loss of millions of small business jobs. Large businesses are offshoring many of the jobs won on government contracts including BICs. With a concentration of contracting in the hands of fewer, larger businesses, the government loses the benefit of competition to lower prices. Furthermore, when large businesses subcontract to small companies, they mark up our services by 25 to 40 percent without additional value to the government. Innovation is stifled. And let's face it, most of the innovation in today's economy comes from small businesses and entrepreneurs. And the hollowing out of small businesses in our industrial supplier base creates National Security risks in countless industry sectors. As an immigrant, I am not deterred by hard work or challenging times. I view it as my honor and responsibility to shoulder and protect the future of a vibrant, small business ecosystem in the U.S. And I am encouraged by the protections for small businesses included in the National Defense Authorization Act, including exemptions from Category Management for small business in all socio economic categories. Provisions like these are absolutely essential to protecting the viability of America's small business contractors who have already been pressed to their limits. I am immensely grateful for the opportunity to address this Subcommittee and for the work that you do to preserve diversity and inclusion in our federal government supplier base. I will gladly answer any questions. Thank you so very much. Chairman MFUME. Thank you very, very much, Ms. Aleman. We appreciate your testimony. Ms. Casey, you are now recognized for 5 minutes. STATEMENT OF LYNN ANN CASEY Ms. CASEY. Chairman Mfume, Ranking Member Salazar, and Members of the Committee. Thank you for the invitation. My name is Lynn Ann Casey. I am the founder and CEO of Arc Aspicio, a woman-owned small business that has provided innovative professional services to the federal government since 2008. I am also a Member of the Board of Directors of the Professional Services Council and work often with other small businesses who serve the federal government and this topic is of particular importance to me. Category Management is an urgent issue for my company and other small businesses since it is contributing to the trend of decreasing the small business supplier base and running counter to the purpose of the Small Business Act. In my testimony, I plan to offer some ideas and potential solutions to help grow the supplier base. All of my remarks refer to professional services rather than any items or products. While Category Management does help increase procurement efficiencies, our company has seen it reduce the number of small businesses and the number of opportunities that are available for companies like mine to compete on. This in turn reduces innovation that small businesses bring. In terms of the challenges of Category Management, we have been competing as a subcontractor and a prime contractor with the federal government for 13 years who are very experienced. We have been on several Category Management Best-in-Class vehicles, and despite our extensive experience and exceptional performance, we have only won one of those. And that is after spending hundreds of thousands of dollars. We are also a mentor to another small business in a Small Business Administration Mentor Protege program under an 8(a) program. So both Arc Aspicio and our protege, which are very different in the stages of maturity in our company, have seen a significant reduction in the number and size, as well as the scope of opportunities for us available to compete and pursue competitively. We love hard work and we love to compete. We just want the opportunity to compete. Many new and recompete contract opportunities for Arc Aspicio have moved to Best-in-Class contract vehicles where we were not a prime contractor and therefore, could not pursue the work. Agencies have raised significant concerns about not being able to allow their incumbent small businesses to bid for their recompetes competitively. Allowing small businesses to recompete on follow-on contracts after successfully delivering to the government should be a regular practice in small businesses. And yet, Category Management does not allow this competition and it prohibits innovation, competition, and it does not allow for continuous improvement. In addition to fewer opportunities to pursue, it is very difficult for small businesses to compete and win Tier 3 BIC contracts. You have to have hundreds of thousands of dollars' worth of certifications and these BIC contracts often disproportionately favor small businesses who have extensive experience and certifications with the Department of Defense. And yet, many other departments outside of DoD use these vehicles but they cannot get access to their current small business contractors. As a result, there are fewer small businesses, there is less competition, and while the revenue to small businesses may be increasing, it is to a much smaller base of small businesses. So ultimately, very small businesses are getting acquired or are just dropping out of the market and we are dramatically reducing the small business supplier base. There are four potential ideas that I suggest and provide additional information in my written testimony. I would encourage the Committee to explore looking at Category Management for Spend Under Management (SUM) and exempting small business goals from the Spend Under Management to expand the opportunities for set-aside contracts. Legislation to increase simplified acquisition thresholds from $250,000 to $1 million or more is another idea. Considering legislation or policy to allow the GSA Multiple Award Schedules for professional services contracts to be a BIC is another solution. Thank you so much for the opportunity to testify today and I welcome further questions on my testimony. Thank you to the Committee. Chairman MFUME. Thank you very much, Ms. Casey. We appreciate your testimony. Mr. Holt, you are now recognized for 5 minutes. STATEMENT OF VICTOR HOLT Mr. HOLT. Thank you, Chair Mfume, Ranking Member Salazar, and Members of the Subcommittee. Thank you for the invitation to testify today. I am Victor P. Holt, president and CEO of V-Tech Solutions, Inc. As a minority veteran-owned HUBZone firm, we provide health, technology, and professional services. We most recently celebrated our 21st anniversary. Today, I testify as the Vice Chair of the HUBZone Contractors National Council. The Council is a nonprofit trade association that provides information and support for companies and individuals interested in the HUBZone program. The HUBZone program provides economic assistance to historically underutilized business zones by awarding federal contracts to HUBZone companies that operate and employ workers who live in designated HUBZone tracts. We would like to thank the Committee for its commitment and support of small government contracting businesses. We also thank you for highlighting the topic of Category Management. This is a topic that the Council continues to be concerned about. Council Chair, Shirley Bailey testified in 2018 before the Committee on this topic. Today, we are here again facing the same bleak outlook as 2018. The cause for concern remains simple--small business access to government contracts. Small businesses are the engine that fuels the American economy. We