Testimony of

Ruth Alicia Sandoval

Deputy Director

Minority Business Development Agency

U.S. Department of Commerce

Before The Committee on Small Business, Subcommittee

on Government Programs and Oversight

U.S. House of Representatives

August 18, 1999

Good Morning Mr. Chairman, Ranking Member Davis, and Members of the Subcommittee. I am Ruth Alicia Sandoval, Deputy Director of the Minority Business Development Agency (MBDA), at the U.S. Department of Commerce. I am appearing on behalf of Courtland Cox, Director of MBDA. Thank you for the opportunity to appear before the Committee this morning. I bring you greetings from the Secretary of Commerce, William Daley, and from the Director of the Minority Business Development Agency, Courtland Cox.

The Minority Business Development Agency is pleased to have this opportunity to appear before you to discuss the status of programs designed to assist small businesses to participate in the Federal procurement market. This year marks the thirtieth anniversary of the establishment of MBDA by President Richard Nixon through Executive Order 11625, and over the course of our thirty-year history, we have seen the Federal procurement market develop into a critical source of contracting opportunities for small, minority, and women-owned businesses throughout the country. Through enlightened public policy in the Federal contracting arena, the Federal Government has successfully encouraged the growth of thousands of new small, minority and women-owned businesses. This has in turn encouraged the development of new, competitive sources of supply, created new jobs, and strengthened our communities. In short, Mr. Chairman, we at MBDA will continue to ensure that our Federal contracting policy continues to support the development of small business for the good of the Nation as a whole.

This is particularly true as minorities grow in numbers and become a much larger percentage of total United States population. The Census Bureau is projecting that minorities will account for almost ninety percent of the net population growth from 1995 to 2050; and will then become 47% of the total population. Minority populations will grow in every state; and in Illinois the minority population will be 37% of total population by 2025.

Under Executive Order 11625, MBDA is directed to provide assistance to businesses owned and operated by members of the Nation's ethnic minority groups, as opposed to those operated by small, minority and women-owned businesses generally. My comments therefore will be largely directed toward MBDA's efforts to promote the expansion of the minority business sector. However I believe that many of these comments will apply to the issue of small business development overall.

Since the introduction of Public Law 95-507 in 1976, our Government has supported the use of Federal contracting as a public policy vehicle to help promote the Nation's minority business development agenda. Federal procurement outreach has long been viewed as a way to give capable minority vendors access to the kind of large volume, high dollar-value contract opportunities that make it truly possible for a company to grow in size. Because of the transparent procedures and requirements for fair competition built into the government contracting process, the public sector has been able to adopt a clear, institutionalized approach to the inclusion of minority vendors that does not exist in the private sector.

As the custodians of Federal taxpayer dollars, we have an obligation to ensure that this Government procures goods and services in a way that benefits all of America's communities, and that encourages the growth of new businesses. The alternative is to create an oligopoly of major national contractors that would ultimately reduce competition.

MBDA has established a number of programs and services to assist minority vendors to access procurement opportunities. This past year we developed the Phoenix and Opportunity Databases, which together form what we suspect may be the most effective bid matching system in the Federal procurement arena. Under the Phoenix System, as it is called, minority companies anywhere in the country can register their company names and profiles into our Phoenix database using an online registration form residing at our MBDA Web site. At the same time contracting officers from throughout the Federal sector can use our Web site to input notices of their contract opportunities into our Opportunity database. Server-side software then instantly matches each posted opportunity with minority companies that fit the required profile, then generates an e-mail or fax notification to each of the matched minority companies. The notification includes the RFP number, name and contact information for the contracting officer, a short descriptive paragraph about the contract, open and closing dates, and other relevant information. Another e-mail containing a list of the matched minority companies is sent back to the contract offeror.

In our first six months of operation, we have logged over 15,000 successful matches for companies registered with the system.

The Phoenix System is not limited to Federal procurement officials. Contracting officers from state and local government participate actively in the system, as do corporate purchasing executives and those representing quasi-governmental agencies such as airports, water and sewer authorities, stadium authorities, public utilities, and others. The system's user-friendly interface and refined sorting capabilities allow virtually all types of institutional purchasing organizations to effectively utilize the system for identifying minority vendors.

The fact that the Phoenix System "pushes" bid notices out to qualifying minority companies is one of the key features of this program. Contract databases require a search on the part of the business seeking contract opportunities. However, as we know, most small businesses already suffer from too few hands trying to perform too many tasks to be able to regularly search through voluminous on-line data. In the absence of this push technology, there is a slim likelihood of a business owner searching a database frequently enough to be able to identify contract opportunities before they become stale.

In addition, the system benefits from its availability to a wide spectrum of contract offers. We have often heard minority business owners complain about the proliferation of agency-specific contract databases that offer information on contracts available only from a single source. This approach clearly fragments the procurement market, and exacerbates a problem that already exists within many small and minority-owned businesses -- the lack of available resources to track sales and marketing leads on a sustained, continuous basis. By aggregating contracts from a variety of contracting organizations in one place, MBDA is building a critical mass of users that will simplify the process for minority businesses of obtaining timely information concerning the overall market for their product or service.

We have been very pleased with the results of our Phoenix System thus far, and are actively promoting the system to our sister agencies for their procurement opportunities throughout the Federal sector.

Another feature of the MBDA system is the Performance database. This is an online application that tracks the progress of contracts and loan packages processed by our minority business development centers nationwide. Reports are delivered in real-time to manger's desktops. We also have a system of Virtual Centers accessible through the Internet, which provide information on topics such as International Trade, Manufacturing, and Aquaculture. These centers can be accessed through our MBDA website.

As an agency of the U.S. Department of Commerce, MBDA is also pleased to be able to present to this Committee testimony concerning the Commerce Information Technology Solutions (COMMITS) initiative. COMMITS is the first-ever Government-wide Acquisition Contract (GWAC) set-aside exclusively for small businesses. This GWAC will enable agencies across the Government to access the services of top-notch small businesses, including small minority businesses, small women-owned businesses, and other firms. Twenty-nine vendors have been selected to participate in this program, including Nieto Engineering, a firm based here in Chicago. Nieto was MBDA's 1995 Minority High Technology Firm of the Year for the Midwest Region.

COMMITS is an innovative use of the Federal Government's new streamlined acquisition procedures, and is expected to result in awards totaling $1.5 billion for the participating firms. Geared specifically for information technology firms, the COMMITS program is but one example of Secretary Daley's commitment to level the playing field for underutilized companies in this critical sector of the U.S. economy.

In addition, this Committee has heard the concerns expressed by small, minority and women-owned businesses that acquisition streamlining has on balance been harmful to their companies. These vendors have stated that acquisition streamlining drives the procurement process toward increasingly larger and larger contracts that can ultimately be performed by only a handful of major vendors. COMMITS recognizes the benefits of acquisition streamlining, while at the same time ensuring that underutilized firms have a fair chance to compete in the Federal marketplace. We believe that this is a model that should be replicated throughout the Federal sector.

We will continue to focus our programs to support the changes in the business environment, which will facilitate the success of minority business, and promote job and wealth creation. MBDA information is available through our Web site at http:// www.mbda.gov. Thank you for inviting the Minority Business Development Agency from the Department of Commerce to testify today. I will be happy to answer any questions you may have.