United States. Congress. House. Committee on Small.

The abuses in the SBA's 8(a) Procurement Program : hearing before the Committee on Small Business, House of Representatives, One Hundred Fourth Congress, first session, Washington, DC, December 13, 1995 online

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Chair Meyers. Thank you, Mr. Bentsen. I do think that your ex-
ample, however, about GE was just exactly on the point. In other
words, GE was fined and found in violation. In 8(a) this would be
allowed, it's allowed to avoid competition and I think that is the
very heart of the problems in this program.

Mr. Bentsen. If the gentle lady would yield, the point I was try-
ing to make is that I think fraud and waste is unfortunately, in
contracting, is Governmentwide.

Chair Meyers. But in one case it's illegal and in another case it
is not.

Mr. Bentsen. I don't disagree with you on that point, it
shouldn't be tolerated. It should not be tolerated in any case in any
program, but let's not throw the baby out with the bath water here.
Let's see if we can clean it up here as DOD should clean up their
contracting in every other Agency, and make it more efficient. Tax
payers shouldn't tolerate it regardless of whether it's 8(a) or de-
fense wide, but let's not do away with the whole program in the
process. I agree with you in that respect.

Chair Meyers. Mr. Chrysler do you have any questions?

Mr. Chrysler. I'm all set here, thank you.

Chair Meyers. Alright. With that we will conclude the hearing.
I thank all those who have participated and all those who were
here today and others. I would ask of those here today to respond
to written questions by those Members who are not here today.
Thank you very much.



41

APPENDIX



Statement of Congresswoman Eva Clayton

Before the United States House of Representatives

Committee on Small Business

Hearing on the 8 (a) Program

Dec em ber 13, 1995

Madame Chairwoman, today the Small Business Committee has
convened a hearing to discuss the findings of a recent General
Accounting Office investigation into the potential regulatory
violations of two former 8(a) firms - I-NET, Inc. of Bethesda,
Maryland, and Technical and Management Services (TAMSCO) of
Calverton, Maryland. From its investigation of these two firms,
the GAO raised two systemic problems with the 8 (a) program.
First, the investigation revealed that a disproportionate number
of 8 (a) contracts were awarded to a small number of firms in a
few key geographic areas. The GAO report states that, "In fiscal
year 1994, the top 50 firms represented 1 percent of the program
participants and obtained 25 percent.... of the $4.37 billion
awarded." Second, the report raised serious concerns about the
ability of SBA 8(a) program administrators to oversee 8(a) firms
and to enforce SBA 8(a) eligibility standards. In the case of I-
NET, the GAO discovered that in order to remain eligible for
contracts, "I-NET excluded items from its financial statements,
understating its total revenue; and it represented itself as a
company at financial risk, although SBA found that I-NET' s access
to credit was considerable."

It is my hope, Madame Chairwoman, that this hearing will allow us
to highlight these systematic problems and to offer constructive
suggestions as to how best to solve them. For, Madame
Chairwoman, it is my firm belief that the 8 (a) program remains a
vital tool through which to further minority small business
participation in the federal procurement process. Impartial data
shows that in 1986, all small disadvantaged firms received only
2.7 percent of the $185 billion in total federal contract
dollars. By 1994, with a reemphasis on the 8(a) program and
other programs, this percentage shot up to 6.2 percent. In
fiscal year 1994, there were approximately 5,300 firms
participating in the 8(a) program generating over $4.3 billion in
contract awards. Operating at a cost of $20.5 million dollars,
it is estimated that the Program generated $60 million dollars in
tax revenue for the same year. Clearly, Madame Chairwoman, the
8 (a) program is a necessary program and a wise investment of
taxpayer dollars. Today's hearing, then, should be used to
improve this valuable and vital program, not to smear and
denigrate it.

However, Madame Chairwoman, the timing of this hearing and the
method taken by the GAO to expose the problems of the 8 (a)
program, leads me to question the intent of this hearing. First,
although the study was originally commissioned by Senator Nunn of
Georgia, the Senate saw no reason to hold a hearing on this
matter. Therefore, my question Madame Chairwoman is why at this



42



time, when the Administration is reviewing the 8(a) program and
other set -aside programs, are we holding this hearing now? Could
we not have waited until after the Administration published its
findings in January to have a more detailed and well rounded
hearing? Second, Madame Chairwoman, the GAO chose to investigate
two firms which the SBA had already highlighted as potentially
having some regulatory irregularities in their application
documentation. So, are we not surprised that the investigation
did discover some problems with the 8(a) program? Furthermore,
Madame Chairwoman, in a program that has approximately 5,700
firms participating in it as of this year, how indicative of the
whole program are problems with two former participants in the
8(a) program?

