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MSGI Congressional Hearing Recap Committee: House Small Business Committee, Subcommittee on Contracting and Infrastructure Hearing Title: “Utilization of Small Contractors in the Infrastructure Plan” Subcommittee Chair: Representative Kweisi Mfume (D-MD) Ranking Member: Representative Maria Salazar (R-FL) Date: June 10, 2021 Witnesses Ms. Sheila Ohrenberg National President, Women Construction Owners and Executives (WCOE) President, Sorella Group Testimony Mr. Ralph Thomas III Executive Director Emeritus, National Association of Minority Contractors (NAMC) Attorney, Law Offices of Ralph C. Thomas III PLLC Testimony Mr. Josh Bone Executive Director ELECTRI International Testimony Dr. Annie Mecias-Murphy Co-Owner & President JA&M Developing Corp. Testimony Main Issues Discussed Participation of Minority-Owned and Women-Owned Small Businesses Chair Mfume (D-MD) Questions: Mr. Thomas, please detail your experience with Amtrak. Response: We were working through the Department of Transportation’s (DOT) DBE program on the project. We performed within budget and on time, the goal was 15% actual action was 17%. The excuse of “we can't find minority businesses” no longer and should never apply. Mr. Boon, do recruitment strategies change based on the segment of the population you are trying to attract? How can we attract women and minorities more effectively? Response: We must use different methods. Women bring a lot of new skill sets, there are a lot of misconceptions that construction is male driven. We need to educate young girls that this industry is changing, such as shifting to off-site construction and is increasingly driven by technology. Mr. Thomas, what are the biggest obstacles that need to be addressed in the infrastructure bill to reach minorities? Response: We need a stronger approach to compliance and enforcement. The DOT has a 10% contracting goal for disadvantaged small businesses. However, 23/50 states do not comply or hit this goal, they ask for waivers. Organizations should be funded for the purpose of identifying small, disadvantaged contractors, since many people are unaware. If Sole source threshold was higher, it would create more opportunities, smaller companies would like this. Timely Payment to Contractors Ranking Member Salazar (R-FL) Question: Mr. Boon, I am concerned about delays in payments to subcontractors. Can you expand on your suggestion on getting paid on time? Response: Capital is king, small businesses have limited funds. When you are a subcontractor of a subcontractor of a subcontractor, it takes a long time to get money. I suggest expanded opportunities for these businesses to work directly with the large companies. Response from Dr. Macias-Murphy: Paid when paid clause, can be 60, 90, 120 days – very detrimental to small businesses who don’t have large reserves of money. Prompt payment is a theory rather than a reality. Ranking Member Salazar (R-FL) Question: Mr. Boon, how can Congress help? Response: The paperwork, the bureaucratic part is the problematic – there needs to be a quicker way of going through the leaps and hurdles. Project Labor Agreements (PLAs), the PRO Act, Unions Ranking Member Salazar (R-FL) Question: Dr. Mecias- Murphy, explain the issue of favoring unionized workers over non-unionized workers. What would this look like? Response: It would completely take us out from being able to bid on these projects. 80% of the workforce is not part of a union, we would not qualify. Chair Mfume (D-MD) Question: Mr. Boon, can you talk about the importance of unions? Response: Electri is not affiliated with unions, but National Electrical Contractors Association (NECA) has no issues - we haven’t seen strikes. Representative Meuser (R-PA) Question: I am favorable to trades. Unions have great apprenticeship programs. However, PLAs are not inclusionary. This is the reason companies have issues with them. The PRO Act removes state rights, states should be able to determine such things on their own. Dr. Mecias-Murphy, how would the PRO Act effect your business? Response: The increase in taxes would be harmful. It would impact us financially in a huge way. There was a 3–4-month delay of projects during COVID, we went 4-6 months with no new projects. Representative Newman (D-IL) Question: More than 80% of the time when there is a PLA in place it is beneficial. PLAs require a very specific payment chronology on top of the federal law. PLAs don’t exclude non-unions; they just protect unions and promote safety. Dr. Mecias-Murphy, what are the top 3 things that frustrate you about PLAs? Response: First, PLA’s restrict businesses like a “merit-based company” if the certain provisions in the PLA aren’t in place. Second, is the issue of protesting. I will be the one who had to deal with the strikes from labor unions. Third, the increased cost for having unions on the jobs, I have seen this in Florida. Tax Increases in the American Jobs Plan Ranking Member Salazar (R-FL) Question: Dr. Mecias-Murphy, how did the Tax Cuts and Jobs Act help you? Response: We experienced a lot of cash flow; my employee was able to purchase their first home. Labor Shortage & Workforce Development Representative