“Restoring America’s Industrial Base: The Role of Small Businesses in National Security.”
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House Small Business U.S. House of Representatives
Follow its sittingsSpeaker 5
Our national security relies on more than weapon 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 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 and competitive small businesses' participation in the defense industrial base is not a choice, but imperative to the long-term national security interests of the United States.
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 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 onus lies.
For small businesses, participation in the defense industrial base has not always been easy. So too often, complex compliance requirements, limited access to capital, and layers of bureaucracy make it harder for new and emerging small businesses to compete and contribute. These are the ongoing challenges we need to continue to address. Now more than ever, it is time for small businesses to activate. We are living through a moment of historic investment in American defense and manufacturing.
The priorities of this committee, the direction of this Congress, and the guidance under this administration will 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 foundational, and as a committee, we must ensure that we are doing everything in our power 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 California, Mr. Cisneros, for his opening remarks.
Gilbert Cisneros
Thank you, Mr. Chairman, and thank thank you to our witnesses for being here today. The Department of Defense obligated $755 billion in contracts in fiscal year 2024. Just over $97 billion of that or 26.3% of eligible contract dollars went to small defense contractors. These dollars point to the critical role small businesses play in supporting the DOD mission and the warfighter. So I was encouraged at first by an official estimate showing an increase to $98.9 billion going to small business firms in fiscal year 2025, an increase at DOD of almost $2 billion.
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 25.7%. 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 Velázquez 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 exacerbated by the disproportionate impact of DOD contract terminations. It is yet to be seen if the overhaul of the government's procurement regulations will be more than a word-cutting exercise and reduce non-value-added requirements for small firms. To date, the results appear to be uneven. While the rule of two 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 unsubstantiated and increasingly unrealized accusations in one small business program. DOD has also unfairly targeted all small businesses with a slickly produced but factually inaccurate social media video designed to intimidate small firms, even those who previously competed and won 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.
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 incredibly difficult. Meeting the unique requirements 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 industrial base and to ensure that as defense budgets continue to climb, the government is incentivized to leverage the capabilities, solutions, innovation, and competition that small businesses bring to the table. Thank you very much.
Roger Williams
Gentleman yields back. We will now move to witness introductions. Our first witness today is Mr. Moshe Schwartz. Mr. Schwartz is a senior fellow for acquisition policy for the National Defense Industrial Association and has spent over 15 years advising Congress on acquisition industrial base issues, including roles at the Congressional Research Service and GAO. Mr. Schwartz has testified before Congress and written extensively on defense acquisitions, 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 JD from Yeshiva University's Cardozo School of Law. And he also plays baseball, guy. There you go. And we thank you for being here today. Our next witness is Mr. Daniel Javoroski.
Mr. Javoroski is president and chief operating officer at Infinity Systems Engineering, a Colorado-based systems engineering and mission operations company specializing in payload integration, space operations, and system sustainment. He's responsible for the establishing of policies and strategies in fulfilling Infinity's mission. Mr. Javoroski has extensive experience in aerospace and defense with a strong 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 MBA from Pennsylvania State University, known as Penn State University to many, right? I look forward to your testimony.
Our next witness today is Mr. Anthony Claussen. Mr. Claussen is the founder and CEO of Colossal Contracting, a Maryland-based IT and professional services company that provides technology, communications, and mission support solutions to government and commercial clients. He is a military veteran and a former communications specialist deployed in Iraq. During his final assignment at Joint Base Andrews as an IT project manager, he laid the foundation for Colossal Contracting. 30% of Colossal Contracting employees are veterans.
He earned a degree from the University of Georgia and 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.
Gilbert Cisneros
Thank you, Mr. Chairman. It is my pleasure to introduce Ms. Angela Dingle, president and chief executive officer of Women Impacting Public Policy. The WIPP or WIPP is a national nonpartisan organization that advocates on behalf of women entrepreneurs and serves as the voice for over 14 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 ensure procurement inclusion and access to the federal marketplace. Prior to serving as the CEO of WIPP, Angela founded Ex Nihilo Management, an award-winning technology and management consultory that provides governance, risk management, and cybersecurity.
She holds a master's degree in management information systems and a bachelor's in computer science. Whip 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 smart solutions to issues that range from access to capital and access to technology to family leave and health and childcare. 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. Thank you, Angela, and to all our witnesses for being here today.
Roger Williams
Gentleman yields back and I also want to thank everybody for being here today and before recognizing the witnesses, I'd like to remind them we've got some rules here, rules in Congress. And remind all of you that your oral testimony is restricted to five minutes in length. If you see the light turn red in front of you, it means your five minutes has concluded and you should wrap up your testimony. And if you keep talking after five minutes, you're going to hear this. That means you're done, okay?
And so forth. And also you may see people coming in and out, 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. So with that, I want to recognize Mr. Schwartz for his five-minute opening remarks.
Moshe Schwartz
Thank you, 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 1953, 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 Eisenhower knew the importance of small business to national security. Small businesses represent 70% of the defense industrial base. Companies like OneBrief, which supports military operations by providing AI-powered software to enhance force 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 50 to 55% 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 2011 to 2020, the number of small businesses receiving DOD contracts decreased by 43%, even as obligations to small businesses increased by approximately 15%. According to a Bloomberg analysis, in fiscal years 21 and 2022, the number of small businesses contracting with DOD decreased an additional 5%. 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 Hexath 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?
