[House Hearing, 118 Congress] [From the U.S. Government Publishing Office] LEVELING THE PLAYING FIELD: CHALLENGES FACING SMALL BUSINESS CONTRACTING ======================================================================= HEARING before the SUBCOMMITTEE ON CONTRACTING AND INFRASTRUCTURE OF THE COMMITTEE ON SMALL BUSINESS UNITED STATES HOUSE OF REPRESENTATIVES ONE HUNDRED EIGHTEENTH CONGRESS SECOND SESSION __________ HEARING HELD FEBRUARY 15, 2024 __________ [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Small Business Committee Document Number 118-041 Available via the GPO Website: www.govinfo.gov ______ U.S. GOVERNMENT PUBLISHING OFFICE 54-744 WASHINGTON : 2024 HOUSE COMMITTEE ON SMALL BUSINESS ROGER WILLIAMS, Texas, Chairman BLAINE LUETKEMEYER, Missouri PETE STAUBER, Minnesota DAN MEUSER, Pennsylvania BETH VAN DUYNE, Texas MARIA SALAZAR, Florida TRACEY MANN, Kansas JAKE ELLZEY, Texas MARC MOLINARO, New York MARK ALFORD, Missouri ELI CRANE, Arizona AARON BEAN, Florida WESLEY HUNT, Texas NICK LALOTA, New York CELESTE MALOY, Utah NYDIA VELAZQUEZ, New York, Ranking Member JARED GOLDEN, Maine KWEISI MFUME, Maryland DEAN PHILLIPS, Minnesota GREG LANDSMAN, Ohio MARIE GLUESENKAMP PEREZ, Washington SHRI THANEDAR, Michigan MORGAN MCGARVEY, Kentucky HILLARY SCHOLTEN, Michigan JUDY CHU, California SHARICE DAVIDS, Kansas CHRIS PAPPAS, New Hampshire Ben Johnson, Majority Staff Director Melissa Jung, Minority Staff Director C O N T E N T S OPENING STATEMENTS Page Hon. Nick LaLota................................................. 1 Hon. Hillary Scholten............................................ 3 WITNESSES Mr. Joseph Spinosa, Vice Chairman, ADDAPT, Massapequa Park, NY... 5 Mr. Joel Lipsky, President, Lipsky Construction, Bayport, NY, testifying on behalf of Associated General Contractors of America........................................................ 7 Mr. Bob Taylor, Owner and Chief Executive Officer, Alliant Healthcare, Grand Rapids, MI................................... 8 APPENDIX Prepared Statements: Mr. Joseph Spinosa, Vice Chairman, ADDAPT, Massapequa Park, NY......................................................... 25 Mr. Joel Lipsky, President, Lipsky Construction, Bayport, NY, testifying on behalf of Associated General Contractors of America.................................................... 29 Mr. Bob Taylor, Owner and Chief Executive Officer, Alliant Healthcare, Grand Rapids, MI............................... 37 Questions for the Record: None. Answers for the Record: None. Additional Material for the Record: Associated Builders and Contractors (ABC).................... 41 National Aeronautics and Space Administration (NASA)......... 43 Piliero Mazza................................................ 53 Women Veterans Business Coalition............................ 58 The HUBZone Contractors National Council..................... 59 LEVELING THE PLAYING FIELD: CHALLENGES FACING SMALL BUSINESS CONTRACTING ---------- THURSDAY, FEBRUARY 15, 2024 House of Representatives, Committee on Small Business, Subcommittee on Contracting and Infrastructure, Washington, DC. The Subcommittee met, pursuant to call, at 10:03 [a.m.], in Room 2360, Rayburn House Office Building, Hon. Nicholas LaLota [chairman of the Subcommittee] presiding. Present: Representatives LaLota, Ellzey, Molinaro, Bean, Maloy, Scholten, McGarvey, and Thanedar. Chairman LALOTA. Good morning. Before we get started, I would call on Ranking Member Scholten to lead us in the Pledge of Allegiance. Ms. SCHOLTEN. Would you please stand with me. All. I pledge allegiance to the Flag of the United States of America, and to the Republic for which it stands, one nation, under God, indivisible, with liberty and justice for all. Chairman LALOTA. Good morning. And welcome to today's Small Business Subcommittee hearing on leveling the playing field and challenges facing the small business contracting. First, I want to thank our witnesses for joining us today, a few of who have traveled here from the best place in the country, Long Island. Your time is very much appreciated, and I look forward to your testimonies, all three of you. Today our Subcommittee will focus on several critical issues facing Main Street America. First, the number of small businesses receiving federal contracts has decreased by 50 percent over the past 10 years. Further, nearly 60 percent fewer small businesses are entering the federal contracting system. Second, the regulatory burden placed on small businesses that seek to enter federal contracting is too high. And, finally, third, we intend to address the systemic failures in the federal acquisition process which undermines small business participation in contracting. But it is not enough that we point out those problems. The focus here should be on how we solve these three and other issues, knowing the crucial role that Main Street America and small businesses play. We want to help increase competition, innovation, and stimulating our economy through our small businesses. It is embarrassing and even shameful that our small businesses have been systematically squeezed out of federal contracting for decades, and this decline comes as no surprise as the administration actively steers our economy and national security in the wrong direction. At a time when the country needs a robust defense industrial base, small businesses are getting pushed out of government contracts in this very space. Specifically, in my district, we are the nation's second largest industrial park after Silicon Valley, in Hauppauge, and, more broadly, Long Island is home to over 167 defense and aerospace companies comprising over 3 million square feet of industrial and commercial space, with 10,000 full-time employees and $3 billion of economic activity. And with the decline of domestic industrial small- and medium-size defense contractors, it is vitally important that we recognize and promote the vital work of our existing industry, like Long Island's industrial defense industry, whose contributions keep our military prepared at a moment's notice. As we look at contracting the Department of Defense, we must not only consider the primes but also the tiers of suppliers providing parts for ships, submarines, and planes, or businesses providing vital services. The bureaucratic red tape small businesses are forced to navigate is also extremely harmful and burdensome. Needless to say, the complexity of these barriers makes it even harder for small businesses to enter the federal marketplace. For example, involvement in federal contracting requires a sufficient understanding of the long and cumbersome regulations related to federal acquisition, defense federal acquisition, and within the federal register. Together, these burdensome and bureaucratic documents are over 94,000 pages long and require thousands of man hours to read. I am sure that we can all agree that no small business has the manpower to accomplish this burden successfully. Finally, we must examine the systemic failures currently in the federal acquisition process which consistently undermine main street. Practices like self-certification and joint ventures are ripe for exploitation by large companies to the detriment of small firms when large firms partner with a small business to gain access to small business contracts. Fraud is rampant in self-certification, and yet the administration seeks to expand rather than correct these actions. I recently joined my colleague from the other side of the aisle and fellow New Yorker, Ranking Member Velazquez, in introducing a bill that would phase out self-certified women- owned small businesses from the governmentwide procurement goals and protect the integrity of that program. Just like with any small business program across the federal government, we must ensure structure and guidance is in place to ensure firms are accurately represented. Our goal in this Committee is to create a pathway for small businesses to succeed, and we must ensure that small business is given the opportunity to thrive without drowning in bureaucratic red tape. Thanks again for everybody joining us today. Our witnesses' real world experiences, which we will hear shortly, will help this Committee work to make meaningful improvements to ensure small businesses are fully utilized in the federal procurement marketplace. We must work together to stop the decline of small business contracting and fight to keep main street open for business. With that, I yield to my distinguished colleague, the Ranking Member from Michigan, Ms. Scholten. Ms. SCHOLTEN. Thank you so much, Mr. Chairman, for holding today's important hearing. The premise is simple and straightforward: The federal government needs to contract with businesses in order to run. We believe they should be contracting with small businesses. How and the means through which that happens is what we are going to be talking about today. The federal government is spending almost half a trillion annually on goods and services needed for its daily operation. In fiscal year 2022, 5.5 billion defense contracting dollars were spent in Michigan alone. At least 131 million of those dollars are spent in my district. This