Newman (D-IL) Question: Mr. Thomas, can you share what would be helpful to you with workforce training and development? Response: We were happy to see more funds for workforce development projected in the American Jobs Plan, but the focus must be on diversity. There hasn’t been a move towards workforce development in DOT since 2017. Representative Hagedorn (R-MN) Question: Labor shortage is a huge problem. We must encourage our Governors to forgo extra unemployment benefits – people need to be pushed into the workforce. I have introduced H.R. 2691, a bill that would permit 529 plans (tax advantage savings plan for saving for future education costs) to be used for certain non-degree technical training certificate programs and apprenticeship programs. Dr. Mecias -Murphy, how have you encouraged workforce development? Response: We have been able to go into Boys and Girls clubs and expose the students to our industry. We have seen that working with middle and high school students is very important, it exposes students to the future of work. From this effort, close to 40 students have been hired by one of our member companies. Organizational Protesting Representative Stauber (R-MN) Question: Currently there is a pipeline replacement project in Minnesota. This project will supply jobs for small contractors and should be celebrated. However, Democrats are bussing in protestors from large cities and disrupting the process. Dr. Mecias-Murphy, what are the dangers of protestors showing up? What would this do to your small businesses? Response: Safety is important to us. People don’t realize that a day of delay can be catastrophic. It can delay you two or four weeks sometimes. It also disrupts cash flow for small businesses -workers cannot go into work, then they cannot get paid. The Biden Administration has cancelled Keystone Pipeline project, ruining many small business contracting opportunities.

By Rebecca Pselos | MSGI Partner President of Kite Tail Strategy This week the House Small Business Committee held a hearing on the Small Business Innovation and Research (SBIR) and Small Business Technology Transfer (STTR) programs. These programs require reauthorization this year otherwise they expire in the fall. Members and witnesses reinforced concerns that the U.S. is falling behind other countries when it comes to research and development and subsequent commercialization of new technologies. SBIR/STTR provide a necessary path for the U.S. to support small businesses - our most innovative sector. The hearing highlighted four main recommendations for lawmakers to consider. 1. Increase funding for small businesses. Less than 10 percent of federal research and development funding goes to small businesses; however, they are the most innovative sector. Other countries, including the E.U. and China, are directing as much as 20 percent to small businesses. In addition, other countries are targeting certain areas such as robotics, energy technology, and biomedical engineering. Having SBIR/STTR prioritize funds for specifics areas has not occurred to date, but it may be time to do so to help the U.S. compete with other countries. 2. More assistance for commercialization. Often referred to the Valley of Death, the transition from Phases 1 and 2 to commercialization (Phase 3) is challenging. In theory, federal funding and venture capital complement each other - the first supporting research and the second supporting commercialization. Venture capital requires a business to demonstrate commercial viability in order to justify an investment. A SBIR recipient has a difficult time demonstrating this when they finish Phase 1 and 2 making Phase 3 elusive for many. Again, this problem places the U.S. at a disadvantage compared to other countries that are assisting with commercialization. Of note, Representative Houlahan referenced H.R. 652 - Research Advancing to Market Production (RAMP) for Innovators Act. The bill provides commercialization services under the SBIR and STTR programs. 3. Support women-owned and minority-owned businesses. Minorities and women have a harder time accessing seed capital. Women hold less than 20 percent of tech jobs and less than 5 percent of leadership positions in tech companies. Part of this problem is that there is a significant funding gap from venture capital firms for women-owned businesses. 4. Ease entry in the program, and make the program attractive. Twenty-five percent of SBIR winners are new to the program. This statistic generated several questions - how can the government encourage more businesses to partake in the program and should existing recipients be limited on the number of awards they can receive. Witnesses strongly advocated for changes that address the fact that small businesses have limited resources and expertise to write award-winning application, even though they have extremely valuable ideas; manage the grants; and keep employees on payroll while they wait for Phase 2 funding, which can take up to 2 years. Hurdles that make the program less attractive, especially when there is no guarantee of completing Phases 2 and 3. Witnesses also explained why limiting the number of awards to individual businesses would be detrimental.

