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

1[House Hearing, 119 Congress]2[From the U.S. Government Publishing Office]34                 RESTORING AMERICA'S INDUSTRIAL BASE: THE5                  ROLE OF SMALL BUSINESSES IN NATIONAL6                  SECURITY7=======================================================================89                                HEARING1011                               BEFORE THE1213                      COMMITTEE ON SMALL BUSINESS14                             UNITED STATES15                        HOUSE OF REPRESENTATIVES1617                    ONE HUNDRED NINETEENTH CONGRESS1819                             SECOND SESSION2021                               __________2223                              HEARING HELD24                              JUNE 3, 20262526                               __________2728[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]2930            Small Business Committee Document Number 119-03831             Available via the GPO Website: www.govinfo.gov3233                               __________3435                    U.S. GOVERNMENT PUBLISHING OFFICE3663-917                      WASHINGTON : 202637=======================================================================3839                   HOUSE COMMITTEE ON SMALL BUSINESS4041                    ROGER WILLIAMS, Texas, Chairman42                        PETE STAUBER, Minnesota43                        DAN MEUSER, Pennsylvania44                         BETH VAN DUYNE, Texas45                           JAKE ELLZEY, Texas46                         MARK ALFORD, Missouri47                        BRAD FINSTAD, Minnesota48                          TONY WIED, Wisconsin49                      ROB BRESNAHAN, Pennsylvania50                          BRIAN JACK, Georgia51             KIMBERLYN KING-HINDS, Northern Marina Islands52                         DEREK SCHMIDT, Kansas53                        JIMMY PATRONIS, Florida54                          CLAY FULLER, Georgia55               NYDIA VELAZQUEZ, New York, Ranking Member56                       MORGAN MCGARVEY, Kentucky57                       HILLARY SCHOLTEN, Michigan58                      LAMONICA MCIVER, New Jersey59                        GIL CISNEROS, California60                       KELLY MORRISON, Minnesota61                        GEORGE LATIMER, New York62                         DEREK TRAN, California63                       LATEEFAH SIMON, California64                       JOHNNY OLSZEWSKI, Maryland65                    MAGGIE GOODLANDER, New Hampshire6667                  Sean Dillon, Majority Staff Director68                 Melissa Jung, Minority Staff Director6970                            C O N T E N T S7172                           OPENING STATEMENTS7374                                                                   Page75Hon. Roger Williams..............................................     176Hon. Gil Cisneros................................................     37778                               WITNESSES7980Mr. Moshe Schwartz, Senior Fellow for Acquisition Policy,81  National Defense Industrial Association, Potomac, MD...........     682Mr. Daniel Jaworowski, Chief Operating Officer and President,83  Infinity Systems Engineering LLC, Colorado Springs, CO.........     884Mr. Anthony Closson, Chief Executive Officer and Founder,85  Colossal Contracting, LLC, Annapolis, MD.......................     986Ms. Angela Dingle, President and Chief Executive Officer, Women87  Impacting Public Policy, Washington, DC........................    118889                                APPENDIX9091Prepared Statements:92    Mr. Moshe Schwartz, Senior Fellow for Acquisition Policy,93      National Defense Industrial Association, Potomac, MD.......    3894    Mr. Daniel Jaworowski, Chief Operating Officer and President,95      Infinity Systems Engineering LLC, Colorado Springs, CO.....    4596    Mr. Anthony Closson, Chief Executive Officer and Founder,97      Colossal Contracting, LLC, Annapolis, MD...................    4798    Ms. Angela Dingle, President and Chief Executive Officer,99      Women Impacting Public Policy, Washington, DC..............    56100Questions for the Record:101    None.102Answers for the Record:103    None.104Additional Material for the Record:105    Women Impacting Public Policy (WIPP) Letter..................    61106107 RESTORING AMERICA'S INDUSTRIAL BASE: THE ROLE OF SMALL BUSINESSES IN108                           NATIONAL SECURITY109110                              ----------111112                        WEDNESDAY, JUNE 3, 2026113114                  House of Representatives,115               Committee on Small Business,116                                                    Washington, DC.117    The Committee met, pursuant to call, at 10:05 a.m., in Room1182360, Rayburn House Office Building, Hon. Roger Williams119[chairman of the Committee] presiding.120    Present: Representatives Williams, Van Duyne, Alford, Wied,121Bresnahan, Jack, Patronis, Scholten, Cisneros, Morrison, Tran,122Olszewski, and Goodlander.123    Chairman WILLIAMS. Before we get started, I would like to124recognize Representative Clay Fuller from the great state of125Georgia to lead us in the Pledge of Allegiance and a prayer.126Please stand.127    Mr. FULLER. Dear Heavenly Father, today we give thanks for128the small business owners who are the backbone of our country.129We are grateful for the men and women who work long hours, make130sacrifices, and take risks to provide for their families and131serve their communities. Lord, bless these business owners and132their families; strengthen them during the late nights, early133mornings, and challenging seasons; reward their hard work;134guide their decisions; and help their businesses to continue to135grow and prosper.136    We also ask your blessing on the work of this Committee.137Grant us wisdom, good judgment, and a sprit of service as we138carry out our responsibilities. May we work together with139integrity, purpose, and gratitude for the freedoms and140opportunities we all enjoy in this great nation. May God141continue to bless our community, our country, the United States142of America. In your name we pray. Amen.143    ALL. I pledge allegiance to the Flag of the United States144of America, and to the Republic for which it stands, one145nation, under God, indivisible, with liberty and justice for146all.147    Chairman WILLIAMS. Good morning, everybody. And it is great148to have everybody here today. I now call the Committee on Small149Business to order. Without objection, the Chair is authorized150to declare a recess of the Committee at any time.151    Before we get to the main business of today, I ask152unanimous consent to waive Representative Fuller onto the153Subcommittee on Oversight, Investigations, and Regulations and154the Subcommittee on Innovation, Entrepreneurship, and Work155Force Development. Without objection, so moved.156Congratulations.157    I now recognize myself for my opening statement.158    Welcome to today's hearing titled `` Restoring America's159Industrial Base: The Role of Small Business in National160Security.'' I want to thank our witnesses for joining us today161and for bringing us expertise and experience to the important162discussion.163    Our national security relies on more than weapons164stockpiles. For generations, America's strength has been165defined by both the power of our military and the tenacity of166the American people. It is an honored--it is anchored on the167determination of American entrepreneurs and the belief that in168this country, if you are willing to build something, create169something, and contribute something greater than yourself,170there ought to be a place for you in the American story. And171nowhere is that more evident than in the small businesses that172help shape our defense industrial base.173    Sustaining strong and competitive small businesses'174participation in the defense industrial base is not a choice,175but it is imperative to the long-term national security176interests of the United States. What our history teaches us is177what our adversaries already understand, that the country's178defense and industrial base is increasingly concentrated in a179small handful of large companies, which means it is inherently180fragile.181    Resilience, by definition, requires depth. It requires a182network capable of adapting when disruption occurs and when183carrying the load when part of the system is compromised. A184resilient defense industrial base cannot hinge on a single185point of failure. That is where the Committee's onus lies.186    For small businesses, participation in the defense187industrial base has not always been easy. So too often complex188compliance requirements, limited access to capital, and lawyers189of bureaucracy make it harder for more--for new and emerging190small businesses to compete and contribute. These are the191ongoing challenges we need to continue to address.192    Now more than ever, it is for small--it is time for small193businesses to activate. We are living through a moment of194historic investment in America defense and manufacturing. The195priorities of this Committee, the direction of this Congress,196and the guidance under this administration will point to the197capabilities small businesses are uniquely able to provide. The198door is open for small business.199    None of this happens by accident. The work of this200Committee is foundational. As a Committee, we must ensure that201we are doing everything in our power to make good on our202promises. We are responsible for ensuring American innovation203is neither stifled by unnecessary complexity nor concentrated204solely at the top of the supply chain.205    At the same time, capable firms remain on the outside206looking in. We must ensure that the opportunity is real,207competition is fair, and American small businesses have a208genuine chance to contribute to our economy and national209security. That is the work before us today.210    I want to thank all of you for joining us again today. I211look forward to the conversation ahead.212    I now yield to our Ranking Member from the great state of213California, Mr. Cisneros, for his opening remarks.214    Mr. CISNEROS. Thank you, Mr. Chairman, and thank you to our215witnesses for being here today.216    The Department of Defense obligated $755 billion in217contracts in fiscal year 2024. Just over $97 billion of that,218or 26.3 percent of eligible contract dollars, went to small219defense contractors. These dollars point to the critical role220small businesses play in supporting the DOD mission and the221warfighter. So I was encouraged at first by an official222estimate showing an increase to $98.9 billion going to small223business firms in fiscal year 2025, an increase at DOD of224almost $2 billion. However, the dollar figure alone does not225provide a complete picture of the health of the defense226industrial base.227    We will discuss today two worrying trends behind these228numbers. The first is that the percentage of dollars awarded to229small firms saw a year-over-year decrease to 25.7 percent.230Small business contracts are not growing at the same rate as231overall DOD contracts. The second is an issue I have raised232here and through my work on the House Armed Services Committee233that must continue to be a top priority: the shrinking234industrial base. While small business dollars have gone up,235small business participation has gone down. In fact, the number236of small businesses in the government's ecosystem has almost237halved.238    Over a year ago, Ranking Member Velazquez and I wrote about239the decline of the industrial base in The Hill op-ed. We240highlighted the importance of the SBA's program and contracting241authorities that level the playing field for all small242businesses to enter, compete, and have success in the federal243market.244    Since then, unfortunately, but typical, the245administration's actions have made things worse. As one recent246study summarized, the decline of small business participation247is an existing trend exacerbated by the disproportionate impact248of DOGE contract terminations. It is yet to be seen if the249overhaul of the government's procurement regulations will be250more than a word-cutting exercise and reduce nonvalue-added251requirements for small firms. To date, the results appear to be252uneven.253    While the Rule of Two was retained, it is not secured as254its future depends on a sunset provision. Some processes were255streamlined, but particularly harmful buying practices known to256drive small firms from the market have been bolstered. Further,257contract consolidation and required use of contract vehicles258will put more opportunities out of reach for small businesses,259who we know leave the industrial base as a result.260    Rather than advocate for or assist small business261government contractors, SBA is AWOL. They have gutted the262workforce and diverted limited resources to a phishing263expedition based on unsubstantiated and increasingly unrealized264accusations in one small business program. DOD has also265unfairly targeted all small businesses with a slickly produced,266but factually inaccurate social media video designed to267intimidate small firms, even those who previously competed and268won defense contracts.269    If we are serious about strengthening America's industrial270base and securing our economic future, we should be expanding271opportunities for all small businesses, not undermining them.272This is almost--there is almost universal agreement that the273government's acquisition process has become too cumbersome, too274burdensome, and needs to be simplified. I saw this firsthand275during my time at the Department of Defense.276    CMMC has further upended the degree of difficulty, layering277on new requirements small firms must meet without any guarantee278of a return on their costly investments. Starting and growing a279business is already incredibly difficult. Meeting the unique280requirements to complete--to compete for defense contracts adds281another layer of complexity, especially for small firms without282the resources of corporate giants or the ear of this President.283    I look forward to hearing from our witnesses on what we can284do to revitalize the defense industrial base and to ensure that285as defense budgets continue to climb, the government is286incentivized to leverage the capabilities, solutions,287innovation, and competition that small businesses bring to the288table.289    Thank you very much.290    Chairman WILLIAMS. The gentleman yields back. We will now291move to witness introductions.292    Our first witness today is Mr. Moshe Schwartz. Mr. Schwartz293is a senior fellow for acquisition policy for the National294Defense Industrial Association. And has spent over 15 years295advising Congress on acquisition industrial base issues,296including roles at the Congressional Research Service and GAO.297Mr. Schwartz has testified before Congress and written298extensively on defense acquisitions reform, contract policy,299the Defense Production Act, wartime contracting, and other300related issues. He holds an MBA and M.S. in public policy from301Carnegie Mellon University and a J.D. from Yeshiva University's302Cardozo School of Law. And he also is a baseball guy. There you303go. And we thank