Restoring America’s Industrial Base: The Role of Small Businesses in National Security

Good morning to everybody, and uh it's great to have everybody here today. I now call the committee on small business to order. Without objection the chair is authorized to declare a recess of the committee at any time. Uh, before we uh get to the main business of today, I ask unanimous consent to waive representative Fuller onto the Committee on Oversight, Investigations and Regulations, and the Subcommittee on Innovation, Entrepreneurship and Workforce Development. Uh, without objection, so moved. Congratulations.

Thank you, Mr. President.

I now recognize myself for uh my opening statement. Uh, welcome to today's hearing, uh, titled " Restoring America's Industrial Base, the Role of Small Business in National Security". I want to thank our witnesses for joining us today and for bringing us expertise, and experience to the important discussion. Our national security relies on more than uh weapons stockpiles for generations America's strength has been defined by both the power of our military and the tenacity of the American people. It is an honored uh, is an i- it's it's anchored on the determination of American entrepreneurs and the belief that in this country, if you are willing to build something, create something, and contribute something greater than yourself, there ought to be a place for you in the American story. And nowhere is that more evident than in the small businesses that help shape our defense industrial base. Sustaining strong competitive small businesses' participation in the defense industrial base is not a choice, but it's imperative to the long-term national security interests of the United States. What uh uh what our history teaches us is what our adversaries already understand, that the country's defense and industrial base is increasingly concentrated in a small handful of large companies which means it's inherently fragile. Resilience by definition requires depth. It requires a network capable of adapting when a disruption occurs, and when carrying the load when part of the system is compromised. A resilient defense industrial base cannot hinge on a single point of failure. That is where the committee's only lies. For small businesses, participation in defense industrial base has not always been b- uh, easy. So too often complex compliance requirements, limited access to capital, and lawyers of bureaucracy make it uh harder for more uh for new and emerging small businesses to compete and contribute. These are the uh ongoing challenges we need to continue to address. Now more than ever it is for small, it's time for small businesses to activate. We are living through a moment of historic investment in America, defense and manufacturing. The priorities of this committee, uh the direction of this Congress and the guidance under this administration will uh p- point to the capabilities small businesses are uniquely able to provide. The door is open for small business. None of this happens by accident. The work of this committee is is foundational, and as a committee we must ensure that we are doing everything in our power to make a to make good on our promises. We are responsible for ensuring American innovation is neither stifled by unnecessary complexity nor concentrated solely at the top of the supply chain at the same time capable firms remain on the outside looking in. We must ensure that the opportunity is real, Competition is fair and American small businesses have a genuine chance to contribute to our economy and national security. That is the work before us today. I want to thank all of you for joining us again today. I look forward to the conversation ahead. I now yield to our ranking member from the great state of Cal- uh the great state of California, Mister Cisneros, for his opening remarks.

Thank you, Mister Chairman, and thank uh thank you to our witnesses for being here today. Uh the Department of Defense obligated seven hundred fifty five billion dollar in contracts in physical year two thousand twenty four just over ninety seven billion of that or twenty six point three percent of eligible contract dollars went to the small defense contractors these dollars point to the critical role small businesses play in supporting the DOD mission and the war fighter so i was encouraged at first by an official estimate uh showing an increase to ninety eight point nine billion going to small business firms in physical year two thousand twenty five an increase at DOD of almost two billion dollars. However, the dollar figure alone does not provide a complete picture of the health of the defense industrial base. We will discuss today two worrying trends behind these numbers. The first is that the percentage of dollars awarded to small firms saw a year-over-year decrease to twenty-five point seven percent small business contracts are not growing at the same rate as overall DOD contracts. The second is an issue I have raised here and through my work on the House Armed Services Committee that must continue to be a top priority, the shrinking industrial base. While small business dollars have gone up, small business participation has gone down. In fact, the number of small businesses in the government's ecosystem has almost halved. Over a year ago, Ranking Member Velazquez and I wrote about the decline of the industrial base in the Hill Op-Ed. We highlighted the importance of the SBA's program and contracting authorities that level the playing field for all small businesses to enter, compete, and have success in the federal market. Since then, unfortunately, but typical, the administration's actions have made things worse. As one recent study summarized, the decline of small business participation is an existing trend, exasperated by the disproportionate impact of Doge contract terminations. It is yet to be seen if the overhaul of the government's procurement regulations will be more than a word-cutting-cutting exercise, and reduce non-value-added requirements for small firms.

What?

To date, the results appear to be uneven. Wh- while the rule of tool was retained, it is not secured as its future depends on a sunset provision. Some processes were streamlined, but particularly harmful buying practices known to drive small firms from the market have been bolstered. Further, contract consolidation and required use of contract vehicles will put more opportunities out of reach for small businesses, who we know leave the industrial base as a result. Rather than advocate for or assist small business government contractors, SBA is AWOL. They have gutted the workforce and diverted limited resources to a fishing expedition based on up substantiated and un- and increasingly unrealized acquisition ac- accusations in one small business program. DOD has also unfairly targeted all small businesses with a slight the slickly produced but factually inaccurate social media video, designed to intimidate small firms, even those who previously competed in one defense contracts. If we are serious about strengthening America's industrial base and securing our economic future, We should be expanding opportunities for all small businesses, not undermining them. This is almost uni- there is almost universal agreement that the government's acquisition process has become too cumbersome, too burdensome, and needs to be simplified. I saw this firsthand during my time at the Department of Defense. CMMC has further upended the degree of difficulty. Layering on new requirements, small firms must meet without any guarantee of a return on their costly investments. Starting and growing a business is already an incredibly difficult. Meeting the unique requirements to complete f- to compete for defense contracts adds another layer of complexity, especially for small firms without the resources of corporate giants, or the ear of this president. I look forward to hearing from our witnesses on what we can do to revitalize the defense imbu- industrial base and to ensure that as defense budgets continue to climb The government is incentivized to leverage the capability, solutions, innovation, and competition that small businesses bring to the table. Thank you very much.

General Neal's back. Uh, uh, we will now, uh, move to, uh, witness introductions. Our first witness today is Mister Moshe Swartz. Mister Swartz is a senior fellow for acquisition policy for the National Defense Industrial Association, and has spent over fifteen years advising Congress, on acquisition industrial-based issues, including roles at the Congressional Research Service and GAO. Mr. Swartz has testified before Congress and written extensively on defense acquisitions uh reform contract policy the Defense Production Act, wartime contracting, and other related issues. He holds an MBA and MS in public policy from Carnegie Mellon University and a J a JD from uh Yeshiva. uh university's uh Cardoza school of law. And he also is a baseball guy. There you go. And we thank you for being here today. Uh our next witness is Mister Daniel Javor Oski. Uh Mister Javor Oski is President and Chief uh Operating Officer at Infinite Systems Engineering, at Colorado-based Systems uh Engineering and Mission Operations Company, specialized in payload integration, space operations, and system sustainment. He's he's responsible for the establishing of of policies and strategies and fulfilling infinity's mission. Uh, Mister Jaworski has extensive uh experience in aerospace and defense uh with a strong uh track record in portfolio management, space system development, and major ground system sustainment programs. He holds a BA in geography and an MS in management information systems from the University of Mary Washington, as well as well as MBA from Pennsylvania State University. uh, known as Penn State University to many, right? Uh, I look forward to your testimony. Our next witness today is Mister Anthony Clausen. Uh, Mister Clausen is the founder and CEO of Colossal Contracting, a Maryland-based IT and professional services company that provides technology, communications, and mission state, uh, s- mission support solutions to government and commercial clients. He is a military veteran and a former communications specialist deployed in Iraq. Uh, during his final assignment at Joint Base Andrews as an IT Project Manager, he laid the foundation for colossal contracting, thirty percent of colossal contracting employees are veterans. Uh, he earned a degree from the University of Georgia, uh, and, uh, uh, Terry College of Business. Thank you for your service and we appreciate you all being here today. I now recognize the ranking member, Mr. Cisneros, to briefly introduce our last witness appearing before us.

Thank you, Mr. Chairman. It is my pleasure to introduce Miss Angela Deengo, President and Chief Executive Officer of Women Impacting Public Policy. WIPP or WIPP is a national nonpartisan organization that advocates on behalf of women entrepreneurs, and serves as the voice for over for the over fourteen million women owned companies in the US. Women Impacting Public Policy has a proven track record of working directly with our committee and others in Congress to shape policies that create economic opportunities for women owned small businesses, and in sheer procurement, inclusion, and access to the federal marketplace. Prior to serving as the CEO of WIP, Angela founded XNihilo Management, an award-winning technology and management con- consultory that provides governance, risk management, and cyber security. She holds a master's degree in management, information systems, and a bachelor's in computer science. WIP has championed key small business government contracting initiatives including the women-owned small business program, and has built, led, or joined coalitions to advocate for small so smart solutions to issue the range from access to capital and access to technology, to family leave and health and child care. I just read with interest your piece from two weeks ago, the future of innovation depends on whether small businesses are at the table. I hope my colleagues will as well and ask unanimous consent to insert this for the record.

So many.

Thank you Angela and to all our witnesses for being here today.

Gentlemen, Neal's back, and uh I also wanna thank everybody for being here today and before recognizing the witnesses I'd like to remind them we got some rules here, rules in Congress. Uh and remind all of you uh that your oral testimony is restricted to five minutes in length if you see the light turn red in front of you uh it means your five minutes has ex uh uh concluded and you should wrap up uh your testimony. And if you keep talking after five minutes you're gonna hear this. That'll meant you're done. OK. And uh, so forth. And also you may see people coming in and out. Uh, there's other hearings going on today. And so you may see other members going in and out. It's nothing you said, nothing you did. It's just trying to cover all the bases. Uh, so with that, uh, I want to, uh, recognize Mister Schwartz for his five minute opening remarks.

