Administration Draws Fire For Downsizing SBA In his first congressional testimony, SBA’s new contracting chief defended the agency’s performance despite deep budget cuts. After just five weeks on the job as associate deputy administrator for government contracting and business development, Anthony Martoccia declared, “The SBA has improved the effectiveness of the taxpayers’ dollars supporting small business development.” He appeared March 30 before the House Small Business Committee’s Subcommittee on Regulatory Reform and Oversight. He said small firms have won more prime contract dollars in every year since the Bush administration took office, with a total increase of $20 billion over the five years. However, the small business share of the federal market is little changed from the last year of the Clinton administration: 23.08% in 2004 compared to 22.26% in 2000. Official figures for 2005 are not yet available, but Eagle Eye Publishers has estimated that the small business share dropped to 17.23% last year as large contracts for the war and hurricane relief consumed a bigger share of the federal budget. The administration’s 2007 SBA budget request, $624 million, is 37% less than the agency received in 2000. The Small Business Committee’s ranking Democrat, Rep. Nydia Velazquez (NY), declared, “The lack of resources causes programs to be abused, fraud-ridden and in some cases not executed at all.” She and Martoccia exchanged sharp views over several key contracting issues. Bundling. Velazquez said SBA has filed only four appeals attempting to break up bundled contracts in the past two-and-a-half years since the administration released new rules on bundling. Martoccia responded that formal appeals are the smallest part of the process. “We are talking to small business specialists, talking to contracting officers. We are training contracting officers,” he said. “We have had discussions and made many changes…to break up these contracts.” Fraud. Velazquez pointed to a report commissioned by SBA’s Office of Advocacy that showed at least 4% of the dollars credited to small businesses in 2002 actually went to large companies or other entities such as nonprofits. Martoccia said deliberate misrepresentation by large companies is not “as widespread as some people think.” As SBA officials have previously argued, he said the problem most often arises when a small firm is acquired by a large one. SBA issued a rule in 2004 requiring companies to recertify their small business eligibility when they are acquired or merge. (See related story, page 2.) Procurement Center Representatives. These officials work with major contracting offices to encourage opportunities for small firms by recommending contracts for set-aside and discouraging unnecessary bundling. The administration’s budget proposes increasing the number of PCRs to 58, from 35 when President Bush took office. But Velazquez said SBA had 73 PCRs when the federal marketplace was half its current size. There are more than 2,000 federal contracting offices. Martoccia said new technology allows the so-called “electronic PCRs” to get involved earlier in the procurement planning process. Advice to SBA At the request of Rep. Todd Akin (R-MO), chairman of the subcommittee on regulatory reform and oversight, three business representatives gave their number-one recommendations for improving SBA’s performance. Rafael Collado, CEO of Phacil Inc., Camden, NJ: “Force the unbundling of contracts and audit prime contractors and agencies to make sure they are meeting their goals and not lying about it.” Catherine Giordano, president of Knowledge Information Solutions, Virginia Beach, VA: Implement the set-aside program for woman-owned businesses, which was signed into law more than five years ago. “If we were having children based on this gestation period of this program, we would be having twin elephants.” Christina Schneider, chief financial officer of Purcell Contracting Corp., Watertown, NY: Procurement statistics “are flawed” because of Alaska Native Corporations and HUBZone companies “fronting for large businesses” in large construction contracts. “There’s really nasty stuff going on out there.”