bring growth, innovation, and employment opportunities. We embody the promise, hope, and future of our country. However, substantial challenges and barriers still exist. The Council continues to believe that Best-in-Class contracts create enormous barriers for small businesses. As the government moves away from direct award contracts, business opportunities decrease for the small business community. The large buying contracts used in Category Management require substantial resources to bid and win. These contract requirements keep small businesses from competing. This includes stringent past performance or other requirements that are impossible for a small business to beat. Subcontracting comes with its own challenges as well. This includes small margins and often alignment with a large or mid- size prime based solely on cost. BIC vehicles also have a crippling effect on small business competitive opportunities. Approximately 25,000 small businesses provide IT services to the government, but for the OASIS Small Business Pool 1, only 30 slots are available. Additionally, some Best-in-Class vehicles do not have on ramps. This restricts the opportunities for future on ramping for small businesses. Hence, shutting us out from high dollar contract opportunities. According to Bloomberg Government, IT spending represented more than half of the Best-in-Class market in FY20 with the Best-in-Class spending goal of FY21 at approximately $48.4 billion. With a large portion of IT spending going through these Best-in-Class contracts, winning a recompete or direct award may be even more challenging than before. Category Management, when applied to broad acquisitions, does not consider that innovation provides incredible value. Best-in-Class should not resemble lowest price technically acceptable. We hope the government does not mistake lowest cost for best value. As to popularity of utilizing Best-in-Class contracts increases, HUBZones and other small businesses have pure opportunities to compete. In fact, the government has never met its goal to obligate 3 percent of the eligible prime contract dollars to the HUBZone community. This represents 23 years of missed opportunities and unawarded dollars to HUBZone companies that can train, employ, and mentor constituents within your HUBZone tracts. No one would disagree with the goals of efficient government by and saving taxpayer money. However, we believe Category Management comes at a cost. It can restrict the ability of small businesses to grow through federal contracts. The Council urges the Committee to exercise its authority to ensure the government's procurement policies, specifically Category Management, utilize small businesses. I thank you for the opportunity to speak today and look forward to engaging in continued dialogue. Chairman MFUME. Thank you very much, Mr. Holt. We appreciate your testimony. We will be back to you, obviously. Ms. Tong, you are now recognized for 5 minutes. Please proceed. STATEMENT OF SOPHIA TONG Ms. TONG. Chairman Mfume, Ranking Member Salazar, and Members of the Subcommittee, I thank you for the opportunity to testify before you today. My name is Sophia Tong. I am founder and CEO of T and T Consulting Services, Inc. (T&T). We are located in Falls Church, Virginia. T&T is a woman-owned small business. We specialize in providing strategic IT solutions to the federal government that allow them to successfully achieve their mission objectives on time and within budget. I am testifying today on behalf of the Montgomery County Chamber of Commerce (MCCC) in Montgomery County, Maryland. Today's topic is very important for the small business contracting community. The impact of Category Management is increasingly evident in my industry and affecting our company. Agencies are bundling contracts that were previously performed successfully by small businesses, rolling them into large contracts and awarding them to large businesses. The outcome of this action is killing small suppliers like ours. There are countless examples of this in the IT field. For example, in August of this year, the Defense Health Agency (DHA) awarded a large business a single award 10-year, $2 billion blanket purchase agreement (BPA) to support the Military Health System's Enterprise IT Services Integrator requirement. By taking this work and bundling it into a massive single award contract, a monopoly is created, allowing the large business to control (and raise) prices on the worked performed for the government. Large businesses always claim there is no harm to the small business supplier base as contract consolidation happens, because they will hire the small businesses as subcontractors. However, the fact is large firms often take substantial cuts. Small businesses are usually given unrealistically low rates and it makes it difficult to meet requirements, recruit, and retain resources--the margins are too thin. Additionally, small business lost the close relationship we had with the government client when we were prime and now we have become subcontractors. Another example, large businesses also use high rates they receive from the government to steal the workforce from small businesses. There are numerous instances where Members of my team have been hired by large business that were awarded my previous contract, all due to the consolidation efforts. Unfortunately, my experience is that government clients are unable to help in resolving those disputes. And the third one, primes have also bullied small businesses, leveraging their existing network and relationships with government clients to try to steal contracts from successfully performing smalls. For example, we received a sole source contract to create a minimum viable product (MVP) for an organization under DHA. The contract is still ongoing, and the customers are very satisfied with our performance. But, because the contract is very important and could potentially become a very large contract, we were contacted by many large businesses wanting to be a part of this effort. One of them is Google. When Google found out we were not able to bring them on the team, Google wrote a ``letter of concern'' to DHA complaining that DHA awarded this contract to a small business. This type of behavior is common and increasingly concerning. Although we have grown to a larger small business, newer and smaller entrants are particularly hard-hit with Category Management. Even for mature, well-established small businesses with a diverse portfolio, like us, contract bundling and consolidation is hurting these businesses. The cost of getting on a Best-in-Class contract is substantial and requires significant investments just to get a slot. Category Management continues to shift an increasing number of dollars to large contract vehicles. Additionally, Category Management has accelerated a decline in diversity of vendors with large dollar amounts held only by a few companies. The Chamber applauds inclusion of provision in the FY2022 NDAA by the Committee to combat the effects of Category Management and any future bundling strategies. MCCC also understands additional factors are contributing to the supplier base decline, in addition to Category Management: increasing transparency and accountability in subcontracting, as well as increasing R&D investment to maintaining and growing the small business supplier base. In conclusion, small