Thank you. Uh, Chairman Williams, Ranking Member Cisneros, members of the committee, thank you for inviting me today to testify The views expressed are my own and not necessarily those of NDIA. The topic for this hearing, the role of small business in national security, is an important one. Today, I would like to make four points. First, small businesses play a critical role in the defense industrial base. In nineteen fifty-three, President Eisenhower signed the Small Business Act because he understood the importance of having a level playing field to give small businesses equal opportunity to compete for government contracts. General and I Eisenhower knew the importance of small business to national security. Small businesses represent seventy percent of the defense industrial base. Companies like One Brief, which supports military operations by providing AI powered software to enhance forced deployment, and Aurora Engineering, which provides AI machine learning and simulation to support NASA missions, are contributing to mission success. But what is less well known is that small businesses also play a significant role in subcontracting. Small businesses make up approximately fifty to fifty-five percent of the subcontractor base for defense prime contractors. This brings me to my second point. The defense industrial base is shrinking. The defense industrial base has been shrinking because fewer companies are willing to work with the Department of Defense. As a result, the government has less access to advanced technologies and capabilities, that commercial markets have to offer less competition which often results in increased costs and a less resilient supply chain. Here are some numbers. From fiscal year two thousand eleven to twenty twenty the number of small businesses receiving DOD contracts decreased by forty three percent even as obligations to small businesses increased by approximately fifteen percent. According to a bloomberg analysis in fiscal years twenty one and twenty twenty two the number of small businesses contracting with DOD decreased an additional five percent. This decline is occurring precisely when the federal government increasingly relies on commercial technologies. The reason for this decline was explained by secretary of defense, Hegseth, when he said, " we have been impossible to deal with. A bad customer who year after year changes our mind on what we want and what we don't want. We have to fix our own house first." provide clarity, simplify the system, allow more people to access it, give that steady demand signal. This brings me to my third point. We need to streamline the acquisition rules and help small businesses find the front door. There are too many acquisition rules and they are overly complicated. In a recent poll by NDIA, companies were asked, what do you find most difficult about government processes? Fifty-six percent cited the burden of the acquisition process and paperwork. thirty-three percent cited regulations. Some may argue that streamlining is coded code for repealing necessary oversight. On the contrary. Done right, streamlining will increase accountability by clarifying lines of authority, shortening timelines, and improving outcomes, without undermining oversight. Let me give an example. The Office of the National Cyber Director reported that current regulations are harming cybersecurity outcomes and increasing costs through administrative burdens. Many companies have reported that complying with the regulations is actually drawing resources away from actual cyber security programs and efforts. Finally, my last point. We can be smarter in helping small businesses. Even though the department has consistently met its overall small businesses' target, the number of small businesses, as has been mentioned, working with DOD has declined. There are other methods that could be just as impactful. or more in helping small businesses. Here are three proposals. One, promote the use of shared classified workspaces. Small businesses generally do not have the resources to build or maintain secure compartment information facilities or skiffs, creating a barrier to entry. We could encourage more use of companies like NUX, which offers secure high-end skiff spaces for lease. And by the way, NUX is a small business. Agencies could also provide access to underutilized government-owned skiff space. Such access could help small and other businesses compete and provide new capabilities to the department. Two, streamline subcontracting regulations. When regulations placed on prime contractors must be included in subcontracts, we are actually placing regulations on small businesses. Congress and the department could view regulations to see when the benefits of flowing down requirements are outweighed by the costs imposed on subcontractors. And third, help small businesses submit better SBR applications. Companies often do not get meaningful feedback on SBR proposals that were not accepted. Better communication with losing bidders, explaining the weaknesses of the offer, will help them do better next time, and help small businesses learn how to improve their bids and help DOD by increasing the quality of their offers. Thank you for your opportunity to share these thoughts. I look forward to your questions.

Gentleman, he goes back. Uh, thank you very much. I now recognize Mister Jaborowski. for his five minute opening remarks.

Chairman Williams, uh, ranking members Cisneros, uh, distinguished members of the committee, thank you for the opportunity to testify before you today. My name is Dan Jaworowski. I'm the President and Chief Operations Officer of Infinity Systems Engineering in Colorado Springs. We support the Air Force, the Space Force, intelligence community, and a variety of major industry pri- uh, industry primes. Uh, I've got a thirty year career myself in this business. Uh, coincidentally, Infinity celebrates our thirtieth anniversary today. Um, and I'd like to use my most recent experience uh working in small business to appeal for you to look out for the independent small businesses like us that face what can only really be described as a second valley of death. Uh, Infinity has successfully scaled, yet we find ourselves trapped in a regulatory blind spot. Uh, and we're not alone, as a small business with fewer than three hundred employees and no socio-economic designations, We're too large to benefit from uh entry-level small business set-aside programs, uh therefore we're considered a large uh and forced to compete for full and open contracts to grants directly against multi-billion dollar defense primes who possess exponentially more proposal legal and overhead resources. Uh forcing a growing mid-sized business uh to jump straight into the ring with the defense giants is is the antithesis of of uh of healthy competition. There are countless uh commercial entities uh with valuable capability to bring to the fight who stay away from the sector for this reason small private businesses like ours are are really left with three choices when we get to this stage we can stay in the fight uh and try to grow organically which is what we're continuing to do we can make our own investments in m and a and try to scale in organically but that takes capital investment that we can't handle um and if we take on outside investment we start to lose control of our business and finally exit the market via an acquisition. Uh in the past six years nearly a dozen private held uh privately held defense firms in Colorado Springs have sold to larger firms and or private equity. All are now a part of significantly larger entities thereby shrinking the base as we as as we so see. Um I'm often asked by my peers and counterparts how I feel about the recent eight day audits taking place in government services including defense. In short I believe that they're necessary but in my experience most of these firms seemingly operate within the bounds of the law and with integrity i do work with lot of these firms that operate under the protections offered by legislation that's geared towards helping small disadvantaged firms compete however many of these firms are very far from small um and they certainly are not disadvantaged while intended to assist developing firms the eight a program frequently grants immense advantages to multi uh to massive multi-entity holding structures and conglomerations These firms masquerade as small businesses yet have shared corporate services and capital pools that far exceed the reach of an independent and truly small business. Uh, it's firms like ours that become disadvantaged when accommodation is made where accommodation is not needed. The frequent use of sole-source non-competitive direct awards allows these firms to essentially name their price to the government. That has an impact on the labor force in that local market and it severely undercuts the small businesses that have to compete based on price alone. The far overhaul designed to bring flexibility and speed is both necessary and overdue, however these changes are only as good as the acquisition professionals are executing them. Today, contracting shops are paralyzed by a weaponized protest culture throughout the industry. The fear of frivolous protest traps contracting offices in endless acquisition strategy design and source selection morass. The result is delayed acquisition schedules sometimes for months or even years. For a small business that has already sunk hundreds of thousands of dollars into our pursuit these delays drain vital capital that we need to fund independent R and D, and to sustain our talent for future pursuits. In the end, the government feels this in increased rate structures. From a leg legislative perspective, this committee can do a lot to address these concerns and I'm hopeful to see some of these things materialize. Uh number one, legislate directly uh to direct an expansion of NAICS categories and size standards to include the middle tier of companies, set asides for larger than X but smaller than Y companies. Uh, legislate to limit the accommodations of eight the eight A program to truly disadvantaged firms and prohibit holding companies of any kind from participation. Legislate accountability metrics that hold government acquisition timelines to the same standard as its contractor schedules. It should be no more acceptable for the government to miss deadlines than it is for the contractor to miss them. And finally, introduce clear statutory thresholds and financial penalties to curb frivolous bid protests designed purely for revenue extension, or to force a failed competition. This will liberate contracting officers from a culture of fear. With that, I thank you and I look forward to answering your questions.

Chairman, he owes back, thank you, and I now recognize Mister Clausen for his five minute opening remarks.

Chairman Williams, Congressman Cicinero, as members of the committee. Thank you for the opportunity to testify today. My name is Anthony Claussen, and I'm the founder and CEO of Colossal Contracting, a service-disabled, better-known small business, IT value-added reseller and integrator. As of our, we deliver comprehensive IT solutions, combining industry-leading products, engineering expertise, integration services, and lifecycle support to maintain mission-critical technology environments. Thank you for holding this hearing. on the important role small businesses play in strengthening America's industrial base and supporting national security. My journey to entrepreneurship began in the United States Air Force, as a Communications Specialist, affectionately known as " the Wire Dog". At my duty stations in Japan, Joint Base Andrews, deployments to Kuwait and Iraq, I saw firsthand how government agencies depend on both public servants and private sector partners to accomplish mission critical missions. In two thousand nine I founded Colossal Contracting and believe service to this country does not end when we take off the uniform. We build our company on the values defined our military service, integrity, accountability, teamwork, mission focus. Today as Colossal we support mission critical programs across the federal government while creating opportunities for veterans, military spouses, and other highly skilled professionals who wanna serve their nation. My testimony today focuses on the role of the IT VAR in the industrial base. Companies like ours serve as the bridge between technology manufacturers and government agencies, helping evaluate, integrate, secure, and deploy mission-critical technology solutions. As the federal government pursues modernization initiatives like the GSA one gov strategy, we support these efforts, leverage buying power, and deliver better t- value to taxpayers. However, those efforts must continue to preserve meaningful opportunities for small businesses. A strong supplier base depends on both innovation from the manufacturer and eske execution from small business like Colossal. There are three issues I would like to highlight today. First, the federal government's industry classification system has not kept pace with modern technology marketplace. Today's technology procurements often combine hardware, software, cloud, AI, cyber security, technical support into one single requirement, yet there is no dedicated classification for these buys. Establishing a separate ITVAR NAX code would provide greater clarity on how technology solutions are delivered to government customers. Second, the current a hundred and fifty employee SBA size standard no longer reflects the realities of today's technology sectors. Reaching a hundred and fifty-one employees does not mean a company is a large business. Yet it forces those companies to compete against mass multinational corporations that employ tens of thousands of people. Increasing the threshold to at least three hundred would allow successful small businesses to continue to grow and compete while strengthening the federal supplier base. Third, I strongly support robust cyber security requirements, including the cyber security maturity model certification program. That colossal achieving CMMC certification required substantial investments. in technology, compliance, and personnel. As implementation continues, cyber security requirements should remain risk-based and scalable so that small businesses can continue to contribute to the industrial base, while meeting the government's security objectives. Before I close, I would like to thank the committee for its leadership in passing HR twenty-eight O four to codify the rule of two. This legislation helps preserve small businesses to compete for federal work and strengthen the industrial base by ensuring continuing to consider qualified small businesses as your first solution. Small businesses are innovators. We're job creators. We're veteran advocates, problem solvers. And mission partners. When small businesses succeed, our government gains competition, resilience, and access to the expertise needed to meet to meet the ever-evolving national security challenges. Thank you for this opportunity.