By Rebecca Pselos | MSGI Partner President of Kite Tail Strategy This week the Subcommittee on Readiness, Senate Armed Services Committee held a hearing on acquisition reform to help inform the FY22 National Defense Authorization Act (NDAA). Witnesses were asked to comment on how to achieve a quicker acquisition system while reducing risks. Ms. Stacy Cummings performing the duties of Under Secretary of Defense for Acquisition and Sustainment (USD(A&S)), Department of Defense (DOD); Ms. Shelby Oakley, Director, Contracting and National Security Acquisitions, Government Accountability Office (GAO); and Dr. Raymond O’Toole, Acting Director, Operational Test and Evaluation, DOD (DOT&E) testified as the witnesses. Overall, the April 28th hearing highlighted 2021 procurement issues relevant to both defense and civilian agencies - quicker acquisitions, role of small businesses, emerging tech, and cybersecurity. In addition to DOD’s acquisition authorities and policy, the importance of traditional metrics of acquisitions success - cost and schedule - were mentioned. As were new factors to consider, such as value to the end-user and contribution to maintaining a competitive edge against U.S. competitors. DOD alluded to some authorities they’ll likely seek to change in this year’s NDAA - DoD’s Commercial Solutions Opening program and DOT&E authority. Ms. Cummings highlighted DoD’s Adaptive Acquisition Framework (AAF) as a recent reform to emphasize speed and agility. The framework established six acquisition pathways. Ms. Cummings added her office is working on improving data analytics to determine the success of the framework. GAO applauded the effort to measure success, but cautioned that the reform may be undermined if acquisitions are not based on sound business cases. Metrics should go beyond cost and schedule to include the value to the end user. Additionally, Ms. Cummings said that Defense Acquisition University (DAU) training will be revamped to align with the framework. Historically, the defense acquisition workforce has been taught a one-size fits all approach for acquisitions. The revised training will focus on different AAF pathways. I imagine DAU’s updated training will increase awareness of authorities benefiting non-traditional and small businesses and that awareness will spill over to civil agencies’ procurement shops. When asked about engaging with non-traditional and small businesses to leverage technology, Ms. Cummings provided two examples. DOD utilized recent contracting authorities to engage with these entities to respond to Covid-19. The authorities included Commercial Solutions Opening which accounted for roughly $7 billion in obligations related to the pandemic (just under half of the program’s total $16 billion in FY20 obligations). Under AAF, DOD has competed systems’ individual components among non-traditional and small businesses which then partner with Primes to integrate innovation. While GAO recognized that one of the key priorities of DOD’s new acquisition framework is to improve its ability to benefit from commercial innovation, GAO found the department has been challenged in developing and integrating innovative technologies into its weapon systems. GAO recommended DOD find the right balance of disruptive and incremental technology solutions and create an environment that attracts businesses that do not typically sell or develop solutions for DOD’s use. DOD will also need to address intellectual property and cybersecurity to fully take advantage of new technology. Dr. O’Toole agreed with GAO that focusing on incremental, open systems would allow DOD to speed up delivery for the warfighter. The approach would quickly field minimal viable capabilities which can be upgraded later. Moreover, the approach helps promote innovation and maintain a competitive edge against U.S. competitors. Dr. O’Toole went further to say the incremental approach needed to also be applied to testing. However, a larger concern he raised was cybersecurity. Of the programs DOT&E assessed in FY20, virally none were survivable against relevant cyber threats.