money brings well-paying jobs to west Michigan and stimulates the economy. The U.S. Government remains a consistent and reliable client, yet the federal marketplace can be a hard space to survive, especially for small businesses. Small businesses experience challenges, including lag time between the speed of approvals and the speed of acquisitions, lack of uniform requirements across agencies, and inconsistent contract windows. These issues threaten the health of the industrial base and those businesses participating in it. If anything, we should be able to agree that the economic security and national security of our country is dependent upon a strong industrial base fueled by secure supply chains. Small businesses play a critical role in making sure that happens. To that end, I am glad that this Committee is examining the ways to empower our agencies to establish clear guidelines that would spare businesses the costs of associating with compliance with varying redundant and antiquated reporting requirements. The ability of small businesses to compete in the federal marketplace has also been adversely affected by the lack of staff in critical roles. Our witnesses here today may not be surprised to learn that there are openings in the role of procurement center representatives and commercial market representatives overseeing millions of contracting actions. Those delays result in attendant delays down the chain. Small businesses cannot be adequately advocated for with such few numbers promoting their use and ensuring the agencies are following the small business contracting procedures. Lastly, the government has taken steps, such as in the SBA taking over the certification process for Service-Disabled Veteran-Owned Small Businesses from the Department of Veterans Affairs, to streamline the certification process and eliminate unnecessary redundancies. I welcome discussions like today so we can build on success like this and identify additional factors challenging our small contractors and develop thoughtful, effective solutions. What is important for this Committee to keep in mind is that the testimony we hear today is part of the bigger picture, which is that the federal procurement marketplace is always evolving, and it is incumbent upon our agencies to remain agile, responsive, and accountable to the partner small business community that they work with. Small firms bring new ideas to the table, which in turn generate new jobs, new solutions, and, again, secure our industrial base. We must take steps to ensure that they can thrive and navigate the federal marketplace. I want to thank all of the witnesses for being here today, including our constituent business represented by Mr. Bob Taylor here today. And I yield back the balance of my time. Chairman LALOTA. Thanks so much. One of the responsibilities of both the Chair and the Ranking Member of the Committee is to identify and invite qualified witnesses to help us identify those issues and to help to provide solutions. And I am thrilled to introduce our first witness here today, hailing all the way from my neck of the woods on Long Island, Mr. Joe Spinosa. Thanks for being with us today, sir. Mr. SPINOSA. Thank you. Chairman LALOTA. Mr. Spinosa is the Vice Chair of ADDAPT and former co-owner and vice president of business development at East/West Industries located in Ronkonkoma. Mr. Spinosa has an amazing 44-year track record of success in business development with his contributions including designing, developing, and manufacturing aircraft subsystems. As the Cold War is ending, ADDAPT was formed in 1991 in response to reductions in defense spending by the federal government. ADDAPT's focus is on promoting the interests of New York companies adversely affected by consolidations among prime contractors and downsizing throughout the aerospace and defense industry. Mr. Spinosa graduated from Fordham University with a bachelor of arts degrees in economics and applied psychology. Thanks again for joining us today, Mr. Spinosa, and we look forward to the conversation ahead. Our next witness here today is also a very qualified Long Islander too, Mr. Joel Lipsky. And Mr. Lipsky is president of Lipsky Construction located in Bayport, New York. Lipsky Construction was founded in 1955 when Herbert Lipsky founded the Levittown carpentry program, earning its reputation by transforming hundreds of Cape Cod models into expanded Colonials. Now Mr. Lipsky serves as president of his own third- generation family business. Prior to working for his family business, Mr. Lipsky worked for the Haskell Company and the Turner Construction Company. Mr. Lipsky graduated from the University of North Florida with a bachelor's degree in construction management. Thanks so much for joining us here today, and we look forward to the conversation ahead. And I am going to yield to the Ranking Member for our final introduction. Ms. SCHOLTEN. Thank you so much, Mr. Chairman. It is truly my pleasure to introduce our final witness today, Mr. Bob Taylor. Mr. Taylor is a decorated veteran of the U.S. Air Force and is the founder, CEO, and sole owner of Alliant Healthcare Products which is based in my district, Grand Rapids, Michigan. Alliant specializes in manufacturing lifesaving and life-improving healthcare products that help our Active Duty military and veterans every day. Mr. Taylor earned his bachelor's of science degree from Michigan State University. Go Green. Since founding Alliant in 2002, he has successfully grown his company, navigated an evolving federal marketplace, and established strong relationships with the Department of Defense and Department of Veterans Affairs. In 2019, the SBA's Michigan chapter recognized his efforts in naming Alliant as the Veteran-Owned Small Business of the Year. I am thrilled to have you here, Mr. Taylor, and look forward to your testimony. Thank you for being here and thank you for your service to our country. Chairman LALOTA. And thank you. Appreciate, Mr. Spinosa, Mr. Lipsky, Mr. Taylor, all three of you, for making the trek to Washington to help inform us on this important conversation here today. Before I formally recognize you for your testimony, I want to remind you that your oral testimony is restricted to 5 minutes in length. If you see the red light in front of you come on, it means that your 5 minutes has concluded, and that is go time. That is time to wrap it up. And we want to recognize first, Mr. Spinosa, for your 5- minute opening remarks, sir. STATEMENTS OF MR. JOE SPINOSA, VICE CHAIR, ADDAPT; MR. JOEL LIPSKY, PRESIDENT, LIPSKY CONSTRUCTION; AND MR. BOB TAYLOR, OWNER AND CEO, ALLIANT HEALTHCARE STATEMENT OF MR. JOE SPINOSA Mr. SPINOSA. Thank you very much, Chairman and Congresswoman. Thank you for allowing ADDAPT to testify today. I will be presenting points which have been collected from member companies of ADDAPT, over 120. They represent tiers 1, 2 and 3 of the supply chain. In order to set a baseline, let me reference the following points that were made in a message by Secretary of Defense Austin. Small businesses account for 99 percent of all employer firms, 44 percent of our nation's economic activity. Small businesses comprise more than 70 percent of the companies that do business with DOD. They keep our military forces combat ready with critical parts, cutting edge technology, and top notch services. They fortify our defense supply chains in times of crisis. They ensure the military has the best capabilities to keep us safe. The most innovative minds in the country come from smaller companies. Despite efforts, though, the defense industrial base has declined by over 40 percent in the past decade. If we do not work to reverse the decline of small business contracting, then the industrial base that equips our military will weaken. If we do not take action, we risk losing mission-critical domestic capabilities, stifling competition and innovation, and potentially weakening the supply chains. From ADDAPT's perspective, in fact, small businesses that support aerospace and defense efforts are struggling to survive and stay relevant. Small businesses are faced with many challenges. We have categorized our presentation of challenges in two basic categories: overarching or primary issues and breakdown of system or secondary issues. Today I will cover my oral only the primary issues. Regulations are many and complicated, leading to the need to hire costly attorneys and translate regulations for small business owners. Small business owners do not employ full-time attorneys on staff. Many small businesses agree to contractual terms and conditions that are onerous or risk-intense because they have no choice. Financial issues arising from the economic environment resulting in high interest rates and limiting access to capital. There is a need for equitable adjustments to be available for multiyear fixed price contracts to counter the unprecedented inflation increase and drastic changes to the markets of raw material, process and finishing, and power. Consideration should be made for interest costs to be considered as allowable costs, where progress payments have not been extended as part of the contract