Gentleman yields back. I now recognize Miss Dingell uh for her five minute opening remarks.

Good morning, Chairman Williams, ranking members Cisneros and members of the committee. My name is Angela Dingell. I am President and CEO of Women Impacting Public Policy, a national nonpartisan organization advocating on behalf of women-owned businesses. I am also a small business owner with more than twenty years of experience in the federal marketplace, helping companies navigate it successfully. Thank you for the opportunity to testify. This hearing asked the right questions. Small businesses are not bystanders to America's industrial base, they are its foundation. A procurement system built on a broad base of small firms is more competitive, more resilient, and harder for our adversaries to disrupt. A narrow one, built up around a smaller pool of larger contractors, is a national security risk. And yet that base is shrinking. In fiscal year twenty twenty-four, agencies awarded a record one hundred and eighty-three billion dollars in prime contracts to small businesses, the highest total ever. But the number of firms doing that work has been cut nearly in half, from roughly one hundred and twenty-one thousand in two thousand nine to about sixty-three thousand in two thousand twenty-two. Record dollars are flowing to fewer and fewer companies. As firms leave, agencies grow more dependent on a smaller group of large incumbents, reducing competition, raising costs, and weakening the government's own leverage. It is the opposite of a strong industrial base. What is driving small businesses out? In a word, unpredictability. As a business owner, I factor risk into every decision, how I spend my time, how I price, whether to pursue an opportunity at all. I need real confidence that I have a chance at winning to justify the investment. When contracts are awarded and then abruptly canceled, when policy shifts without warning, that confidence erodes, and small firms simply walk away. Stability and predictability are not luxuries, They are conditions that keep us in the market and investing in the capacity this country needs. This is why the Rule of Two matters so much. It has long been a bedrock protection for small businesses, and any threat to it, even a potential one, raises risk and accelerates consolidation. Congress should retain and codify the Rule of Two as a true shall requirement applied consistently across contract vehicles. WHIP is proud to support the protecting Small Business Competition Act of twenty twenty five, which does just that. We commend the committee for its unanimous approval of this bill, and hope that the full house will follow your lead. I now wanna talk about a program that is near to our mission at WHIP, the Women Own Small Business, or WASBE program. The WASBE program and similar programs are not handouts, nor are they charity. They exist to level a field that is not yet level. and to give the government the widest possible pool of qualified competitors. And they work. In fiscal year twenty twenty four, women owned small businesses won thirty-one point seven billion dollars in federal contracts, and the certified WASBE program grew to more than thirteen thousand four hundred firms. Women owned firms are winning contracts and delivering, but only when they get a fair shot to compete. That is good business and good government. A few practical points. Subcontracting and the chance to grow into a prime is how small firms become the durable suppliers the industrial base relies on. Both deserve protection and the offices meant to champion us inside agencies, the are understaffed or vacant. As the administration reexamines federal programs, the wide reach of those reviews has inadvertently a c- captured offices and resources, that are vital to small firms. Even though supporting small business is squarely a competition and capacity issue, not a peripheral one, a program is only as strong as the people charged with making it work. Small businesses are not just beneficiaries of federal contracts, we are essential partners in this nation's security and prosperity. We bring the innovation, agility, and cost savings that lead the government to meet its mission quickly, and effectively. Protect and expand our role, and you strengthen the Industrial Base. But if we keep facing instability and a shrinking chance to compete, you should not be surprised when fewer of us remain. Thank you, and I look forward to answering any of your questions.

General Leidy yields back, thank you. Uh, we'll now move to the member questions under the five minute rule. Uh, I recognize myself for five minutes. Mister Schwartz, the number of contractors supporting the defense Industrial Base has shrunk by roughly uh forty percent since twenty ten uh rising regulatory costs were cited as a major reason small businesses are leaving these federal uh contracting programs for small firms every dollar spent on compliance is a dollar not spent on innovation uh our uh our production our workforce or even uh cyber security so the question would be how has the trump administration revolutionary far overhaul addressed that challenge

thank you so in a bumper sticker i see one of the ways to improve acquisition generally and for small businesses as well is fewer regulations more consistently enforced by an empowered workforce and this effort to rewrite the far and then the defar as a defense federal acquisition regulation strikes at two of those by deregulating like we've talked about like we've all talked about it gives small businesses more opportunity to focus on the business of what they're delivering instead of non-added evaluate, not added regulation and compliance. That's one. But the second thing, which might be the even more important impact that people don't necessarily think about is the message we're sending to the workforce. The message we're sending is less about compliance and more about doing the right thing and empowering them. And I'm hopeful that this rewrite is really gonna send that message, because unless we deal with the workforce, almost everything else is playing around the margins.

All right, thank you, Mister Jaburovsky. Uh, as the national security landscape becomes increasingly shaped by cutting-edge software and artificial intelligence, the defense and, uh, industrial base is under pressure to modernize faster than traditional acquisition process was designed to support. So the question is, from your position leading infin- infinity systems engineering, how, how do you see the role of a small business involving over the next decade and what structural changes are most necessary? for the defense industrial base to fully leverage main streets capabilities?

Thank you for the question, Mr. Chairman. I I think that the uh the recent uh extension of the small business innovative research program is gonna go a long way to to uh help satisfy some of that that gap that exists, particularly when it comes to AI. Uh, AI is is something that's an area that we operate, we we are active in the in the SBIR program. Uh, I'd love to see it become permanent. not just a five year extension so that we don't have another uh lapse like we did recently but that program is very very encouraging uh for new entrants to this market to come in and participate there's a lot of community uh companies out there that don't participate in the defense industrial base they can absolutely uh bring capability that's that's well needed and that program is is really the the the way to do it.

OK, thank you. I mean limited time I got, Mister Clausen. Colossal Contracting's identity as a veteran-owned business speaks to something larger happening across the federal landscape, and it represents the growing recognition that smaller companies can often move faster and more effectively stay closer to the mission needs of government customers. So my question is, in an environment where uh agencies are looking for for partners who are even who are can rapidly integrate to emerging technologies and adapt to changing requirements, how does Colossal Contracting leverage its veteran led mindset and small business agility as a competitive advantage.

Thank you, sir. Um, being agile, right? Being aggressive, I mean, that's part of who we are and what we're trained to be as veterans. That's why I think it's great to see so many veterans going in to the entrepreneurial, you know, mindset and to to becoming service disabled veteran owned small businesses. That value that we're trained with and the ethics that we have, and the drive from being military have delivered absolute value. And especially in supporting the defense industrial bases, you know, a lot of us veterans are are dealing with the missions that we dealt with when we served. So we're able to see what the issues are, understand their mission, and do what we can to elevate it. And because we're not massive, we don't have these huge layers, right? We're dealing directly with the program, with people that understand the mission. And what we're doing is we're taking all the different types of technologies, as an IT VAR, and as a master aggregator, and bringing those together to answer the mail and to elevate their solution so and to elevate their mission so you know to answer sir is is who we were trained to be is delivering absolute max value and I believe it will continue to do that

Alright, thank you. Uh gentleman Neal is back. I now recognize the ranking member for five minutes of uh questions.

Thank you, Mister Chairman. Uh, Miss Dingell, with the administration's ongoing attack on the eight a in legislation to eliminate the women owned small business programs pending, Can you reiterate for the committee the value of the SBA's programs, not only for small businesses, but for the government and the industrial base?

Thank you, great member. The Women on Small Business program and the SBA programs like the ADEA program, ADEA in particular is a business development program and the Women on Small Business program, they create a level playing field. It, they are not handouts for every contract that I've ever won. i had to compete for those contracts and so do the other businesses when uh as my colleague here mentioned in his comments when we have to compete against multi-billion dollar firms who have existed for hundreds of years it is more costly it creates an unpredictable environment that we're not able to determine whether or not we should invest the dollars that are necessary and it makes it really hard um for business owners to be able to grow one contract award and one of those programs can be a change game changer it can completely change the trajectory of the company cause we simply need a foot in the door and these programs create those opportunities for you to get a foot in the door

yeah you know company like general dynamics right did not start out as a big corporation it started out that kind of doing a small company doing a contract for nasa and and we need to have those game changers out there but halfway through this physical year miss dingo documents circulated online

I think it just flies in the face of what this committee and this conversation that we're having. If we continue to say that small businesses are the engine of the US economy, then we have to create an opportunity for those small businesses to compete. Um, one of my other colleagues mentioned

Mm.

burden that is on the contracting officers. Some of these programs um assist them in getting their work done, and sometimes they just need an easy button, they'll take the least path of resistance. And so if you say to an agency you only have to spend twelve billion dollars less than you did they will simply do that and small businesses will be cut out. Ultimately for the government that means less innovation, it means less competition, and it means additional cost, because we believe, and I'm certain, colleagues would agree with me that small businesses can do it cheaper and faster, and with more flexibility.

Thank you very much for that answer. Uh, Mr. Clausen, the far rewrite removes the justification and approval requirements for direct awards when agencies utilize the service-disabled veteran-owned small businesses or other small business programs. Will these changes make it easier to provide contracting opportunities to serve disabled veteran-owned businesses?

Thank you, sir. Um, I believe so. I believe removing the J and A requirements and getting contracting officers also comfortable with doing sole sources uh the sole source has been around for a while for the SDV USP's but not many people use it um contracting officers see it as bit difficult they they don't wanna have to justify things so we're hoping that that mixed with the rule of two is really gonna open up some things and be able to to showcase the service disabled veteran owned small businesses out there, and be able to provide that max value. So to answer, sir, absolutely, I think that it will hopefully open up some more solid SDB USBs to doing sole sole work sole source work, and then mixed with the rule of two it should open things up.