MSGI client American Fashion Network (AFN) LLC, led by CEO Jackie Wilson of Syracuse NY, secures $46.8 million contract from the U.S. Marine Corps. American Fashion Network (AFN), a women-owned small business based in Syracuse NY, will supply the Marine Corps with over 1.8 million shorts and T-shirts for fitness training uniforms over a 5-year contract. All the clothes will be 100% American made, and will be provided to Marines on base, as well as for sale for those who want additional items. This is a monumental step for the small business, which decided to begin competing for government contracts last year. Previously, AFN had been providing clothing, fabric and promotional specialty products to the world’s most prestigious retailers and corporations including, but not limited to: Amazon, Kohl’s, JCPenney, American Eagle, Lucky Brand, H&M, Express, Comcast, Charter/Spectrum, Syracuse University, PETCO and WESCO. At the beginning of the COVID-19 pandemic, AFN quickly pivoted to producing masks for COVID-19 protection, from design to shipping, in five days. From March to today, AFN has shipped millions of masks to US and international customers. Domestic mask recipients include the U.S. Postal Service, Charter/Spectrum, Comcast and America’s retail sector. AFN is proud to provide uniforms made in America to US service members. Born and raised in Los Angeles County, California, CEO Jackie Wilson has a passion for bringing manufacturing back to the United States. The Marine Corps contract has allowed her to hire an additional 5 employees and she expects the business will continue to grow. Policies like “Buy American,” mandated by the Biden Administration’s Executive Order Ensuring the Future Is Made in All of America by All of America’s Workers, encourage small business participation and give domestic preferences in the federal procurement marketplace. Federal procurement opportunities provide small businesses security and long-term stability and have kept AFN thriving amid a global pandemic. AFN is proof of the talent and hard work that small manufactures bring to the government contracting marketplace and we can’t wait to see what they do next. Read the Syracuse.com article here.

By: Eliza Joyner As the Administration released the preliminary FY2022 budget request last Friday, and the media began throwing around the terms budget and appropriations – often incorrectly and interchangeably – it seems appropriate for a quick refresher on how the government gets funded each year. Budget vs. Appropriations To start, let's compare the terms budget and appropriations. Think of your own personal budget. You set topline spending levels for categories such as rent, food, travel, etc., and these spending levels act as a guideline for how much money you want to spend in each category. The government budget works in the same way, except the spending categories apply to government programs and agencies, rather than your monthly allocation for the grocery store. The appropriations process is meant to use these topline budget numbers asking, what new or existing programs at each federal agency should be funded? What should be eliminated? Compare it to reviewing your budget and taking note of the allocations you gave yourself, but also factoring in other necessary spending costs you will need in the future. Maybe while assessing your budget, you realized that you needed extra money for transportation this month. The appropriations process is supposed to consider these needs and adjust accordingly. This may mean than your weekly grocery allowance shrinks, but you now have additional money to spend on other necessities. President’s Budget or Preliminary Budget? Unlike other legislation, the appropriations process generally follows an annual timeline. It kicks off when the President’s annual budget request is drafted. The key word is should, as it rarely shakes out that neatly. This budget request is formulated by the President, who considers input from federal agencies on what are necessary levels of funding for agency programs. It is expected to be released by mid-February. This year, the White House finds itself behind schedule, which is not unusual for a Presidential transition year. However, this year is running particularly behind, due to the all-consuming American Rescue Plan, signed into law on March 11, 2021 – work on this legislation pushed other agenda items aside during the President’s first 100 days. As of April 10, the Senate has not confirmed an Office of Management and Budget (OMB) Director, which is problematic for this part of the process. The OMB releases and plays a huge role in preparing the President's budget request, therefore the White House is unable to release a full spending plan until a Director is confirmed. The timeline remains up in the air until the Senate confirmation process is done. Nonetheless, the President’s budget request, preliminary or not, is just requests— Congress has the power of the purse. Wonky Terms Galore: Omnibus? Minibus? FSGG? The meat of the process begins with Congressional Appropriations Committees, ideally after receiving the President’s budget (but not always). Since all revenue measures must start in the House, these appropriators get to work drafting the spending bills first. There are 12 subcommittees within the House and Senate Appropriations Committees, each with specific jurisdiction over particular federal agencies and their programs. For example, the Financial Services and General Government Subcommittee (FSGG) handles funding levels for the Small Business Administration (SBA), Treasury Department and other agencies in financial services. This subcommittee drafts a bill solely relating to funding for those programs. So how does a subcommittee like FSGG determine funding levels for each program in a federal agency and decide which ones should stay or go? Each subcommittee holds multiple hearings where they invite witnesses from federal agencies to testify on the needs of their programs. Subcommittees also welcome fellow lawmakers to submit appropriations requests based on constituent submissions. Once a funding level is set and a bill is drafted, the bill charts the following path: subcommittee vote à if passed, full Appropriations Committee for a vote à if passed, heads to the House floor. The same process happens in the Senate. After the House and the Senate have each voted on its versions