you for being here today.304    Our next witness is Mr. Daniel Jaworowski. Mr. Jaworowski305is president and chief operating officer at Infinity Systems306Engineering, a Colorado-based systems engineering and mission307operations company specializing in payload integration, space308operations, and systems sustainment. He is responsible for the309establishing of policies and strategies in fulfilling310Infinity's mission. Mr. Jaworowski has extensive experience in311aerospace and defense with a strong track record in portfolio312management, space system development, and major ground systems313sustainment programs. He holds a B.A. in geography and an M.S.314in management information systems from the University of Mary315Washington, as well as MBA from Pennsylvania State University,316known as Penn State University to many, right? I look forward317to your testimony.318    Our next witness today is Mr. Anthony Closson. Mr. Closson319is the founder and CEO of Colossal Contracting, a Maryland-320based IT and professional services company that provides321technology, communications, and mission support solutions to322government and commercial clients. He is a military veteran and323a former communications specialist deployed in Iraq. During his324final assignment at Joint Base Andrews as an IT project325manager, he laid the foundation for Colossal Contracting.326Thirty percent of Colossal Contracting employees are veterans.327He earned a degree from the University of Georgia and Terry328College of Business. Thank you for your service, and we329appreciate you all being here today.330    I now recognize the Ranking Member, Mr. Cisneros, to331briefly introduce our last witness appearing before us.332    Mr. CISNEROS. Thank you, Mr. Chairman. It is my pleasure to333introduce Ms. Angela Dingle, president and chief executive334officer of Women Impacting Public Policy. W-I-P-P, or WIPP, is335a national nonpartisan organization that advocates on behalf of336women entrepreneurs and serves as the voice for the over 14337million women-owned companies in the U.S. Women Impacting338Public Policy has a proven track record of working directly339with our Committee and others in Congress to shape policies340that create economic opportunities for women-owned small341businesses and ensure procurement inclusion and access to the342federal marketplace.343    Prior to serving as the CEO of WIPP, Angela founded Ex344Nihilo Management, an award-winning technology and management345consultancy that provides governance, risk management, and346cybersecurity. She holds a master's degree in management347information systems and a bachelor's in computer science.348    WIPP has championed key small business government349contracting initiatives, including the Women-Owned Small350Business Program, and has built, led, or joined coalitions to351advocate for small--smart solutions to issues that range from352access to capital and access to technology to family leave and353health and childcare. I just read with interest your piece from3542 weeks ago, `` The Future of Innovation Depends on Whether355Small Businesses Are at the Table.'' I hope my colleagues will356as well, and ask unanimous consent to insert this for the357record.358    Chairman WILLIAMS. So moved.359    Mr. CISNEROS. Thank you, Angela, and to all our witnesses360for being here today.361    Chairman WILLIAMS. The gentleman yields back, and I also362want to thank everybody for being here today.363    And before recognizing the witnesses, I would like to364remind them we got some rules here, rules in Congress, and365remind all of you that your oral testimony is restricted to 5366minutes in length. If you see the light turn red in front of367you, it means your 5 minutes has concluded and you should wrap368up your testimony. And if you keep talking after 5 minutes, you369are going to hear this. That will mean you are done. Okay? And370so forth.371    And also, you may see people coming in and out. There are372other hearings going on today and so you may see other Members373going in and out. It is nothing you said, nothing you did. It374is just trying to cover all the bases.375    So with that, I want to recognize Mr. Schwartz for his 5-376minute opening remarks.377378STATEMENTS OF MR. MOSHE SCHWARTZ, SENIOR FELLOW FOR ACQUISITION379  POLICY, NATIONAL DEFENSE INDUSTRIAL ASSOCIATION; MR. DANIEL380  JAWOROWSKI, CHIEF OPERATING OFFICER AND PRESIDENT, INFINITY381 SYSTEMS ENGINEERING LLC; MR. ANTHONY CLOSSON, CHIEF EXECUTIVE382OFFICER AND FOUNDER, COLOSSAL CONTRACTING, LLC; AND MS. ANGELA383DINGLE, PRESIDENT AND CHIEF EXECUTIVE OFFICER, WOMEN IMPACTING384                         PUBLIC POLICY385386  STATEMENT OF MOSHE SCHWARTZ, SENIOR FELLOW FOR ACQUISITION387        POLICY, NATIONAL DEFENSE INDUSTRIAL ASSOCIATION388389    Mr. SCHWARTZ. Thank you. Chairman Williams, Ranking Member390Cisneros, Members of the Committee, thank you for inviting me391today to testify. The views expressed are my own and not392necessarily those of NDIA.393    The topic for this hearing, the role of small business in394national security, is an important one. Today I would like to395make four points.396    First, small businesses play a critical role in the defense397industrial base. In 1953, President Eisenhower signed the Small398Business Act because he understood the importance of having a399level playing field to give small businesses equal opportunity400to compete for government contracts. General Eisenhower knew401the importance of small business to national security. Small402businesses represent 70 percent of the defense industrial base.403Companies like Onebrief, which supports military operations by404providing AI-powered software to enhance force deployment, and405Aurora Engineering, which provides AI machine learning and406simulation to support NASA missions, are contributing to407mission success. But what is less well known is that small408businesses also play a significant role in subcontracting.409Small businesses make up approximately 50 to 55 percent of the410subcontractor base for defense prime contractors.411    This brings me to my second point. The defense industrial412base is shrinking. The defense industrial base has been413shrinking because fewer companies are willing to work with the414Department of Defense. As a result, the government has less415access to advanced technologies and capabilities that416commercial markets have to offer, less competition, which often417results in increased costs, and a less resilient supply chain.418    Here are some numbers. From fiscal year 2011 to 2020, the419number of small businesses receiving DOD contracts decreased by42043 percent, even as obligations to small businesses increased421by approximately 15 percent. According to a Bloomberg analysis,422in fiscal years 2021 and 2022, the number of small businesses423contracting with DOD decreased an additional 5 percent.424    This decline is occurring precisely when the federal425government increasingly relies on commercial technologies. The426reason for this decline was explained by Secretary of Defense427Hegseth when he said we have been impossible to deal with, a428bad customer who year after year changes our mind on what we429want and what we don't want. We have to fix our own house430first, provide clarity, simplify the system, allow more people431to access it, give that steady demand signal.432    This brings me to my third point. We need to streamline the433acquisition rules and help small businesses find the front434door. There are too many acquisition rules and they are overly435complicated. In a recent poll by NDIA, companies were asked436what do you find most difficult about government processes?437Fifty-six percent cited the burden of the acquisition process438and paperwork, 33 percent cited regulations. Some may argue439that streamlining is code for repealing necessary oversight. On440the contrary, done right, streamlining will increase441accountability by clarifying lines of authority, shortening442timelines, and improving outcomes without undermining443oversight.444    Let me give an example. The Office of the National Cyber445Director reported that current regulations are harming446cybersecurity outcomes and increasing costs through447administrative burdens. Many companies have reported that448complying with the regulations is actually drawing resources449away from actual cybersecurity programs and efforts.450    Finally, my last point, we can be smarter in helping small451businesses. Even though the Department has consistently met its452overall small businesses target, the number of small453businesses, as has been mentioned, working with DOD has454declined. There are other methods that could be just as455impactful or more in helping small businesses. Here are three456proposals.457    One, promote the use of shared classified workspaces. Small458businesses generally do not have the resources to build or459maintain secure compartment information facilities, or SCIFs,460creating a barrier to entry. We could encourage more use of461companies like Nooks, which offers secure, high-end SCIF spaces462for lease. And by the way, Nooks is a small business. Agencies463could also provide access to underutilized government-owned464SCIF space. Such access could help small and other businesses465compete and provide new capabilities to the Department.466    Two, streamline subcontracting regulations. When467regulations placed on prime contractors must be included in468subcontracts, we are actually placing regulations on small469businesses. Congress and the Department could view regulations470to see when the benefits of flowing down requirements are471outweighed by the costs imposed on subcontractors.472    And third, help small businesses submit better SBIR473applications. Companies often do not get meaningful feedback on474SBIR proposals that were not accepted. Better communication475with losing bidders explaining the weaknesses of the offer will476help them do better next time and help small businesses learn477how to improve their bids and help DOD by increasing the478quality of their offers.479    Thank you for the opportunity to share these thoughts. I480look forward to your questions.481    Chairman WILLIAMS. The gentleman yields back. Thank you482very much.483    I now recognize Mr. Jaworowski for his 5-minute opening484remarks.485486  STATEMENT OF DANIEL JAWOROWSKI, PRESIDENT & CHIEF OPERATING487           OFFICER, INFINITY SYSTEMS ENGINEERING LLC488489    Mr. JAWOROWSKI. Chairman Williams, Ranking Member Cisneros,490distinguished Members of the Committee, thank you for the491opportunity to testify before you today. My name is Dan492Jaworowski. I am the president and chief operations officer of493Infinity Systems Engineering in Colorado Springs. We support494the Air Force, the Space Force, intelligence community, and a495variety of major industry primes.496    I have got a 30-year career myself in this business.497Coincidentally, Infinity celebrates our 30th anniversary today.498And I would like to use my most recent experience working in499small business to appeal for you to look out for the500independent small businesses like us that face what can only501really be described as a second Valley of Death.502    Infinity has successfully scaled, yet we find ourselves503trapped in a regulatory blind spot, and we are not alone. As a504small business with fewer than 300 employees and no505socioeconomic designations, we are too large to benefit from506entry-level small business set-aside programs. Therefore, we507are considered a large and forced to compete for full and open508contracts directly against multibillion-dollar defense primes509who possess exponentially more proposal, legal, and overhead510resources. Forcing a growing mid-sized business to jump511straight into the ring with defense giants is the antithesis of512healthy competition. There are countless commercial entities513with valuable capability to bring to the fight who stay away514from the sector for this reason.515    Small private businesses like ours are really left with516three choices when we get to this stage. We can stay in the517fight and try to grow organically, which is what we are518continuing to do. We can make our own investments in M&A and519try to scale inorganically, but that takes capital investment520that we can't handle. And if we take on outside investment, we521start to lose control of our business. And finally, exit the522market via an acquisition.523    In the past 6 years, nearly a dozen privately held defense524firms in Colorado Springs have sold to larger firms and/or525private equity. All are now a part of significantly larger526entities, thereby shrinking the base as we so see.527    I am often asked by my peers and counterparts how I feel528about the recent eight audits taking place in government529services, including defense. In short, I believe that they are530necessary, but, in my experience, most of these firms seemingly531operate within the bounds of the law and with integrity. I do532work with a lot of these firms that operate under the533protections offered by legislation that is geared towards534helping small, disadvantaged firms compete. However, many of535these firms are very far from small, and they certainly are not536disadvantaged.537    While intended to assist developing firms, the 8(a) program538frequently grants immense advantages to massive multi-entity539holding structures and conglomerations. These firms masquerade540as small businesses, yet have shared corporate services and541capital pools that far exceed the reach of an independent and542truly small business. It is firms like ours that become543disadvantaged when accommodation is made where accommodation is544not needed.545    The frequent use of sole source noncompetitive direct546awards allows these firms to essentially name their price to547the government. That has an impact on the labor force in that548local market, and it severely undercuts the small businesses549that have to compete based on price alone.550    The FAR overhaul designed to bring flexibility and speed is551both necessary and overdue. However, these changes are only as552good as the acquisition professionals executing them. Today,553contracting shops are paralyzed by a weaponized protest culture554throughout the industry. The fear of frivolous protest traps555contracting offices in endless acquisition strategy design and556source selection morass. The result is delayed acquisition557schedules, sometimes for months or even years. For a small558business that has already sunk hundreds of thousands of dollars559into a pursuit, these delays drain vital capital that we need560to fund independent R&D and to sustain our talent for future561pursuits. In the end, the government feels this in increased562rate structures.563    From a legislative perspective, this Committee can do a lot564to address these concerns, and I am hopeful to see some of565these things materialize. Number one, legislate directly to566direct an expansion of NAICS categories and size standards to567include the middle tier of companies, set-asides for larger568than X, but smaller than Y companies. Legislate to limit the569accommodations of the 8(a) program to truly disadvantaged firms570and prohibit holding companies of any kind from participation.571    Legislate accountability metrics that hold government572acquisition timelines to the