In conclusion, Madame Chairwoman, I believe that this hearing is
valuable exercise if it allows us to improve the 8(a) program.
However, Madame Chairwoman, if this hearing is simply political
cover to eliminate the 8(a) program, I believe that this
committee has done a great disservice to the thousands of 8 (a)
firms who have provided jobs and opportunity to economically
disadvantaged communities throughout the country.



43



FILE No. 149 04/09 '96 13=33 ID: PAGE 2



STATEMENT OF FLOYD H FLAKE BEFORE THE HOUSE COMMITTEE ON SMALL

BUSINESS HEARING ON THE ABUSES IN THE SBA'S 8(a) PROCUREMENT PROGRAM

DECEMBER 13, 1995

THANK YOU MADAM CHAIR FOR CONVENING THIS
HEARING TODAY. I AM PLEASED TO PARTICIPATE IN
ANY DISCUSSION ON WAYS THAT WE CAN IMPROVE
THE SMALL BUSINESS ADMINISTRATION'S 8(A)
PROCUREMENT PROGRAM. I HOPE IN OUR
DISCUSSION TODAY WE CAN DISCUSS THE REQUISITE
CHANGES WHICH ALTER THIS COMMENDABLE
PROGRAM SO THAT MANY MORE MINORITY
ENTREPRENEURS AND SMALL, DISADVANTAGED
FIRMS WILL HAVE THE OPPORTUNITY TO COMPETE
EFFECTIVELY AND REMAIN FINANCIALLY VIABLE.

1 APPRECIATE THE EFFORTS OF THE GENERAL
ACCOUNTING OFFICE TO HELP US UNDERSTAND THE
AREAS THAT NEED TO BE IMPROVED IN SBA'S 8(A)
PROGRAM. I WOULD LIKE TO URGE MY COLLEAGUES
TO CONSIDER THAT THIS REPORT SIMPLY
HIGHLIGHTS THE MISCONDUCT OF TWO FIRMS AND,



44



FILE No. 149 04/09 "96 13=33 ID: PAGE 3



BY NO MEANS, SHOULD BE SEEN AS
REPRESENTATIVE OF THE MAJORITY OF FIRMS IN THE
8(A) PROGRAM.

THE 8(A) PROGRAM HAS INCREASED THE BUSINESS
OWNERSHIP ASPIRATIONS OF MANY INDIVIDUALS
WHO WOULD NOT OTHERWISE HAVE HAD THE
CHANCE TO PURSUE ENTREPRENEURIAL EFFORTS. IN
1986, SMALL, DISADVANTAGED FIRMS RECEIVED
ONLY 2.7 PERCENT OF FEDERAL CONTRACT DOLLARS.
BY 1994, THAT PERCENTAGE HAS INCREASED TO 6.2
PERCENT, WITH THREE PERCENT OF THAT INCREASE
DUE TO THE 8 (A) PROGRAM. WE MUST REMEMBER
THAT THIS PROGRAM OFFERS BUSINESSES
OPPORTUNITY TO USE THEIR CREATIVE TALENT TO
ACCESS CAPITAL AS IT HAS DONE FOR BUSINESSES IN
MY DISTRICT LIKE WECO CLEANING SPECIALISTS.

THEREFORE, I LOOK FORWARD TO OUR DISCUSSION
TODAY ON WAYS THAT WE CAN IMPROVE THE



45

FILE No. 149 04/09 '96 13:33 ID: PAGE 4



PROGRAM SO THAT THE 8(A) PROGRAM WILL BE ABLE
TO HELP MANY DESERVING ENTREPRENEURS IN THE
YEARS TO COME.



46



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Online LibraryUnited States. Congress. House. Committee on SmallThe abuses in the SBA's 8(a) Procurement Program : hearing before the Committee on Small Business, House of Representatives, One Hundred Fourth Congress, first session, Washington, DC, December 13, 1995 → online text (page 6 of 20)