of an appropriations bill, a conference committee meets. That committee consists of equal number of House and Senate members who reconcile any differences between the spending bills before sending them to the President’s desk for signature. The President must sign the appropriations bills into law by October 1, the first day of the new fiscal year. Otherwise, the government shuts down. A way to avoid a shutdown and give additional time to work on the bills after this deadline has passed, Congress can pass a “continuing resolution” that funds the government at the previous fiscal year levels. This has happened every year for the last 24 years. In an ideal world, the President would sign all 12 appropriations bills into law at once - called an “omnibus.” This rarely happens, and usually there is the passage of a few “minibus,” grouping of a few appropriations bills together. At the end of last year, however, Congress did pass an omnibus. Why is that? At the end of a Congress, which lasts 2 years, all bills expire. This means, that if these bills were not signed into law, all 12 bills would have had to be redrafted come January, when the 117th Congress began. Return of the earmark. In this longstanding process, something new happened this year – return of the famous earmark. Earmarking is controversial because it allows lawmakers to recommend set asides for programs that would benefit their state, district or locality using federal dollars. Congress banned earmarking in 2011 when the provision became associated with allegations of corruption. However, now they are back with a new set of rules and a new name: “Community Project Funding.” Each Member of Congress can submit up to 10 funding requests, in order of priority. Many Members have posted specific instructions on how constituents can submit a request on their official websites. It is key for federal contractors to follow the appropriations process – follow the money – as it continues throughout this year.

By Eliza Joyner The Senate Small Business Committee held the nomination hearing of Isabel Guzman last week to be the next Small Business Administration (SBA) Administrator. Guzman is no stranger to the SBA or small business ecosystem. She served as Senior Advisor and Deputy Chief of Staff during the Obama Administration and has since served as California’s Small Business Advocate. Committee Chair Ben Cardin (D-MD) began the hearing by highlighting the urgent need for strong leadership at the SBA. It is no secret that the SBA has played a monumental role in the fight against COVID-19. If confirmed, Guzman will be entering the agency during a pivotal time, as the SBA rolls out the second round of the Paycheck Protection Program (PPP) and additional Economic Injury Disaster Loan Program (EIDL) grants. As such a large undertaking, there was much controversy surrounding the first round of the PPP, primarily focused on the disparity of loan disbursement among minority communities and lack of data transparency from the SBA. In her testimony, Guzman assured the Committee that she would serve as a voice for all small businesses while championing diversity and support of minority businesses. There was a range of concerns raised by members of the Committee, but the persistent topic of discussion remained on how to better serve minority-owned small businesses. Chair Cardin and Senators Coons (D-DE) and Hirono (D-HI), reiterated the need for targeted outreach to minority communities through community-based lenders like CDFI’s, as well as financial education and technical training to make the programs more accessible. All members of the Committee appeared hopeful about the second round of the PPP and EIDL advances, many referencing newly added subsidies, such as the Shuttered Venue Operators Grants. These grants provide aid to small businesses in the entertainment industry that do not fit within the parameters of the PPP. Senators Shaheen (D-NH) and Ernst (R-IA) asked Guzman how she planned to get the program running, and how she was going to maintain its tenure. Guzman promised that Shuttered Venue Operators Grants would be a top priority of hers, and that she would work with her team to make sure they were administered effectively. Another common theme amongst the Committee was the issue of data transparency, specifically concerning the first round of the PPP. Chair Cardin, and Senator Shaheen, spoke to the importance of communication between the agency and the Committee. They asked Guzman if she would be committed to active, open communication between the agency and the Committee. Guzman promised to work with her staff and the Committee to ensure that all SBA programs and relationships remained strong and effective. There was also bipartisan concern over the exclusion of convicted criminals’ ability to access SBA loan programs. In the first round, people convicted of non-economic crimes were prohibited from accessing the loans if they had been convicted within the last five years. Following fierce pushback, this rule was reduced to one year. Nonetheless, Senators Booker (D-NJ) and Scott (R-SC) argued that the existence of this rule at all is unjust. Both senators urged Guzman to consider repealing it entirely. A departure from the usual tone of bipartisanship was the issue of Affiliation Standards in the PPP. Republican Senators Ernst and Hawley (R-MO) took issue with Planned Parenthood receiving PPP funds, arguing that the organization did not fit the criteria for consideration. While both sides agreed on the need for clarification, Hawley pressed Guzman, asking her to commit to the rules outlined in the CARES Act and to promise that Planned Parenthood would not receive any more funding. Guzman agreed to uphold the rules of the CARES Act but did not comment on the Planned Parenthood case specifically. Note that her predecessor Jovita Carranza took the same stance in an oversight hearing last year on PPP, saying she could not comment publicly on any one borrower. Overall, there was obvious bipartisan support for the nomination of Ms. Guzman, with most Democrats and Republicans offering congratulations on her nomination. Although she kept her responses short, she highlighted the focus of equity in the new Biden Administration. If confirmed, she will certainly bring minority businesses to the forefront of consideration and appears eager to access all the systems and technology available to her.

