Gulf Coast's small businesses never made a priority, lawmaker says

Information on Aug. 2 hearing

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Editor's note: This story was updated at 11:15 a.m. Aug. 8, 2007. Please go to Corrections & Clarifications to see what has changed.

Rep. Nydia Velazquez (D-N.Y.), chairwoman of the House Small Business Committee chairwoman, wasn't impressed with what Bush administration officials had to say at an Aug. 2 hearing about the role of small businesses in the Gulf Coast's recovery efforts.

After hearing them, Velazquez said their testimony shied away from specifics and measurable ways to include these businesses, vital to the region’s recovery -- and the intent of the hearing.

“At this point, I would expect less lip service and more action,” she said.

For example, Lurita Doan, administrator of the General Services Administration, focused her remarks on GSA's Veterans Technology Services governmentwide acquisition contract, which, Velazquez pointed out, was irrelevant to the hearing. “But you spent all your time talking about this.”

Doan disagreed with Velazquez.

GSA, one of the largest buying agencies in the region, has awarded three contracts that represented only .6 percent in contracting dollars toward the local small businesses, well below the statutory goal, Velazquez said. Doan, however, said GSA has awarded five contracts.

“The bottom line is that unless these agencies include the local businesses, the region’s economy will never make a full recovery,” she said.

In addition, Velazquez charged that the Homeland Security Department is actually taking money away from small businesses in the Gulf Coast area. DHS awards contracts to small local businesses and then modifies the contract afterward. Using a bar graph,  Velazquez showed that small businesses had a net loss of $82 million in contracts because of modifications. Meanwhile, larger companies received $12 million.

Paul Schneider, DHS’ undersecretary for management,  responded that his agency is not taking money away from the small businessesl. It is “de-obligating” money to speed up the procurement process. In what Schneider called a max price or “not-to-exceed” price contract, a contract is awarded well above its foreseen cost. When the project is finished, the unused money is de-obligated from the contract.

Negotiating down to the dollar amount would delay the work the department needs to finish as it works to help in the Gulf Coast, Schneider said.

“It’s not a question of taking money from the small business. It’s a question of basically removing the excess dollars that were obligated as part of the financial responsibility that we have,” he told Velazquez. “We are basically settling up.”

Despite the de-obligations, the number of businesses that DHS contracts with small local businesses does not change, Schneider said.

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