businesses are asking for equity, a fair chance to compete for contracts. We are asking for actions from this Committee to change the trajectory of contract consolidation which in our view creates opportunities for large businesses but results in fewer opportunities for a small business like us. We need your help and appreciate the opportunity to bring these issues before you today. Thank you. Chairman MFUME. Thank you very much, Ms. Tong. We are going to begin our questioning in just a minute. I want to again thank all of the witnesses. I know you have much more to say and hopefully you will get that opportunity as we go around the table so to speak and have Members join in with questions. I will now recognize myself for 5 minutes. Ms. Aleman, I would like to really just start with you. We all know that the ultimate goal of Category Management is to increase efficiencies and to decrease duplication and things that harm the process. And yet, what we see as we have all heard today and which many of you have given in your testimonies, has been an adverse effect on small businesses. Now, I know some of you, and I want to come to you in just a moment, had some specific suggestions, but Ms. Aleman, what do you think we can do to strike the right balance as the Congress with oversight between the goals of Category Management and ensuring that we still have a robust small business base? Ms. ALEMAN. Thank you. I think that the actions already taken in the house version of the National Defense Authorization Act already addresses some of the important topics that we have been testifying on. For example, an amendment to the Small Business Act included in the NDA states that all contracts awarded under the relevant sections of the Small Business Act will be classified as Tier 0. In essence, they will not be aligned to Category Management principles and not be required to be enforced under Category Management rules. And it further stipulates that these Tier 0 contracts shall not be included in metrics related to Category Management rules and that federal agencies shall not re-classify Tier 0 contracts to Tier 1, 2, or 3 without approval from the SBA administrator. This is a really important step to preventing future small business awards from being rolled up into massive procurements for large businesses as is currently being done with several of our own task orders at the IRS. As a metrics person, as a person who lives for numbers, I can tell you that people will do what they are measured against. If you measure them against what percentages they do in each of these tiers, and Tier 0 is not an option for them, guess what? They are not going to use Tier 0. Chairman MFUME. Okay. Ms. Casey, you were specific in your written testimony. You have four recommendations. Is it fair to assume that all of these recommendations that you listed are still very much needed and necessary? And if you would, could you kind of prioritize them and let the Committee know what is the most important or the second most important issue? Ms. CASEY. Yes, of course. As Ms. Aleman just said, the number one item would be to consider the language that allows small businesses and small business to be considered in Category Management such that they would not get count against the metrics. And so that would allow more small businesses to compete. So I agree with that recommendation. And if that cannot be done, considering that for professional services contracts, considering the GSA schedules which are very successful for both new entrants and current small businesses to win prime contracts should be considered because they are competitively awarded under GSA. And so they should be considered under Category Management. I would also strongly consider that you look at not only current SBA increases in small business size standards but future increases that keep the small business supplier base very healthy or very important. Chairman MFUME. Okay. I am going to quickly go to you, Mr. Holt. You talked specifically about loss of competition, smaller margins. I think I also heard you say that someone from your firm or that you associated with came before a similar hearing back in 2018 and that nothing has changed in many respects. Any specific ideas? You have heard both Ms. Aleman and Ms. Casey. What are your thoughts on what we can do and should do to be able to turn this around? Mr. HOLT. I echo what they say as far as more language as it relates to the NDA for inclusion. One of the biggest challenges that we face as small businesses, especially as it relates to Category Management, Best-in-Class type contracts as a subcontractor is playing with very, very razor thin margins where we are asked to do a lot with a little. And it is sort of like sometimes just going down the line to whatever company will sign up for that. So what we are looking at is how do we hold these primes that we work with more accountable, understanding their pricing structure that you see on the procurement side and being able to say this is fair and justified what they are doing with their small businesses, that small businesses will be able to perform. There will not be any false starts on onboarding a small business, a subcontractor in getting underway and showing good service delivery to the federal government. Chairman MFUME. Thank you very much, Mr. Holt. Ms. Tong, I do not have any time left so I will try to hold off my comments and questions for our next round. But thank you very much for your patience. As I said, my time is expired, so the Ranking Member, Ms. Salazar of Florida, is now recognized for 5 minutes. Ms. SALAZAR. Thank you, Mr. Chairman. And thank you to all the witnesses. I wanted to start with Ms. Tong. You mentioned, you said two key words. That you were being bullied and that Google had written a letter to an agency which I am sorry that I did not-- maybe I did not write the name correctly and I wanted you to expand on the bullying situation. Who has been bullying you? And number two, if you could expand on that initiative taken by Google, and to what agency and what did the letter contain? Thank you, Ms. Tong. Ms. TONG. Thank you for the opportunity to talk about this issue. Yes, it was Google, the giant. This is a very important initiative taken by DHA for an organization called Joint Pathology Center. So DHA had conducted initiatives before and identified the solutions they want for this effort. And we were picked to be the integrator for this work. So Google called us and said we have talked to the executive in DHA and they like our solution. So I told them the solution was picked by DHA. All we have to do is to follow the instruction they want and put together the team to perform this work. So I told them. I said I will try to help them look for the future but I just cannot take them to the team. So Google turned around and sent a letter of concern to DHA complaining that why did DHA award this contract to an 8(a) company? I do not know the details of the letter because it was directly sent to a lawyer of DHA. All I know is that the customer asked us what we had disclosed to Google, which I did not because we signed an NDA. This is a very---- Ms. SALAZAR. So you signed an NDA but nonetheless, Google had the information that it should have not had? Ms. TONG. They got the information--and also, I think they know something from their connection in the network in DHA. So