56% cited the burden of the acquisition process and paperwork. 33% cited regulations. Some may argue that streamlining is coded code for appealing 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 cybersecurity 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 workspace. Small businesses generally do not have the resources to build or maintain secure compartment information facilities or SCIFs, creating a barrier to entry. We could encourage more use of companies like Knucks, which offers secure high-end SCIF spaces for lease and by the way, Knucks is a small business. Agencies could also provide access to underutilized government-owned SCIF 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 SBIR applications.
Companies often do not get meaningful feedback on SBIR 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.
Speaker 8
Gentleman yields back and thank you very much and now recognize Mr. Javoroski for his five minute opening remarks.
Daniel Javoroski
Chairman Williams, ranking member Cisneros, distinguished members of the committee, thank you for the opportunity to testify before you today. My name is Dan Javoroski, I'm the president and chief operating officer of Infinity Systems Engineering in Colorado Springs. We support the Air Force, the Space Force, intelligence community and a variety of major industry primes. I've got a 30-year career myself in this business, coincidentally Infinity celebrates our 30th anniversary today. And I'd like to use my most recent experience 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.
Infinity has successfully scaled yet we find ourselves trapped in a regulatory blind spot and we're not alone. As a small business with fewer than 300 employees and no socio-economic designations, we're too large to benefit from entry-level small business set-aside programs. Therefore we're considered a large and forced to compete for full and open contracts directly against multi-billion dollar defense primes who possess exponentially more proposal, legal and overhead resources. Forcing a growing mid-sized business to jump straight into the ring with defense giants is the antithesis of healthy competition. There are countless commercial entities with valuable capability to bring to the fight who stay away from the sector for this reason.
Small private businesses like ours are really left with three choices when we get to this stage.
We can stay in the fight and try to grow organically, which is what we're continuing to do. We can make our own investments in M&A and try to scale inorganically, but that takes capital investment that we can't handle. And if we take on outside investment, we start to lose control of our business. And finally, exit the market via an acquisition. In the past six years, nearly a dozen privately held defense firms in Colorado Springs have sold to larger firms and or private equity.
All are now part of significantly larger entities, thereby shrinking the base as we so see. I'm often asked by my peers and counterparts how I feel about the recent 8(a) 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 a 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.
And they certainly are not disadvantaged. While intended to assist developing firms, the 8(a) program frequently grants immense advantages 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. 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 executing them. Today, contracting shops are paralyzed by a weaponized protest culture throughout the industry. The fear of frivolous protests 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 a pursuit, these delays drain vital capital that we need to fund independent R&D and to sustain our talent for future pursuits. In the end, the government feels this in increased rate structures. From a legislative perspective, this committee can do a lot to address these concerns and I'm hopeful to see some of these things materialize. Number one, legislate 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.
Legislate to limit the accommodations of the 8(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 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.
Roger Williams
Gentleman yields back, thank you, and I now recognize Mr. Clawson for his five-minute opening remarks.
Anthony Claussen
Chairman Williams, Congressman Cisneros, and members of the committee, thank you for the opportunity to testify today. My name is Anthony Clausen, and I'm the founder and CEO of Colossal Contracting, a service-disabled veteran-owned small business IT value-added reseller and integrator. As a VAR, 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 a 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 2009, I founded Colossal Contracting and believe service to this country does not end when we take off the uniform. We built 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 want to 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 OneGov strategy, we support these efforts, leverage buying power, and deliver better 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 execution from small businesses 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 combined hardware, software, cloud, AI, cybersecurity, technical support into one single requirement, yet there is no dedicated classification for these buys. Establishing a separate IT VAR NAICS code would provide greater clarity on how technology solutions are delivered to government customers. Second, the current 150-employee SBA size standard no longer reflects the realities of today's technology sectors. Reaching 151 employees does not mean a company is a large business, yet it forces those companies to compete against multinational corporations that employ tens of thousands of people.
Increasing the threshold to at least 300 would allow successful small businesses to continue to grow and compete while strengthening the federal supplier base. Third, I strongly support robust cybersecurity requirements, including the Cybersecurity Maturity Model Certification program. At Colossal, achieving CMMC certification required substantial investments in technology, compliance, and personnel. As implementation continues, cybersecurity 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 2804 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 business succeeds, our government gains competition, resilience, and access to the expertise needed to meet the ever-evolving national security challenges. Thank you for this opportunity to testify today and for your continued support on America's small businesses and the veteran community, and I look forward to any and all questions. Thank you.
Roger Williams
Gentleman yields back, and I now recognize Ms. Dingle for her five-minute opening remarks.
Angela Dingle
Good morning, Chairman Williams, Ranking Member Cisneros, and members of the committee. My name is Angela Dingle. 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 20 years of experience in the federal marketplace, helping companies navigate it successfully. Thank you for the opportunity to testify.
This hearing asks 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 large contractors is a national security risk. And yet that base is shrinking.
In fiscal year 2024, agencies awarded a record $183 billion 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 121,000 in 2009 to about 63,000 in 2022. 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 cancelled, 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. WIPP is proud to support the Protecting Small Business Competition Act of 2025, 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 want to talk about a program that is near to our mission at WIPP, the Women-Owned Small Business or WOSB program. The WOSB 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 2024, women-owned small businesses won $31.7 billion in federal contracts, and the certified WOSB program grew to more than 13,400 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 OSDBUs, are understaffed or vacant.