By Ann Sullivan 1. An effective vaccination program. Small businesses, especially vulnerable during the pandemic, need to get employees back to work and customers through their doors. Clear communication from the President and public health officials and a robust vaccination plan will accomplish just that. 2. Capital to weather the pandemic. The Paycheck Protection Program (PPP) got lots of things right – the two rounds of loans assisted many small businesses. However, adjusting to changes caused or accelerated by the pandemic are far from over. Businesses have had to make significant changes, such as investments in technology infrastructure. This spans across industries – accommodating working from home or shifting to take out/delivery services, just to name a few. It is unclear if or when the workforce will return to their workplaces five days a week. While the second round of PPP funding passed in December expanded covered expenses, the need for capital has never been greater. The temptation by government is to simply pile money on top of existing programs. That has not necessarily been successful—women still get just 4% of all commercial capital and businesses in underserved communities were the last to receive PPP funds. Federal loan programs for these businesses need an overhaul. 3. Greater access to public sector contracts. During the pandemic, public sector (federal/state/local) contracting is a way to reposition successful commercial businesses. However, the current set of acquisition policies and federal agency initiatives are really designed to keep them out. Citing efficiency, the federal government buys in large quantities from large companies but in the process relegates smaller businesses to providing goods and services through large prime contractors, rather than buying directly from small businesses. This strategy results in fewer small federal contractors – which has had a ripple effect on the economy. Access, by the way, does not mean a handout. It just means having a fair shot at winning the business. 4. Changing the tax code from “one size fits all.” Although the last tax rewrite made some much-needed changes for small businesses that are organized as pass-throughs as opposed to C corporations, considerable work remains. The Treasury Department should review every deduction/tax credit and its impact on small business vis-à-vis large businesses and make regulatory adjustments and recommended changes to the law that require Congressional action. 5. Make small businesses stakeholders in the clean energy future. If small businesses are not at the table, the new Administration’s goal to build a “modern, sustainable infrastructure and deliver an equitable clean energy future” won’t get much traction. If involved, they will find ways to create revenue and business growth. Their unique ability to pivot and innovate will give life to the opportunities the new Administration envisions.

By Ann Sullivan I was on a call recently with fellow business leaders and one of them articulated what I have been thinking. Is there any end in sight? Meaning COVID-19, meaning nasty politics and gridlock on important issues, meaning decreased revenues and meaning people in a pretty bad mood. If you are a business owner, you have dreams of simply walking away saying “I quit.” But you can’t—here are five reasons why. 1. You have invested too much into the business to walk away. As satisfying as walking away sounds, why would you throw away all that time and effort that it takes to build a business. More than 50% of businesses fail in the first year. If you made it past that mark, you overcame a big hurdle – the odds are with you. 2. You like being your own boss. In a study by Guidant Financial, 55% of respondents said being their own boss was their biggest motivation for owning their business. Business owners don’t necessarily excel in playing corporate politics – they live with the consequences of their own decisions. Plus, being your own boss has the potential for greater income than working for someone else. 3. You’re in good company. Depending on what survey you choose, nearly 1/3 of all small businesses in the US are non-operational due to COVID. If you are in business, you’ve beat the odds, so chances are you’ll climb out of this. 4. You have been given an unusual chance to reposition and get creative. This opportunity doesn’t happen very often but COVID-19 forced us to think about pursuing new business lines and add new capabilities. Not that we wanted to do this – life was pretty good when the revenues were strong, but every business needs a refresh at some point. 2020 just gave us the kick in the pants we probably needed. 5. You can’t fix the political world. Having been in the political arena for a long time, I remember when politicians were much more collegial. Even though you can’t fix the political divide, what you can do is vote, volunteer, contribute to candidates that share your views and work for a better future for you and your employees.

