STATEMENT
of the
Honorable Nydia M. Velázquez, Chairwoman
House Committee on Small Business
Hearing on Procurement
April 19, 2007

The federal government is the biggest buyer of goods and services in the world.  Given the volume of its purchases—$340 billion last year—and the diversity of its acquisitions, it should be easy for the small business participation goals to be met. 

Unfortunately, as we have seen repeatedly, this is not the case.  Over the past seven years, this committee has had at least 15 hearings on agency procurement practices and the negative effect they have on small companies.  Already in the 110th Congress, we have held 2 hearings on this issue.  Today, we continue our examination of the key barriers small businesses face when accessing federal contracts and legislation offered by our colleague from Iowa that addresses many of these problems. 

In our work, several failures of the federal government have been made clear.  The entrepreneurial share of the federal marketplace is slipping—not expanding as it should be.  Agencies consistently fail to achieve their minimum small business goals.  And, they are padding their accomplishments with contracts awarded to large corporations – inflating the amount of contracts that go to small firms.

In today’s economy, entrepreneurs are the drivers representing 99 percent of all firms in this country, yet the federal government continues to fail to meet the 23 percent government-wide statutory small business goal.  When these goals are not met it means money out of the pockets of our small business owners, and the loss of job creation in communities throughout the country.

• In our most recent Scorecard, we found that small businesses in general lost $4.5 billion in contracting opportunities last year because the 23 percent goal was missed.
• We found that women-owned businesses lost $5.2 billion because their 5 percent goal was missed. 
• Minority contractors lost $4.5 billion because their 5 percent goal was not reached. 

Over the past couple of years, we have also noted another disturbing trend:  agencies are counting contract awards to large companies as small business contracts.  In 2005, about $12 billion in contracts was wrongly counted. These false numbers make it appear agencies are doing more with small businesses than they really are which make the true state of opportunity even worse.    

One of the major problems here is that when agencies believe they are doing well with their small business measurements, they are more likely to engage in practices that are harmful to small businesses.  In the last few years, for example, we have seen substantial increases in contract bundling and limited contract sourcing. 

Contract bundling has been “public enemy number one” for small businesses that are trying to penetrate the federal marketplace.  Over the last five years, total government contracting dollars have increased by almost 60 percent, while the number of contract actions to small businesses declined by 55 percent.  Fewer contract actions combined with greater procurement spending is proof of contract bundling.

Today’s hearing will allow us to review potential sources to increase access to government contracts as contained in H.R. 1873, the Small Business Fairness in Contracting  Act,  introduced by our colleague, Representative Braley.  I believe this proposal will provide the tools necessary to create opportunities for increased small business contracts.   

I look forward to working with my colleagues as we reinforce our mission of expanding and solidifying the role of small companies in the federal marketplace.