As the administration re-examines federal programs, the wide reach of those reviews has inadvertently 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.
Roger Williams
Gentlelady yields back, thank you. We will now move to the member questions under the five-minute rule. I recognize myself for five minutes. Mr. Schwartz, the number of contractors supporting the defense industrial base has shrunk by roughly 40% since 2010. Rising regulatory costs are cited as a major reason small businesses are leaving these federal contracting programs.
For small firms, every dollar spent on compliance is a dollar not spent on innovation or production or workforce or even cybersecurity. So the question would be, how has the Trump administration revolutionary FAR overhaul addressed that challenge?
Moshe Schwartz
Thank you. So in a bumper sticker, I'd say 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 DFARS, the 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 value, non-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 going to send that message because unless we deal with the workforce, almost everything else is playing around the margins.
Roger Williams
Right, thank you. Mr. Javoroski, as the national security landscape becomes increasingly shaped by cutting-edge software and artificial intelligence, the defense industrial base is under pressure to modernize faster than traditional acquisition process was designed to support. So the question is, from your position leading Infinity Systems Engineering, how do you see the role of a small business evolving over the next decade and what structural changes are most necessary for the defense industrial base to fully leverage Main Street's capabilities?
Daniel Javoroski
Thank you for the question, Mr. Chairman. I think that the recent extension of the Small Business Innovative Research program is going to go a long way to help satisfy some of that gap that exists, particularly when it comes to AI. AI is something, that's an area that we operate. We are active in the SBIR program. I'd love to see it become permanent, not just a five-year extension so that we don't have another lapse like we did recently.
But that program is very, very encouraging for new entrants to this market to come in and participate. There's a lot of companies out there that don't participate in the defense industrial base that can absolutely bring capability that's well needed, and that program is really the way to do it.
Roger Williams
Okay, thank you. In limited time I've got Mr. Colosimo, 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 agencies are looking for partners who can rapidly integrate emerging technologies and adapt to changing requirements, how does Colossal Contracting leverage its veteran-led mindset and small business agility as a competitive advantage?
Anthony Claussen
Thank you, sir. 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 into the entrepreneurial, you know, mindset and 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 base is, you know, a lot of us veterans 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 who we were trained to be is delivering absolute max value, and I believe it'll continue to do that.
Roger Williams
All right, thank you. Gentleman yields back. I now recognize the ranking member for five minutes of questions.
Gilbert Cisneros
Thank you, Mr. Chairman. Ms. Dingle, with the administration's ongoing attack on the 8(a) and 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?
Angela Dingle
Thank you, ranking member. The women-owned small business program and the SBA programs like the 8(a) program, the 8(a) in particular is a business development program and the women-owned small business program, they create a level playing field. 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, 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 for business owners to be able to grow. One contract award in one of those programs can be a game changer. It can completely change the trajectory of the company because we simply need a foot in the door, and these programs create those opportunities for you to get a foot in the door.
Gilbert Cisneros
Yeah. You know, a company like General Dynamics, right, did not start out as a big corporation. It started out kind of doing a small company doing a contract for NASA, and we need to have those game changers out there. But halfway through this fiscal year, Ms. Dingle, documents circulated online showing SBA changed their scorecard criteria and lowered each agency's spending targets. What will be the impact of SBA telling agencies they should spend less, potentially twelve billion dollars less, on small business?
Angela Dingle
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. One of my other colleagues mentioned the burden that is on the contracting officers. Some of these programs 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 my colleagues would agree with me, that small businesses can do it cheaper and faster and with more flexibility.
Gilbert Cisneros
Thank you very much for that answer. Mr. Clawson, 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 service-disabled veteran-owned businesses?
Anthony Claussen
Thank you, sir. I believe so. I believe removing the J and A requirements and getting contracting officers also comfortable with doing sole source. The sole source has been around for a while for the SDVOSBs, but not many people use it. Contracting officers see it as difficult, they don't want to have to justify things.
So we're hoping that that mixed with the rule of two is really going to open up some things and be able 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 SDVOSBs to doing sole source work, and that mixed with the rule of two, it should open things up.
Gilbert Cisneros
Since you mentioned the rule of two, let me ask you this. Can you quickly address what a sunset of the rule of two would mean for small business participation in the industrial base?
Anthony Claussen
It would hurt. 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 the place for the systems integrator where they are working on massive programs that protect this nation, and I'm good with that, and we work with a lot of them. But there is a lot of amazing opportunities for the agility and the expertise that small businesses bring, and we need that rule of two.
Gilbert Cisneros
All right. Ms. Dingel, since you mentioned the rule of two in our last thirty seconds here, can you answer that same question, what would it mean if this sunsetted?
Angela Dingle
I agree. I mean, it would just be disastrous for small businesses. 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 viable for me to consider for competition. And the predictability of knowing what's going to happen in this environment is what makes me decide whether or not I'm going to continue to do business in the federal marketplace.
Speaker 13
The gentleman yields back. I now recognize Mr. Alford from the great state of Missouri for five minutes.
Mark Alford
Well, thank you, Mr. 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 I did not get to listen to your testimony, but I did read it, and I'm high on in there. So thanks for coming here. When most people think about our national defense, they think about large defense contractors, but behind every major weapons system, aircraft, and military platform is a network of small businesses providing innovative technology, specialized manufacturing, and critical supply chain support. I'm excited that you're here today.