they come to me. Ms. SALAZAR. Oh. Ms. TONG. I just tell them I cannot tell them. Ms. SALAZAR. DHA is working for Google then? Ms. TONG. They did not get that for the effort. So this is the way that DHA find out what could be possible solutions out there for them. And then based on their response, they will decide what are the solutions they would like to use for this effort. So Google participated but was not selected. Ms. SALAZAR. All right. And besides what you just described as Google's way of conducting itself against your interests, what other bullying incidents have you felt or have you experienced in the last while conducting your business as a small business owner? Ms. TONG. So I have another contract as an example. We created software that was very successful at the regional level. I was able to convince the CIO to bring it to enterprise-wide and they are very happy about it and would support this idea. But unfortunately, they were told by the contracting and one of the organizations that managed the money, they told them, they say, no, we cannot have more contracts. And I cannot say it is bullying but I think they have connections with the large businesses. So the award actually got pushed through a large business vehicle and it is not even an IT contract vehicle. So our customer told them, say we are the ones who create software and they were hoping that they could leverage us for this effort. But the large business just turned around and used the money to hire our people. Ms. SALAZAR. All right. Very, very insightful information that I am sure our Chairman is understanding that we definitely need to do something about this and continue protecting people like you all over the country that are being stolen not only their intellectual property but their employees, people that you have invested time and effort and energy into training for now to be then just stolen away by the bigger guy. Thank you. I think that my time is coming to an end. I will get back to you in the second round. Thank you very much for sharing that with us. I am sure that is not an experience that you have only felt. I am sure there are thousands of other small business owners all over the country that are experiencing the same thing. Thank you, Ms. Tong. Ms. TONG. Thank you. Chairman MFUME. Thank you. The gentlewoman's time is expired. The Chair recognizes the gentleman from New Jersey, Mr. Kim for 5 minutes. Mr. KIM. Thank you, Mr. Chair. I really appreciate it. Mr. Holt, I wanted to start with you. In your testimony, you noted that ``with larger contracts being utilized by the federal government, subcontracting is more important than ever.'' You identified better oversight of prime contractors' compliance with subcontracting plans as one solution. I have a legislation I am trying to put forward called the Put Our Neighbors to Work Act, which was also included in the House passed--which would require upcoming DoD subcontracting opportunities to be posted publicly so local small businesses have a better chance to compete. One thing that we have come across that we feel like has been helpful, for instance, are the procurement technical assistance centers (PTACs), like the one at the New Jersey Institute of Technology, which provides one-on-one counseling to help small businesses become subcontractors. I wanted to ask your thoughts. What other strategies should we be using to get more small businesses started in contracting? Because trying to figure out how to demystify the process and help them understand what might be feasible. So I wanted to see if you had other thoughts about the PTACs or about other opportunities. Mr. HOLT. We happen to work with the PTAC, specifically DC PTAC. And they are a great resource for what we have been able to do and they have been instrumental with our growth as it relates to having entry points into federal government introductions as well as understanding certain programs that are out there. So I would definitely push the PTAC as one of those resources for you. In addition, the Putting Our Neighbors to Work, when you said that I smiled because I always think of our neighbors as many different neighborhoods but me, as a HUBZone company, that is something that I really embrace and the HUBZone Council embraces that where we are always looking at how do we get subcontracting and prime opportunities put into the HUBZone arena. HUBZone companies, and I say this probably more than anyone, knows how to find these individuals, these neighbors that you speak of that we can identify, train, employ, coach, and mentor along their career journey and get them into gainful employment. Currently, I have about 120 employees in Alabama with the majority of them, 80 percent plus of them are in HUBZone communities. And so when I think about that, working with various local agencies, the Department of Employment Services, working with PTACs, working with veteran organizations who they are always looking at how do we find our returning heroes and our warfighters employment. So those are some that come to mind. Mr. KIM. Yeah, thank you. I appreciate that, Mr. Holt. I wanted to just open this up for anyone who might want to respond. But another issue that I keep hearing over and over again is about how small businesses often have fewer resources than larger businesses in terms of navigating red tape and the bureaucracy that comes with contracting with federal gvernment. And that obviously creates these barriers to entry for many qualified small businesses from the very start. So I wanted to ask if any one of you had any thoughts about whether or not there were targeted reforms that could be made to administrative burdens that would allow accessibility for small businesses to enter the market and whether or not you have any thoughts or some concrete thoughts here about what it is that we can do. So I will just kind of open that up if anybody has any thoughts here. Mr. HOLT. I will speak up real quickly. The HUBZone program has never met its 3 percent goal requirements since inception, 23 years. There is a lot that can be done there. And I would offer to work with you on that. The HUBZone Council would offer to work with you on that. Mr. KIM. Ms. Tong? Ms. TONG. Yeah. I would like to suggest can we remove the J&A requirement for HUBZone, women-owned and SDVOSB sole source? Because right now, every time we try to do sole source for those three categories, the contracting officer refuses to do so because it has to go through the lawyer for legal review and it takes a long time. So even though we have the FAR saying that we are allowed to get a sole source but no one is doing that. Or very few of them. Mr. KIM. Great. Thank you. Mr. Chair, I yield back. Chairman MFUME. Thank you very much. The gentleman yields back. The Chair recognizes Mr. Stauber, the gentleman from Minnesota, for 5 minutes. Mr. STAUBER. Thank you very much, Mr. Chair. And thanks to all the witnesses. This is for anyone on the panel. What hurdles must small businesses, particularly new small businesses that are just starting out in the federal marketplace have to overcome to successfully participate in government contracts under Category Management? This is for anybody on the panel. Ms. CASEY. I am happy to take that, Mr. Stauber. Gosh, to be a small business entry in the market and telling the federal government is almost impossible. So to actually even