same standard as contractor573schedules. It should be no more acceptable for the government574to miss deadlines than it is for the contractor to miss them.575    And finally, introduce clear statutory thresholds and576financial penalties to curb frivolous bid protests designed577purely for revenue extension or to force a failed competition.578This will liberate contracting officers from a culture of fear.579    With that, I thank you, and I look forward to answering580your questions.581    Chairman WILLIAMS. The gentleman yields back. Thank you.582    And I now recognize Mr. Closson for his 5-minute opening583remarks.584585    STATEMENT OF ANTHONY CLOSSON, FOUNDER & CHIEF EXECUTIVE586               OFFICER, COLOSSAL CONTRACTING LLC587588    Mr. CLOSSON. Chairman Williams, Congressman Cisneros, and589Members of the Committee, thank you for the opportunity to590testify today. My name is Anthony Closson, and I am the founder591and CEO of Colossal Contracting, a service-disabled veteran-592owned small business IT value-added reseller and integrator. As593a VAR, we deliver comprehensive IT solutions combining594industry-leading products, engineering expertise, integration595services, and lifecycle support to maintain mission-critical596technology environments. Thank you for holding this hearing on597the important role small businesses play in strengthening598America's industrial base and supporting national security.599    My journey to entrepreneurship began in the United States600Air Force as a communications specialist, affectionately known601as a wire dog. At my duty stations in Japan, Joint Base602Andrews, deployments to Kuwait and Iraq, I saw firsthand how603government agencies depend on both public servants and private604sector partners to accomplish mission-critical missions. In6052009, I founded Colossal Contracting and believe service to606this country does not end when we take off the uniform. We607build our company on the values defined our military service:608integrity, accountability, teamwork, mission focus. Today, as609Colossal, we support mission-critical programs across the610federal government while creating opportunities for veterans,611military spouses, and other highly skilled professionals who612want to serve their nation.613    My testimony today focuses on the role of the IT VAR in the614industrial base. Companies like ours serve as the bridge615between technology manufacturers and government agencies,616helping evaluate, integrate, secure, and deploy mission-617critical technology solutions. As the federal government618pursues modernization initiatives like the GSA OneGov Strategy,619we support these efforts, leverage buying power, and deliver620better value to taxpayers.621    However, those efforts must continue to preserve meaningful622opportunities for small businesses. A strong supplier base623depends on both innovation from the manufacturer and execution624from small business like Colossal. There are three issues I625would like to highlight today.626    First, the federal government's industry classification627system has not kept pace with modern technology marketplace.628Today's technology procurements often combine hardware,629software, cloud, AI, cybersecurity, technical support into one630single requirement, yet there is no dedicated classification631for these buys. Establishing a separate IT VAR NAICS code would632provide greater clarity on how technology solutions are633delivered to government customers.634    Second, the current 150-employee SBA size standard no635longer reflects the realities of today's technology sectors.636Reaching 151 employees does not mean a company is a large637business, yet it forces those companies to compete against638multinational corporations that employ tens of thousands of639people. Increasing the threshold to at least 300 would allow640successful small businesses to continue to grow and compete641while strengthening the federal supplier base.642    Third, I strongly support robust cybersecurity643requirements, including the Cybersecurity Maturity Model644Certification program. At Colossal, achieving CMMC645certification required substantial investments in technology,646compliance, and personnel. As implementation continues,647cybersecurity requirements should remain risk-based and648scalable so that small businesses can continue to contribute to649the industrial base while meeting the government's security650objectives.651    Before I close, I would like to thank the Committee for its652leadership in passing H.R. 2804 to codify the Rule of Two. This653legislation helps preserve small businesses to compete for654federal work and strengthen the industrial base by ensuring655continuing to consider qualified small businesses as your first656solution. Small businesses are innovators. We are job creators.657We are veteran advocates, problem solvers, and mission658partners. When small businesses succeed, our government gains659competition, resilience, and access to the expertise needed to660meet the ever-evolving national security challenges.661    Thank you for this opportunity to testify today and for662your continued support on America's small businesses and the663veteran community, and I look forward to any and all questions.664Thank you.665    Chairman WILLIAMS. The gentleman yields back.666    I now recognize Ms. Dingle for her 5-minute opening667remarks.668669    STATEMENT OF ANGELA DINGLE, PRESIDENT & CHIEF EXECUTIVE670             OFFICER, WOMEN IMPACTING PUBLIC POLICY671672    Ms. DINGLE. Good morning, Chairman Williams, Ranking Member673Cisneros, and Members of the Committee. My name is Angela674Dingle. I am president and CEO of Women Impacting Public675Policy, a national nonpartisan organization advocating on676behalf of women-owned businesses. I am also a small business677owner with more than 20 years of experience in the federal678marketplace, helping companies navigate it successfully. Thank679you for the opportunity to testify.680    This hearing asks the right questions. Small businesses are681not bystanders to America's industrial base. They are its682foundation. A procurement system built on a broad base of small683firms is more competitive, more resilient, and harder for our684adversaries to disrupt. A narrow one built up around a smaller685pool of larger contractors is a national security risk. And yet686that base is shrinking. In fiscal year 2024, agencies awarded a687record $183 billion in prime contracts to small businesses, the688highest total ever. But the number of firms doing that work has689been cut nearly in half from roughly 121,000 in 2009 to about69063,000 in 2022. Record dollars are flowing to fewer and fewer691companies. As firms leave, agencies grow more dependent on a692smaller group of large incumbents, reducing competition,693raising costs, and weakening the government's own leverage. It694is the opposite of a strong industrial base.695    What is driving small businesses out? In a word,696unpredictability. As a business owner, I factor risk into every697decision: how I spend my time, how I price, whether to pursue698an opportunity at all. I need real confidence that I have a699chance at winning to justify the investment. When contracts are700awarded and then abruptly canceled, when policy shifts without701warning, that confidence erodes and small firms simply walk702away. Stability and predictability are not luxuries. They are703conditions that keep us in the market and investing in the704capacity this country needs.705    This is why the Rule of Two matters so much. It has long706been a bedrock protection for small businesses, and any threat707to it, even a potential one, raises risk and accelerates708consolidation. Congress should retain and codify the Rule of709Two as a true shall requirement applied consistently across710contract vehicles. WIPP is proud to support the Protecting711Small Business Competition Act of 2025, which does just that.712We commend the Committee for its unanimous approval of this713bill and hope that the full House will follow your lead.714    I now want to talk about a program that is near to our715mission at WIPP, the Women-Owned Small Business, or WOSB,716Program. The WOSB Program and similar programs are not717handouts, nor are they charity. They exist to level a field718that is not yet level and to give the government the widest719possible pool of qualified competitors, and they work. In720fiscal year 2024, women-owned small businesses won $31.7721billion in federal contracts, and the certified WOSB Program722grew to more than 13,400 firms. Women-owned firms are winning723contracts and delivering, but only when they get a fair shot to724compete. That is good business and good government.725    A few practical points. Subcontracting and the chance to726grow into a prime is how small firms become the durable727suppliers the industrial base relies on. Both deserve728protection. And the offices meant to champion us inside729agencies, the OSDBUs, are understaffed or vacant.730    As the administration reexamines federal programs, the wide731reach of those reviews has inadvertently captured offices and732resources that are vital to small firms. Even though supporting733small business is squarely a competition and capacity issue,734not a peripheral one, a program is only as strong as the people735charged with making it work. Small businesses are not just736beneficiaries of federal contracts. We are essential partners737in this nation's security and prosperity. We bring the738innovation, agility, and cost savings that lead the government739to meet its mission quickly and effectively.740    Protect and expand our role, and you strengthen the741industrial base. But if we keep facing instability and a742shrinking chance to compete, you should not be surprised when743fewer of us remain.744    Thank you, and I look forward to answering any of your745questions.746    Chairman WILLIAMS. The gentlelady yields back. Thank you.747    We will now move to the Member questions under the 5-minute748rule. I recognize myself for 5 minutes.749    Mr. Schwartz, the number of contractors supporting the750defense industrial base has shrunk by roughly 40 percent since7512010. Rising regulatory costs were cited as a major reason752small businesses are leaving these federal contracting753programs. For small firms, every dollar spent on compliance is754a dollar not spent on innovation or production or workforce or755even cybersecurity. So the question will be, how has the Trump756administration's revolutionary FAR overhaul addressed that757challenge?758    Mr. SCHWARTZ. Thank you. So, in a bumper sticker, I would759say one of the ways to improve acquisition generally, and for760small businesses as well, is fewer regulations, more761consistently enforced by an empowered workforce. And this762effort to rewrite the FAR and then the DFAR, the Defense763Federal Acquisition Regulation, strikes at two of those. By764deregulating, like we have talked about, like we have all765talked about, it gives small businesses more opportunity to766focus on the business of what they are delivering instead of767non-added valuate, non-added regulation and compliance. That is768one.769    But the second thing, which might be the even more770important impact that people don't necessarily think about, is771the message we are sending to the workforce. The message we are772sending is less about compliance and more about doing the right773thing and empowering them. And I am hopeful that this rewrite774is really going to send that message because unless we deal775with the workforce, almost everything else is playing around776the margins.777    Chairman WILLIAMS. All right. Thank you.778    Mr. Jaworowski, as the national security landscape becomes779increasingly shaped by cutting-edge software and artificial780intelligence, the defense industrial base is under pressure to781modernize faster than traditional acquisition process was782designed to support. So the question is, from your position783leading Infinity Systems Engineering, how do you see the role784of a small business evolving over the next decade, and what785structural changes are most necessary for the defense786industrial base to fully leverage main street's capabilities?787    Mr. JAWOROWSKI. Thank you for the question, Mr. Chairman. I788think that the recent extension of the Small Business789Innovative Research Program is going to go a long way to help790satisfy some of that gap that exists, particularly when it791comes to AI. AI is something--that is an area that we operate.792We are active in the SBIR Program. I would love to see it793become permanent, not just a 5-year extension so that we don't794have another lapse like we did recently. But that program is795very, very encouraging for new entrants to this market to come796in and participate. There are a lot of companies out there that797don't participate in the defense industrial base that can798absolutely bring capability that is well needed, and that799program is really the way to do it.800    Chairman WILLIAMS. Okay. Thank you.801    In the limited time I got, Mr. Closson, Colossal802Contracting's identity as a veteran-owned business speaks to803something larger happening across the federal landscape, and it804represents the growing recognition that smaller companies can805often move faster and more effectively, stay closer to the806mission needs of government customers. So my question is, in an807environment where agencies are looking for partners who are808even--who can rapidly integrate emerging technologies and adapt809to changing requirements, how does Colossal Contracting810leverage its veteran-led mindset and small business agility as811a competitive advantage?812    Mr. CLOSSON. Thank you, sir. Being agile, right? Being813aggressive. I mean, that is part of who we are and what we are814trained to be as veterans. That is why I think it is great to815see so many veterans going into the entrepreneurial, you know,816mindset and to becoming service-disabled veteran-owned small817businesses. That value that we are trained with and the ethics818that we have and the drive from being military have delivered819absolute value.820    And especially in supporting the defense industrial bases,821you know, a lot of us veterans are dealing with the missions822that we dealt with when we served. So we are able to see what823the issues are, understand their mission, and do what we can to824elevate it. And because we are not massive, we don't have these825huge layers, right, we are dealing directly with the program,826with people that understand the mission. And what we are doing827is we are taking all the different types of technologies as an828IT VAR and as a master aggregator and bringing those together829to answer the mail and to elevate their solution, so--and to830elevate their mission.831    So, you know, to answer, sir, is who we were trained to be832is delivering absolute max value. And I believe it will833continue to do that.834    Chairman WILLIAMS. All right, thank you. The gentleman835yields back.836    I now recognize the Ranking Member for 5 minutes of837questions.838    Mr. CISNEROS. Thank you, Mr. Chairman.839    Ms. Dingle, with the administration's ongoing attack on the8408(a) and legislation to eliminate the women-owned small841business programs pending, can you reiterate for the Committee842the value of the SBA's programs not only