Since you mentioned the rule of two, let me ask you this. Um, can you quickly address what a sunset of the rule of two would mean for small business participation in industrial base?

It would hurt. Uh, if that went away and contracting officers and program people were not evaluating the value of small business, I think it would impact us greatly. I mean, we need the rule of two. We need there to be that first look, especially, hey, there's, there's, there's the place for the systems integrator, where they are working on massive programs that protect this nation, and I'm, I'm good with that, and we work with a lot of them. But there is a lot of amazing opportunity, opportunities for the agility and the expertise that small businesses bring. And we need that rule of two.

Alright. Miss Dingell, since you mentioned the rule of two on our last thirty seconds here, can you uh answer that same question? What would it mean if this sunsetted?

I I agree. I mean it would just be disastrous for a small business, is that rule of two helps me in my decision making as a business owner, when I'm evaluating whether or not I'm going to compete on an opportunity. The rule of two makes it something that's um viable for me to consider for competition. And um the predictability of knowing what's going to happen in this environment is what what makes me decide whether or not I'm gonna continue to do business in the federal marketplace.

All right. Well, thank you for your testimony and I yield back.

A gentleman yields back. I now recognize Mister Alford from the great state of Missouri for five minutes.

Well, thank you, Mister Chair. I'm also on the Appropriations Committee and we have two markups across the hall, so I'm kind of back and forth, but uh I did not get to listen to your testimony, but I did read it and I'm um high on the in there. Uh, I'm excited that you're here today. Um So thanks f- thanks for coming here. When most people think about our national defense, uh, they think about large defense contractors, but behind every major weapon system, aircraft and military platform is a network of small businesses providing innovative technology specialized manufacturing and critical supply chain support. Small businesses are essential to maintaining America's technological edge, and they're often the first to deploy emerging capabilities in areas like intelligence, cyber security, advanced manufacturing, and electronic warfare. And they also provide the competition and innovation necessary to make sure that our military has access to the best capabilities available. However, despite their importance, the number of small businesses participating in federal contracting has declined significantly. Raising concerns about consolidation within the defense industrial base and long-term resilience. And as we face increasing competition from adversaries such as China, it's critical that we expand opportunities for innovative American companies to enter and succeed in the defense marketplace. Today's hearing provides an opportunity to better under- understand those challenges and identify ways Congress can strengthen small business participation in our defense industrial base. I represent a great base in the DOD family, uh Fort Leonard Wood. We also Whiteman Air Force Base, but we have exciting things going on. We have a technology park, ten square miles on the base in Fort Leonard Wood in the southeastern part of our district where we're, we're trying to attract more uh small defense capabilities there. So, Mister Jar- Jarorowski, did I pronounce that correct?

Very close, Jarorowski.

All right, very, very close. Jarorowski. Better? All right.

Better.

Uh, your business started out contracting with DOW and then won a SBIR award. What led you and your company to pursue that award after receiving multiple defense contracts?

Uh, thank you for your question, sir. We uh, you know, y- you you hit the nail on the head at the beginning of your your your statement in question there. Uh, you know, Infinity's been around for thirty years, but we were were founded on subcontracts with the large primes. So some of those large primes today are still some of our biggest customers. Uh, we're primarily a services uh company, uh, providing engineering services to the, to those primes and to DOW on, on the satellite operations front. Um, uh, about five years ago we made the decision that uh we were seeking out some higher margin work. We didn't really wanna leave DOD and go into the commercial space. And we saw SPIR as an opportunity to bring some ideas and innovations to the table that we saw as gaps with some of the large primes that uh, probably not media enough for them to go after themselves, uh, but they were difference making enough for us that, uh, we were able to innovate and, and capitalize on that program. And it's been a game changer for us.

Uh, Mr. Swartz, as you know, Secretary Hegseth proposed a one point five trillion dollar defense budget for fiscal year. We're going to be taking up the defense appropriations in the coming weeks right across the hall. How can Congress make sure that small businesses are positioned to compete for these dollars?

is a great question and i think there are lot of um examples there are lot of things that congress can do to help small businesses have a level playing field and i'll just uh reiterate uh two of them one is when a company loses an sbir right they don't necessarily get the feedback that would help them do a better bid next time right now this actually cause gao bid protest had been mentioned this was a problem with bid protests where companies didn't know why they were losing bid protests. So Congress actually legislated and said, DOD, you will do enhanced debriefings. And they did. And companies thought that was very helpful. And in fact, my understanding is the data said that bid protests decreased, because cuz com- companies understood. That's one thing that Congress could do. They could say, you shall give better debriefings for SBIRs. You know, so companies know how to compete better. And another one very quickly is shared skiff space. You know, companies don't always have the investment if they're small businesses. to invest in that, which means they can't comp- compete for the bid and then they can't perform.

Right.

Excess skiff space in GSA, for example, is a great way, like, for a pay-for-fee like a WeWorks,

Right.

is another opportunity.

Huh! Well, two very innovative ideas. I think we had similar legislation with, um, other government contracts that uh passed through this committee and the full house, I believe, that that required uh the government to give explanations to small businesses of why they did not secure a contract. I think maybe this would be good to look at this in this case and also the shared skip space. Great ideas. We'll get to work on that. I yield back. Thank you.

Uh, gentleman yields back. I now recognize Miss Goodlander from the great state of New Hampshire for five minutes.

Thank you, Mister Chairman, and thank you to our witnesses for being here today for this really important hearing. I wanna start with two numbers that have come up in this hearing. Fifty-one to five. Fifty-one to five. That That's how many prime defense contractors we had in this country in nineteen ninety three, fifty one. Just seven years later, we were down to five. And this was driven by consolidation that the Pentagon itself blessed. You know, fast forward to today, we're seeing this same movie once again, even more consolidation. And, mister Jarwowski, I wanna be sure to emphasize this very powerful portion of your written testimony, where you described the second valley of death. frozen middle where small businesses like yours uh are trapped with three really challenging options the first and i applaud you for pursuing it to continue to try to operate in this environment where the deck is stacked against you the rules are not written for you uh and i wanna work with you and each one of our witnesses who are here today to help us write better rules of the road when i think of president eisenhower General Eisenhower, Mister Schwartz, you invoked him, I think he would be very disappointed in the progress that we've made since nineteen fifty three. We've reversed course uh from where we should be and I came to Congress having worked in the antitrust division at the Justice Department where we worked really hard to dust off the federal code to give and empower people across our administration, including in the Pentagon uh the confidence that they can enforce the rules that we have on the books and I'm here now and I wanna write better rules of the road that are gonna help businesses trapped in the second valley of death. The three options you have in front of you, can you just say a bit more about the two the two other bad options uh that are available to a small business like yours, sir, in the second valley of death?

Sure, I'm happy to. Um, you know, really, sell selling out is is what we're see most prevalent. Um, mo- most companies are getting to our size. and they find that this competitive landscape has changed and it gets frustrating, and it's it's the easy answer is to just take the exit.

Sell to a prime.

Sell to a prime or sell to private equity. Private equity is what we see more more commonly and co- uh would they're they're consolidating small businesses like ours, um ultimately for a sale of that entity to to probably to a prime, in a in a more strategic transaction.

Mm-hmm.

Um the the uh second road is really to say we're gonna go to try to acquire another company ourselves. Um, and that is capital intensive, right?

Yeah.

And, and that's, that's a really, really challenging decision to make for a independent privately held company. Um, and it, if, the, the capital is just not there to do something like that. So we would have to take out an outside investment, and when we do that, you're, you're probably gonna lose some control over your company, and we're not interested in doing that either.

Well, I appreciate that. Mister Claussen, can you speak too? I s- I, I gather you are also riding through the second valley of death.

Yes, I am. Um, you know, we're we're on that, in our in our world as an IT var, as soon as you go over one fifty, you are now competing against systems integrators and very large companies.

Mm-hmm.

Um, if you walk into Colossal's headquarters today, you'll hear music playing, people, you know, enjoying life, but it's a small business feel,

Mm-hmm.

right? It's it's a culture that we created, that we will lose. Right? If it, if, if we can't compete, because as soon as we go over one fifty-one, without things like the gentleman was saying here, losing who you are, selling out the private equity, you know, making a massive investment that you don't have, right? You're gonna lose who you are. I, I, I said the other day to, to our, our group that I, I wish and I hope and I will work as hard as I can that Colossal becomes a legacy company, and that we can stay around for a long time. But like I mentioned, I, my fear is I'm constantly battling this under one fifty and because we are an IT VAR, people will see that we're selling a lot of equipment with our services and look at us and say hey well you're a large business right even though we're we're a hundred and

Right.

five people so we're constantly in that battle and it is something that we have to fight for.

Well I really look forward to you know, as you point out determining whether a business qualifies as small, sounds like an easy exercise, we clearly have gotten it right under federal law so I really look forward to working with you on this important legislative measure that we should correct as soon as we possibly can. What you described as footnote eighteen um as soon as we're talking about footnotes and manuals that aren't in the US code I think we we haven't given you the clarity that you need so I appreciate that. I well I guess I've run out of time but I I really appreciate our witnesses being here today and with that I yield back.

General Lady Yields back. I now recognize Mister Weed from the great state of Wisconsin for five minutes.

Thank you, Mister Chairman, thank you to all of our witnesses for being here today. Main Street America is not only the backbone of the United States' economy but also of our defense industrial base as contractors and subcontractors. As the new chairman of the subcommittee of contracting and infrastructure, I'm committed to ensuring that small businesses are given fair opportunities to compete for government contracts. Bills like protecting small business competition which passed out of this committee two weeks ago, go a long way to ensuring our nation's small businesses are afforded those opportunities. I look forward to discussing the state of government contracting for small businesses, including the Department of War's newly implemented cyber security maturity model certification. Uh, mister Jo- Jovorosky. The s- the CMMC, which is the cyber security maturity model certification, is a tiered certification process that's based off of sensitive data that contractors have access to. I've heard from some of the small business owners in our area that that the cost to comply with the Department of War's uh new cyber security requirements can be upwards of hundred thousand dollars. What did this process look like for you?