consideration. It is difficult for small businesses to be extended progress payments or milestone payments as part of contracts from the government or primes. There is a need to maintain the waiver on progress payment rates and encourage prime OEMs to extend that to tier 1 suppliers. Also request the progress payment threshold to remain at 95 percent for small businesses. Cybersecurity has added a new wrinkle to the challenges. We understand and support that this is a required effort, but it is expensive to implement for a small business. According to our Members, to accomplish and implement CMMC for a small business can run from $200,000 to $500,000. For the average small business, this is a considerable amount and is growing. This is just to be allowed entry into the system to provide a quote to the prime or the government. Who will ultimately bear the cost for this? If it is added to the cost of items being quoted, will the small business be deemed noncompetitive? Furthermore, at the lowest levels of the supply chain, having to implement CMMC can be too expensive or beyond their capabilities, leading to a death spiral in the defense industrial base. Is there a right size solution to protect small business of the DIB while still protecting data integrity of the warfighting apparatus? Will there be sufficient numbers of assessors on hand to perform the certification to address the demand? Workforce development is another issue. Pandemic effects have reduced the workforce. In order to recover, defense manufacturers need programs that encourage and assist those that wish to be employed in the industry. Grants for training, certification, and transportation are needed to develop that workforce. As we have seen, there are many issues that challenge small businesses. It has become very difficult for small businesses in the aerospace and defense industry to make a good living and continue to invest in their companies to provide the kind of stabilities and capacities we need as the country moves into the future. Once again, ADDAPT thanks you for this opportunity to testify. Chairman LALOTA. Thank you. And I now recognize Mr. Lipsky for his 5-minute opening statement. STATEMENT OF MR. JOEL LIPSKY Mr. LIPSKY. Chairman LaLota, Ranking Member Scholten, and Members of the Committee on Small Business, Subcommittee on Contracting and Infrastructure, thank you for inviting me here to testify today. It is an honor to be in your presence. My name is Joel Lipsky, and I am president of Lipsky Construction located in Long Island, New York. Lipsky Construction is a third-generation commercial contracting company started by my grandfather in Levittown. Since my brother and business partner, Alex, and myself succeeded the company from my father and my uncle only a few short years ago, our organization has grown to over 12 construction management professionals who currently work with us today. We work in collaboration with some of the region's most respected design professionals in the New York area, and our work covers both the private and public sector. I am testifying on behalf of the Associated General Contractors of America, otherwise known as the AGC. The AGC is the leading association in the construction industry, representing more than 27,000 firms and their employees, including some of America's leading small business construction firms. It must be noted that more than 90 percent of firms within the construction industry have 20 or fewer employees. The AGC appreciates and thanks the Subcommittee for its continued efforts to help improve our nation's infrastructure and help develop small businesses. One of the greatest challenges contractors face with federal agencies is the disruption of cash flow on a construction project. Cash flow is critical, and without sufficient cash flow, a construction project would never start. Government projects rarely provide any deposit to initiate services and largely do not release funds for any type of early material procurement, leaving the onus on the prime contractor to manage those expenses. Oftentimes to keep the project moving, small businesses self-finance government projects. Lipsky Construction and other small contractors like myself can only self-finance these projects for so long. Slow payments impact not only the prime contractor but all lower tier subcontractors and suppliers as well. It must be noted, Chairman LaLota, as a prime contractor, we at times put the burden on the second- and third-tier subcontractors and suppliers to self-finance their portions of the work. And for Lipsky Construction, this includes putting that financial burden on many of the contractors who are your constituents, as a large portion of my subcontractors who I work with live within your district. The result is a decrease in competition for federal projects and fewer opportunities for small businesses. Additionally, these barriers prevent potential construction companies from ever even wanting to enter the federal market. Construction has been a well-regulated industry, and transparency is important to providing accountability to the American people. While there are many benefits to regulation, there is a balance between regulation and overregulation. This issue becomes particularly hard for small businesses with fewer than 15 employees. As the owner of such business, I frequently navigate the challenges by deploying my support staff in very diverse roles. One day my office manager might be handling phone reception. The next day she might be engaged in tasks like minority- and women-owned reporting, and another day she might be doing Section 8 labor outreach, all of which are required to work on federal projects. For the construction industry, labor shortage is still one of our biggest challenges. Despite increase in pay and benefits, the construction industry's labor shortage remains. A 2023 AGC survey found that 93 percent of construction firms have open positions that they are struggling to fulfill, not only skilled labor but also skilled construction professionals. I want to thank you again for inviting me and the AGC to testify before the Subcommittee today. I look forward to answering any questions you may have. Chairman LALOTA. Thank you. I now recognize Mr. Taylor for his 5 minutes of remarks. STATEMENT OF MR. BOB TAYLOR Mr. TAYLOR. Good morning, Chairman LaLota, Ranking Member Scholten, and distinguished Members of this Committee. Thank you. It is my honor to provide my testimony to this Committee about the way that my small business can work with the federal government in a more effective and efficient manner. My name is Bob Taylor, and I am testifying on behalf of the three businesses that I have in Grand Rapids, Michigan, where I employ 71 people. I am the 100 percent owner of Alliant Healthcare Products, a verified Service-Disabled Veteran-Owned Small Business, which sells healthcare products to the VA and U.S. military hospitals throughout the world, its sister company, Medisurge, a contract medical manufacturer, and Alliant Biotech, an orthopedic company focused on knee implants. As background, I had a 17-year military career leading to the rank of major. I served my first 6 years in the Air Force on Active Duty as a B-52 navigator and radar navigator. As a first lieutenant, I flew 11 combat missions during the first Gulf war. I wrote a book which was published earlier this year called ``From Service to Success.'' The book reflects on my combat experience, the challenges I faced, and provides a roadmap for how veterans can overcome these challenges and not only survive but to find the greatest success of their lives. Since starting Alliant Healthcare almost 22 years ago, we have earned a strong reputation as an exceptional federal market expert who provides value throughout the supply chain. Small businesses are vital to this space. If we have learned anything from our time with COVID it is that our supply chain is fragile, and it is imperative to our national security and the welfare of our citizens that we maintain a vibrant and diversified supply base which focuses on small business. Our small business has streamlined the process for helping the VA military hospitals in acquiring 200,000 different healthcare products from over 40 different manufacturers through 60,000 annual purchase orders. In addition, our most important benefit to the government is that we do not mark up prices for approximately 90 percent of the products we provide. We allow contracting officers to negotiate fair and reasonable pricing as though they are buying directly from the manufacturer, and then we honor those prices. In the words of one contracting officer, ``We love working with Alliant because you offer the same exact pricing and your team understands the government procurement process better than the manufacturers,'' unquote. Challenges? My understanding is this Committee wants to understand a little bit better about how small businesses are exiting this space. I think I can provide some insight. Our major challenge in dealing with the federal government is the time and data required prior to obtaining necessary contracts to meet the government's need. The impact