for small businesses,843but for the government and the industrial base?844    Ms. DINGLE. Thank you, Ranking Member. The Women-Owned845Small Business Program and the SBA programs like the 8(a)846Program--the 8(a) in particular is a business development847program, and the Women-Owned Small Business Program--they848create a level playing field. They are not handouts.849    For every contract that I have ever won, I had to compete850for those contracts, and so do the other businesses. When, as851my colleague here mentioned in his comments, when we have to852compete against multibillion-dollar firms who have existed for853hundreds of years, it is more costly. It creates an854unpredictable environment that we are not able to determine855whether or not we should invest the dollars that are necessary.856And it makes it really hard for business owners to be able to857grow.858    One contract award in one of those programs can be a game-859changer. It can completely change the trajectory of the company860because we simply need a foot in the door, and these programs861create those opportunities for you to get a foot in the door.862    Mr. CISNEROS. Yeah. You know, a company like General863Dynamics, right, did not start out as a big corporation. It864started out with kind of doing a small company doing a contract865for NASA, and, and we need to have those game-changers out866there.867    But halfway through this fiscal year, Ms. Dingle, documents868circulated online showing SBA changed their scorecard criteria869and lowered each agency's spending targets. What will be the870impact of SBA telling agencies they should spend less,871potentially $12 billion less on small business?872    Ms. DINGLE. I think it just flies in the face of what this873Committee and this conversation that we are having. If we874continue to say that small businesses are the engine of the875U.S. economy, then we have to create an opportunity for those876small businesses to compete.877    One of my other colleagues mentioned the burden that is on878the contracting officers. Some of these programs assist them in879getting their work done. And sometimes they just need an easy880button. They will take the least path of resistance. And so if881you say to an agency, you only have to spend $12 billion less882than you did, they will simply do that and small businesses883will be cut out. Ultimately, for the government, that means884less innovation. It means less competition, and it means885additional cost because we believe, and I am certain my886colleagues would agree with me, that small businesses can do it887cheaper and faster and with more flexibility.888    Mr. CISNEROS. Thank you very much for that answer.889    Mr. Closson, the FAR rewrite removes the justification and890approval requirements for direct awards when agencies utilize891the Service-Disabled Veteran-Owned Small Businesses or other892small business programs. Will these changes make it easier to893provide contracting opportunities to serve disabled veteran-894owned businesses?895    Mr. CLOSSON. Thank you, sir. I believe so. I believe896removing the J&A requirements and getting contracting officers897also comfortable with doing sole sources. The sole source has898been around for a while for the SDVOSBs, but not many people899use it. Contracting officers see it as difficult. They don't900want to have to justify things. So we are hoping that that901mixed with the Rule of Two is really going to open up some902things and be able to showcase the service-disabled veteran-903owned small businesses out there and be able to provide that904max value.905    So to answer, sir, absolutely, I think that it will,906hopefully, open up some more solid SDVOSBs to doing sole source907work, and that mixed with the Rule of Two, it should open908things up.909    Mr. CISNEROS. Since you mentioned the Rule of Two, let me910ask you this. Can you quickly address what a sunset of the Rule911of Two would mean for small business participation in the912industrial base?913    Mr. CLOSSON. It would hurt. If that went away and914contracting officers and program people were not evaluating the915value of small business, I think it would impact us greatly. I916mean, we need the Rule of Two. We need there to be that first917look, especially, hey, there is the place for the systems918integrator where they are working on massive programs that919protect this nation, and I am good with that. And we work with920a lot of them. But there is a lot of amazing opportunities for921the agility and the expertise that small businesses bring, and922we need that Rule of Two.923    Mr. CISNEROS. All right. Ms. Dingle, since you mentioned924the Rule of Two, in our last 30 seconds here, can you answer925that same question. What would it mean if this sunsetted?926    Ms. DINGLE. I agree. I mean, it would just be disastrous927for small businesses. That Rule of Two helps me in my decision-928making as a business owner when I am evaluating whether or not929I am going to compete on an opportunity. The Rule of Two makes930it something that is viable for me to consider for competition.931And the predictability of knowing what is going to happen in932this environment is what makes me decide whether or not I am933going to continue to do business in the federal marketplace.934    Mr. CISNEROS. All right. Well, thank you for your935testimony, and I yield back.936    Chairman WILLIAMS. The gentleman yields back.937    I now recognize Mr. Alford from the great state of Missouri938for 5 minutes.939    Mr. ALFORD. Well, thank you, Mr. Chair.940    I am also on the Appropriations Committee, and we have two941markups across the hall, so I am kind of back and forth. But I942did not get to listen to your testimony, but I did read it, and943I am high on the end there. I am excited that you are here944today so thanks for coming here.945    When most people think about our national defense, they946think about large defense contractors, but behind every major947weapon system, aircraft, and military platform is a network of948small businesses providing innovative technology, specialized949manufacturing, and critical supply chain support. Small950businesses are essential to maintaining America's technological951edge, and they are often the first to deploy emerging952capabilities in areas like artificial intelligence,953cybersecurity, advanced manufacturing, and electronic warfare,954and they also provide the competition and innovation necessary955to make sure that our military has access to the best956capabilities available.957    However, despite their importance, the number of small958businesses participating in federal contracting has declined959significantly, raising concerns about consolidation within the960defense industrial base and long-term resilience. And as we961face increasing competition from adversaries such as China, it962is critical that we expand opportunities for innovative963American companies to enter and succeed in the defense964marketplace.965    Today's hearing provides an opportunity to better966understand those challenges and identify ways Congress can967strengthen small business participation in our defense968industrial base. I represent a great base in the DOD family,969Fort Leonard Wood. We also have Whiteman Air Force Base, but we970have exciting things going on. We have a technology park, 10971square miles on the base in Fort Leonard Wood in the972southeastern part of our district, where we are trying to973attract more small defense capabilities there.974    So Mr. Jaworowski, did I pronounce that correct?975    Mr. JAWOROWSKI. Very close.976    Mr. ALFORD. All right, very close. Jaworowski, better? All977right.978    Mr. JAWOROWSKI. Better.979    Mr. ALFORD. Your business started out contracting with DOD980and then won an SBIR award. What led you and your company to981pursue that award after receiving multiple defense contracts?982    Mr. JAWOROWSKI. Thank you for your question, sir. We--you983know, you hit the nail on the head at the beginning of your984statement and question there. You know, Infinity has been985around for 30 years, but we were founded on subcontracts with986the large primes. So some of those large primes today are still987some of our biggest customers. We are primarily a services988company providing engineering services to those primes and to989DOW on the satellite operations front.990    About 5 years ago, we made the decision that we were991seeking out some higher margin work. We didn't really want to992leave DOD and go into the commercial space, and we saw SBIR as993an opportunity to bring some ideas and innovations to the table994that we saw we saw as gaps with some of the large primes that995were probably not meaty enough for them to go after themselves,996but they were difference-making enough for us that we were able997to innovate and capitalize on that program, and it has been a998game-changer for us.999    Mr. ALFORD. Mr. Schwartz, as you know, Secretary Hegseth1000proposed a $1.5 trillion defense budget for fiscal year. We are1001going to be taking up the defense appropriations in the coming1002weeks right across the hall. How can Congress make sure that1003small businesses are positioned to compete for these dollars?1004    Mr. SCHWARTZ. That is a great question. I think there are a1005lot of examples. There are a lot of things that Congress can do1006to help small businesses have a level playing field, and I will1007just reiterate two of them.1008    One is when a company loses an SBIR, right, they don't1009necessarily get the feedback that would help them do a better1010bid next time, right? Now, this actually, because GAO bid1011protests had been mentioned, this was a problem with bid1012protests where companies didn't know why they were losing bid1013protests. So Congress actually legislated and said, DOD, you1014will do enhanced debriefings, and they did. And companies1015thought that was very helpful. And in fact, my understanding is1016the data said that bid protests decreased because companies1017understood. That is one thing that Congress could do. They1018could say you shall give better debriefings for SBIRs, you1019know, so companies know how to compete better.1020    And another one very quickly is shared SCIF space.1021Companies don't always have the investment if they are small1022businesses to invest in that, which means they can't compete1023for the bid----1024    Mr. ALFORD. Right.1025    Mr. SCHWARTZ.--and then they can't perform. Excess SCIF1026space in GSA, for example, is a great way, like, for a pay-for-1027fee like a WeWorks----1028    Mr. ALFORD. Right.1029    Mr. SCHWARTZ.--is another opportunity.1030    Mr. ALFORD. Well, two very innovative ideas. I think we had1031similar legislation with other government contracts that passed1032through this Committee and the full House, I believe, that1033required the government to give explanations to small1034businesses of why they did not secure a contract. And I think1035maybe this would be good to look at this in this case and also1036the shared SCIF space.1037    Great ideas. We will get to work on that. I yield back.1038Thank you.1039    Chairman WILLIAMS. The gentleman yields back.1040    I now recognize Ms. Goodlander from the great state of New1041Hampshire for 5 minutes.1042    Ms. GOODLANDER. Thank you, Mr. Chairman, and thank you to1043our witnesses for being here today for this really important1044hearing.1045    I want to start with two numbers that have come up in this1046hearing: 51 to 5. Fifty-one to five. That is how many prime1047defense contractors we had in this country in 1993, 51. Just 71048years later, we were down to 5. And this was driven by1049consolidation that the Pentagon itself blessed. You know, fast1050forward to today, we are seeing this same movie once again,1051even more consolidation.1052    And Mr. Jaworowski, I want to be sure to emphasize this1053very powerful portion of your written testimony where you1054described the second Valley of Death, this frozen middle where1055small businesses like yours are trapped with three really1056challenging options. The first, and I applaud you for pursuing1057it, to continue to try to operate in this environment where the1058deck is stacked against you, the rules are not written for you.1059And I want to work with you and each one of our witnesses who1060are here today to help us write better rules of the road.1061    When I think of President Eisenhower, General Eisenhower,1062Mr. Schwartz, you invoked him, I think he would be very1063disappointed in the progress that we have made since 1953. We1064have reversed course from where we should be. And I came to1065Congress having worked in the Antitrust Division at the Justice1066Department ,where we worked really hard to dust off the federal1067code to give and empower people across our administration,1068including in the Pentagon, the confidence that they can enforce1069the rules that we have on the books. And I am here now and I1070want to write better rules of the road that are going to help1071businesses trapped in the second Valley of Death.1072    The three options you have in front of you, can you just1073say a bit more about the two other bad options that are1074available to a small business like yours, sir, in the second1075Valley of Death?1076    Mr. JAWOROWSKI. Sure, I am happy to. You know, really1077selling out is what we are seeing most prevalent. Most1078companies are getting to our size and they find that this1079competitive landscape has changed and it gets frustrating and1080it is the easy answer is to just take the exit.1081    Ms. GOODLANDER. Sell to a prime.1082    Mr. JAWOROWSKI. Sell to a prime or sell to private equity.1083Private equity is what we see more commonly and they are1084consolidating small businesses like ours, ultimately for a sale1085of that entity to probably to a prime in a more strategic1086transaction.1087    The second road is really to say, we are going to go try to1088acquire another company ourselves. And that is capital1089intensive.1090    Ms. GOODLANDER. Yeah.1091    Mr. JAWOROWSKI. And that is a really, really challenging1092decision to make for an independent, privately held company.1093And if--the capital is just not there to do something like1094that. So we would have to take on an outside investment, and1095when we do that, you are probably going to lose some control1096over your company, and we are not interested in doing that1097either.1098    Ms. GOODLANDER. Well, I appreciate that.1099    Mr. Closson, can you speak to--I gather you are also riding1100through the second Valley of Death.1101    Mr. CLOSSON. Yes, I am. You know, we are on that, in our1102world as an IT VAR, as soon as you go over 150, you are now1103competing against systems integrators and very large companies.1104If you walk into Colossal's headquarters today, you will hear1105music playing, people, you know, enjoying life, but it has a1106small business feel, right? It is a culture that we created1107that we will lose, right? If we can't compete, because as soon1108as we go over 151, without things like the gentleman was saying1109here, losing who you are, selling out to private equity, you1110know, making a massive investment that you don't have, right,1111you are going to lose who you are.1112    I said the other day to our group that I wish and I hope1113and I will work as hard as I can that Colossal becomes a