learn about all of the contract peoples and the experience that you need to start applying for those contracts, it starts as a subcontractor. So you need to find out opportunities to subcontract. But then you need opportunities to prime contract. And there are fewer and fewer opportunities to prime contract on GSA schedules than there used to be. The GSA schedules used to provide a great opportunity to subcontract to get you ready to bid on things like a GWAC or a Best-in-Class vehicle. And so allowing more opportunities on the schedules so that small businesses can get the prime contract experience they need to then be a credible prime for the Best-in-Class vehicles is a critical pathway and very important. Mr. STAUBER. Thank you very much. Is there anybody else on the panel that would like to tackle that question or have comments on the question? Ms. TONG. From my experience I found was very helpful for the new entrants. They can enter into a Joint Venture with a larger company and then through the large company they can get sole source contracts or they can get subcontract opportunities to help them to get started. That is how I helped my proteges. Mr. STAUBER. Thank you very much. And Ms. Aleman, did you want to respond? Ms. ALEMAN. So the thing that I am look for today is the opportunity to create opportunities for small emerging companies. So one of those is through mentorships. Historically, and we benefitted from large businesses under the Department of Defense's Mentor-Protege program. And SAIC at that time was our mentor. We learned so much. They helped us with our certifications. But the DoD Mentor-Protege program funds those large businesses. Provides dollars for them to have staff to help us. So they are incented to. That does not exist in the civilian space. So for those that are working civilian, there is no funding for that. And quite frankly, as a mentor to other small businesses in the Women's Chamber of Commerce, I find that our smalls are larger smalls, like the ones represented here today, make better mentors to the small smalls than the big companies because we get them. We are there every Saturday and Sunday writing the proposal. We can hit each other up on Teams. We are talking 24/7. We understand the world they are living in and we are still facing some of those challenges. So we are closer to the fire and we have a better shot at really helping them. So providing funding for mentors would be ideal. Mr. STAUBER. Thank you very much. Mr. Chair, how much time do I have left? Chairman MFUME. Let's see. It looks like you have got a minute and one second. Mr. STAUBER. Okay. You know, I think that the cost savings for taxpayers, it is absolutely laudable. But it is clear that Category Management is and has a punishing effect on some of our small businesses. And so I would ask any of the panelists real quick, what suggestions do you have to make our federal marketplace more accessible for small business participation? And just give me one or two quick examples all three of you with the time remaining. Thank you. Ms. CASEY. I would suggest mandating that all of the agencies use a forecast system to project out what their requirements are so small businesses can pursue both subcontracting and prime opportunities and that is not consistent across agencies. Mr. STAUBER. Thank you. Sophia? Ms. TONG. So I would suggest to stop counting by the quota of the sole source and set aside for small businesses for the Category Management. And increase more sole source, more small business set aside for us. Mr. STAUBER. Thank you. Ms. Aleman, real quick. Ms. ALEMAN. Yeah. So for BICs like Alliant 2 that got canceled for the small businesses, they only offered 80 seats at the table for the 400 small business bidders. Percentage- wise, the 50 larges that got it out of the 80 that bid does not make any sense. And why GSA stuck to their ground on 80 when they had the opportunity through the federal procurement process and the protest process to increase the ceiling to 120 and they refused. They just canceled it and they essentially locked out small businesses from that BIC vehicle forever because they canceled the procurement. It is only open for the larges. Mr. STAUBER. Well, thank you very much. Back to you, Mr. Chair. Thank you. Chairman MFUME. Thank you. The gentleman from Minnesota yields back. The Chair recognizes the gentleman from Pennsylvania, Mr. Meuser, for 5 minutes. Mr. MEUSER. Thank you, Mr. Chairman. Thank you to our witnesses very much. This is quite an important hearing. I have many small businesses in my district throughout Pennsylvania going through much of what you are all discussing and revealing. And it is appreciated. And it matters. So hopefully we can take this information and do something with it. That is what our role should be. Oversight but also effectuate some improvements. And Mr. Stauber's last question on what we can do for you to make contracting more accessible, efficient, transparent is a key question here. So I noted that well. I would ask Lynn Ann Casey, in your original testimony or your testimony here losing contracts, you have lost contracts, or all of you have difficulty retaining contracts due to changes in class requirements. And sometimes that happens sort of late in the game or during the contracting process. Can you illustrate that a little more and tell us, that just sounds like a very challenging situation should a contract requirement change late in the game. Ms. CASEY. Yes. Often we find out, we would like to compete on a contract. We want to do that fairly. We are not asking to be rewarded a contract without a competition. But we are finding out later and later that our agencies are at the very end moving our recompetes to these Best-in-Class vehicles without even clearly communicating that to us. So we do not know where those opportunities are going sometimes and we have to scramble at the last minute to become a subcontractor to someone who is on those vehicles. And that has happened to us multiple times, mostly because of the department and agency- level procurement policies that require mandatory use for vehicles and for Category Management vehicles. And so often we see those switching vehicles all the time so we cannot even track them. We have had multiple contracts go to large business instead of small on Category Management or to just go onto a Category Management where we are not a prime contractor and it does not happen all the time. Mr. MEUSER. Is it explained to you why that occurs? Like the agent that you are working with, they explain to you anything? Ms. CASEY. No. Actually, at the department level, they will not even publish what their policy is so we only find out about it by talking to a contracting officer who says very little. They say they cannot share a copy of the policy with us and they would like to get an exception for the policy but they actually are afraid to put their neck out and go talk to a fair exception process in their agencies and they really do not have the information to explain it. They just have to blindly follow the policy from their agencies. Mr. MEUSER. Mr. Holt, does this seem like a fair process to you? Mr. HOLT. No, it is not. And it is a process that I have been affected by. We had a Best-in-Class vehicle be a Stars 2-- where we were doing cybersecurity work with the Navy and there was a contract that we enjoyed for