is significant. It costs our company in lost revenue and lost profit. But it also delays lifesaving and life-improving healthcare for our nation's warfighters and veterans. The delays are not measured in weeks or months. It is measured in years. As examples, our products need to be on multiple different contracting tools, such as the Federal Supply Schedule, ECAT, IDIQs, DAPA, MSPVs, HTMEs, among others. All require hundreds of thousands of transactional data, and most do not require the same data. And if one contracting officer determines that our prices are fair and reasonable, the others do not recognize that determination. Each submission takes 12 to 18 months or longer. The process of their analysis can take so much that we have to resubmit data, which causes more delays. The requirements are daunting. Our challenges also include government payments. Alliant Healthcare currently has $7.4 million in receivables from the government. Of that, approximately $4.2 million is past due. The government is not paying in a timely manner. What is interesting is Congress passed laws to ensure timely payments to small businesses described in FAR Part 32.009, but the agencies are not adhering to the law. Congress also passed laws to require prime contractors to subcontract with SDVOSBs, but are allowed to achieve subcontracting goals that are far below the requirements. For example, the law requires 3 percent subcontracting, but the numbers are an order of magnitude below that. In conclusion, Alliant offers the military and VA hospitals the ability to acquire healthcare products in a streamlined and efficient manner. We could do more with greater efficiency, but we need to work together to solve these challenges. The government needs to realign its contracting tools to consolidate the required data required for awarding contracts, and the agencies also need to follow the laws already in place. This concludes my testimony. And I have provided nine items as recommended improvements. Chairman LALOTA. Thank you, Mr. Taylor. I suspect we will be talking about some of those nine here coming up soon. We are going to now move to the Member questions under the 5-minute rule, and I will start by recognizing myself for 5 minutes. Mr. Spinosa, thanks again for being here. Prior to being and serving as the Vice Chairman of ADDAPT, you have had 44 years of success in your industry, including being the co-owner and vice president of business development at East/West Industries. And we have said how the federal bureaucracy can be very difficult, 94,000 pages of rules and regulations for businesses like the ones that you represent. Mr. Spinosa, in your experience, what are some of the unique challenges that small businesses encounter when navigating the Department of Defense procurement process? Mr. SPINOSA. Thank you, Chairman. The challenges are, as have been stated by other testimony here, daunting. You run a small business. You do the best you can to get everything together. These regulations that come in, as I said, require attorneys to come in and help translate from legal speak to business speak and execution. And, you know, small businesses don't have attorneys on staff. It is expensive to do that and even bring attorneys in to go through this. And in the end, you are trying to figure out--at times people come in and quote, irregardless of what the regulations have in place, they ignore some of the regulations. And the government doesn't pick that up. You need to be able to have the regulations readily identifiable and clear to the businesses so that they adhere to that and everybody is on a level playing field. That is really what it boils down to. Sometimes the businesses go through looking at it and signing on to contracts, as I said, that were onerous or have a lot of risk associated with it, and it is--I am going to put it in this kind of fashion. Sometimes you need to step up to those to be competitive and land the business. You need to keep the business going, because when the big gorilla in the room comes in, they sit wherever they want to sit. And that is, you know, the challenge to the regulation side of stuff. It is also staying on top of those regulations. My feeling about the regulations is a lot of them are designed to rein in large business, and large business has a tremendous amount of resources to apply to that. The small businesses don't, and that is almost--not that there should be two different. I understand where some of the regulations are going to regulate the industry, but the onerous part of it is just driving nonvalue-added cost into the system. If we go to the folks at the pointy end of the spear, the warfighters, and ask them, ``How does this affect you?'' they look at that and say, ``What are we even spending money on this for? We need to spend it in the right places to get the right equipment, the right services, the right technology.'' Chairman LALOTA. So small businesses like the ones that you represent don't typically have an attorney on staff to help chew through those 94,000 pages of regulation? Mr. SPINOSA. They do not. They do not. And, you know, a side note, I worked in the time early on when everything was paper, and the books that we would bring in were huge to go look through regulations and stuff. Electronic maybe makes it a little bit easier, but it doesn't change the issue of taking legal speak and moving it into plain language. Chairman LALOTA. So when you have to spend money to hire counsel to help chew through those 94,000 pages worth of regulations, where do you pass those costs off to? Mr. SPINOSA. It has got to get passed back through the parts or, you know, through the nonrecurring costs. It has got to go somewhere. Chairman LALOTA. So with the less than a minute I have remaining in this round of questioning, what is the best solution to that? Mr. SPINOSA. The solution, to me, is the regulation has to become more plain language. It is just too legalese. Chairman LALOTA. And we are going to stick with costs. And, Mr. Lipsky, sir, can you discuss some of the costs associated with a company like yours when you are bidding for a federal contract? Mr. LIPSKY. Similar to my colleague here, we spend a tremendous amount of time just qualifying for the bid opportunity without any assurances that we are actually going to be awarded that project. And I think that is what he was trying to say is that just to get in to submit a price, there is tremendous burden and overhead that is not guaranteed to be recovered that goes back to the corporation's overhead. I also do not have an attorney on standby, although the joke in my office is that she is the second highest employee within my company. Chairman LALOTA. Thanks. My time has expired. I now yield 5 minutes to my colleague from Michigan, the Ranking Member, Ms. Scholten. Ms. SCHOLTEN. Thank you so much, Mr. Chairman. Just as a point of privilege, Mr. Spinosa, I could not relate more readily to your fervent insistence on plain language. My team knows, everyone who has ever worked with me knows, I am a firm believer, if you can't explain a concept in plain language, you don't really know what you are talking about. I am with you 100 percent. The SBA needs to just put these regulations in much more easily understandable terms. Why say it in 94,000 pages when you can say it in one? Again, I just want to thank all the witnesses for being here today. As the Ranking Member of this Subcommittee, one of my top priorities is to ensure that Service-Disabled Veteran- Owned Small Businesses like Alliant are able to navigate and grow in the federal contracting marketplace. They served our country. Now it is our responsibility to serve them. As such, I am committed to improving the process with which agencies award contracts and pay our hardworking small businesses what they are owed in a timely manner. Mr. Taylor, in your testimony, you explained your company has $7.4 million in receivables from the federal government and, of that, $4.2 million is past due. I am so sorry about that. As a business delivering lifesaving and life-improving technologies to VA and military hospitals, how do delays in payments impact your business and our servicemen and women? Mr. TAYLOR. Thank you, Ranking Member Scholten. The issue is that it impacts us disproportionately to how it impacts larger businesses that have access to larger credit facilities. What happens is, when we deliver a product, say, an operating room table, it gets received, but then the documentation doesn't get processed in a timely manner. And it can take a month to get someone to fill out the documentation before their clock starts. So the clock doesn't start when the operating room table shows up. It starts when they have gone through the bureaucracy of receiving it. So it is an unfair position for the government to take. They have received the products. We have already paid for the products, and we are under tremendous pressure from our suppliers to pay on time. And so we have to borrow millions of dollars so that we can pay our suppliers in a timely manner so that we can continue to do business. And all of that detracts us. That cash is going to payables