Uh, thank you for your question. I would I would say upwards of a of a several hundred thousand dollars is probably is probably the more likely answer um, that that's the that's what we've seen. Uh, for us, we were pretty fortunate. Uh, we had made some decisions early on about five years ago that, uh, once the first drafts of CMC compliance were coming out, that we were gonna lean in and start to do that work.

Mm-hmm.

Uh, so we started to do that work with existing IT infrastructure and in in existing IT personnel. We had to make investments along the way in order to be compliant, uh, but we were able to limit the overall cost of that, but it took five years to be ready. So if we were to fast-forward to today, if I were process all over again I would have to hire a staff of of several individuals to come in and help us be compliant and if I was trying to do it in in inside of a year it would it would definitely cost us several hundred thousand dollars

Do you think that there's issues with over classification

absolutely absolutely there's issues with over classification and to the degree that C uh that CMMC is uh geared towards uh managing uh uh controlled unclassified information Uh, what we're seeing now is anything that is unclassified is now being called Cooey for the sake of CMMC. Um, so i- it's really, uh, when it comes to the outside entities trying to add to the def- the defense industrial base all we've really done is create another barrier to entry.

Thank you, Mister Clausen, while lot large contractors have an easier time absorbing the costs associated with CMMC compliance, small contractors are required to meet the same standards. Right, with, I mean, a fraction of the resources. So, what has achieving CMMC compliance looked like for you in your business?

Uh, it was extremely difficult, but we understand the value. We clearly understand the value of it, but we, we have a, you know, we've had things like ISO certifications and CMMI because we do have a lot of work in, in defense space. Um, but that helped us prepare for it. But we had dedicated resources. We had, you know, auditors that you have to pay for. pre-auditors that you have to pay for. We understand the value of it and I truly do. My concern isn't for just Colossal, it's for the, when Colossal was ten people.

Mm.

Like, I don't know how that would be done. Again, I understand the importance and I, and I stomp that completely. Uh, but the reality is, is when, yeah, I was going through this, it made me feel, man, when I was ten people, I would have been able to do this. Um, so we, we luckily have a great team and, and um, and great partners, so we were able to get it done, but it definitely was a big lift.

Well, thank you for serving in the Air Force. And thank you for all your efforts in helping those that are disabled, uh, disabled veterans. I know that's very important and near and dear to your heart. So, do you wanna talk a little bit about the, what's the acronyms? And the government are great. SDVOSB, the program that, of course, was designed to ensure that service disabled veteran owned small businesses have a meaningful opportunity to compete for federal contractors. And your experience, how has that certification changed your ability to compete in the defense marketplace. It's a small business.

Uh, it's been amazing, uh number one it's a very proud designation um that I'm that I've been honored to have and that the SBA is is is blessed with with creating uh with creating but now uh holding the uh the certification but being able to set things aside has not only helped Colossal but but our entire environment. I'm going to the DAV and speaking to entrepreneurs and they're wanting to start businesses because of this program. To see a room of fifty disabled veterans, now with the motivation to do it because there's proven success like a colossal, uh, is one of the biggest gifts that I think that I can give the veteran community. So for, for Colossal it has been an amazing thing. Uh, now hopefully getting the rule of two to, to, to dive in a little more and now open up the JNAs for, for more soul sources. I hope we attract more people in, but it's, it's been a blessing.

All right. Thank you. I yield back.

Gentleman Neal is back. I now recognize Doctor Morrison from the great state of Minnesota for five minutes.

Thank you very much, Chairman Williams, for holding this hearing and thank you to our witnesses for being here today. In an era of rapid technological disruption, the agility and speed of small businesses are exactly what we need to maintain our military advantage. However, we face an urgent reality. Small business participation in the defense industrial base has steadily stagnated, presenting a serious risk to our national security. To reverse this trend, we have to look closely at where the barriers are highest and where regional solutions are succeeding. I'm proud to say that my home state of Minnesota is combating this challenge head-on, and there are a small number of uh there are a number of small businesses doing phenomenal work in the defense ecosystem. One small business based in my district, Operative X, is working on the cutting edge of combat medicine and is developing a sophisticated deployment system to help triage medical decisions on the battlefield. Using advanced AI-based diagnostics, this technology aims to extend the capabilities of military hospitals into the field, providing combat medics with the information they need to make quick informed decisions that get wounded war fighters the care they need as quickly as possible. As a physician, myself, and the wife of an army combat veteran, I'm proud that this great work is happening in my backyard. Competition is essential for innovation, and it's critical that small businesses know how to effectively compete and know what resources are available to them across the federal government. Aligning these resources is essential to reducing barriers for small businesses with the potential to transition dual use capabilities for our urgent national security needs. Miss Dingell, how can federal workforce and education programs better align with the needs of small businesses, supporting the defense industrial base?

Thank you for the question. I really think it's important to have resources that are available to assist small businesses with technical assistance and access to training and education that will allow them to take advantage of new technologies such as AI. We've uh we've worked with our partners and we understand how important AI is to the growth of small businesses, but decisions about the affordability of those technologies, the availability of those technologies, and how they might be available, access to them, those conversations are happening without those small businesses, and it is the small businesses that bring that innovation to the defense uh industrial base, so ensuring that that small businesses are involved in those conversations, that the pricing and access to those technologies are available to small businesses, because we simply can't afford to uh buy into those technologies and create new products and services at the price point that exists right now.

Thank you for that answer. Another one for you. Uh, in fiscal year twenty twenty four, fewer small businesses received government contracts than the year before, and the women owned small businesses, uh, receiving contracts decreased by an even larger percentage. An SBA report found that women owned small businesses accounted for a quarter of the total small business decline in one year alone. What factors contribute to more women owned firms leaving the industrial base?

There are a number of factors that contribute. Um, my, my colleague mentioned the difficulty in getting uh contracting officers to understand the program and how to use the program, so more education being available to them, and with a lot of the changes that have happened with the federal workforce then, we're we're starting over having conversations about how you might be able to leverage that program. There are misunderstandings about the program that, you know, it might be some form of handout as opposed to a way to increase competition. And then the complexity of complying and competing in the federal market place just continues to get more and more difficult. And so if I have to uh if I have to evaluate the ability to compete on a program against a large company that may cause me not to want to compete uh some of the doze changes that we've seen have just completely wiped out business owners. I received a phone call very early on last year, as soon as one of the executive orders were passed, and one of the business owners, I've received many, but this one very early on in January essentially said, I'll be out of business by May. if these things move forward. So I think that Congress can really help us by not just saying, we want to, you know, modernize this process or we wanna revitalize something, but hearing the voices of small business to understand what that looks like. WHIP has always, we always come to the home offer, we're here to help, right? We don't wanna, you know, we're not here to bash you over the heads, but we really wanna be able to help you to find solutions around that. And keeping that woman owned small business program and other small business programs available and open and usable. um, creates access and, uh, an opportunity for small businesses.

Thank you so much. Um, one for you, Mister Claussen. A recent study found that, uh, contract terminations and declining market participation for small businesses are creating defense supply chain innovation and competition concerns. So, what do you think are the short-term actions we can take to help offset Doge's negative impact on the industrial base?

So, the reality is is, you know, we have to get out there and compete, and this is the landscape that we're in right now. I believe there is competition to be had, um, but we need to continue to be agile and we need contracting officers and the government to be able to have enough opportunities out there for us in the prime. We'll see that number go up as opportunities are there. There's still plenty of good small businesses out there, we just need to see as many opportunities as we can.

Thank you for getting an answer and I've exceeded my time, Mister Chair. I yield back. Thank you.

Uh, gentlelady yields back. Uh, now recognize Mister Fuller from the great state of Georgia for five minutes.

Thank you, Mister Chairman. Mister Clausen, uh, great to see another airman in in the room. I was going over your bio, had an uh, an admonishment for you real quick. I didn't see the University of Georgia in the bio that I have. So just, just quick question, you would agree with me that's a far superior school than the TCU or something like that, right?

TCU.

Yeah, it was bad.

Don't bring me into this.

And, I wanna, wanted to ask you real quick, specifically related to, you were talking about giving speeches to, uh, veterans at, at a DAV. Um, one of the things that I think with suicide rates in the veteran community being so high is just losing that sense of purpose, losing that sense of service. Um, what's your number one piece of advice that you give to veterans in that speech, specifically to go through this process of Making sure you can get the certification for the service disabled veteran owned small business program.

Right. I'm very truthful with them. I, when I speak at the DAV, I don't talk about the clouds and the unicorns and all the great stuff that come, you know, seven years, seventeen years, for me almost eighteen years. It's hard and no one's gonna do it for you, you know, and there's been a lot of programs like the DAV now that are available. When I sit through these things, you know, we're giving them the road map. Right? But we're just honest with them on what it takes, but also to be there for each other. The support programs talk a lot about small businesses and SDV USBs and how to be successful in GovCon but we talk equally about being there for each other and removing the stigma of being the tough guy and saying, hey man, are you okay? Right? Uh, cuz it is challenging. I mean, all of us have opened small businesses. This is a challenge to, in GovCon. It is not easy. So what we focus on is being there for them through their the programs like the the DAV has that lays out the structure of how to get there and then having a community with you that has your back because it does put a lot of stress on you and a lot of these gentlemen and and and ladies have PTSD um and but

Yeah.

I've seen some amazing success stories come from those programs and we're gonna keep seeing it

Yeah, well said, air power, and I appreciate you being here.

Yes sir.

Uh, Mister Schwartz, I wanted to turn to you in in my rem remaining time here i don't know if you would agree with me so correct me if you feel like i'm wrong i feel like the american defense industrial base is broken but if you had to put it on a scale of one to it's uh one it's doing fine to ten it's completely broken where would you put the american defense industrial base

so first i disagree with you on the ranking of colleges that out there

wait a stall for time i said

yeah no no second of all i wouldn't say it's broken i would say it's a system designed for something else like if you're going into the rockies and colorado you probably

hmm hmm

that shouldn't have to happen.

Yep.

