STATEMENT
Of the
Honorable Nydia M. Velázquez, Chairwoman
House Committee on Small Business
"Disaster Planning and Recovery: Are We Ready for Another Katrina?”
August 2, 2007

This hearing continues the Committee’s examination of the government’s response to Hurricane Katrina.  With hurricane season upon us, it is critical that we fully understand the ability of federal agencies to serve those affected by large scale disasters.

This past April, the Committee held a field hearing in New Orleans to review the government’s efforts to include local, small businesses in Hurricane Katrina recovery contracting.  What we found was disappointing. 

The Committee uncovered miscoded contracts and missed opportunities.  Local, small businesses testified at the hearing that they were unable to get prime contracts – and that contracts were being awarded to large firms from out-of-state.  The agency’s own data supported this testimony. 

At the end of that hearing, I told the agencies that the Committee would continue to monitor their contracting practices in New Orleans.  So I have brought them back today to update the Committee on their progress. 

Today’s hearing will explore what has been done since we met in New Orleans.  We will also look at any institutional changes that may have been made, updated statistics, and plans for future contract awards. 

But, I have to say, I am disappointed with the submitted testimony.  Not one of the agencies testifying today has made local, small businesses a priority.  The testimony does not focus on specific and measurable ways to include these local small businesses in the rebuilding effort.  At this point, I would expect less lip service and more action.

The use of local and small businesses is vital to the recovery of the Gulf Coast.  These agency witnesses acknowledged as much at our last meeting – in front of local, small business owners.  Today we are going to find out why more action has not been taken.

When we talk about the federal government’s response to disasters, we generally talk about SBA’s disaster loan program, and with good reason.  In the aftermath of the Hurricanes, thousands of small businesses turned to the SBA for financial assistance, but instead only found frustration and difficulty. 

Over 204,000 applications sat mired in a loan processing backlog that took well over a year to process.  Those victims who were approved for loans often waited months to receive any funds. 

We are also beginning to learn that the agency’s efforts to improve the backlog employed some very aggressive tactics, which left many disaster victims without the help they needed.  A recent SBA Inspector General report confirmed this and this Committee continues to review these findings.

In addition to these concerns, the SBA released a Disaster Recovery Plan that falls short of making the necessary cultural and workforce changes to remedy these past problems.  While we do want to spend time examining this plan, we also need to talk about government-wide plans to increase contracting opportunities for local small businesses. 

For the agencies here today, it must be a priority for them to ensure that small and local firms are part of any rebuilding process following a disaster.  As Louisiana, Mississippi, and Alabama begin the long process of reconstruction, we are already seeing the important contributions that can only come from these businesses.  Small firms are the largest job creators and the engines that power economic growth.  Clearly, the federal government must focus on prioritizing these companies in its Gulf Coast recovery efforts.

I look forward to the testimony today.