Small businesses are essential to maintaining America's technological edge, and they're often the first to deploy emerging capabilities in areas like artificial intelligence, cybersecurity, 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 increased 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 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, 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 trying to attract more small defense capabilities there. So Mr. Jarosky, did I pronounce that correctly?
Very close.
Better.
Mark Alford
All right. Your business started out contracting with DOD and then won a SBIR award. What led you and your company to pursue that award after receiving multiple defense contracts?
Daniel Javoroski
Thank you for your question, sir. We, you know, you hit the nail on the head at the beginning of your statement and question there, you know, Infinity's been around for 30 years, but we were founded on subcontracts with the large primes. So some of those large primes today are still some of our biggest customers. We're primarily a services company, providing engineering services to those primes and to DOD on the satellite operations front. About five years ago, we made the decision that we were seeking out some higher margin work.
We didn't really want to leave DOD and go into the commercial space and we saw SBIR as an opportunity to bring some ideas and innovations to the table that we saw as gaps with some of the large primes that were probably not meaty enough for them to go after themselves, but they were difference-making enough for us that we were able to innovate and capitalize on that program. And it's been a game changer for us.
Mark Alford
Mr. Schwartz, as you know, Secretary Hegseth proposed a 1.5 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?
Moshe Schwartz
That's a great question. And I think there are a lot of examples, there are a lot of things that Congress can do to help small businesses have a level playing field. And I'll just reiterate 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. Now this actually, because GAO bid protests 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 companies understood. That's one thing that Congress could do. They could say you shall give better debriefings for SBIRs so companies know how to compete better. And another one very quickly is shared SCIF space.
Companies don't always have the investment if they're small businesses to invest in that, which means they can't compete for the bid and then they can't perform. Access SCIF space in GSA, for example, is a great way like for a pay-for-fee like a WeWorks is another opportunity.
Mark Alford
Well two very innovative ideas. I think we had similar legislation with other government contracts that passed through this committee and the full House I believe that required the government to give explanations to small businesses of why they did not secure a contract. And I think maybe this would be good to look at this in this case and also the shared SCIF space. Great ideas, we'll get to work on that. I yield back, thank you.
Gentleman yields back. I now recognize Ms. Goodlander from the great state of New Hampshire for five minutes.
Maggie Goodlander
Thank you, Mr. Chairman, and thank you to our witnesses for being here today for this really important hearing. I want to start with two numbers that have come up in this hearing: 51 to 5.
Speaker 18
51 to 5. That's how many prime defense contractors we had in this country in 1993, 51. 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 Mr. Jarowski, I want to be sure to emphasize this very powerful portion of your written testimony where you described the second valley of death, this frozen middle where small businesses like yours 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. And I want to 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, Mr. Schwartz, you invoked him, I think he would be very disappointed in the progress that we've made since 1953. We've reversed course 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, the confidence that they can enforce the rules that we have on the books. And I'm here now and I want to write better rules of the road that are going to help businesses trapped in this second valley of death. The three options you have in front of you, can you just say a bit more about the two other bad options that are available to a small business like yours, sir, in the second valley of death?
Daniel Javoroski
Sure, I'm happy to. You know, really selling out is what we see most prevalent. Most companies are getting to our size and they find that this competitive landscape has changed and it gets frustrating and it's the easy answer is to just take the exit.
Sell to a prime?
Daniel Javoroski
Sell to a prime or sell to private equity. Private equity's what we see more commonly. And they're consolidating small businesses like ours, ultimately for a sale of that entity to probably to a prime in a more strategic transaction. The second road is really to say we're going to go to try to acquire another company ourselves. And that is capital intensive, right?
And that's a really, really challenging decision to make for an independent privately held company. And if the capital's just not there to do something like that. So we would have to take on outside investment and when we do that, you're probably going to lose some control over your company and we're not interested in doing that either.
Speaker 17
Well, I appreciate that. Mr. Clawson, can you speak to, I gather you are also riding through the second valley of death?
Anthony Claussen
Yes, I am. You know, we're on that in our world as an IT VAR, as soon as you go over 150, you are now competing against systems integrators and very large companies. 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, right? It's a culture that we created that we will lose, right, if we can't compete.
Because as soon as we go over 151 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 going to lose who you are. I said the other day to our group that 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, my fear is I'm constantly battling this under 150 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, even though we're 105 people. So we're constantly in that battle and it is something that we have to fight for.
Speaker 18
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 not 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 18, as soon as we're talking about footnotes in manuals that aren't in the US Code, I think we haven't given you the clarity that you need. So I appreciate that. I guess I've run out of time, but I really appreciate our witnesses being here today and with that I yield back.
Roger Williams
Gentlelady yields back and I recognize Mr. Wied from the great state of Wisconsin for five minutes.
Tony Wied
Thank you, Mr. 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 Act, 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 Cybersecurity Maturity Model Certification. Mr. Jaworski, the CMMC, which is the Cybersecurity 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 the cost to comply with the Department of War's new cybersecurity requirements can be upwards of $100,000. What did this process look like for you?
Daniel Javoroski
Thank you for your question. I would say upwards of several hundred thousand dollars is probably the more likely answer. That's what we've seen. For us, we were pretty fortunate. We had made some decisions early on about five years ago that once the first drafts of CMMC compliance were coming out, that we were going to lean in and start to do that work.