So, if that,

Right.

and

Yeah, absolutely. And, hey, obviously you've highlighted here in in your testimony that small businesses can help fix those problems. You refer to it as small businesses finding the front door, back home I would call it the the front porch. One of my concerns is that the defense and bu- industrial small business base that may get into this may be on the coast East and West coast, uh, represent Appalachian communities. Uh, what would be your one piece of advice for me as a legislator or leader, to make sure small businesses and entrepreneurs in Appalachia are getting involved in the defense industrial base. What can I do to help them?

I'm gonna say two. I apologize. One is work really hard to get rid of all those ancillary regulations that are not priorit priorities. Right? Cyber security is important, but you can't focus on your job and cyber security when you're also given twenty twenty five other regulations that really aren't as important anymore. and the second is help them figure out where to open the door right and sometimes that might be helping them giving them the contacts sometimes it might be legislating in ways to insure that do d is reaching out because what we need from our acquisition workforce and this is the i think the key here is for them to have the time and the support to slow down and say i don't wanna push the easy button i wanna find the best solution and sometimes the best solution is a small business but if you don't have the time to sit back and say, let me do my market research and really scout out where to go and who's out there, we're not gonna get them.

Yes, sir. Mister Chairman, I yield back my time. Thank you for your testimonies.

Uh, gentleman yields back, I now recognize Mister Tran from the great state of California for five minutes.

Thank you, Mister Chairman and the Ranking Member for today's hearing. Thank you for our witnesses for being here today. Los Angeles and Orange Counties are home to one of the nation's most dynamic aerospace and defense manufacturing and research ecosystems. I'm especially proud to represent Auriga space located in Garden Grove. I've had the chance to tour their facility with their CEO, Winnie Lye, and see firsthand the amazing work that they are doing to develop the first electromagnetic launch system for rockets. From advanced manufacturing and satellite technology to defense software and precision engineering, small businesses throughout Southern California are helping build the systems that keep America secure. Small businesses are often the source of breakthrough technologies and specialized capabilities that our national security depends on. But there is a troubling disconnect. The federal government is spending more on our national security than ever before, but the share of contract dollars going to small businesses declined. In fiscal year twenty twenty five, the Department of Defense awarded nearly five hundred billion in contracts, but only a quarter of those went to small businesses. That's less than the year before. Far too often federal procurement remains too complicated, too slow, and too expensive to navigate for small businesses. They face burdensome compliance requirements, lengthy contracting timelines, slow funding disbursements from other transaction authority, managers, and a maze of regulations that often favor companies with dedicated administrative staff and teams of consultants. Meanwhile, the Small Business Administration has significantly significantly cut staff meant to help with government contracting. Instead of cutting resources, we should be smartly investing in America's industrial base. That means reducing red tape, streamlining streamlining contracting pathways, improving outreach, appropriately funding the offices of small and disadvantaged business utilization and ensuring agencies are held accountable for meeting their small business contracting goals because America's national security stronger, more innovative and more resilient when small business ha- small businesses have a fair shot at contracting opportunities and a level playing field to compete. Miss Dingell, despite significant increases in DOD contracting spending in fiscal year twenty-five, the National Defense Industrial Association's Vital Signs twenty-six report found that overall small businesses are reporting fewer contracting opportunities than last year with a significant percentage seeing a decrease. What do you think we can do to ensure that the department is structuring contracts in a way that small businesses can compete and perform?

Thank you for that question. I think there are a number of things that uh that you can work on. As my colleague mentioned the the the process of getting into the front door can be extremely difficult so if you're not already in that uh defense industrial base it's nearly impossible to get in less and less agencies are permitting new entrants. because you need to have a clearance in order to get a contract and you need a contract to get a clearance so that's one of the issues the other is if there is anything that can be done to lessen the burden of all of the compliance requirements i grew up in cyber security i've worked in defense for many years i understand the importance so it is a necessary uh it's necessary to have cyber security provisions in place but the amount of money that it costs for a company to comply is nearly impossible and some companies are getting out Sometimes the procurements come out and, you know, it's a hundred and eighty some odd pages of things that you have to be able to read and respond to. And for small businesses, we just don't have the staff that are necessary to be able to navigate those things, and to respond to those types of requirements. So streamlining the requirements in a way that doesn't necessarily burden uh small businesses would be great.

Thank you for that. Miss Dingell and Mister Coulson, uh while small businesses may receive contracts, The actual uh funding is frequently delayed. Government inefficiencies and other acquisition bottlenecks are the cause. As you know, these challenges create uh severe cash flow problems for small business, uh small businesses. How would you expand multi-year procurement procurement authorities that the DOD help create more stable business opportunities for both prime contractors and subcontractors? And secondary to that is would this help reduce the barrier to entry for small businesses? Ladies first.

Thank you. Uh, you mentioned um stability and predictability, I think those are just the key, right? When I started my business the uh the the sales cycle was about six months, that sales cycle now is nearly three years. It's nearly impossible for a small business to hold on to the staff and the resources that are necessary to compete, so that's something that's important. And I apologize, a little bit of noise, I forgot what the second half of your question was.

Uh, no problem. I'll just go to Mr. Coulson,

Yep.

you have anything to add, five seconds.

Yeah, um, okay, five seconds. Uh, the reality is it's tough, right? And we have to find ways to be able to get it done. I'm hoping that the rule of two, using more soul sources. I mean, you think about that. The soul source alone would be something huge. The rule of two and actually executing soul sources would expedite everything.

Thank you. Chairman, are you about?

Gentleman Neal's back. I now recognize Miss Van Duyn from the gray state of Texas for five minutes.

And I agree with um, Mister Schwartz's assessment on the uh ranking of colleges. TC, your roles. Um, thank you, Mister Chairman. This hearing is important because rebuilding America's defense industrial base cannot just mean relying on the same large prime contractors. Small businesses are a critical part of getting new ideas, faster production and better capabilities to the war fighter. Too often Washington makes it harder than it needs to be for small businesses to be able to compete. And for a small business, every dollar that's spent on an unnecessary compliance is a dollar that can hiring workers, developing new products, or supporting the mission. And that's why I introduced the Small Business Regulatory Reduction Act, which passed the House in December and is weighting Senate action. It's killing me. I have introduced this for three sessions now. We finally got it out of of committee. We got it on the floor. And now it's dying a very slow death in in the Senate. And my bill requires the Small Business Administration to ensure that the cost of its rulemaking on small businesses is not greater than zero each fiscal year. It requires SBA to report on regulations that impact small businesses, and the principle is simple. Before Washington adds another burden, it has to start removing them. And today's hearing shows why that matters. If we want a stronger defense industrial base, we need more small businesses willing and able to work with the federal government and not fewer. Mister Swartz, in your testimony you discussed the critical role of small businesses in keeping our defense industry competitive and in innovative. My concern is that even while higher contracting dollar amounts are flowing, from the Department of War to small businesses, we're ignoring that the overall number of small businesses that win contracts is actually shrinking. So what does the shrinking number of contractors say exactly about the health of the defense industrial base? And what makes it less attractive now for small businesses to work with the government than it was five years ago?

So the first one is shrinking, what does it say? So You may have noticed I eat kosher, and I'm Jewish, right? I lived in the city, there is a point really, I promise. i lived in a city that had one kosher pizza store the food wasn't great their service was not great and it could be cleaned up a little bit one day another kosher pizza store opened up two blocks away you would be i guess not surprised how quickly that first pizza store the pizza got really good and the service was excellent it's the same thing here when you have that decline in the industrial base you are losing that competition when you're losing that competition you're losing that hunger to improve and get better to win that contract at the end of the day that is i think the example ok now i was thinking of food so i totally forgot the second question i apologize

in the last five years do you think that it's that that that the government has made it harder or easier for small businesses to be able to work with

oh i think they've definitely made it harder and i'll give one example um as was mentioned every dollar matters for small businesses and what they need is that predictability of business and yet we saw this year the SPIR authority lapse and then get renewed right that interruption of SPRs that some companies knew they were gonna win and got disrupted and lost that cash flow is a huge problem for planning a business so that's just one example of including some of the ones we talked about in cyber so one option to really help small businesses i think is make some of those authorities permanent so companies know they can count on it and don't worry every single year that it's going to disrupt their business.

Yeah, I appreciate that. I remember we had a witness here in front of the small business committee several years ago from the defense industry. And he held up a four, a three, uh, a three-ring bounder that was about four inches thick. And he said, " This is the regulation we're sitting here talking about today. If you pass this, I close my doors." "Because while some of the major defense companies can afford to have regulatory agencies, I cannot." "This is gonna cost me about a hundred thousand dollars and my margins are this." or this thin. So if you pass this, you are you are literally taking my business away from me, just by a re- regulation. Tell me how important and I understand we have to have regulations, that's important. But the layering upon layering upon layering, how much have you seen your time being spent on that as opposed to what you should actually be focused on?

So, I can't say my time because I don't run a small business for defense,

Yeah.