almost 8 years. When the option period was coming up they took it down to the wire. They did put it on the street. There was no recompete and that week we were informed that the small business work was no longer needed and I saw 75 percent of my team absorbed in a prime who was already doing work with that program office and they just took them on. So, this is something that has affected us personally. And what that did, that hit us, that was worth about $2.8 million a year in revenue that walked out the door. Mr. MEUSER. Okay. I am glad to hear this. Sorry it occurred, but glad to hear it. I want to change subjects a little bit and ask about vaccine guidance for federal contractors, both from those who provide product and service. Have you in your view received guidance that is to go into effect by December 8th, clear, understandable, comprehendible guidance on what type of vaccines or level of vaccination and all that your employees must have in order to keep your contracts? Ms. ALEMAN. So we have already published a policy for our employees regarding that and provided them with timelines, options, the path for obtaining legitimate exemptions. We have engaged once the Executive Order was signed, within 2 weeks we engaged legal counsel to develop how we would roll that out into our organization. We have been on all-hands calls with our employees. Everyone that is vaccinated has uploaded their vaccine cards to a private HR portal. And there are folks that will not get vaccinated that are not exempt and they know that their last day with us will be December 8th. Mr. MEUSER. Okay. And I yield back, Mr. Chairman. I will say though that I do hear from many small businesses that have federal contracts that they do not understand clearly the vaccine requirements which they want to abide by but they do not have the precise requirements. I yield back. Thank you. Chairman MFUME. Thank you very much. The gentleman from Pennsylvania yields back. The Chair recognizes the gentleman from Wisconsin, Mr. Fitzgerald, for 5 minutes. Mr. FITZGERALD. Thank you, Mr. Chairman. As somebody that was a former small business owner and a veteran, you know, a lot of the questions today kind of nibble on the edges of what is the big frustration. And it is the same today as I think it has been for many years and that is having the technical assistance available to navigate the federal system. And I know personally, and I think if you talk to specifically a couple of industries, for the most part the sector, light manufacturing or certainly, I was very familiar with the printing industry. And if you want a federal contract, you either need to hire out professional services that can navigate the federal system and the technical aspects of all the specs that need to be met, or you need to hire somebody that is full-time on staff that can work and navigate, like I said, the entire system. So that is a frustration that has existed for many years. I would just say there is a couple of different angles I think that could be helpful, and I would like maybe Ms. Tong could comment on this and Mr. Holt for sure. If there were larger contractors that were granted kind of a larger scope of what they could enter into or what they could actually bid on and then the ancillary smaller businesses, whether it is a tool and die shop down the street or certainly transportation services, if there was some way of enhancing the synergy between those two entities, do you think that would be helpful? Because that seems to be still missing out there in this whole discussion. And I would offer that to Ms. Tong first. Ms. TONG. Thank you. So I think the challenge for us to working with large businesses actually, they take a big cut on pass through when they give it to us which makes it difficult for us. Yes, they constantly engage small businesses but they just did not give us the good rate to recruit talents to be able to have margin or to work efficiently. And like us, T&T, we actually have like 15 contract vehicles. We are able to bid and we see all the opportunities. But challenge is more like some of the opportunities get consolidated, become a super huge contract and it is just not something small business or even midsize companies can bid. That is the main issue. Mr. FITZGERALD. Mr. Holt, do you have any comment on that? Mr. HOLT. Yes, sir. We actually have played on both sides of the field. Right now we are working with a large, coming up on a year, it has been a very enjoyable, enjoyable opportunity where they have given us custodial responsibility for the services that we deliver with the appropriate rates. And that is an anomaly. That is usually not the norm. And what the norm is is that depending on the health and the needs of the prime, a lot of times when the task order comes up for renewal or a recompete, they are going to ask you to lower your rate. They are going to ask you how do you lower your rate? And we have had it happen at mid-contract before where I call it the bullying effect where the prime will come and say, hey, is there any room? We need you to go down by X percent. And, you know, we have held our ground on some and we have had opportunities where we just have to walk away because we could not do the business. So, you know, if there was a way to have more compliance as it relates to the prime and how the government looked into how they treated their subcontractors, I think it would go a long way as it relates to compliance and oversight and ensuring proper revenue shift as far as the pricing that is being pushed down to us. Mr. FITZGERALD. Very good. Thank you. Thank you. In the limited amount of time that I have left, I just wanted to touch on something that Congressman Meuser brought up earlier and that is, Mr. Chairman, I think there is kind of a storm brewing out there on the vaccination. There are so many different tentacles that are kind of reaching in to the smaller businesses that do work or are associated with specific types of sectors, whether they utilize the U.S. Mail or they may have obviously DoD ties. And you know, what was presented I think by the Biden Administration as something that was only going to affect corporations with 100 employees or more, we are starting to hear, I am back in the district, that this is reaching down much further than that and I would hope that this Committee would use its voice to make sure we reach out to the administration and make them aware of that because, like I said, I think it is a storm that is brewing that could become a big problem down the road. So, and I would yield back. Thank you, Mr. Chair. Chairman MFUME. The gentleman from Wisconsin yields back. The gentleman's points are well taken and I will share them with the larger Committee on Small Business that might want to pursue that going forward. We are going to pursue a second round of questioning and I will recognize myself for 5 minutes. Can any of you or all of you talk to the fact about whether or not you were not allowed to recompete at some point in time on a contract and what was that like and how did you make out? Anyone? Ms. CASEY. I can speak to that, Mr. Mfume. Over the past 3 years, we have not been allowed to recompete on at least seven different contracts worth probably well over $15 million of work where we were getting exceptional ratings from the government on our performance. So it is really significantly affecting