So we started to do that work with existing IT infrastructure and existing IT personnel. We had to make investments along the way in order to be compliant, 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 starting that process all over again, I would have to hire a staff of several individuals to come in and help us be compliant, and if I was trying to do it inside of a year, it would definitely cost us several hundred thousand dollars.
Daniel Javoroski
Absolutely. Absolutely, there's issues with overclassification, and to the degree that CMMC is geared towards managing controlled unclassified information, what we're seeing now is anything that is unclassified is now being called CUI for the sake of CMMC. So it's really, when it comes to outside entities trying to add to the defense industrial base, all we've really done is create another barrier to entry.
Speaker 21
Thank you. Mr. Clawson, while large contractors have an easier time absorbing the costs associated with CMMC compliance, small contractors are required to meet the same standards with a fraction of the resources.
So what has achieving CMMC compliance looked like for you in your business?
Anthony Claussen
It was extremely difficult, but we understand the value. We clearly understand the value of it, but we have, you know, we've had things like ISO certifications and CMMI because we do a lot of work in defense space. But that helped us prepare for it, but we had dedicated resources, we had, you know, auditors that you have to pay for, we have pre-auditors that you have to pay for. I understand the value of it and I truly do. My concern isn't for just Colossal, it's for the when Colossal was 10 people.
Like, I don't know how that would be done. Again, I understand the importance and I stomp that completely. But the reality is, is when I was going through this, it made me feel, man, when I was 10 people, I wouldn't have been able to do this. So we luckily have a great team and great partners, so we were able to get it done, but it definitely was a big lift.
Speaker 21
Well, thank you for serving in the Air Force and thank you for all your efforts in helping those that are disabled, disabled veterans. I know that's very important and near and dear to your heart. So talk a little bit about the, what's the, acronyms in 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 contracts.
In your experience, how has that certification changed your ability to compete in the defense marketplace as a small business?
Anthony Claussen
It's been amazing. Number one, it's a very proud designation that I'm that I've been honored to have and that the SBA has blessed with creating, well, creating but now holding the certification. But being able to set things aside has not only helped Colossal 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 50 disabled veterans now with the motivation to do it because there's proven success like a Colossal is one of the biggest gifts that I think that I can give the veteran community.
So for Colossal, it has been an amazing thing. Now hopefully getting the rule of two to dive in a little more and now opening up the J&As for more sole sources, I hope we attract more people in, but it's been a blessing.
All right, thank you. I yield back.
Roger Williams
Gentleman yields back. I now recognize Dr. Morrison from the great state of Minnesota for five minutes.
Kelly Morrison
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 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 warfighters 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. Ms. Stingle, how can federal workforce and education programs better align with the needs of small businesses supporting the defense industrial base?
Angela Dingle
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 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 industrial base. So ensuring 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 buy into those technologies and create new products and services at the price point that exists right now.
Kelly Morrison
Thank you for that answer. Another one for you. In fiscal year 2024, fewer small businesses received government contracts than the year before, and the women-owned small businesses 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?
Angela Dingle
There are a number of factors that contribute. My colleague mentioned the difficulty in getting 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 starting over having conversations about how you might be able to leverage that program. There are misunderstandings about the program, that 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 marketplace just continues to get more and more difficult.
And so 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. Some of the DOE's 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 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 modernize this process or we want to revitalize something, but hearing the voices of small business to understand what that looks like. WIPP has always, we always come to the Hill and offer, we're here to help, right?
We don't want to, we're not here to bash you over the heads, but we really want to be able to help you to find solutions around that and keeping that women-owned small business program and other small business programs available and open and usable creates access and opportunity for small businesses.
Kelly Morrison
Thank you so much. One for you, Mr. Clawson. A recent study found that 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 DOE's negative impact on the industrial base?
Anthony Claussen
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, 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 in. I've exceeded my time, Mr. Chair. I yield back. Thank you.
Speaker 23
The gentlelady yields back. I now recognize Mr. Fuller from the great state of Georgia for five minutes.
Chris Fuller
Thank you, Mr. Chairman.
Mr. Clawson, great to see another airman in the room. I was going over your bio, I had an admonishment for you real quick. I didn't see the University of Georgia in the bio that I have, so just quick question, you would agree with me that's a far superior school than the TCU or something like that?
Don't bring me into this.
Chris Fuller
And I wanted to ask you real quick, specifically related to, you were talking about giving speeches to veterans at a DAV. 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. 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?
Anthony Claussen
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, 17 years for me, almost 18 years. It's hard and no one's going to 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 roadmap, right, but we're just honest with them on what it takes, but also to be there for each other.
Those support programs talk a lot about small businesses and SDVOSBs 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, because it is challenging. I mean, all of us have opened small businesses, this is a challenge to get into GovCon. It is not easy. So what we focus on is being there for them through their, the programs like 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 ladies have PTSD. And but I've seen some amazing success stories come from those programs and we're going to keep seeing it.
Yes, sir.
Chris Fuller
Mr. Schwartz, I wanted to turn to you in my 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, one it's doing fine to 10 it's completely broken, where would you put the American defense industrial base?
Moshe Schwartz
So first I disagree with you on the ranking of colleges. Get that out there.
Way to stall for time, I see.