legacy1114company and that we can stay around for a long time. But like I1115mentioned, I--my fear is I am constantly battling this under1116150. And because we are an IT VAR, people will see that we are1117selling a lot of equipment with our services and look at us and1118say, hey, well, you are a large business, right?1119    Ms. GOODLANDER. Right.1120    Mr. CLOSSON. Even though we are 105 people. So we are1121constantly in that battle and it is something that we have to1122fight for.1123    Ms. GOODLANDER. Well, I really look forward to, you know,1124as you point out, determining whether a business qualifies as1125small sounds like an easy exercise. We clearly have not gotten1126it right under federal law, so I really look forward to working1127with you on this important legislative measure that we should1128correct as soon as we possibly can.1129    What you just described as footnote 18, as soon as we are1130talking about footnotes and manuals that aren't in the U.S.1131Code, I think we haven't given you the clarity that you need.1132So I appreciate that.1133    I--well, I guess I have run out of time, but I really1134appreciate our witnesses being here today. And with that, I1135yield back.1136    Chairman WILLIAMS. The gentlelady yields back.1137    I now recognize Mr. Wied from the great state of Wisconsin1138for 5 minutes.1139    Mr. WIED. Thank you, Mr. Chairman. Thank you to all of our1140witnesses for being here today.1141    Main Street America is not only the backbone of the United1142States economy, but also of our defense industrial base as1143contractors and subcontractors. As the new Chairman of the1144Subcommittee on Contracting and Infrastructure, I am committed1145to ensuring that small businesses are given fair opportunities1146to compete for government contracts. Bills like Protecting1147Small Business Competition Act, which passed out of this1148Committee 2 weeks ago, go a long way to ensuring our nation's1149small businesses are afforded those opportunities. I look1150forward to discussing the state of government contracting for1151small businesses, including the Department of War's newly1152implemented Cybersecurity Maturity Model Certification.1153    Mr. Jaworowski, the CMMC, which is the Cybersecurity1154Maturity Model Certification, is a tiered certification process1155that is based off of sensitive data that contractors have1156access to. I have heard from some of the small business owners1157in our area that the cost to comply with the Department of1158War's new cybersecurity requirements can be upwards of1159$100,000. What did this process look like for you?1160    Mr. JAWOROWSKI. Thank you for your question. I would, I1161would say upwards of several hundred thousand dollars is1162probably the more likely answer. That is the--that is what we1163have seen.1164    For us, we were pretty fortunate. We had made some1165decisions early on about 5 years ago that once the first drafts1166of CMMC compliance were coming out, that we were going to lean1167in and start to do that work. So we started to do that work1168with existing IT infrastructure and existing IT personnel. We1169had to make investments along the way in order to be compliant,1170but we were able to limit the overall cost of that, but it took11715 years to be ready.1172    So if we were to fast forward to today, if I were starting1173that process all over again, I would have to hire a staff of1174several individuals to come in and help us be compliant, and if1175I was trying to do it inside of a year, it would definitely1176cost us several hundred thousand dollars.1177    Mr. WIED. Do you think that there are issues with1178overclassification?1179    Mr. JAWOROWSKI. Absolutely. Absolutely. There are issues1180with overclassification. And to the degree that CMMC is geared1181towards managing controlled unclassified information, what we1182are seeing now is anything that is unclassified is now being1183called CUI for the sake of CMMC. So it is really when it comes1184to outside entities trying to add to the defense industrial1185base, all we have really done is create another barrier to1186entry.1187    Mr. WIED. Thank you.1188    Mr. Closson, while large contractors have an easier time1189absorbing the costs associated with CMMC compliance, small1190contractors required to meet the same standards, right, with, I1191mean, a fraction of the resources. So what has achieving CMMC1192compliance looked like for you in your business?1193    Mr. CLOSSON. It was extremely difficult. But we understand1194the value. We clearly understand the value of it. But we have,1195you know, we have had things like ISO certifications and CMMI,1196because we do have a lot of work in the defense space. That1197helped us prepare for it. But we had dedicated resources. We1198had, you know, auditors that you have to pay for, we have pre-1199auditors that you have to pay for. We understand the value of1200it and I truly do.1201    My concern isn't for just Colossal, it is for the when1202Colossal was 10 people. Like, I don't know how that would be1203done. Again, I understand the importance and I stomp that1204completely. But the reality is, is when I was going through1205this, it made me feel, man, when I was 10 people, I would have1206been able to do this. So we would luckily have a great team and1207great partners. So we were able to get it done, but it1208definitely was a big lift.1209    Mr. WIED. Well, thank you for serving in the Air Force. And1210thank you for all your efforts in helping those that are1211disabled, disabled veterans. I know that is very important and1212near and dear to your hearts.1213    I want to talk a little bit about the--what is--the1214acronyms in the government are great, SDVOSB Program that, of1215course, was designed to ensure that service-disabled veteran-1216owned small businesses have a meaningful opportunity to compete1217for federal contractors. In your experience, how has that1218certification changed your ability to compete in the defense1219marketplace as a small business?1220    Mr. CLOSSON. It has been amazing. Number one, it is a very1221proud designation that I have been honored to have and that the1222SBA is blessed with creating, but now holding the1223certification. But being able to set things aside has not only1224helped Colossal, but our entire environment.1225    I am going to the DAV and speaking to entrepreneurs, and1226they are wanting to start businesses because of this program.1227To see a room of 50 disabled veterans now with the motivation1228to do it because there is proven success, like a Colossal, is1229one of the biggest gifts that I think that I can give the1230veteran community. So for Colossal, it has been an amazing1231thing. Now hopefully getting the Rule of Two to dive in a1232little more and now open up the J&As for more sole sources. I1233hope we attract more people in, but it has been a blessing.1234    Mr. WIED. All right, thank you. I yield back.1235    Chairman WILLIAMS. The gentleman yields back.1236    I now recognize Dr. Morrison from the great state of1237Minnesota for 5 minutes.1238    Ms. MORRISON. Thank you very much, Chairman Williams, for1239holding this hearing, and thank you to our witnesses for being1240here today.1241    In an era of rapid technological disruption, the agility1242and speed of small businesses are exactly what we need to1243maintain our military advantage. However, we face an urgent1244reality. Small business participation in the defense industrial1245base has steadily stagnated, presenting a serious risk to our1246national security. To reverse this trend, we have to look1247closely at where the barriers are highest and where regional1248solutions are succeeding.1249    I am proud to say that my home state of Minnesota is1250combating this challenge head-on, and there are small number1251of--there are a number of small businesses doing phenomenal1252work in the defense ecosystem. One small business based in my1253district, Operative X, is working on the cutting edge of combat1254medicine. And is developing a sophisticated deployment system1255to help triage medical decisions on the battlefield. Using1256advanced AI-based diagnostics, this technology aims to extend1257the capabilities of military hospitals into the field,1258providing combat medics with the information they need to make1259quick, informed decisions that get wounded warfighters the care1260they need as quickly as possible. As a physician myself and the1261wife of an Army combat veteran, I am proud that this great work1262is happening in my backyard.1263    Competition is essential for innovation, and it is critical1264that small businesses know how to effectively compete and know1265what resources are available to them across the federal1266government. Aligning these resources is essential to reducing1267barriers for small businesses with the potential to transition1268dual-use capabilities for our urgent national security needs.1269    Ms. Dingle, how can federal workforce and education1270programs better align with the needs of small businesses1271supporting the defense industrial base?1272    Ms. DINGLE. Thank you for the question. I really think it1273is important to have resources that are available to assist1274small businesses with technical assistance and access to1275training and education that will allow them to take advantage1276of new technologies such as AI. We have worked with our1277partners and we understand how important AI is to the growth of1278small businesses, but decisions about the affordability of1279those technologies, the availability of those technologies, and1280how they might be available, access to them, those1281conversations are happening without those small businesses. And1282it is the small businesses that bring that innovation to the1283defense industrial base.1284    So ensuring that small businesses are involved in those1285conversations, that the pricing and access to those1286technologies are available to small businesses because we1287simply can't afford to buy into those technologies and create1288new products and services at the price point that exists right1289now.1290    Ms. MORRISON. Thank you for that answer. Another one for1291you. In fiscal year 2024, fewer small businesses received1292government contracts than the year before, and the women-owned1293small businesses receiving contracts decreased by an even1294larger percentage. An SBA report found that women-owned small1295businesses accounted for a quarter of the total small business1296decline in 1 year alone. What factors contribute to more women-1297owned firms leaving the industrial base?1298    Ms. DINGLE. There are a number of factors that contribute.1299My colleague mentioned the difficulty in getting contracting1300officers to understand the program and how to use the program,1301so more education being available to them. And with a lot of1302the changes that have happened with the federal workforce, then1303we are starting over, having conversations about how you might1304be able to leverage that program.1305    There are misunderstandings about the program that, you1306know, it might be some form of handout as opposed to a way to1307increase competition. And then the complexity of complying and1308competing in the federal marketplace just continues to get more1309and more difficult. And so if I have to evaluate the ability to1310compete on a program against a large company, that may cause me1311not to want to compete.1312    Some of the DOGE changes that we have seen have just1313completely wiped out business owners. I received a phone call1314very early on last year, as soon as one of the executive orders1315were passed, and one of the business owners--I have received1316many, but this one very early on in January essentially said, I1317will be out of business by May if these things move forward. So1318I think that Congress can really help us by not just saying we1319want to, you know, modernize this process or we want to1320revitalize something, but hearing the voices of small business1321to understand what that looks like.1322    WIPP has always--we always come to the Hill and offer we1323are here to help, right? We don't want to--you know, we are not1324here to bash you over the heads, but we really want to be able1325to help you to find solutions around that. And keeping that1326woman-owned small business program and other small business1327programs available and open and usable creates access and1328opportunity for small businesses.1329    Ms. MORRISON. Thank you so much.1330    One for you, Mr. Closson. A recent study found that1331contract terminations and declining market participation for1332small businesses are creating defense supply chain innovation1333and competition concerns. So what do you think are the short-1334term actions we can take to help offset DOGE's negative impact1335on the industrial base?1336    Mr. CLOSSON. So the reality is, you know, we have to get1337out there and compete, and this is the landscape that we are in1338right now. I believe there is competition to be had, but we1339need to continue to be agile, and we need contracting officers1340and the government to be able to have enough opportunities out1341there for us in the prime. We will see that number go up as1342opportunities are there. There are still plenty of good small1343businesses out there. We just need to see as many opportunities1344as we can.1345    Ms. MORRISON. Thank you for getting an answer.1346    And I have exceeded my time, Mr. Chair. I yield back. Thank1347you.1348    Chairman WILLIAMS. The gentlelady yields back.1349    I now recognize Mr. Fuller from the great state of Georgia1350for 5 minutes.1351    Mr. FULLER. Thank you, Mr. Chairman.1352    Mr. Closson, great to see another Airman in the room. I was1353going over your bio, had an admonishment for you real quick. I1354didn't see the University of Georgia in the bio that I have. So1355just a quick question, you would agree with me that is a far1356superior school than the TCU or something?1357    Mr. CLOSSON. Don't bring me into this.1358    Mr. FULLER. And I wanted to ask you real quick,1359specifically related to you were talking about giving speeches1360to veterans at a DAV. One of the things that I think with1361suicide rates in the veteran community being so high, it is1362just losing that sense of purpose, losing that sense of1363service. What is your number one piece of advice that you give1364to veterans in that speech specifically to go through this1365process of making sure you can get the certification for the1366Service Disabled Veteran-Owned Small Business Program?1367    Mr. CLOSSON. Right. I am very truthful with them. When I1368speak at the DAV, I don't talk about the clouds and the1369unicorns and all the great stuff that come, you know, 7 years,137017 years, for me almost 18 years. It is hard and no one is1371going to do it for you, you know. And there has been a lot of1372programs like the DAV now that are available.1373    When I sit through these things, you know, we are giving1374them the roadmap, right, but we are just honest with them on1375what it takes, but also to be there for each other. The support1376programs talk a lot about small businesses and SDVOSBs and how1377to be successful in GovCon. But we talk equally about being1378there for each other and removing the stigma of being the tough1379guy