rather than innovation. It is going to payables instead of new salaries. And so that is where it impacts us is in how can we provide better, more cost effective, and streamlined service to the government. Ms. SCHOLTEN. Thank you. That is incredibly helpful. Another issue that I consistently hear about as an impediment to small businesses contracting is agency unique requirements. These can be barriers to growth for companies already in the market but who don't have the capacity to meet requirements for new agencies, even though they are already a government contractor. I'll be very brief, and you all can be brief as well. This is for all of you, but beginning with Mr. Taylor, can you speak to your experiences in meeting the specific requirements when contracting with different agencies? Mr. TAYLOR. Congresswoman, the issue is that it is not only agency specific, it is contracting tool specific, and then it is contracting officer specific. So each contracting officer is allowed to interpret the language in the federal regulations independently of others, and each contracting tool has separate regulations and requirements separate from others. So there is no consistency at all on how to work with each federal contracting or contracting officer. Ms. SCHOLTEN. Thank you. Mr. Lipsky. Mr. LIPSKY. So I am a builder, and we build for multiple agencies. It just behooves me that if I build for one agency, that the procurement, the payment terms, the change order process vary from agency to agency. As soon as I figure out one agency--and we are having a similar problem with New York State where I just don't understand why it is not a unilateral way to do a change order or unilateral way to get a procurement. Everyone does it a little differently. And to my colleague's credit, different agencies handle it better and pay faster than others. I will yield my time to Mr. Spinosa. Ms. SCHOLTEN. Do you have a few thoughts in the remaining seconds? Mr. SPINOSA. I can only say--I will give an example. In the test area, you always look at the assessors and find out are they out there to do a gotcha or are they out there as a learning and move forward and keep the system moving forward. I will give an example. You go to different folks where you have a part that you have been making for years, and it should go right through the whole procurement process and the production lead time, et cetera, testing. You go to some folks, and they delay and delay, delay getting stuff in that you have been making for decades. And to what end? It just adds cost and cost and cost to the system going back and forth. Ms. SCHOLTEN. Thank you. Chairman LALOTA. Thank you. I now recognize Representative Ellzey from the great State of Texas for 5 minutes. Mr. ELLZEY. Thank you, Chairman LaLota, my shipmate from the Naval Academy. Thanks for having this hearing today. And thank you all for being here today. Small businesses make up 50 percent--nearly 50 percent of all jobs in the United States. And despite claims from agencies that they are prioritizing small businesses, the numbers show otherwise. While the total value of contracts issued to small businesses has generally increased over time, since 2010, the number of small businesses receiving prime contracts from the federal government decreased by more than 50 percent. In that same period, the number of small businesses entering the federal contracting system has also decreased by 60 percent. The Biden administration has only made things worse. And in 2021, 27 percent--27.2 percent of contracts went to small businesses, while in 2022, only 26.5 percent of contracts were issued to small businesses. Bureaucratic regulations and red tape hurt small businesses. Small business contractors play a vital role in America's industrial base and national security apparatus, and stifling red tape has caused a number of small businesses receiving federal contracts to significantly decrease. And while I mentioned the Biden administration, I want to point out that after administration after administration, it doesn't matter which party they are from, they stay. They outlive those of us at this dais and they outlive administrations. And the only reason they exist is, as I said yesterday, a self-licking ice cream cone, and they get ahead by adding more burdens to you because they are getting a paycheck every 2 weeks. So they don't make it easier for small businesses to succeed. And when the balloon goes up, as we are looking at a time of unprecedented--at least since 1938--potential for worldwide conflict, the primes have their roles to play in providing for our military and industrial might. However, they rely on the subs, like you, to make sure that on-time delivery of those weapon systems is ensured. In my own district in Red Oak, Texas, is Qarbon Aerospace, which is providing the fuselage and the wings for the Boeing T- 7. Boeing is the prime, but without Qarbon Aerospace, they couldn't get it done. Without that workforce, they couldn't get that done. Without the materials that they are responsible for the supply chain of achieving, they wouldn't get that done. Now, Qarbon Aerospace can afford those attorneys that we have talked about and the manpower and the ability to navigate this extremely expensive process of providing for our nation's infrastructure, but you guys don't. And so while the bureaucracy lives on administration to administration, you guys struggle to try to even turn a living. But when the balloon goes up--and, by God, I hope it doesn't. But if it does, the only people who are going to be able to scale up to provide increased production of any weapon system we have is going to be relying on you because the primes are already tapped out. So pulling back, clawing back what the SBA does, what the banking industry does is essential to success of American businesses, because we are from the government and everything looks like a nail, and all those nails are the same size. So when you talk about the banking industry and too big to fail and the big boys up high adhering to the Basel Endgame and they can provide for lawyers to negotiate that, our small community banks can't. And it is exactly the same way in government contracting, specifically for our military. So access to capital is great for the big guys and for the primes, and it is almost impossible for you because we have made life so difficult for the small banks that you bank at, your community banks, you can't get capital to provide these subcontracts that you have signed up for. So this is a real problem that we have to get through. And I would like to ask, Mr. Spinosa, can you explain the importance of subs to national defense very quickly, 30 seconds? Mr. SPINOSA. Subs to the primes are their primary blood flow of parts. Whatever prime you pick, the small businesses are probably 60 to 70 percent of what they are seeing, similar to what DOD sees, because it is the same type of stuff, the same type of parts, the same type of services. Mr. ELLZEY. Mr. Taylor, I know that you are the so-called Democrat witness here today, but I see three men up here with small businesses whose job is for them to provide for their families and for their communities. First of all, thank you for your 17 years in the Air Force. I am not sure why it wasn't 20, but thank you for doing it. And I see a man who is trying to make money and provide for his small family. So there is not a chasm here of Republican versus Democrat or Biden administration versus any other. You have a bureaucracy issue that prevents you from providing in a way that would add real value to our nation's economy and to your bottom line. And so I would like to thank all of you for being here, and this is something we need to address sooner rather than later so that you all can be successful and so can our economy. Mr. Chairman, I yield back. Chairman LALOTA. Thank you, shipmate. I now recognize my colleague from Kentucky, Representative McGarvey, for 5 minutes. Mr. MCGARVEY. Thank you, Mr. Chairman. I want to thank everybody for being here today. Really highlighted the challenges you all face and giving us insight in this Committee and do what we want to do, which is improve contracting for small business owners. We hear over and over again--and I know I hear it from constituents in Louisville, Kentucky, these business owners-- the procurement processes for these business owners can be incredibly burdensome. And that is because when the small businesses apply for the federal contracts, they have to spend incredibly valuable time, expend limited resources, and parse each agency's prerequisites necessary for certifications and required skill sets to even determine their eligibility. It is only after you do all of those things that then you get to write up your formal proposal. And so, Mr. Taylor, you mentioned how tough it is to find the time and resources to do all the work you need to do even to have the opportunity to apply. You also talked about how federal agencies fail to meet the contracting goals for service-disabled veterans, who I am sure face additional barriers to applying. So, Mr. Taylor, when the SBA recently took over certifications for service-disabled