Moshe Schwartz
Yeah, 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 in Colorado, you probably don't want a Corvette, you probably want a Ford 150, right, so we were designed, the acquisition system was designed for a different era for a different concern and we have not shifted to the right system or the right car. It is substantially problematic. I'll just give one example and I think it highlights the whole concern. The attack drones that we used most recently in Iran were reverse engineered from the Iranian Shaheds.
That shouldn't have to happen. So if that...
Chris Fuller
Yeah, absolutely. And obviously you've highlighted here in in your testimony that small businesses can help fix those problems. You referred to it as small businesses finding the front door, back home I'd call it the front porch. One of my concerns is that the defense industrial small business base that may get into this may be on the coast, East and West Coast.
Moshe Schwartz
I represent Appalachian communities. 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 going to say two. I apologize. One is work really hard to get rid of all those ancillary regulations that are not priority priorities. Right, cybersecurity is important, but you can't focus on your job and cybersecurity when you're also given 20, 25 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 contact, sometimes it might be legislating in ways to ensure that DOD 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 want to push the easy button. I want to find the best solution. And sometimes that 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 going to get them.
Speaker 25
Yes, sir. Mr. Chairman, I yield back my time. Thank you for your testimonies.
Roger Williams
Gentleman yields back. I now recognize Mr. Tran from the great state of California for five minutes.
Derek Tran
Thank you, Mr. 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 Orega Space, located in Garden Grove. I've had the chance to tour their facility with their CEO, Winnie Lai, 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 2025, the Department of Defense awarded nearly 500 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 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 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 is stronger, more innovative, and more resilient when small businesses have a fair shot at contracting opportunities and a level playing field to compete. Ms. Dingle, despite significant increases in DOD contracting spending in fiscal year 25, the National Defense Industrial Association's Vital Signs 26 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?
Angela Dingle
Thank you for that question.
I think there are a number of things that 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 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's anything that can be done to lessen the burden of all of the compliance requirements. I grew up in cybersecurity, I've worked in defense for many years, I understand the importance. So it is a necessary, it's necessary to have cybersecurity 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 180 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 small businesses would be great.
Derek Tran
Thank you for that. Ms. Dingle and Mr. Colson, while small businesses may receive contracts, the actual funding is frequently delayed. Government inefficiencies and other acquisition bottlenecks are the cause. As you know, these challenges create severe cash flow problems for small business, small businesses. How would you expand multi-year 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.
Angela Dingle
Thank you. You mentioned stability and predictability. I think those are just the key, right? When I started my business, 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 onto 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.
Speaker 29
No problem. Let's go to Mr. Colson, you have anything to add, five seconds.
Anthony Claussen
Yeah, okay, five seconds. 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 sole sources, I mean you think about that, the sole source alone would be something huge. The rule of two and actually executing sole sources would expedite everything.
Beth Van Duyne
Gentleman yields back. I now recognize Ms. Van Duyne from the great state of Texas for five minutes.
This hearing is important because rebuilding America's defense industrial base cannot just mean relying on the same large prime contractors. And I agree with Mr. Schwartz's assessment on the ranking of colleges. TCU rolls. Thank you, Mr. Chairman. Small businesses are a critical part of getting new ideas, faster production, and better capabilities to the warfighter.
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 cannot be spent 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 waiting Senate action. It's killing me. I have introduced this for three sessions now, we finally got it out of committee, we got it on the floor, and now it's dying a very slow death 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.
Mr. Schwartz, in your testimony, you discussed the critical role of small businesses in keeping our defense industry competitive and 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?
Moshe Schwartz
So, the first one is shrinking, what does it say? So, you may have noticed I eat kosher, right, I'm Jewish, right? I lived in the city, there is a point really, I promise. I lived in the 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. Okay. Now, I was thinking of food, so I totally forgot the second question, I apologize.
Speaker 30
The last five years, do you think that it's been that that government has made it harder or easier for small businesses to be able to work with?
Moshe Schwartz
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 SBIR authority lapse and then get renewed. Right, that interruption of SBIRs that some companies knew they were going to win and got disrupted and lost that cash flow is a huge problem for planning on business. So that's just one example of including some of the ones that 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 account on it and don't worry every single year that it's going to disrupt their business.
Beth Van Duyne
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 a three-ring binder 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 going to cost me about a hundred thousand dollars, 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 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?
Moshe Schwartz
So, I can't say my time because I don't run a small business for defense, I'm here for the NDIA, the National Defense Industrial Association, but it is one of the biggest complaints that companies have, all the small businesses in 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.
Speaker 31
Gentlelady yields back, I now recognize Mr. Olszewski from the great state of Maryland for five minutes.
Johnny Olszewski
Thank you very much, Mr. Chairman, thank you to our ranking member and to all of our witnesses for being here today. 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, Mr. Schwartz, has a chapter, thank you for fostering collaboration among government, industry, and academia to advance army modernization efforts. APG features expansive test ranges and road courses designed to stress military hardware.
So if a piece of equipment has is meant to shoot, move, or communicate, it likely has gone through testing at APG. 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 60%. 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. Kneecapping 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 produce positive outcomes for the industrial base and for the government cluster. Ms. Dingle, I'll start with you.
Since 2015, SBA has made multiple unsuccessful attempts to 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 and the time SBA to process applications. The unified certification platform was deployed in 2024, 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 wanted to wonder from your perspective, is the portal functioning well for small businesses currently seeking certifications with the SBA?