and saying, hey, man, are you okay? Right? Because it is1380challenging. I mean, all of us have opened small businesses.1381This is a challenge to get into GovCon. It is not easy.1382    So what we focus on is being there for them through their--1383the programs like the DAV has that lays out the structure of1384how to get there, and then having a community with you that has1385your back, because it does put a lot of stress on you. And a1386lot of these gentlemen and ladies have PTSD. And--but I have1387seen some amazing success stories come from those programs, and1388we are going to keep seeing it.1389    Mr. FULLER. Yeah. Well said. Airpower and I appreciate you1390being here.1391    Mr. CLOSSON. Yes, sir.1392    Mr. FULLER. Mr. Schwartz, I wanted to turn to you in my1393remaining time here. I don't know if you would agree with me,1394so correct me if you feel like I am wrong. I feel like the1395American defense industrial base is broken. But if you had to1396put it on a scale of 1 to--it is 1 is doing fine to 10 it is1397completely broken. Where would you put the American defense1398industrial base?1399    Mr. SCHWARTZ. So first, I disagree with you on the ranking1400of colleges. Put that out there.1401    Mr. FULLER. Way to stall for time.1402    Mr. SCHWARTZ. Yeah. No, no, second of all, I wouldn't say1403it is broken. I would say it is a system designed for something1404else. Like if you are going into the Rockies in Colorado, you1405probably don't want a Corvette. You probably want a Ford 150,1406right? So we were designed--the acquisition system was designed1407for a different era, for a different concern. And we have not1408shifted to the right system or the right car. It is1409substantially problematic.1410    I will just give one example and I think it highlights the1411whole concern. The attack drones that we used most recently in1412Iran were reverse engineered from the Iranian Shaheds. That1413shouldn't have to happen. So if that----1414    Mr. FULLER. Yeah, absolutely. And obviously, you have1415highlighted here in your testimony that small businesses can1416help fix those problems. You refer to it as small businesses1417finding the front door, and back home I would call it the front1418porch.1419    One of my concerns is that the defense industrial small1420business base that may get into this may be on the coast, East1421and West Coast. I represent Appalachian communities. What would1422be your one piece of advice for me as a legislator or leader to1423make sure small businesses and entrepreneurs in Appalachia are1424getting involved in the defense industrial base? What can I do1425to help them?1426    Mr. SCHWARTZ. I am going to say two. I apologize. One is1427work really hard to get rid of all those ancillary regulations1428that are not priorities, right? Cybersecurity is important, but1429you can't focus on your job and cybersecurity when you are also1430given 20, 25 other regulations that really aren't as important1431anymore.1432    And the second is help them figure out where to open the1433door, right? And sometimes that might be helping them, giving1434them the contact. Sometimes it might be legislating in ways to1435ensure that DOD is reaching out because what we need from our1436acquisition workforce, and this is, I think, the key here, is1437for them to have the time and the support to slow down and say,1438I don't want to push the easy button. I want to find the best1439solution. And sometimes the best solution is a small business.1440But if you don't have the time to sit back and say let me do my1441market research and really scout out where to go and who is out1442there, we are not going to get them.1443    Mr. FULLER. Yes, sir.1444    Mr. Chairman, I yield back my time. Thank you for your1445testimony.1446    Chairman WILLIAMS. The gentleman yields back.1447    I now recognize Mr. Tran from the great state of California1448for 5 minutes.1449    Mr. TRAN. Thank you, Mr. Chairman and the Ranking Member,1450for today's hearing. Thank you for our witnesses for being here1451today.1452    Los Angeles and Orange Counties are home to one of the1453nation's most dynamic aerospace and defense manufacturing and1454research ecosystems. I am especially proud to represent Auriga1455Space, located in Garden Grove. I have had the chance to tour1456their facility with their CEO, Winnie Lai, and see firsthand1457the amazing work that they are doing to develop the first1458electromagnetic launch system for rockets. From advanced1459manufacturing and satellite technology to defense software and1460precision engineering, small businesses throughout southern1461California are helping build the systems that keep America1462secure.1463    Small businesses are often the source of breakthrough1464technologies and specialized capabilities that our national1465security depends on, but there is a troubling disconnect. The1466federal government is spending more on our national security1467than ever before, but the share of contract dollars going to1468small businesses declined. In fiscal year 2025, the Department1469of Defense awarded nearly $500 billion in contracts, but only a1470quarter of those went to small businesses. That is less than1471the year before.1472    Far too often, federal procurement remains too complicated,1473too slow, and too expensive to navigate for small businesses.1474They face burdensome compliance requirements, lengthy1475contracting timelines, slow funding disbursements from other1476transaction authority managers, and a maze of regulations that1477often favor companies with dedicated administrative staff and1478teams of consultants. Meanwhile, the Small Business1479Administration has significantly cut staff meant to help with1480government contracting.1481    Instead of cutting resources, we should be smartly1482investing in America's industrial base. That means reducing red1483tape, streamlining, streamlining contracting pathways,1484improving outreach, appropriately funding the Offices of Small1485and Disadvantaged Business Utilization, and ensuring agencies1486are held accountable for meeting their small business1487contracting goals because America's national security is1488stronger, more innovative, and more resilient when small1489businesses have a fair shot at contracting opportunities and a1490level playing field to compete.1491    Ms. Dingle, despite significant increases in DOD1492contracting spending in fiscal year 2025, the National Defense1493Industrial Association's Vital Signs '26 report found that1494overall small businesses are reporting fewer contracting1495opportunities than last year, with a significant percentage1496seeing a decrease. What do you think we can do to ensure that1497the Department is structuring contracts in a way that small1498businesses can compete and perform?1499    Ms. DINGLE. Thank you for that question. I think there are1500a number of things that you can work on. As my colleague1501mentioned, the process of getting into the front door can be1502extremely difficult. So if you are not already in that defense1503industrial base, it is nearly impossible to get in. Less and1504less agencies are permitting new entrants because you need to1505have a clearance in order to get a contract, and you need a1506contract to get a clearance. So that is one of the issues.1507    The other is if there is anything that can be done to1508lessen the burden of all of the compliance requirements. I grew1509up in cybersecurity. I have worked in defense for many years. I1510understand the importance. So it is a necessary--it is1511necessary to have cybersecurity provisions in place, but the1512amount of money that it costs for a company to comply is nearly1513impossible, and some companies are getting out.1514    Sometimes the procurements come out, and, you know, it is1515180-some-odd pages of things that you have to be able to read1516and respond to. And for small businesses, we just don't have1517the staff that are necessary to be able to navigate those1518things and to respond to those types of requirements. So1519streamlining the requirements in a way that doesn't necessarily1520burden small businesses would be great.1521    Mr. TRAN. Thank you for that.1522    Ms. Dingle and Mr. Closson, while small businesses may1523receive contracts, the actual funding is frequently delayed.1524Government inefficiencies and other acquisition bottlenecks are1525the cause. As you know, these challenges create severe cash1526flow problems for small businesses. How would you expand1527multiyear procurement authorities that the DOD help create more1528stable business opportunities for both prime contractors and1529subcontractors? And secondary to that is, would this help1530reduce the barrier to entry for small businesses?1531    Ladies first.1532    Ms. DINGLE. Thank you. You mentioned stability and1533predictability. I think those are just the key, right? When I1534started my business, the sales cycle was about 6 months. That1535sales cycle now is nearly 3 years. It is nearly impossible for1536a small business to hold on to the staff and the resources that1537are necessary to compete. So that is something that is1538important.1539    And I apologize, a little bit of noise. I forgot what the1540second half of your question was.1541    Mr. TRAN. No problem. I will just go to Mr. Closson. You1542have anything to add, 5 seconds.1543    Mr. CLOSSON. Yeah. Okay, 5 seconds. The reality is it is1544tough, right? And we have to find ways to be able to get it1545done. I am hoping that the Rule of Two, using more sole1546sources, I mean, you think about that, the sole source alone1547would be something huge. The Rule of Two and actually executing1548sole sources would expedite everything.1549    Mr. TRAN. Thank you. Chairman, I yield back.1550    Chairman WILLIAMS. The gentleman yields back.1551    I now recognize Ms. Van Duyne from the great state of Texas1552for 5 minutes.1553    Ms. VAN DUYNE. And I agree with Mr. Schwartz' assessment on1554the ranking of colleges. TCU rules.1555    Thank you, Mr. Chairman. This hearing is important because1556rebuilding America's defense industrial base cannot just mean1557relying on the same large prime contractors. Small businesses1558are a critical part of getting new ideas, faster production,1559and better capabilities to the warfighter.1560    Too often Washington makes it harder than it needs to be1561for small businesses to be able to compete. And for a small1562business every dollar that is spent on unnecessary compliance1563is a dollar that cannot be spent hiring workers, developing new1564products, or supporting the mission. And that is why I1565introduced the Small Business Regulatory Reduction Act, which1566passed the House in December and is waiting Senate action. It1567is killing me. I have introduced this for three sessions now.1568We finally got it out of Committee. We got it on the floor. And1569now it is dying a very slow death in the Senate.1570    And my bill requires the Small Business Administration to1571ensure that the cost of its rulemaking on small businesses is1572not greater than zero each fiscal year. It requires SBA to1573report on regulations that impact small businesses. And the1574principle is simple: before Washington adds another burden, it1575has to start removing them. And today's hearing shows why that1576matters. If we want a stronger defense industrial base, we need1577more small businesses willing and able to work with the federal1578government and not fewer.1579    Mr. Schwartz, in your testimony, you discussed the critical1580role of small businesses in keeping our defense industry1581competitive and innovative. My concern is that even while1582higher contracting dollar amounts are flowing from the1583Department of War to small businesses, we are ignoring that the1584overall number of small businesses that win contracts is1585actually shrinking. So what does the shrinking number of1586contractors say exactly about the health of the defense1587industrial base, and what makes it less attractive now for1588small businesses to work with the government than it was 51589years ago?1590    Mr. SCHWARTZ. So the first one is shrinking, what does it1591say? So you may have noticed I eat kosher and I am Jewish,1592right? I lived in a city--there is a point, really, I promise.1593I lived in a city that had one kosher pizza store. The food1594wasn't great, their service was not great, and it could be1595cleaned up a little bit. One day, another kosher pizza store1596opened up two blocks away. You would be, I guess, not surprised1597how quickly that first pizza store, the pizza got really good,1598and the service was excellent. It is the same thing here. When1599you have that decline in the industrial base, you are losing1600that competition. When you are losing that competition, you are1601losing that hunger to improve and get better to win that1602contract. At the end of the day, that is, I think, the example.1603    Okay. Now, I was thinking of food, so I totally forgot the1604second question. I apologize.1605    Ms. VAN DUYNE. The last 5 years, do you think that it is--1606that government has made it harder or easier for small1607businesses to be able to work with?1608    Mr. SCHWARTZ. Oh, I think they have definitely made it1609harder. And I will give one example. As was mentioned, every1610dollar matters for small businesses. And what they need is that1611predictability of business. And yet we saw this year the SBIR1612authority lapse and then get renewed, right? That interruption1613of SBIRs that some companies knew they were going to win and1614got disrupted and lost that cash flow is a huge problem for1615planning on business. So that is just one example of including1616some of the ones that we talked about in cyber.1617    So one option to really help small businesses, I think, is1618make some of those authorities permanent so companies know they1619can count on it and don't worry every single year that it is1620going to disrupt their business.1621    Ms. VAN DUYNE. I appreciate that. I remember we had a1622witness here in front of the Small Business Committee several1623years ago from the defense industry, and he held up a three-1624ring binder that is about four inches thick. And he said, this1625is the regulation we are sitting here talking about today. If1626you pass this, I close my doors. Because while some of the1627major defense companies can afford to have regulatory agencies,1628I cannot. This is going to cost me about $100,000. My margins1629are this thin. So if you pass this, you are literally taking my1630business away from me, just by a regulation.1631    Tell me how important--and I understand we have to have1632regulations. That is important. But the layering upon layering1633upon layering, how much have you seen your time being spent on1634that as opposed to what you should actually be focused on?1635    Mr. SCHWARTZ. So I can't say my time because I don't run a1636small business for defense. I am here for the NDIA, the1637National Defense Industry Association. But it is one of the1638biggest complaints that companies have. All the small1639businesses in the polls, it is consistently at the top. It is1640the regulations, the paperwork. And it--not only does it take1641up their time. I would argue what is even worse than taking up1642their time is distracting them from what we really want them to1643be