I'm here for for the NDIA, the National Defense Industry Association,

Yeah.

but it is one of the biggest complaints. that companies have all the small businesses and the polls is consistently at the top it's the regulations the paperwork and it not only does it take up their time i would argue what's even worse than taking up their time is distracting them from what we really want them to be doing which is delivering capability not working on compliance that doesn't really add anything

i appreciate that and i yield back thank you

gentle lady yields back i now recognize mr. Olszewski from the great state of maryland for five minutes

Thank you very much, uh, Mr. Chairman. Uh, thank you to our ranking member and all of our witnesses for being here today. Uh, I believe that we can all agree that driving American innovation for small business is a top priority for members of this committee and on all sides of the aisle. Maryland, we're proud to be home of the Army's oldest active proving ground, Aberdeen Proving Ground, where I know the National Defense Industrial Association. Mister Schwartz, uh, as a chapter, thank you for fostering collaboration among government. industry and academia to advance army modernization efforts. Uh, APG features expansive test ranges and road courses to desi- designed to stress military hardware. So if a piece of equipment has uh, is meant to shoot, move or communicate, it likely has gone through testing at APG. Uh, APG uses small business administration guidelines to award research, technology and service contracts to smaller scale companies. Unfortunately, The Trump administration has gutted the SBA's capacity to advocate for small contractors at federal agencies like APG. The Office of Government Contracting and Business Development has been reduced by sixty percent, meaning fewer negotiators to help identify small business opportunities and fewer phone calls from small business owners being answered, which makes no sense to me, especially as Trump's own DOD has said, quote, "A weakened American industrial base and supply chain threatens both the economic security of millions of Americans and our country's national security. I agree wholeheartedly. Knee-capping small businesses who want to enter, compete and innovate in the federal market does in fact weaken our industrial base and supply chain so I do hope we can work together in spite of these challenges to pr- produce positive outcomes for the industrial base and for the government cluster. Uh, Miss Dingell, I'll start with you, since twenty fifteen SBA has made multiple unsuccessful attempts deliver a single IT platform to bring all of its small business certifications into place. I think this is a great idea, especially if it cuts down on time for small businesses to apply um and the time SBA to process applications. The unified certification platform was deployed in twenty twenty four, even as the GAO and others raised concerns. The committee no longer receives annual certification data and it's unclear if those outstanding concerns have been addressed. I'm just wanting to wonder from your perspective, is the portal functioning well for small businesses currently seeking certifications with the SBA?

Thank you for that question. So I'm not certain whether the uh the portal is currently functioning well. It was.

Why?

The challenge for our business owners is they don't have a person they can contact at the SBA to figure out what's going on. This, the the workforce has just been uh m- moved around, I won't say decimated, but it's small businesses need a point of contact in an agency or in the SBA for instance. to be able to get the answers that they need. Just like we were talking about debriefs on a contract, you need a debrief on what's happening with your application, and that's not possible right now.

Sure. Hopefully it's something we can uh address together. Um, I wanna thank the committee for recently passing legislation I sponsored requiring the SBA to provide Congress with more comprehensive information on the certification portal and related programs. Um, can you speak a little bit to how having that more complete picture of application volumes, processing times, and outcomes uh might help SBA improve the portal and better serve those small business applicants.

Yeah, I think the small business community, the women owned business community is is all for transparency and accountability, it's just how does that come about, right? And what we are seeing, uh I was just having a conversation recently and someone says, have you spoken to this person at the SBA or have you spoken to this, like we have little to no contact with the resources that used to be able to assist business owners. So I think as taxpayers, as business owners, we all want transparency and accountability. But we also need the resources that are necessary to support that transparency and accountability.

Thank you. And then, Mister Clausen, I'll I'll close with you with my last minute. Um, we know that small business only competitions are critical for small firms to participate in the defense industrial base but, are a small percentage of those defense dollars making up just over seventeen percent? How can we expand efforts to protect this small but critical investment, rather than allow them to exit the industrial base and taking their innovation capacity with them?

The rule of two. Like we mentioned earlier, being able to get more small business prime opportunities for small businesses, uh that is gonna be critical. And educating on the J and A for the sole sources, I mean these are, these are two quick paths to be able to get more, the the companies that are there operating and then also bringing in new. Uh but we need more prime contracts right now, I would say the majority of our work growing, you know was subcontracting. Right? So being able to give us the opportunity to compete at the prime level as many times as possible is not only gonna strengthen who's there but it's gonna bring more in.

Thank you very much. Uh, appreciate the witness's time, and, Mister Chairman, I yield back.

Uh, gentlemen, uh, yields back. I now recognize Mister Bresnahan from the great state of Pennsylvania for five minutes.

Thank you, Chairman, Ranking Member, and thank you to all of our witnesses for being here today. The Defense Industrial Base has long been one of the United States' most important economic and national security assets, creating jobs, strengthening communities, and helping keep the American people safe. While many hear defense contracting and think of large corporations and mega-contractors small businesses located all over the country, play a critical role in supporting our national defense and military readiness. In Northeastern Pennsylvania, we see this firsthand. Small businesses throughout Northeastern Pennsylvania provide specialized services and equipment that help ensure our service members have the tools they need to complete their missions safely and effectively. During the committee's annual small business showcase last month, I was proud to welcome Interproducts, a small business representative for from Pennsylvania's eighth congressional district. Interproducts is a veteran-owned small business developing advanced training aids and life-saving equipment that help security forces detect, respond to, and defeat explosive threats. Anyone who saw their state-of-the-art tactical robot at the showcase saw firsthand how inert products equips our troops and allies with the best possible equipment to protect them while they protect us. Another standout example is Noble Biomaterials, who produce thermal, radar, and electromagnetic interference shielding technology that protect our war fighters and critical military assets. Based in Scranton, Noble manufactures lightweight flexible, low-observable materials that help our service members operate more effectively, and avoid detection in high-risk environments. Small businesses like these protect our troops and save American lives. But we must continue to ensure they, and companies like them, are given fair opportunities to thrive in the space, which will in turn create local jobs, benefit our communities, and provide for their families. So, my first question is for Mister Schwartz. Um, in your testimony you cited the overburdensome paperwork, uh, and regulatory process that often push away potential defense contracting small businesses. Um, obviously that barrier to enter the marketplace, uh, shouldn't be impeded by unnecessary paperwork. Is there anything tangible that we can be doing in Congress to simplify the process?

yes there there are couple of things but one is there are lot of regulations that stem from statute so if you look at the federal acquisition regulation overhaul that's being done right now the revolutionary overhaul what they're trying what they are doing is taking everything that is not required by statute and taking it out right but there are things that are required by statute that have been required by statute because of things that are twenty thirty years old that perhaps we have not reviewed of late that are still in there that is not being reviewed because of this overhaul because the administration has no authority to take that out or any of the agencies so one thing that could be done is a systematic review of the statutory requirements and regulation with a very simple question is this doing more good than harm right because some of those there used to be a regulation that said you had to use dollar coins in every vending machine on a on a base that was ultimately repealed because of something that uh congress did or there was a requirement you had to use double-sided paper right those might be requirements that are examples that we may want to start reviewing those and getting rid of those so we can focus on the important things so that that would be at the top of my list

well the eleven words uh you never want to hear we're from the government and we are here to help so uh honestly uh my second question for mister claussen first of all thank you for your service as the founder of the service disabled veteran owned small business what advice would you have uh, or to give to a veteran in the early stages of starting a small business. And this is something that I frequently encounter when I'm meeting with my constituents. They served our country and sometimes it's incredibly frustrating to get that inertia moving to be able to get the business off of the ground. So, if you can maybe identify perhaps one or two key suggestions that I can take back to them.

Uh, first is find a good program. Like uh, the, the DAV has programs where they have mentorship programs for starting small businesses. It's one of the best ones I've ever seen. I've been honored enough to, to teach a couple of those sessions. Uh, extremely valuable for me, I actually sent through some of the others to get value. Extremely valuable. So the DAV puts on an awesome STVOSP entrepreneurial veteran clinic for people starting business. Two is understanding how to monetize who you are and the value that you have. Being able to take that step to dig into your, your, your Rolodex of people you've worked with in government or not, and be able to monetize your relationships and bring value to their mission. Understand your value and how you can impact theirs.

Than- uh, thank you for your, your service as well, and, Mister Chairman, I yield.

Gentleman yields back, and now I recognize Miss Galton from the great state of Michigan for five minutes.

Thank you so much, uh, Mister Chairman, and, and, uh, Mister Ranking Member, and thank you for uh our witnesses for being here today. This is a a really, really important conversation. Um, you know, there is a through line here, right, that we agree small businesses are the backbone of our economy and they are foundational to the strength of our defense industrial base. On that we agree. However, according to a twenty twenty-two study, the number of small businesses competing for awards through the Department of Defense dropped by twenty-three percent. Over that same time period, the number of firms that were awarded small dollar contracts, less than one million dollars, shrank by even more, by thirty-two percent. Miss Dingell, what steps can we take to ensure that there are sufficient opportunities for small businesses who compete for these lower uh awards?

Thank you for the question. I think we've heard from a number of uh my colleagues here about the rule of creating opportunities right because that sets aside some of the business. But the uh the other thing is consolidations right now are causing problems for us, some of the consolidations and again when you look at it from a taxpayer's standpoint it makes sense but when you look at it from a business standpoint, that just takes some small businesses out of competition completely. You you've gotta be at a certain dollar figure to even be able to compete. So uh making small business set-asides available, using tools like the rule of two, making sure that uh contracts are not necessarily consolidated. I'll try to be sensitive to time, but as a small business owner who has worked in defense,

Yeah.

we had existing income at work that was then moved to a consolidated contract vehicle that we weren't eligible to compete on.

Mm-hmm.

So even though we had gotten our foot in the door, now the door was we would put on outside of the door and the door was closed, so we couldn't get back in.

Yeah.

And so being mindful of those kind of things is something that's going to be important.

Yeah. Um, another factor, that you have emphasized in your testimony is the ever-changing economic landscape and and the instability I mean I know uh defense contracting or not that is the number one issue that I hear about from our our small businesses back home. A recent op-ed from WHIP emphasizes that the use of AI in small business operations presents both a critical opportunity and a barrier to entry for certain entrepreneurs my bill the AI wise act would address this challenge by requiring the SBA to to create learning modules to help small business owners adopt AI into their operations. We know they want it, but often they don't know how to use it. They might be afraid that a changing regulatory landscape, for example, could uh negatively impact them down the road. They're afraid of giving up proprietary information. Can you talk more uh about the challenges small businesses are facing with this new technology, specifically if you're able to speak to it? Um and how it could potentially help them to compete for federal contracts.

So, we know that AI is being used in the evaluation process for federal contracts. So, first of all, as a business owner, I need to understand how my proposals are being evaluated.

That's exactly right.

So, even having someone at the SBA or in one of the agencies be able to provide an informational session to tell us that or to have some educational programs. And I'll use cyber security as an example, as the defense uh uh industrial base was ro- cybersecurity was rolled out,

Mm-hmm.

there were roadshows around the country to say, hey, this is what this is going to look like,

Yeah.

and here's how you need to be prepared. We need to be doing that now with AI, right? So having some education for that might be uh might be really helpful. Making sure that the tools are accessible in terms of the costs associated with those tools. There has been some push to make sure that there are some cybersecurity tools that are available doing that same thing from an artificial intelligence standpoint, would be really helpful.