us. It has been many, many contracts. What ultimately ends up happening---- Mr. FITZGERALD. I am going to have to jump off now, so. Chairman MFUME. Okay. So you will skip the second round? Ms. CASEY. What ends up happening is we have to give up the work and then our people who are doing work at that agency then get hired by either the large contractor or the company on Category Management that run the work. So it is hurting our long-term workforce and it is hurting our long-term revenue, and it is places where we were doing excellent performance. I am sure my fellow panelists have seen similar things. Chairman MFUME. And was there any effort to move you into a Best-in-Class situation? Ms. CASEY. Yes. Most of those were because they were moving it from say a GSA schedule to a Best-in-Class vehicle or they were moving it from a department-wide vehicle into a Best-in- Class vehicle. So, yes, it was because of Category Management and Best-in-Class. Chairman MFUME. Now, I have heard the term ``bullying'' a couple times today and it is interesting because I think what I am really hearing is something that Mr. Holt referenced earlier and that is the way primes treat subs and that there is apparently a lack of best practices or a lack of guidelines. I mean, we put in place a number of guidelines. If you are a prime in order to get a sub you must do this, you must do that. There are a number of things that have to be complied with. Mr. Holt, am I talking out of school? Are you suggesting here that there ought to be some sort of standards that we can put in place even if we do it through report language? That would give primes some sense that they are being watched in terms of how they are treating subs to make sure this ``bullying'' phenomena does not continue? Mr. HOLT. Yes, sir. That is exactly what I am saying. Chairman MFUME. And do you have any suggestions of what those standards or guidelines should encompass? Mr. HOLT. I think it should be part of their service level deliveries being transparent with the government, as well as being transparent with the subs that are supporting the primes, understanding what the expected revenue share is up front where a lot of times primes, they will say, hey, we want you on this particular opportunity. Give us your pricing. Give us this. Give us that. And when you go to talk about workshare, they do not want to have that conversation. That is taboo. And what usually can come out of that is that they start using us as staff augmentation as opposed to solutionists where we can really come in and provide something that is of value, if you will, that we can create more effect from this, more efficiency. And on the other side of the coin is for the primes to partner with us as opposed to just push work down to us that they may not want to do and that the margin may not be big enough for them to put their own employees in. Chairman MFUME. Okay. My time is short. Ms. Tong, you had mentioned also your not so pleasant experience with Google and you heard Mr. Holt. Any suggestions you may have also to kind of prevent that from occurring in the future? Ms. TONG. Yes. So I think right now, government only look at the percentage they sub out to the sub or small business but they never look at the financial numbers in terms of how much will the money pass down to small business. Or do they even offer to pass down the escalation to the subs? For some cases, we cannot ask escalation for rate adjustment, our rate over the year remains the same but you know that people's salaries are going to increase over a year. So things like that. If government can look at more numbers, or even use cost plus type of contract i.e. base on what is the actual cost they hire the sub and then they just give them incentives or the profit, I think it will help so they do not have to cut our rate in order to meet their financial goal. Chairman MFUME. Okay. Thank you very much. My time has expired. The Chair recognizes the Ranking Member, Ms. Salazar of Florida, for 5 minutes. Ms. SALAZAR. Thank you, Mr. Chairman. And this goes for any of the witnesses and any of the speakers. I would like to hear your experiences. I have heard from some of you this term of ``buying your staff and intellectual property for pennies on the dollar.'' I know that Ms. Tong spoke about it but I would like to hear Ms. Aleman or Ms. Casey, if there are any examples that you want to share with us specifically when another bigger contractor stole from you precious employees after you had trained them and invested money, time, and energy in keeping them. So, Ms. Aleman or Ms. Casey or Ms. Tong. Let's start with you, Ms. Aleman. I am not sure if you want to share with us. Do you have examples where we can illustrate this practice is happening right now? Please do so. Ms. ALEMAN. Yes. This is a very recent example at the IRS. We have developed an award-winning solution for Dev Sec Ops, CICD pipeline, onboarding, saving the IRS 27,000 to 30,000 hours a year for the automation we have done and we have accelerated that with a patent pending unique solution that we have actually patented and won a national and international award for. It was so critical to their filing season that they gave us, they issued us under the women-owned procurement preference, they issued us a sole source contract last year to continue our work because our large agency-wide vehicle got shut down by a BIC. And that was full and open and it got shut down by the BICs. So they issued us this wonderful 2-year contract, sole source, base and option. Come September at the end of our base year, we still had an option where they did not need to reprocure. Instead of exercising our option year which they need the support we provide, they bundled a series of large contracts into something like a $120, $200 million contract. So they bundled it and they said, ``No, no. Everything goes under that now. So you have got to go talk to them.'' So we did. We went to the prime, Maximus, who said, ``Oh, no, we do not have space for you on our team.'' This is after award, knowing that our work would be shut down. Then they sent us, they batted us over, this is the bullying part but it is almost like collusion. They batted us over to their key subcontractor which we all know Deloitte is not a small. So Maximus and Deloitte, both of them telling each other in the background, ``no, no, no, do not hire them.'' Meanwhile, calling every single one of our employees on that contract and now the government is calling our employees. The government. The federal employees are calling our employees saying, ``Go, please go. We cannot shut down your work. We need it.'' We have been off the contract for 3 weeks and the pipeline has been shut down. So I am looking forward to January when filing season kicks off and they are not able to launch this because my employees refused to go. So they are sitting on my bench now which is totally fine because that is on me. That is the kind of decisions we small business owners make. We choose where our money goes. We choose to invest our profits in our people. And that is why they do not leave during a shutdown, during COVID, during contract transitions. They do not go because of that. So that is not only predatory but they are also positioned to steal our intellectual property. Ms. SALAZAR. Absolutely. This cannot happen and I thank you very much for sharing this