doing, which is delivering capability, not working on1644compliance that doesn't really add anything.1645    Ms. VAN DUYNE. I appreciate that, and I yield back. Thank1646you.1647    Chairman WILLIAMS. The gentlelady yields back.1648    I now recognize Mr. Olszewski from the great state of1649Maryland for 5 minutes.1650    Mr. OLSZEWSKI. Thank you very much, Mr. Chairman. Thank you1651to our Ranking Member and all of our witnesses for being here1652today.1653    I believe that we can all agree that driving American1654innovation for small business is a top priority for Members of1655this Committee and on all sides of the aisle. Maryland, we are1656proud to be home of the Army's oldest active proving ground,1657Aberdeen Proving Ground, where I know the National Defense1658Industrial Association, Mr. Schwartz, has a chapter. Thank you1659for fostering collaboration among government, industry, and1660academia to advance Army modernization efforts. APG features1661expansive test ranges and road courses designed to stress1662military hardware. So if a piece of equipment has--is meant to1663shoot, move, or communicate, it likely has gone through testing1664at APG.1665    APG uses Small Business Administration guidelines to award1666research, technology, and service contracts to smaller-scale1667companies. Unfortunately, the Trump administration has gutted1668the SBA's capacity to advocate for small contractors at federal1669agencies like APG. The Office of Government Contracting and1670Business Development has been reduced by 60 percent, meaning1671fewer negotiators to help identify small business opportunities1672and fewer phone calls from small business owners being1673answered, which makes no sense to me, especially as Trump's own1674DOD has said, quote, `` A weakened American industrial base and1675supply chain threatens both the economic security of millions1676of Americans and our country's national security.'' I agree1677wholeheartedly.1678    Kneecapping small businesses who want to enter, compete,1679and innovate in the federal market does, in fact, weaken our1680industrial base and supply chain. So I do hope we can work1681together in spite of these challenges to produce positive1682outcomes for the industrial base and for the government1683cluster.1684    Ms. Dingle, I will start with you. Since 2015, SBA has made1685multiple unsuccessful attempts to deliver a single IT platform1686to bring all of its small business certifications into place. I1687think this is a great idea, especially if it cuts down on time1688for small businesses to apply and the time SBA to process1689applications. The Unified Certification Platform was deployed1690in 2024, even as the GAO and others raised concerns. The1691Committee no longer receives annual certification data, and it1692is unclear if those outstanding concerns have been addressed.1693    I just wanted to wonder, from your perspective, is the1694portal functioning well for small business businesses currently1695seeking certifications with the SBA?1696    Ms. DINGLE. Thank you for that question. So I am not1697certain whether the portal is currently functioning well. It1698was. The challenge for our business owners is they don't have a1699person they can contact at the SBA to figure out what is going1700on. The workforce has just been moved around. I won't say1701decimated, but it is--small businesses need a point of contact1702in an agency or in the SBA, for instance, to be able to get the1703answers that they need. Just like we were talking about1704debriefs on a contract, you need a debrief on what is happening1705with your application, and that is not possible right now.1706    Mr. OLSZEWSKI. Sure. Hopefully, it is something we can1707address together. I want to thank the Committee for recently1708passing legislation I sponsored requiring the SBA to provide1709Congress more comprehensive information on the certification1710portal and related programs.1711    Can you speak a little bit to how having that more complete1712picture of application volumes, processing times, and outcomes1713might help SBA improve the portal and better serve those small1714business applicants?1715    Ms. DINGLE. Yeah, I think the small business community, the1716women-owned business community, is all for transparency and1717accountability. It is just how does that come about, right? And1718what we are seeing--I was just having a conversation recently1719and someone says have you spoken to this person at the SBA or1720have you spoken to this? Like, we have little to no contact1721with the resources that used to be able to assist business1722owners. So I think as taxpayers, as business owners, we all1723want transparency and accountability, but we also need the1724resources that are necessary to support that transparency and1725accountability.1726    Mr. OLSZEWSKI. Thank you.1727    And then, Mr. Closson, I will close with you with my last1728minute. We know that small business-only competitions are1729critical for small firms to participate in the defense1730industrial base, but are a small percentage of those defense1731dollars, making up just over 17 percent. How can we expand1732efforts to protect this small but critical investment rather1733than allow them to exit the industrial base and taking their1734innovation capacity with them?1735    Mr. CLOSSON. The Rule of Two, like we mentioned earlier,1736being able to get more small business--prime opportunities for1737small businesses, that is going to be critical. And educating1738on the J&A for the sole sources. I mean, these are two quick1739paths to be able to get more--the companies that are there1740operating and then also bringing in new. But we need more prime1741contracts.1742    Right now I would say the majority of our work growing, you1743know, was subcontracting, right? So being able to give us the1744opportunity to compete at the prime level as many times as1745possible is not only going to strengthen who is there, but it1746is going to bring more in.1747    Mr. OLSZEWSKI. Thank you very much. I appreciate the1748witnesses' time.1749    And Mr. Chairman, I yield back.1750    Chairman WILLIAMS. The gentleman yields back.1751    I now recognize Mr. Bresnahan from the great state of1752Pennsylvania for 5 minutes.1753    Mr. BRESNAHAN. Thank you, Chairman, Ranking Member, and1754thank you to all of our witnesses for being here today.1755    The defense industrial base has long been one of the United1756States' most important economic and national security assets,1757creating jobs, strengthening communities, and helping keep the1758American people safe. While many hear defense contracting and1759think of large corporations and mega contractors, small1760businesses located all over the country play a critical role in1761supporting our national defense and military readiness.1762    In northeastern Pennsylvania, we see this firsthand. Small1763businesses throughout northeastern Pennsylvania provide1764specialized services and equipment that help ensure our service1765members have the tools they need to complete their missions1766safely and effectively. During the Committee's annual Small1767Business Showcase last month, I was proud to welcome Inert1768Products, a small business representative from Pennsylvania's1769Eighth Congressional District. Inert Products is a veteran-1770owned small business developing advanced training aids and1771life-saving equipment that help security forces detect, respond1772to, and defeat explosive threats. Anyone who saw their state-1773of-the-art tactical robot at the showcase saw firsthand how1774Inert Products equips our troops and allies with the best1775possible equipment to protect them while they protect us.1776    Another standout example is Noble Biomaterials, who produce1777thermal, radar, and electromagnetic interference shielding1778technology that protect our warfighters and critical military1779assets. Based in Scranton, Noble manufactures lightweight,1780flexible, low-observable materials that help our servicemembers1781operate more effectively and avoid detection in high-risk1782environments.1783    Small businesses like these protect our troops and save1784American lives, but we must continue to ensure they and1785companies like them are given fair opportunities to thrive in1786the space, which will in turn create local jobs, benefit our1787communities, and provide for their families.1788    So my first question is for Mr. Schwartz. In your1789testimony, you cited the overburdensome paperwork and1790regulatory process that often push away potential defense1791contracting small businesses. Obviously, that barrier to enter1792the marketplace shouldn't be impeded by unnecessary paperwork.1793Is there anything tangible that we can be doing in Congress to1794simplify the process?1795    Mr. SCHWARTZ. Yes, there are a couple of things, but one is1796there are a lot of regulations that stem from statute. So if1797you look at the Federal Acquisition Regulation overhaul that is1798being done right now, the revolutionary overhaul, what they are1799trying--what they are doing is taking everything that is not1800required by statute and taking it out, right? But there are1801things that are required by statute that have been required by1802statute because of things that are 20, 30 years old that1803perhaps we have not reviewed of late that are still in there1804that is not being reviewed because of this overhaul, because1805the administration has no authority to take that out, or any of1806the agencies.1807    So one thing that could be done is a systematic review of1808the statutory requirements and regulation with a very simple1809question: is this doing more good than harm? Right? Because1810some of those--there used to be a regulation that said you had1811to use dollar coins in every vending machine on a base. That1812was ultimately appealed because of something that Congress did,1813or there was a requirement you had to use double-sided paper.1814Right? Those might be requirements that are examples that we1815may want to start reviewing those and getting rid of those so1816we can focus on the important things. So that would be at the1817top of my list.1818    Mr. BRESNAHAN. Well, the 11 words you never want to hear:1819we are from the government and we are here to help. So,1820honestly.1821    My second question for Mr. Closson. First of all, thank you1822for your service. As the founder of the Service Disabled1823Veteran-Owned Small Business, what advice would you have or to1824give to a veteran in the early stages of starting a small1825business? And this is something that I frequently encounter1826when I am meeting with my constituents. They served our1827country, and sometimes it is incredibly frustrating to get that1828inertia moving to be able to get the business off of the1829ground. So if you can maybe identify perhaps one or two key1830suggestions that I can take back to them.1831    Mr. CLOSSON. First is find a good program. Like the DAV has1832programs where they have mentorship programs for starting small1833businesses. It is one of the best ones I have ever seen. I have1834been honored enough to teach a couple of those sessions.1835Extremely valuable for me. I actually sit through some of the1836others to get value. Extremely valuable. So the DAV puts on an1837awesome SDVOSB Entrepreneurial Veteran clinic for people1838starting business.1839    Two is understanding how to monetize who you are and the1840value that you have. Being able to take that step, to dig into1841your Rolodex of people you have worked with in government or1842not and be able to monetize your relationships and bring value1843to their mission. Understand your value and how you can impact1844theirs.1845    Mr. BRESNAHAN. Thank you for your service as well.1846    And Mr. Chairman, I yield.1847    Chairman WILLIAMS. The gentleman yields back.1848    I now recognize Ms. Scholten from the great state of1849Michigan for 5 minutes.1850    Ms. SCHOLTEN. Thank you so much, Mr. Chairman and Mr.1851Ranking Member, and thank you for our witnesses for being here1852today. This is a really, really important conversation.1853    You know, there is a through line here, right, that we1854agree small businesses are the backbone of our economy and they1855are foundational to the strength of our defense industrial1856base. On that, we agree. However, according to a 2022 study,1857the number of small businesses competing for awards through the1858Department of Defense dropped by 23 percent. Over that same1859time period, the number of firms that were awarded small-dollar1860contracts, less than $1 million, shrank by even more, by 321861percent.1862    Ms. Dingle, what steps can we take to ensure that there are1863sufficient opportunities for small businesses who compete for1864these lower awards?1865    Ms. DINGLE. Thank you for the question. I think we have1866heard from a number of my colleagues here about the Rule of Two1867creating opportunities, right, because that sets aside some of1868the business. But the other thing is consolidations right now1869are causing problems for us, some of the consolidations. And1870again, when you look at it from a taxpayer standpoint, it makes1871sense, but when you look at it from a business standpoint, that1872just takes some small businesses out of competition completely.1873You have got to be at a certain dollar figure to even be able1874to compete. So making small business set-asides available,1875using tools like the Rule of Two, making sure that contracts1876are not necessarily consolidated.1877    I will try to be sensitive to time, but as a small business1878owner who has worked in defense, we had existing incumbent work1879that was then moved to a consolidated contract vehicle that we1880weren't eligible to compete on. So even though we had gotten1881our foot in the door, now the door was--we were put on the1882outside of the door and the door was closed so we couldn't get1883back in.1884    Ms. SCHOLTEN. Yeah.1885    Ms. DINGLE. And so being mindful of those kind of things is1886something that is going to be important.1887    Ms. SCHOLTEN. Yeah. Another factor that you have emphasized1888in your testimony is the ever-changing economic landscape and1889the instability. I mean, I know defense contracting or not,1890that is the number one issue that I hear about from our small1891businesses back home.1892    A recent op-ed from WIPP emphasizes that the use of AI in1893small business operations presents both a critical opportunity1894and a barrier to entry for certain entrepreneurs. My bill, the1895AI-WISE Act, would address this challenge by requiring the SBA1896to create learning modules to help small business owners adopt1897AI into their operations. We know they want it, but often they1898don't know how to use it. They might be afraid that a changing1899regulatory landscape, for example, could negatively impact them1900down the road. They are afraid of giving up proprietary1901information.1902    Can you talk more about the challenges small businesses are1903facing with this new technology, specifically if you are able1904to speak to it, and how it could potentially help them to1905compete for federal contracts?1906    Ms. DINGLE. So we know that AI is being used in the1907evaluation process for federal contracts. So first of all, as a1908business owner, I need to understand how my proposals are being1909evaluated. So even having someone at the SBA or in one of the1910agencies be able to provide an informational session to tell us1911that or to have some educational programs.1912    And I will use cybersecurity as an example. As the defense1913industrial base was--cybersecurity was rolled out, there were1914roadshows around the country to say, hey, this is what this is1915going to look like----1916    Ms. SCHOLTEN. Yeah.1917    Ms. DINGLE.