Yeah.

business owners um they wanna use the technology but we're concerned right there's no real uh regulatory guidance on whether we can use AI as a part of our solution there's no real guidance on what our exposure is with respect to privacy and loss of data for our clients and so some some assistance in that area would be great.

Mm-hmm that's uh very very helpful feedback we uh teach our students the first thing you learn in an English class is right for your audience right, it's almost dystopian to think that that audience uh might be ai but the reality is we know that this is evaluating uh our our proposals and so making sure folks understand uh how to prepare that is critically important we're teaching students now how to write smart ai prompts to get it to do what they want uh you know getting our small business owners prepared uh for drafting their proposals is a a really good idea we'll follow up with your team we'd love to you know uh chat out some

Thank you.

Um, uh, my time is almost up, so I'll I'll yield back. That was uh very helpful. Thank you, Miss Dingell.

The gentlelady yields back. I now recognize Mr. Petronas from the great state of Florida for five minutes.

Thank you, Mr. Chairman. Um, my district, Northwest Florida, we've got over a hundred thousand veterans. I got twenty five thousand active duty. Um, and it's um, it's it's definitely a stable part of of the country because of their understanding commitment to service mission. Um, but I, I think I'm, I'm, I'm, I'm gonna leave this kinda open for anybody that wants to chime in. Um, what are we doing right and doing wrong? I know there's so many different organizations and groups that assemble to help those, uh, those war fighters transition into careers, small business, but, uh, again, I'm, I'm, I'd rather you just you know, throw darts at us where we're dropping the ball and, and creating problems to help those transitions. Cuz there's, there, otherwise there wouldn't be so many different organizations trying to, to be the non-profit solution, whether it be uh Operation New Uniform or what have you, that tries to help that. So I'm, I'm, Mister Chairman, I'm open to anyone who wants to chime in.

Um, sure. So, as somebody who transitioned, um, you know, a while ago, now it's been seventeen years. uh but being having friends that are transitioning now and also working with um mission twenty two and dav and all of these agencies uh these nonprofits trying to transition is having these programs available within the military right cause right now they're having to go out outside of that there are the the military has done an amazing job from over the last couple of years of doing better transitioning i was talking we have a a former colonel that works with colossal now and i was asking him cause i was Curious. Um, he said it's getting better, right, and that there's a lot more care into that transition. But I think specifically around wanting to start an STV US, be a veteran owned small business, a small business in general. Are there classes available during that transition that they can point them in that direction and say? Cuz a lot of it they train us to go get a job, right? Hey, this is what you need to do to go work for Lockheed or Raytheon or or whoever else, and we're we're figuring that out. For me when I made the decision to s- there wa- there wasn't anything available,

Mm-hmm.

right? Now, today there's a lot of these programs like the DAV has of the, the, the SDV USP, a veteran boot camp that they have and there's these other agencies doing it. But my question is, is what is the government doing to foster that within the military? Uh, there may be some programs I'm not sure about, so I don't wanna say that that's not happening. But in the transitioning, uh, that I'm hearing happening is we gotta be there for them. and be able to foster that.

Well, you've been there, done that. OK, so in, in your career of service, when did you make up your mind that you were going to transition out? And ideally, what is the, the perfect timing to try to catch somebody with those transition procedures?

Absolutely. Uh, with me it was, you know, I, when I got to join Base Andrews, I really got a better view of how the contractor can support the mission. And I was like, man, I think I could do this. Like I, I really believe that I could bring value to this mission as a contractor and I can still serve the nation, right, cuz I didn't wanna take the uniform off,

Mm-hmm.

but I wanted to find a way to continue to serve. So in that transfer time is what I started doing is asking these companies I was working with as a military member, hey, how's this work? You know, I was just interviewing everyone, they probably thought I was crazy. But I knew that this is the path that I wanted to take, but there was nothing there for me. So the answer to your question is it's probably different with every with every member, right? But the reality is is once that transition happens and you decide six months into it or a year into it or you're hitting your eighteen years and you're getting the itch and you got two left is what programs are there to train them and to educate them on how to start an SDVOS per veteran owned small business.

Sure. Sure.

Yeah, I would add to that, I think that the the the programs that are that are there to support transitioning service members into indi industry are great. We we utilize them all the time, we hire from them. Frequently when it comes to active duty internships, they frequently take place at the very tail end of the career. And if you've got somebody that, that uh like Mister Clausen said, that is, has maybe got a few years left, that's a really good time to expose them to some of what industry has to offer, the challenges that industry faces so that they can make an informed decision about where they're gonna take their future. I think that they can um uh the the you know, rotation programs, maybe you know work with this company for a month and then a different company. for a month and then could see what the different size companies uh are really dealing with. I think that there's a lot of opportunity to improve there.

Sure. Ma'am.

Thank you for your question. And might I add that doing those rotations would be really helpful for small businesses, because we want that expertise. And I think that exposure for the folks that are still in will give them a sense of what the two environments look like, cuz it can be pretty shocking to come out of the military or come out of federal service, like like myself, and then transition into business.

Gotcha. Thank you.

do i have time to answer

sorry

no you have you have you have

oh thank you i will be very quick

you got fifteen seconds

fifteen seconds one of the things i think is very often overlooked is many veterans who leave the department leave and they're like i saw this problem i know how to fix it in a way that other people don't and that's something that i think we should really leverage when people leave like the company one brief that i mentioned earlier in the testimony that person left the military and he said i saw this problem i can fix it and start a company to fix it If we can capture that, we would really benefit.

Sure. Great answer.

Gentlemen,

Thank you.

his time is up, I now recognize Mr. Jack from the great state of Georgia for five minutes.

Thank you very much, Mr. Chairman. If I could start with Mr. Schwartz. I appreciate your testimony today, and I wanna talk a little bit about, you know, you you had a great graph that you include in your testimony that shows the declining uh number of companies contracting with the federal government, and would welcome your thoughts as to why you believe it's harder for small businesses to contract with the federal government particularly within the defense industrial space.

So first, thank you for reading the written testimony. Appreciate it. Um, I think there are a lot of challenges. Let me start with the uh the workforce, right? Is if you're a contracting officer and you have a lot of pressures, and there's a perception of compliance that you have to do and you have to move fast, it is very difficult to sit back and say, OK, I can do this really fast, or I can go slow, do more market research, figure out what the right companies are, who's offering the best thing. And find them that go find them is hard because who knows about a small business we had to find a plumber recently and we had no idea where to start except roto-rooter cause they were right there right they're easy it's a lot harder to find some of these small businesses I think what that's one of the biggest challenges is the visibility of people knowing this is what they have to offer

you also included in your testimony um the crushing burden of over-regulation would welcome thoughts to this committee as to how we as a small business committee can help reduce regulatory costs and burdens to small businesses trying to get involved.

Right, I'll just uh review two. The first one is, a- a- as we were talking before, there are a number of small businesses that are subcontractors. And it's not infrequent that a requirement on a prime contractor is required to be flowed down through contract to every lower tier, which means we're also putting those regulations on small businesses that that are the subcontractors well perhaps let's review those requirements it would has to go flow down and say do we really need to flow that down is it really important and related to that is systematically go through all of the regulations and say this was this is a regulation because of something that was passed in nineteen ninety two do we really need it anymore or can we amend it to alleviate the burden

that's how i feel too uh mister jurorski appreciate your testimony as well and uh i would welcome for this committee um and answer this question because as a small business that does not have an SBA certification and must compete in the broader small business category, how challenging is it for those types of businesses to win awards and do you believe you're at a disadvantage in terms of the contracts offered to you because of it?

Uh we're definitely at a disadvantage because the contract space uh and opportunity space uh for a company that's our size that doesn't uh apply for a set-aside that's that's uh set-aside for a socio-economic basis forces us to compete at a at a at a higher level and in my testimony i i talked about how there is this pool of of uh companies that really punch above their weight they're large businesses masquerading as small businesses that get to um operate uh based on eight a criteria um in similar spaces to us so it's it's it's really a three hundred person company going up against a behemoth that can be several thousand employees at times So it's very, very challenging to find the right opportunity space. And frequently if those companies that are large, uh, are pursuing a small business set-aside where we can compete, uh, we often see contracting officers electing to do a direct award to N eight A, uh, rather than have a, have a full-blown competition. Um, the rule of two should apply there, uh, but there's still subjectivity that can be applied to the rule of two, which can, can limit competition.

Thank you. Uh, next question, Mister Claussen. Um. since we're talking about certificates, would welcome your uh opinion and perspective as to how the SDV OSB certification has changed your ability to compete in the defense marketplace.

It's been extremely valuable. It's helped shape the company in every way. Um, we, we started off just fighting any way that we could, but I think we, we hit it on two values that helped our grow, is they started setting aside for SDV OSB. We started working with the VA more and started getting some work there, and then the The, started working with the Air Force, got a couple of prime contracts, were awarded some GWACs that were able to set aside like soup and ITES that have set aside requirements for STVOSB and you know, also the, the large, you know, partners that we work with also have set aside standards within their large contracts. You just gotta get 'em be out there and, and and work as hard as you can and find the avenues. They don't run and punch you in the face. You gotta go look for 'em and on 'em down through your relationships. But they're out there and we really hope to see more.

Well, I appreciate you all's testimony today. And with that, Mr. Chairman, I yield back.

A gentleman yields back, and I'd like to thank our witnesses today for your testimony and for for appearing before us. It's been a great uh hearing. I hope uh when you go back home you can tell your friends that there are hearings that people don't yell and scream at. And there's a lot of and much of what we talked about, the ranking member and I were just talking about how much we agree from party to party uh on small businesses today. So I want to thank you for being here. Without objection, five legislative days to submit additional materials and written questions for the witness to the chair which will be forwarded to the witnesses. I ask the witnesses to please respond promptly if that happens. If there is no further business without objection, the committee is adjourned. Thank you.