veteran small business owners from the Department of Veterans Affairs, how was your experience with that transition and what is the SBA's process like? Mr. TAYLOR. Congressman, I have a very recent experience with the transition. This was probably our sixth certification process as an SDVOSB, and we just went through the process in January, and we submitted our data and all of the information. It was quite a bit of information that they wanted, but we are happy to supply it. And, shockingly, we received our certification in 2 weeks. And so that is months improved over what it was when it was in the VA. So the change to the SBA for that certification process has been, in my opinion, one of the best examples of what can be done. Mr. MCGARVEY. We like good news up here, so I appreciate that. Mr. TAYLOR. That is good news. Mr. MCGARVEY. I appreciate that. And please let us know how that continues to work and if it is not. So looking back in 2021, the Biden administration set a goal of increasing procurement for disadvantaged small businesses, aiming for 15 percent by fiscal year 2025, and requiring agencies to review category management practices, encourage new entrants in the federal marketplace, and include small business contracting success and senior official's performance goals along with some other reforms. This is for the whole panel. Anybody gets to answer. I would like any of you to answer who want to. Has this goal translated into action? And have you and your colleagues in the industry noticed more opportunities? Mr. TAYLOR. Congressman, I can speak a little bit. The SBA and the focus on small business at this level from legislation has been exceptional, but the agencies do not live up to those standards and requirements. Just like the subcontracting goals with SDVOSBs, there is a lack of authority, it seems, for the small business representatives in the government to effect the change. So I think the laws and requirements are there, but the follow-through and the authority to get large businesses and the government to follow through isn't sufficient. Mr. MCGARVEY. Anybody else? Mr. SPINOSA. I'd like to pass a comment on that, an example. The SBA works very hard to make things happen. And, obviously, you look at the metrics of performance are there, but in terms of what it boils down to, the execution, the implementation at the agency level, the service level, if you get a request for a quote that has gone out, full and open competition, and has a very short fuse on it, response date, small businesses are challenged to meet that. And to me, my opinion on it, when that comes out, it is really destined. They already figured out who they want to award it to. They are just trying to get the check boxes knocked off for, you know, okay, I tried. I put it out there. You know, we are going to get some responses from somebody, but, you know, it is destined for a large business. Even though they would want to, you know, destine it for a small business, the service itself doesn't make that happen. Mr. MCGARVEY. Thank you. I see I am out of time. So, Mr. Chairman, I yield back. Chairman LALOTA. Thanks very much. Many Long Islanders consider what is north of Yankee Stadium to be upstate. While that might not be the case, somebody who truly represents upstate New York, my good friend from New York, Mr. Molinaro, for 5 minutes. Mr. MOLINARO. Thank you, Mr. Chairman. Most of us think, you know, you live on an island. It should likely worry many that they are surrounded by so many New Yorkers, but I do appreciate, Mr. Chairman, this hearing today. It is somewhat timely on a number of fronts. But for me specifically, yesterday I participated in a round table discussion with my colleague, Representative Chris Pappas, along with Department of Defense Office of Small Business Programs to discuss actually with the providers, the government entities, the employees within the federal government expected to administer programs to support small businesses. We discussed at length ways to better assist small businesses in navigating DOD's many services, resources, and contracts. To a conversation had just a few moments ago, I too, having served in local government, can appreciate, although not from the business perspective, but in local government we speak in plain talk, and we have regulations that are very clear. It is one of the reasons that I cosponsored and led the POST IT Act, which is an effort adopted and passed by this Committee in the House to be more transparent with small businesses so you understand how to access and navigate very complex federal regulations. From the conversation yesterday, it is very clear--and you, of course, reinforced--the complexity of contracting rules and regulations. Now, for communities like mine in way upstate New York, rural and underserved areas like those within upstate New York, small businesses rely on partnerships with the Small Business Development Centers and APEX Accelerators. These each provide necessary lifelines and assistance to small businesses. In Binghamton alone in my district, the Binghamton SBDC advised over 26,000 clients, created over 11,000 new jobs, and accessed nearly $600 million in new capital. It is clear that SBDCs are really helpful, but we also know that knowledge of and partnership with SBDCs can become a bit of a challenge. So to both Mr. Spinosa and Mr. Lipsky, to the extent that you have had experience with SBDCs--and I know that you have-- what has been that experience? What understanding exists of what SBDCs provide, and what support do they provide? And then to the extent you want to offer some recommendations on how they can approve their work, we welcome that. Mr. LIPSKY. Yes, I can comment on this. So associations like the Associated General Contractors also has the New York State Chapter, which also represents a lot of the constituents upstate as well. The problem that I see with small businesses, which are the second tier subcontractors and suppliers, is that governments have competition to private. So if there is a opportunity to get a deposit in advance and to get your money out on something, they are going to go for that versus entering a State agency or federal contract. So I think that the SBDC, as far as the partnerships, the small business partnerships, helps try and bring those people into the market, but also poses a challenge because you guys have fierce competition on the private side. Mr. MOLINARO. Sure. Mr. Spinosa? Mr. SPINOSA. Yes. Experience with the SBDCs as well as the MEPs are important, very important from the manufacturing side. I believe overall they are trying to do a good job. The problem we run into is, again, funding disappears to those organizations very quickly. I will give a quick example. Cybersecurity, trying to achieve CMMC evaluation, starting the process to become cyber secure. I know that the MEPs have run out of funding to put in to that effort, and that is--Mohawk Valley is a cyber secure expert area on the MEPs, and they have run into that issue time over time over time. And that, again, just delays small businesses getting the process started, getting themselves ready and entering, because the cybersecurity aspect is being pushed as a barrier to entry from both the government as well as the primes. If you don't get yourself cyber secure to 800- 171 or CMMC, you are not going to be able to continue, even if you have something that you do currently. So---- Mr. MOLINARO. Appreciate that. My district is home to the Lockheed Martin facility in Owego, New York. That is in upstate. From my understanding, there are a number of ADDAPT Members who have worked on two of Lockheed's Owego's projects, including the Air Force combat rescue helicopter. So I just want to restate what we all know: The role of small businesses as relates to DOD contracting and support for our defense, our national defense, critically important; 70 percent of new jobs created by existing small businesses helping navigate the regulatory regime, critically important. And thank you all for testifying today. With that, I yield back. Chairman LALOTA. Thank you very much. I now recognize a fellow freshman from the free State of Florida, Mr. Bean, for 5 minutes. Mr. BEAN. Mr. Chairman, a very good morning to you, and good morning, Small Business Committee. And to our witnesses, what an honor it is to welcome you here. We had a hearing yesterday, had a hearing yesterday, and it was all about just regulations on small business. And the National Association of Manufacturers say 12 percent of our economy--and, of course, small business is the backbone of our economy--12 percent is based on just trying to comply with regulations. So hats off to each of you running small businesses. It is harder than most people know. You are usually the first one to get there, you are the last one to leave, last one to get paid. And nobody sees all the work behind the curtain that you do. And to listen to how hard it is to apply for a government contract, what if--how about this? I want you all to just play along with me. What if there was a world in which the government had to compete with small businesses and the government