Angela Dingle
Thank you for that question. So I'm not certain whether the the portal is currently functioning well. It was. 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. The the workforce has just been moved around, I won't say decimated, but 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.
Johnny Olszewski
Sure. Well, hopefully it's something we can address together. I want to thank the committee for recently passing legislation I sponsored requiring the SBA to provide Congress more comprehensive information on the certification portal and related programs. Can you speak a little bit to how having that more complete picture of application volumes, processing times, and outcomes might help SBA improve the portal and better serve those small business applicants?
Angela Dingle
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, 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.
Speaker 35
Thank you. And then Mr. Clawson, I'll I'll close with you with my last minute. 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 17%. 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?
Anthony Claussen
The rule of two, like we mentioned earlier, being able to get more small business prime opportunities for small businesses, that is going to be critical. And educating on the J&A for the sole sources. I mean, these are these are two quick paths to be able to get more the companies that are there operating and then also bringing in new. 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 going to strengthen who's there, but it's going to bring more in.
Speaker 35
Thank you very much. Appreciate the witnesses' time and Mr. Chairman, I yield back.
Speaker 36
The gentleman yields back. I now recognize Mr. Bresnahan from the great state of Pennsylvania for five minutes.
Robert Bresnahan
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 crucial 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 mission safely and effectively.
During the committee's annual small business showcase last month, I was proud to welcome Inert Products, a small business representative from Pennsylvania's 8th Congressional District. Inert Products 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 warfighters 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 this space, which will in turn create local jobs, benefit our communities, and provide for their families. So my first question is for Mr. Schwartz. In your testimony, you cited the over-burdensome paperwork and regulatory process that often push away potential defense contracting small businesses. Obviously, that barrier to enter the marketplace shouldn't be impeded by unnecessary paperwork.
Is there anything tangible that we can be doing in Congress to simplify the process?
Moshe Schwartz
Yes, there are a couple of things, but one is there are a 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 20, 30 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 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 would be at the top of my list.
Robert Bresnahan
Well, the 11 words you never want to hear: 'We're from the government and we are here to help.' So, honestly. My second question for Mr. Clawson. First of all, thank you for your service as the founder of the service-disabled veteran-owned small business. What advice would you have 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.
Anthony Claussen
First is find a good program like 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, extremely valuable for me. I actually sit through some of the others to get value, extremely valuable. So the DAV puts on an awesome SDVOSB 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 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.
Roger Williams
Gentleman yields back and I now recognize Ms. Scholten from the great state of Michigan for five minutes.
Hillary Scholten
Thank you so much, Mr. Chairman and Mr. Ranking Member and thank you for our witnesses for being here today. This is a really, really important conversation. 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 2022 study, the number of small businesses competing for awards through the Department of Defense dropped by 23%.
Over that same time period, the number of firms that were awarded small dollar contracts less than $1 million shrank by even more, by 32%. Ms. Dingle, what steps can we take to ensure that there are sufficient opportunities for small businesses who compete for these lower awards?
Angela Dingle
Thank you for the question. I think we've heard from a number of my colleagues here about the rule of two creating opportunities, right, because that sets aside some of the business. But the 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 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 got to be at a certain dollar figure to even be able to compete.
So making small business set-asides available, using tools like the rule of two, making sure that contracts are not necessarily consolidated. I'll try to be sensitive to time, but as a small business owner who has worked in defense, we had existing incumbent work that was then moved to a consolidated contract vehicle that we weren't eligible to compete on. So even though we had gotten our foot in the door, now the door was we were put on outside of the door and door was closed so we couldn't get back in. And so being mindful of those kind of things is something that's going to be important.
Speaker 38
Yeah. Another factor that you have emphasized in your testimony is the ever-changing economic landscape and and the instability. I mean, I know 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 WHIPP 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 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 negatively impact them down the road. They're afraid of giving up proprietary information. Can you talk more about the challenges small businesses are facing with this new technology, specifically if you're able to speak to it, and how it could potentially help them to compete for federal contracts?
Angela Dingle
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. 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 cybersecurity as an example. As the defense industrial base was rolled, cybersecurity was rolled out, there were roadshows across the country to say, hey, this is what this is going to look like 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, might be really helpful, making sure that the tools are accessible in terms of the cost 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. Business owners, they want to use the technology, but we're concerned, right?
There's no real 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 assistance in that area would be great.
Speaker 38
That's very, very helpful feedback. We teach our students the first thing you learn in an English class is write for your audience, right? It's almost dystopian to think that that audience might be AI, but the reality is we know that this is evaluating our proposals. And so making sure folks understand 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.
Getting our small business owners prepared for drafting their proposals is a really good idea. We'll follow up with your team, we'd love to, you know, chat out some specifics there. My time is almost up, so I'll yield back. That was very helpful, thank you, Ms. Stingle.
Roger Williams
The gentlelady yields back and I now recognize Mr. Petronas from the great state of Florida for five minutes.
Jimmy Petronas
Thank you, Mr. Chairman. My district, Northwest Florida, I've got over a hundred thousand veterans, I've got twenty-five thousand active duty, and it's, it's definitely a stable part of the country because of their understanding, commitment to service, mission. But I think I'm going to leave this kind of open for anybody that wants to chime in. What are we doing right and doing wrong? I know there's so many different organizations and groups that assemble to help those warfighters transition into careers, small business, but again, I'm, I'd rather you just, you know, throw darts at us where we're dropping the ball and creating problems to help those transitions because there otherwise wouldn't be so many of these different organizations trying to be the nonprofit solution, whether it be Operation New Uniform or what have you that tries to help that.
