Good morning. I welcome our witnesses and guests to the Committee’s second hearing regarding small businesses and the Federal Government’s response to their needs in the aftermath of Hurricanes Katrina and Rita. I thank our Chair, Senator Snowe, for calling this hearing, and I am hopeful that the many administration witnesses invited by the Chair will listen to our concerns and be an advocate within their agencies to implement recommendations we offer today, or find ways to meaningfully address the problems we bring to their attention.

Madam Chair, I think we all recognize that the magnitude of Hurricane Katrina, followed by Rita, created very difficult organizational and staffing challenges for the SBA. And we recognize that in the past week, SBA has made progress in increasing its disaster loan approvals. Nevertheless, even with those challenges and progress, the SBA has exacerbated the problems through mismanagement and unwillingness to listen to what the businesses need, and the assistance offered so far is too slow and unacceptable.

For example, in the most recent report available, dated November 7th, out of more than 28,000 applications received from small businesses, only 840 have been approved. Only about 2,500 small business applications have even been processed. This is after more than two months and increasing the staff from 800 to almost 4,000 employees. Going into this, the SBA had more than $2 billion in loan capacity. Adding together loans to businesses and homeowners, the SBA has approved less than $400 million in loans. Clearly, this is not a resources problem. This is a management problem, mostly to do with implementation of the new data system that in the last hearing we were told was fully capable of handling the demand of these hurricanes. Mr. Barreto testified on September 21st:

“I would like to address head on the misguided media accounts of computer problems in the Office of Disaster Assistance. Nothing could be further from the truth….This system has been in use since December of 2004. All of this is an improvement over our old system, and we have used it successfully already for over 15,000 applications.”

I see no indications that the SBA was ready to fully scrap the old system and rely on the new system, and I still don’t see indications that SBA has in place management to oversee the various components of the disaster loan program in an efficient way.

The Committee sent staff to the region, including Mr. Nigel Stephens of my staff, to see first-hand how the SBA and the other agencies were helping small businesses. Sitting in Fort Worth were stacks of applications waiting to be entered into the new data system, applications that took a week before arriving in Fort Worth and then sit waiting for data entry 10 to 14 days. In Louisiana, no one knew who the contracting specialists were or how to contact them. In follow up meetings, SBA pointed fingers at the IRS and FEMA, and indicated a serious disconnect between headquarters in D.C. and the offices in Louisiana and Fort Worth, out of touch with the gaps at the local level. In fact, SBA’s Washington staff made recommendations that the Fort Worth staff said they didn’t need.

Contracting opportunities for small businesses are equally as challenging. We have all heard the preliminary reports that approximately 90 percent of contracts as of October 3 were awarded to companies outside of the affected area. Today, we will hear from the Army Corps of Engineers and the Department of Homeland Security, the two agencies responsible for the majority of Federal contracts awarded in the region.

There must be a sense of urgency in awarding small businesses contracts because these firms are essential in providing the economic growth necessary for ensuring long-term recovery of the affected area. Small businesses that participate in the federal recovery effort will help to turn over a contracted dollar numerous times in the local economy through worker payroll, purchasing of supplies, and the renting of equipment. In order for this recovery to be truly effective, we must get the region’s small business back to work.

I am concerned, however, that the challenges faced by small businesses in the Gulf region are simply a microcosm of the challenges faced by small businesses throughout the nation that are seeking to participate in Federal contracting. Throughout the Federal government, contracts continue to be bundled without review from the SBA, the accuracy of data reported by the Administration is questionable, and a lack of transparency and accountability by the agencies exists with little leadership from the Administration to correct the problems.

In order for Congress to effectively perform its oversight duties, it is essential that each agency with contracting authority for the relief effort, particularly the Department of Homeland Security and Army Corps of Engineers, provide this committee with a weekly, itemized report of contract actions by the agency.

Releasing an itemized report to Congress on a weekly basis represents a significant step in the right direction towards transparency and accountability in hurricane relief contracting. It will also serve as a guide for those responsible for oversight in their efforts in ensuring that small businesses receive their fair share of relief contracts and contracts throughout the Federal procurement arena.

Finally, the administration must allocate the resources needed to ensure that small businesses are receiving their share of Federal contracts. Given the administration’s poor record on contract bundling and the sheer size of the reconstruction and recovery effort, it is important that every contract be reviewed to ensure small companies in the region are able to participate in the rebuilding effort as prime contractors. Procurement Center Representatives (PCRs) are crucial to assisting small businesses with the Federal procurement process, yet the Administration has repeatedly refused to expand its staff of PCRs to monitor the over 2,000 procurement locations and over $300 billion in Federal government contracts. Currently, there are only four PCRs monitoring and assisting with Katrina-related contracts: 1 assigned to Louisiana, 2 assigned to Mississippi, and 1 assigned to Alabama. This is far too few for number of contracts, subcontracts, and contract dollars being awarded to businesses working to rebuild New Orleans and the rest of the Gulf region. If the Administration is serious about its intent to provide small firms with the greatest opportunity to compete for these contracts, the SBA should also make the extra effort to hire employees to review the contracting process, find qualified small businesses from the Gulf area, and un-bundle multi-million dollar contracts that are out of the reach for most small businesses.

Madam Chairwoman, I look forward to hearing the testimony of the witnesses and look forward to finding answers to the questions of transparency, accountability and allocation of resources that I have presented.