--and here is how you need to be prepared. We1918need to be doing that now with AI. Right? So having some1919education for that might be really helpful.1920    Making sure that the tools are accessible in terms of the1921cost associated with those tools. There has been some push to1922make sure that there are some cybersecurity tools that are1923available. Doing that same thing from an artificial1924intelligence standpoint would be really helpful.1925    Ms. SCHOLTEN. Yeah.1926    Ms. DINGLE. Business owners, they want to use the1927technology, but we are concerned, right? There is no real1928regulatory guidance on whether we can use AI as a part of our1929solution. There is no real guidance on what our exposure is1930with respect to privacy and loss of data for our clients. And1931so some assistance in that area would be great.1932    Ms. SCHOLTEN. That is very, very helpful feedback. We teach1933our students, the first thing you learn in an English class is1934write for your audience, right? It is almost dystopian to think1935that that audience might be AI. But the reality is, we know1936that this is evaluating our proposals. And so making sure folks1937understand how to prepare that is critically important. We are1938teaching students now how to write smart AI prompts to get it1939to do what they want. You know, getting our small business1940owners prepared for drafting their proposals is a really good1941idea.1942    We will follow up with your team. We would love to, you1943know, chat out some specifics there.1944    Ms. DINGLE. Thank you.1945    Ms. SCHOLTEN. My time is almost up, so I will yield back.1946That was very helpful. Thank you, Ms. Dingle.1947    Chairman WILLIAMS. The gentlelady yields back.1948    I now recognize Mr. Patronis from the great state of1949Florida for 5 minutes.1950    Mr. PATRONIS. Thank you, Mr. Chairman.1951    My district, northwest Florida, I have got over 100,0001952veterans. I got 25,000 Active Duty, and it is definitely a1953stable part of the country because of their understanding,1954commitment to service, mission. But I think I am going to leave1955this kind of open for anybody that wants to chime in. What are1956we doing right and doing wrong?1957    I know there are so many different organizations and groups1958that assemble to help those warfighters transition into1959careers, small business. But again, I am--I would rather you1960just, you know, throw darts at us where we are dropping the1961ball and creating problems to help those transitions, because1962there is--otherwise there wouldn't be so many different1963organizations trying to be the nonprofit solution, whether it1964be Operation New Uniform or what have you, that tries to help1965that. So I am, Mr. Chairman, I am open to any that wants to1966chime in.1967    Mr. CLOSSON. Sure. So as somebody who transitioned you1968know, a while ago now, it has been 17 years, but being--having1969friends that are transitioning now and also working with1970Mission 22 and DAV and all of these agencies, these nonprofits1971trying to transition, is having these programs available within1972the military. Right? Because right now they are having to go1973out outside of that.1974    There are--the military has done an amazing job from over1975the last couple of years of doing better transitioning. I was1976talking--we have a former colonel that works with Colossal now,1977and I was asking him because I was curious. He said it is1978getting better, right? And that there is a lot more care into1979that transition.1980    But I think specifically around wanting to start an SDVOSB,1981a veteran-owned small business, a small business in general,1982are there classes available during that transition that they1983can point them in that direction and say--because a lot of it1984they train us to go get a job, right? Hey, this is what you1985need to do to go work for Lockheed or Raytheon or whoever else,1986and we are figuring that out. For me, when I made the decision1987just--there wasn't anything available. Right?1988    Now, today, there are a lot of these programs like the DAV1989has of the SDVOSB veteran boot camp that they have, and there1990are these other agencies doing it. But my question is, is what1991is the government doing to foster that within the military?1992There may be some programs I am not sure about, so I don't want1993to say that that is not happening, but in the transitioning1994that I am hearing happening is we got to be there for them and1995be able to foster that.1996    Mr. PATRONIS. Well, you have been there, done that. Okay.1997So in your career of service, when did you make up your mind1998that you were going to transition out? And ideally, what is the1999perfect timing to try to catch somebody with those transition2000procedures?2001    Mr. CLOSSON. Absolutely. With me, it was, you know, when I2002got to Joint Base Andrews, I really got a better view of how2003the contractor can support the mission. And I was like, man, I2004think I could do this. Like, I really believe that I could2005bring value to this mission as a contractor and I can still2006serve the nation, right? Because I didn't want to take the2007uniform off, but I wanted to find a way to continue to serve.2008    So in that transfer time is what I started doing is asking2009these companies I was working with as a military member, hey,2010how does this work? You know, I was just interviewing everyone.2011They probably thought I was crazy, but I knew that this is the2012path that I wanted to take, but there was nothing there for me.2013    So the answer to your question is it is probably different2014with every member, right? But the reality is, is once that2015transition happens and you decide 6 months into it or a year2016into it, or you are hitting your 18 years and you are getting2017the itch and you got 2 left, is what programs are there to2018train them and to educate them on how to start an SDVOSB or2019veteran-owned small business?2020    Mr. PATRONIS. Sure, sure.2021    Mr. JAWOROWSKI. Yeah, I would add to that, I think that the2022programs that are there to support transitioning servicemembers2023into industry are great. We utilize them all the time. We hire2024from them frequently. When it comes to Active Duty internships,2025they frequently take place at the very tail end of the career,2026and if you have got somebody that, like Mr. Closson said, that2027has maybe got a few years left, that is a really good time to2028expose them to some of what industry has to offer, the2029challenges that industry faces, so they can make an informed2030decision about where they are going to take their future.2031    I think that they can--the more--you know, rotation2032programs, maybe, you know, work with this company for a month2033and then a different company for a month, and they can see what2034the different size companies are really dealing with. I think2035that there is a lot of opportunity to improve there.2036    Mr. PATRONIS. Sure.2037    Ma'am?2038    Ms. DINGLE. Thank you for your question. And might I add2039that doing those rotations would be really helpful for small2040businesses because we want that expertise. And I think that2041exposure for the folks that are still in will give them a sense2042of what the two environments look like because it can be pretty2043shocking to come out of the military or come out of federal2044service, like myself, and then transition into business.2045    Mr. PATRONIS. Gotcha. Thank you.2046    Mr. SCHWARTZ. Do I have time to answer? Oh, thank you. I2047will be very quick.2048    Chairman WILLIAMS. You got 15 seconds.2049    Mr. SCHWARTZ. Fifteen seconds. One of the things I think is2050very often overlooked is many veterans who leave the Department2051leave and they are like, I saw this problem, I know how to fix2052it in a way that other people don't. And that is something that2053I think we should really leverage when people leave. Like the2054company Onebrief that I mentioned earlier in the testimony,2055that person left the military and said, I saw this problem, I2056can fix it, and started a company to fix it. If we can capture2057that, we would really benefit.2058    Mr. PATRONIS. Sure. Great answers.2059    Chairman WILLIAMS. The gentleman's time is up.2060    Mr. PATRONIS. Thank you.2061    Chairman WILLIAMS. I now recognize Mr. Jack from the great2062state of Georgia for 5 minutes.2063    Mr. JACK. Thank you very much, Mr. Chairman.2064    If I could start with Mr. Schwartz, I appreciate your2065testimony today, and I want to talk a little bit about, you2066know, you had a great graph that you included in your testimony2067that shows the declining number of companies contracting with2068the federal government, and would welcome your thoughts as to2069why you believe it is harder for small businesses to contract2070with the federal government, particularly within the defense2071industrial space.2072    Mr. SCHWARTZ. So first, thank you for reading the written2073testimony. Appreciate it.2074    I think there are a lot of challenges. Let me start with2075the workforce. Right? Is if you are a contracting officer and2076you have a lot of pressures and there is a perception of2077compliance that you have to do and you have to move fast, it is2078very difficult to sit back and say, okay, I can do this really2079fast or I can go slow, do more market research, figure out what2080the right companies are, who is offering the best thing, and2081find them. That go find them is hard because who knows about a2082small business?2083    We had to find a plumber recently and we had no idea where2084to start except Roto-Rooter because they were right there.2085Right? They are easy. It is a lot harder to find some of these2086small businesses. I think that is one of the biggest challenges2087is the visibility or people knowing this is what they have to2088offer.2089    Mr. JACK. You also included in your testimony the crushing2090burden of overregulation. Would welcome thoughts to this2091Committee as to how we as a Small Business Committee and a2092Republican majority can help reduce regulatory costs and2093burdens to small businesses trying to get involved.2094    Mr. SCHWARTZ. Right. I will just review two.2095    The first one is, as we were talking before, there are a2096number of small businesses that are subcontractors. And it is2097not infrequent that a requirement on a prime contractor is2098required to be flowed down through the contract to every lower2099tier, which means we are also putting those regulations on2100small businesses that are the subcontractors. Well, perhaps2101let's review those requirements of what has to go flow down and2102say, do we really need to flow that down? Is it really2103important?2104    And related to that is systematically go through all of the2105regulations and say this was--this is a regulation because2106something that was passed in 1992. Do we really need it anymore2107or can we amend it to alleviate the burden?2108    Mr. JACK. That is how I feel, too.2109    Mr. Jaworowski, appreciate your testimony as well, and I2110would welcome for this Committee an answer to this question,2111because as a small business that does not have an SBA2112certification and must compete in the broader small business2113category, how challenging is it for those types of businesses2114to win awards? And do you believe you are at a disadvantage in2115terms of the contracts offered to you because of it?2116    Mr. JAWOROWSKI. We are definitely at a disadvantage because2117the contract space and opportunity space for a company that is2118our size that doesn't apply for a set-aside that is set aside2119for socioeconomic basis forces us to compete at a higher level.2120And in my testimony, I talked about how there is this pool of2121companies that really punch above their weight. They are large2122businesses masquerading as small businesses that get to operate2123based on 8(a) criteria in similar spaces to us. So it is really2124a 300-person company going up against a behemoth that can be2125several thousand employees at times.2126    So it is very, very challenging to find the right2127opportunity space. And frequently, if those companies that are2128large are pursuing a small business set-aside where we can2129compete, we often see contracting officers electing to do a2130direct award to an 8(a) rather than have a full-blown2131competition. The Rule of Two should apply there, but there is2132still subjectivity that can be applied to the Rule of Two,2133which can limit competition.2134    Mr. JACK. Thank you.2135    Next question, Mr. Closson, since we are talking about2136certificates, would welcome your opinion and perspective as to2137how the SDVOSB Certification has changed your ability to2138compete in the defense marketplace?2139    Mr. CLOSSON. It has been extremely valuable. It has helped2140shape the company in every way. We started off just fighting2141any way that we could, but I think we hit it on two values that2142helped our grow. As they started setting aside for SDVOSB, we2143started working with the VA more and started getting some work2144there, and then started working with the Air Force, got a2145couple prime contracts, were awarded some GWACs that we are2146able to set aside, like SOOP and ITES, that have set aside2147requirements for SDVOSB. And, you know, also the large, you2148know, partners that we work with also have set aside standards2149within their large contracts.2150    You just got to get to be out there and work as hard as you2151can and find the avenues. They don't run and punch you in the2152face. You got to go look for them and hunt them down through2153your relationships. But they are out there and we really hope2154to see more.2155    Mr. JACK. Well, I appreciate you all's testimony today.2156    With that, Mr. Chairman, I yield back.2157    Chairman WILLIAMS. The gentleman yields back.2158    And I would like to thank our witnesses today for your2159testimony and for appearing before us. It has been a great2160hearing. I hope when you go back home you can tell your friends2161that there are hearings that people don't yell and scream at.2162And there is a lot of--much of what we talked about, the2163Ranking Member and I were just talking about how much we agree2164from party to party on small businesses today. So I want to2165thank you for being here.2166    Without objection, Members have 5 legislative days to2167submit additional materials and written questions for the2168witnesses to the Chair, which will be forwarded to the2169witnesses. I ask the witnesses to please respond promptly if2170that happens.2171    If there is no further business, without objection, the2172Committee is adjourned. Thank you.2173    [Whereupon, at 11:51 a.m., the committee was adjourned.]21742175                            A P P E N D I X21762177[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]21782179                                 [all]