itself had to bid on a project to show that they could do it better than you? We know they can't, and many times small business does it better. What if? Wait a minute. There is such a bill. It is a Bean bill. It is called the Yellow Pages bill, and it says this: If a government is going to provide a service and there already is a firm that will provide that service, then they need to bid themselves, and let's see apples to apples and see what can be saved. I have got good news, Committee Members. I have saved--I have saved a spot for you to cosponsor this legislation. We can all go hand in hand together. And so check it out, because that is the world we want to live in if we are ever going to get spending and just get everything under control. I asked yesterday, I asked yesterday to the firms there, has it ever been this bad? That answer yesterday--well, in fact, I will tell you what they said yesterday after I hear from you guys. I don't want to spoil the answer of what these firms from across America told me yesterday, unless you watch C-SPAN, which you probably don't. But let's start with Mr. Lipsky. Mr. Lipsky, you are an outlier, because most people that are from New York move to Florida, but you were in Florida and then went back to New York. I totally understand because you went to school in Jacksonville, and hats off--I went to Jacksonville. You went to the University of North Florida. We are kind of archrivals. I will bow down. You won the River City Rumble this time. Has it ever been this bad, in your opinion? Mr. LIPSKY. It is pretty bad. You know, just qualifying for some of these programs--I mean, we just heard one niche, which is cybersecurity, to get even entered into submitting a proposal is pretty bad. So I will yield my time to some of my other colleagues who might be able to weigh in---- Mr. BEAN. Mr. Spinosa--so, for the record, you said it is pretty bad. So we will take that as an answer. Mr. Spinosa, what say you? What say you? Has it ever been this bad, regulatory---- Mr. SPINOSA. It has not been this bad. Mr. BEAN. It has not? Mr. SPINOSA. It has not been this bad. It is hard to explain. The confluence of all the different things that are happening--and to go towards your bill for a moment---- Mr. BEAN. Yeah. Mr. SPINOSA.--the government has tried to come out and do things and say, oh, we are going to do this better than industry can do. And every time they have gone through that, they found that they can't do it as innovatively, as effectively, as economically. Mr. BEAN. Yeah. Mr. SPINOSA. And the flip side is the organizations themselves try to show obvious--you don't want to show failure on things, so they try and make it look like a success. Mr. BEAN. Yeah. So if you were a Member, you would sign on to that bill is what you are saying? Mr. SPINOSA. Absolutely, absolutely. Mr. BEAN. And in small business you look at every little number. You look at every little number, and that is why you run a tight ship. Mr. Taylor, what say you, my friend? Has it been this bad before? Mr. TAYLOR. So I've been doing this for 20 years. I have seen a lot of ebbs and flows, and--I'm sorry. And so I think the--the one thing that makes this period worse---- Mr. BEAN. Yeah. Mr. TAYLOR.--is the direction that we are going. We seem to be heading in an even more difficult direction, and that-- that's what causes me the greatest concern. Mr. BEAN. Gotcha. Let me tell you what they said yesterday. Yesterday, all of the firms that were represented--and they were small oil and gas providing energy--they said it has never been this bad, and they have been in business a long time. I am almost out of time, and I talk way too much. I appreciate you all coming forward, appreciate you all standing firm. You represent--I know some of you represent--right now you are representing just thousands of small businesses across America that are struggling to make it. You are fighting supply chain, getting good help, you are fighting inflation. And so we are proud of you. Hang in there. Help is on the way. Chairman LALOTA. Will the gentleman yield for a question? Mr. BEAN. Mr. Chairman, you are the Chairman. I will yield to the Chairman. Chairman LALOTA. Mr. Bean, the Bean bill. What is the bill number, sir? Mr. BEAN. You would think I would know that. Chairman LALOTA. We are going to have a second round. Maybe we can---- Mr. BEAN. 10-4. Thank you, Mr. Chairman. We will get it to you. Chairman LALOTA. I now recognize fellow freshman, the newest Member of the Small Business Committee, but with a wealth of experience, Ms. Maloy from Utah, for 5 minutes. Ms. MALOY. Thank you, Mr. Chairman. There is a lot of freshman energy, a lot of New York energy in this room today. I don't know if I can rise to the occasion. I am going to do my best. I represent Utah, which, for all of you in this room, is very far west of western New York, also west of Florida. But Utah is a really entrepreneurial State. We love our small businesses. We are small business friendly, but I have concerns. To Mr. Bean's point, things are harder than they have been in the past for small businesses. I appreciate you being here to testify about your experiences and what you are seeing. I am going to give you a unique opportunity today. We are the Small Business Committee. We are Congress. I am going to give you a chance to give Congress a little bit of advice. I've only been here for 2.5 months, and I know people who are not in Congress all know how we should be doing our jobs. So I am going to give you a platform to talk about it. My first question--and I am just going to go right down the row--is, how can Congress incentivize prime contractors to collaborate with small businesses in infrastructure projects? I know it is tough for small businesses to get into these federal contracts because the--the prime contractors already have a lot of the market. What advice would you have for us to help make that better? Mr. SPINOSA. Thank you very much, Congresswoman. I would say that, obviously, the regulations need to be trimmed and--I am going to say--common language so that the businesses can address those. But more to the point, I am--there is a--there is a short-term issue, which is the businesses are in tough times right now. I'll give you an example. Fixed price contracts, that--long-term contracts that the government has done to try and control things, businesses applied normal incrementing of pricing as you go along based on the--I am going to say on assumptions. We are in a time of crazy interest rate increase that is killing small business. And the primes and the government are not going back and allowing the businesses to do equitable adjustments based on that. That is why in my presentation I talked to progress payments, I talked to allowable interest and equitable adjustments that are desperately needed by small business to handle the times that we are in right now. If you want to adhere to fixed pricing, you have to take care of areas that are out of the norm. Everyone went together to put pricing together and quantities together. We put the facilities in place to do stuff. You can't hold them--hold feet to the fire and say, oh, you quoted a price based on interest rates that are long gone. It has got to be handled. Ms. MALOY. Okay. Thank you, Mr. Spinosa. Mr. SPINOSA. Thank you. Ms. MALOY. Mr. Lipsky? Mr. LIPSKY. Essentially, what I am hearing is, what advice do you have to fix the problem. Ms. MALOY. Yes. Mr. LIPSKY. And my--as much as I can get into cash flow and regulation tape, I think the two big pieces of advice that I can contribute today is to continue to have open discussions with the private sectors and the people who are affected, which is what we are doing today, and to listen to the partners such--and the associations, such as the Association of General Contractors. We are a great resource in order to provide representation on hundreds of thousands of employees and their--and their--and all the subcontractors that they represent. That would be my biggest advice. Ms. MALOY. I just want to make sure we put a fine point on what you are saying. So you don't feel like the federal government is currently listening adequately and responding to your concerns? Mr. LIPSKY. I think that this is a very good start. I haven't personally seen it myself previous to this, but I appreciate the open invitations to be here today. Ms. MALOY. I also don't think the federal government is adequately listening, so thank you for bringing that up. Mr. Taylor? Mr. TAYLOR. Congresswoman, the first point I want to make is I didn't show up here today, nor do other small businesses, look for handout. Ms. MALOY. Right. Mr. TAYLOR. I firmly believe that we offer the federal government innovation, cost effectiveness, the ability to do things that large businesses cannot do. We are more responsive, we are faster, we are more adaptive. I am not asking the government to say, here, here's something for you. What I would recommend is that I think there are laws and goals in place, but the large businesses and primes need to be held accountable to those. So, for example, if the subcontracting goal is 3 percent and they are achieving .3 