So I'm, Mr. Chairman, I'm open to any that wants to chime in.
Anthony Claussen
Sure, so as somebody who transitioned, you know, a while ago, now it's been seventeen years, but being, having friends that are transitioning now and also working with Mission 22 and DAV and all of these agencies, these nonprofits trying to transition, is having these programs available within the military, right? Because right now they're having to go outside of that. The military's done an amazing job from over the last couple of years of doing better transitioning. I was talking, we have a former colonel that works with Colossal now and I was asking him because I was curious.
He said it's getting better, right, and that there is a lot more care into that transition. But I think specifically around wanting to start an SDVOSB, 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, because 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 figuring that out. For me, when I made the decision to start, there wasn't anything available, right? Now today there's a lot of these programs like the DAV has of the the SDVOSB 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? There may be some programs I'm not sure about, so I don't want to say that that's not happening, but in the transitioning that I'm hearing happening is we got to be there for them and be able to foster that.
Jimmy Petronas
Well you've been there done that, okay, 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?
Anthony Claussen
Absolutely. With me it was, you know, I when I got to Joint 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? Because I didn't want to take the uniform off, 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 18 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 SDVOSB or veteran-owned small business.
Daniel Javoroski
Yeah, I would add to that. I think that that the programs that are that are there to support transitioning service members into 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 like Mr. Clawson said, that is is 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 going to take their future.
I think that they can um the more you know rotation programs, maybe work with this company for a month and then a different company for a month and then get to see what the different size companies are really dealing with. I think that there's a lot of opportunity to improve there.
Angela Dingle
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, because it can be pretty shocking to come out of the military or come out of federal service like myself and then transition into business.
Oh, thank you. I will be very quick.
You got 15 seconds.
Moshe Schwartz
15 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 OneBrief that I mentioned earlier in the testimony. That person left the military and said, I saw this problem, I can fix it, and started a company to fix it. If we can capture that, we would really benefit.
Roger Williams
Great answer. The gentleman's time is up. Sure. I now recognize Mr. Jack from the great state of Georgia for five minutes.
Brian Jack
Thank you very much, Mr. Chairman. If I could start with Mr. Schwartz, appreciate your testimony today. And I want to talk a little bit about, you know, you had a great graph that you included in your testimony that shows the declining 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.
Moshe Schwartz
So first, thank you for reading the written testimony. Appreciate it. I think there are a lot of challenges. Let me start with 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, okay, 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 because they were right there, right? They're easy. It's a lot harder to find some of these small businesses. I think that's one of the biggest challenges is the visibility or people knowing this is what they have to offer.
Speaker 44
You also included in your testimony the crushing burden of overregulation. Would welcome thoughts to this committee as to how we as a Small Business Committee in a Republican majority can help reduce regulatory costs and burdens to small businesses trying to get involved.
Moshe Schwartz
I'll just review two. The first one is, 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 are the subcontractors. Well, perhaps let's review those requirements of what 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 1992. Do we really need it anymore, or can we amend it to alleviate the burden?
Brian Jack
That's how I feel too. Mr. Jaworski, appreciate your testimony as well. And I would welcome for this committee an answer to 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?
Daniel Javoroski
We're definitely at a disadvantage because the contract space and opportunity space for a company that's our size that doesn't apply for a set-aside that's set aside for socioeconomic basis forces us to compete at a higher level. And in my testimony, I talked about how there is this pool of companies that really punch above their weight. They're large businesses masquerading as small businesses that get to operate based on 8(a) criteria in similar spaces to us. So it's really a 300-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 are pursuing a small business set-aside where we can compete, we often see contracting officers electing to do a direct award to an 8(a) rather than have a full-blown competition.
The rule of two should apply there, but there's still subjectivity that can be applied to the rule of two, which can limit competition.
Brian Jack
Thank you. Next question to Mr. Clawson, since we're talking about certifications, would welcome your opinion and perspective as to how the SDVOSB certification has changed your ability to compete in the defense marketplace.
Anthony Claussen
It's been extremely valuable. It's helped shape the company in every way. We started off just fighting any way that we could, but I think we hit it on two values that helped our growth as they started setting aside for SDVOSB. We started working with the VA more and started getting some work there, and then started working with the Air Force, got a couple prime contracts, were awarded some GWACs that were able to set aside like SEWP and ITES that have set-aside requirements for SDVOSB. And, you know, also the large partners that we work with also have set-aside standards within their large contracts.
You just gotta be out there 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 them and hunt them down through your relationships, but they're out there and we really hope to see more.
Brian Jack
Well, I appreciate y'all's testimony today, and with that, Mr. Chairman, I yield back.
Roger Williams
The gentleman yields back, and I'd like to thank our witnesses today for your testimony and for appearing before us. It's been a great hearing. I hope 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 and much of what we talked about that the ranking member and I were just talking about how much we agree from party to party on small businesses today. So I want to thank you for being here. Without objection, members have five legislative days to submit additional materials and written questions for the witnesses to the chair, which will be forwarded to the witnesses.
I ask the witnesses to please respond promptly if that happens. If there's no further business, without objection, the committee is adjourned. Thank you.
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