testimony. Chairman, you have been listening to this. We have got to stop this somehow. That is what we are here for. The government cannot be stealing away from the private sector. So thank you, Ms. Aleman. I think I have a couple of more minutes. Ms. Casey, would you like to share some of your experiences with us? Ms. CASEY. I, too, have had similar experiences where large businesses have signed subcontracts with us and have given us a workshare. Say 30 percent of the work is supposed to be performed by Arc Aspicio. And if we are lucky, we will get 5 to 10 percent of that revenue and nobody holds the prime accountable. And there is no way, you know, they have a lot of lawyers and there is no way we can kind of argue with them about standing forward with their teaming agreements. But they use our teaming agreements to actually win the contracts in the first place. So they say we are going to team with Arc Aspicio. They are going to do all this work and then afterwards they do not do that and I, too, have had similar experiences where a large prime contractor has literally taken one of my employees, given that employee to one of the other small businesses on the contract, and on Friday they leave us and they say that person will not work there and on Monday they are there working on the same contract for another small business. Ms. SALAZAR. Incredible. Ms. CASEY. Unbelievable. Ms. SALAZAR. Unbelievable. Thank you very much for sharing, both of you, and I am sure that we will, we are going to take action into this. And thanks once again. I have to yield back. I do not have any more time. Chairman MFUME. The gentlewoman yields back. The Chair recognizes again the gentleman from Pennsylvania, Mr. Meuser, for 5 minutes. Mr. MEUSER. Thank you again, Mr. Chairman. Thanks, everyone, again, for all this important information. I agree with Ms. Salazar. We certainly need to help them and act upon it. So in a couple of the testimonies and in the discussion that just took place, you know, Ms. Aleman referred to as predatory Joint Ventures between large and small firms and that has been discussed. But I want to delve into that a little bit further here where these larger firms will set up subsidiaries or just new companies and set up Joint Ventures. And therefore, are able to capture contracts that they would not normally be able to capture. So large companies can do that and then perhaps undercut along the way. I mean, that is capitalism to an extent; right? I mean, if you can do something better you are going to be able to sell it for less, but when you are engaged in a deliberate, truly manipulative manner that is not outlined in a contract. It does not state, hey, if you want to get a small business contract or a minority-owned contract or a veteran-owned contract, you cannot just set up a company with those people as owners and therefore now you are eligible. I mean, that is just clearly against the grain and inappropriate and should not be done and perhaps should be illegal. Is that something that, now, you have all been mentioning it but I will go to Lynn Ann Casey. Ms. Casey, is that something that small businesses experience related to federal contracts? Ms. CASEY. I would say that there are certain situations where large business prims enter into Joint Ventures. And I would call them serial Joint Ventures where they do it over and over and over. I think Joint Ventures are a good thing for small businesses, especially under the mentoring programs but I would look to maybe limit how often a large business can enter into those Joint Ventures and whether they are serial Joint Ventures and therefore, preventing other small businesses from benefitting. Mr. MEUSER. Yes. It has to be a legitimate Joint Venture, not just a spinoff. Would someone else like to comment on that? Ms. TONG. Yeah, can I? So my situation is my mentor, they actually have so many proteges which makes our Joint Venture was not as fruitful as I wish it would be because just with us it is a food fight within us. So I want to echo what Ms. Casey said. Limit the number of proteges they can have because we can only have two mentors but they can have at a minimum three at the same time within SBA and not to mention other agencies like DoD or Treasury. Mr. MEUSER. Thank you. Ms. Aleman or anyone else care to comment? Ms. ALEMAN. So I am a big fan of capitalism. I am a Cuban- American immigrant. This is what my parents brought me here to this country to do. I believe in America, freedom, the opportunities it provides. I will live and die by that. And I can tell you that I hear the pain in Lynn Ann and Victor and Sophia's voice because we have all been there. And any small business owner that you put in front of a room and you say, oh, has this ever happened to you, the intent of Joint Ventures is a good one. Just like Category Management. It is a good one. It is to relieve the pressure of procurement offices. The reason smalls, ultra-smalls, are gravitating towards them knowing that they are still vulnerable is because they do not have a choice. So I think it is our responsibility, mutual responsibility, you as our elected representatives and us with a voice in our communities and in the organizations we belong, to create that opportunity for them. Let's give them the choice. Let's give them the choice to get work so that they can put other human beings to work, which is what we spend our money on is other human beings. So I just say create more opportunity. Do not shut down capitalism. That is not what this is about. I promise you all the small business owners I deal with and these on this call, we are not looking for handouts. We are looking for fair competition, that is all. Mr. MEUSER. Perfectly well said. Mr. Holt, last word? You have about 25 seconds. Mr. HOLT. I agree with everything that has been said. I think Joint Ventures is a good thing when done correctly. A lot of times we see that it can become predator where companies come together to capitalize and create an unfair marketplace. So as long as it is done correctly, I am 100 percent supportive. Mr. MEUSER. Great. Thank you. Mr. Chairman, I yield back. And thanks again to all of our witnesses. Chairman MFUME. The gentleman yields back. The gentleman's time is expired. All time has expired. And on behalf of the Ranking Member, I want to thank all of our witnesses for being here today. Your testimonies showcase the obstacles and many of the frustrations that Category Management has created for small businesses like yours across the country. And the longer we allow these issues to persist for small firms, they will be pushed out of the federal supplier base. This would be bad news, obviously, for businesses, but it would also be bad news for our government. So I look forward to working with Committee Members to find ways to improve our federal procurement systems while ensuring abundant opportunities for all small businesses. I would ask unanimous consent that Members have 5 legislative days to submit statements and supporting materials for the record. And without objection, so ordered. And if there is no further business before the Committee, we stand adjourned. Thank you all very much. [Responses to Questions by Mr. Victor Holt were not received in a timely manner.] [Whereupon, at 1:34 p.m., the subcommittee was adjourned.] A P P E N D I X [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] [all]