percent, something needs to be done. And it is not just to throw a favor to me. It is to give me a chance, to give other small businesses a chance, to compete fairly. That is all I ask for. Ms. MALOY. Thank you. I yield my time, Mr. Chairman. Chairman LALOTA. Thank you very much. As the gentlelady said, there is a lot of freshmen energy in this room. And following that, fellow freshman from Michigan, Mr. Thanedar, for 5 minutes. Mr. THANEDAR. Mr. Chair, I am going to pass. Chairman LALOTA. Excellent. We are going to have a second round. So lucky you, we can get to you in the second round. Mr. BEAN. Mr. Chairman? Chairman LALOTA. The gentleman is not recognized just yet. Mr. BEAN. 10-4. Chairman LALOTA. We are going to start a second round for 5 minutes, and I am going to start my 5 minutes by yielding a minute to the gentleman for the purposes of expanding upon the bill to which he referred. Mr. BEAN. Well-played, Mr. Chairman, well-played. Very nicely done. It is H.R. 2744. It is called the Freedom from Government Competition Act. And it just says government needs to verify that they can do it better than small business. We know they can't. So thank you, Mr. Chairman. H.R. 2744. Chairman LALOTA. The gentleman yields back, and we hope that at least 10 more co-sponsors are going to come on today. We do a lot in Congress talking about China. And when we focus on small business, we don't always think there is a correlation necessarily between small businesses and China, but indeed there is, especially with our defense subs. The defense subs have a great impact--despite being small businesses, have a great impact upon America's most strategic competitor, China. And rightfully so, here in Congress, we spend a lot of time focusing on ways to outperform China. In fact, later on today in the Armed Services Committee, I have a hearing on outpacing China through innovation. And, Mr. Spinosa, back to you. I understand small businesses are 16 times more likely to create a patent than their larger competitors. So my question with respect to China, innovation, patents, how can the DOD better harness the innovation of small businesses in the defense industrial base? Mr. SPINOSA. I think it kind of boils down to--I am going to give you just a couple of words on this. Number one is transparency. Work together with us. That is the important aspect there. It is--it is so close to the vest that there are things there that will, even in the commercial area, that has application to help things out, and they are not getting there because there is no transparency. I think the other aspect--I am going to call it this way: We--the government needs to be less adversarial. The DOD needs to be less adversarial with the small businesses and be more parental with their, look, we have got a problem here we need to handle, and let's take care of that. Because when that does happen--and it does happen within certain--certain groups. There is certain services and their program offices that have that--that culture. When it happens, it is wonderful. Things happen quick, happen effectively, and happen economically. Chairman LALOTA. Moving back into what we talked about in the first round with respect to the bureaucratic burdens that the federal government places upon you, would you agree that if we relieved you of some of those burdens, we would free you up to even be more innovative than you already are? Mr. SPINOSA. Quite simply, if a business is spending X amount of money just trying to keep up with the regulations and that kind of stuff, it is money for small business that can't be applied to its facilities, to getting the right people, the right engineers, et cetera. As I said, it is nonvalue-added costs that just don't do anything for our warfighters or the government or whatever the application. So it needs to be looked at and said, what do we really need. As a small business, every day we look at different costs. We say, is it a--is it a I got it, I need it, or is it a like, or is it, do I really need it? Chairman LALOTA. That sounds like some of the dialogue I have with my three children. Nevertheless, if we can make one more connection, if we can agree that relieving you of some of these regulatory burdens leads to more innovation, would you also agree that more innovation allows us to greater outpace China? Mr. SPINOSA. Absolutely. I mean, there is no question about our innovativeness. As I said in my testimony, most of the innovative technology comes out of small business. That is where it is. And we are the ones that are creating it and keeping things moving forward. Look at the different systems that are out there. I will bear one comment on things that kind of hamstring us. Businesses have been asked to become more commercial in their approach to build systems that are close to ready or show the proof of concept to the government. Most recently, the FARA program, both on Bell's side and Sikorsky's side, they have come to the small businesses and said, help us invest in the program, let's go. And I get it. It is a competitive program. But when it gets cut out right out of the bottom, it hurts small business. Chairman LALOTA. Yes. Mr. SPINOSA. I don't know how they thought about that. You know, that is that whole supply chain. It is not just the business itself, but everything that goes on underneath it, the tier 2s, the tier 3s. Chairman LALOTA. That is good insight. I appreciate you sharing it. My time is about expired. I am going to now yield 5 minutes to the Ranking Member. Ms. SCHOLTEN. Thank you so much, Mr. Chairman. Well, the principal job of this committee is to provide some oversight to the SBA. My husband will often joke, what did the SBA do wrong today, when he knows that we have a committee hearing. We can spend a lot of time on it. But I also find a lot of value in talking about what's working. You all are successful small business owners, and the SBA has played a role in that. What good is the SBA doing and how can we ensure that it continues to do that good work? We will start with you, Mr. Taylor. Mr. TAYLOR. Congresswoman, I think over the years, I have seen what the SBA does as very positive. I see a lot of good that comes from the SBA. My only issue is that they don't have enough authority or standing in the federal agencies to--to execute the laws and the requirements that they are giving to the industry. So I don't see a lot of dysfunction in the SBA. I see them as kind of the beacon in the forest for helping small businesses. Ms. SCHOLTEN. Yes. Mr. TAYLOR. I just wish that they had more authority. And I don't know if it is a desire, but something needs to happen so that the voice of the SBA carries more weight. Ms. SCHOLTEN. Thank you. Mr. Lipsky? Mr. LIPSKY. My experience with the SBA is a little limited, but I will comment on some of the private clients that I have who use the SBA, one of which is James Bonanno of the Tap Room, who is--who owns a restaurant on Long Island that you may know of. He uses the SBA quite effectively in getting his funding to have his construction projects and restaurants expand in the Long Island, New York, area. So I will yield my time to Mr. Spinosa. Mr. SPINOSA. Congresswoman, I think the SBA is not the one to blame on this. I think, you know, obviously, regulations--we would like to see regulations, more plain language. But more to the point, it is more about the actual implementation. And, again, that, to me, boils down to my comments from the Secretary of defense. All the points were there. The recognition was there. How it gets down to the troops, how--when I say the troops, the services, the procurement, the acquisition people--and gets implemented, that is where it all--the rubber meets the road. Sometimes it is great and it is wonderful, and other times it is like, oh, my God, what are we doing here again? Ms. SCHOLTEN. That is more helpful than you know. Thank you. That is it for me. Chairman LALOTA. Thanks so much. I appreciate you yielding back. We are going to wrap things up, but I want to say this. We spent a good 75 minutes here together having a good dialogue. This is probably the most effective 75 minutes I have had in Washington in quite some time, which isn't always saying much. But truth be told, this dialogue that we are having is quite important. I appreciate the witnesses for having taken their time to prepare their testimony, prepare the issues that are important to your individual constituencies, and coming here to Washington to inform this committee of that. I want to say thanks to the professional staff for preparing as well. You know, these things don't happen without a lot of folks on this side. And Grady Austin, my guy back there, helps me out a lot with things as well. I want to say thanks to him. And without objection, Members have 5 legislative days to submit additional materials and written questions for the witnesses to the Chair which will be then forwarded to the witnesses. And I ask the witnesses to please respond promptly should you get that correspondence. And if there is no further business, without objection, the Committee is adjourned. A P P E N D I X [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]