WIPP Works in Washington | September 2020 By Elizabeth Sullivan The last time I wrote about the Department of Defense’s (DoD) Cybersecurity Maturity Model Certification (CMMC) was back in early March when the DoD released their final version to industry. The pandemic hit shortly after and turned things upside down…except for the rollout of CMMC, which has continued to move forward. So, where does everything stand now? A major step has been taken in moving this process along – training started at the end of August for certification assessors. These 73 assessors, however, are part of a “provisional program” and won’t actually be assigning the companies they evaluate a final CMMC level. Think of these initial assessments as more of a dry run, with the goal of providing feedback to the DoD and CMMC Accreditation Body (CMMC-AB)on any issues that need to be resolved before the real evaluations begin. As a reminder, the body providing the training – the CMMC-AB – is separate from the DoD. The AB is currently operating with a volunteer board and will eventually be a fully staffed organization. This step comes in the wake of a rift between the DoD and the CMMC-AB over a new contract that would supersede their existing Memoranda of Understanding (MOU). The tension between the two organizations over the new agreement is centered around responsibilities, which some AB board members felt was undermining their authority. The DoD has said this agreement is a new no-cost contract would provide a more binding relationship between the CMMC-AB and the Department. While this was slated to be resolved by the end of August, stay tuned for the final result. In the meantime, CMMC requirements showed up in the General Services Administration’s (GSA) $50 billion 8(a) STARS III contract, where GSA indicated that it “reserves the right” to require certifications for small businesses awarded slots on the federal IT vehicle. Although CMMC is only a future requirement for the approximately 300,000 DoD contractors, it has been predicted that adoption of the certification could spill over into civilian acquisitions. The move by GSA is a prime example of this, but is also not very surprising – DoD was one of the biggest buyers on the predecessor contract, STARS II. So, where does this leave small business contractors? With a lot of remaining questions. Below are a few that come to mind: As companies try to prepare for this assessment, who is credible to help them identify gaps to reach a readiness level? There has been a myriad of bad actors popping up, claiming they can guarantee a certain CMMC level with their analysis (which they can’t). Once the CMMC-AB accredits assessors and their certified third-party assessment organizations (C3PAOs), companies can start to get assessed. What is the actual cost for companies get this assessment? Will all of the accreditors charge the same amount? Once assessors are ready, what is the order in which the 300,000+ businesses will be assessed? Is there a cue? Will it be based on existing contracts? Are small businesses going to pushed to the bottom of the list? According to DoD, all contractors will have to be certified by 2025. Advocacy remains crucial on this issue, and WIPP’s Virtual Symposium on Cyber Resiliency (September 31-October 1) is focusing on these important policy changes for WOSB contractors. Check out the agenda for the Symposium and register here.

By Elizabeth Sullivan Disclaimer: This is longer than our usual blog posts – the rule was 86 pages, so bear with me through this one. Section 889 – a name that does not mean much to the average person, but carries a lot of weight for contractors. This is a section in the FY2019 National Defense Authorization Act (NDAA) that seeks to eradicate Chinese telecom from the entire U.S. government supply chain. Why write about it now? The part that impacts federal contractors of all sizes (Part B) goes into effect in less than a month. Earlier this year, the Department of Defense (DoD) held a public meeting to hear from industry. Of the salient points made, one resounding theme was that definitions will mean everything for implementation. However, industry hasn’t been able to share any definitional clarity because of the rule release delay. The FAR Council published their interim rule last week – Part B goes into effect before the comment period is over, which means contractors will have to comply with the rule starting on August 13, 2020. Public comments can be submitted until September 14. Here are the five key components for small/midsize business contractors to pay attention to. You’ll have a new box to check in SAM. Contractors will need to annually check a box in SAM verifying that they do not use any covered telecommunications equipment or services. A contractor can choose to say yes, they do use some of these banned equipment/services, which would require an offer-by-offer representation for contracts and task/delivery orders under IDIQs. It is important to know this ban applies toany equipment, system, or service that uses the covered equipment or services as a substantial or essential component of any system, or as critical technology as part of any of a contractor’s systems. Think this rule does not apply to you? Think again – acquisitions of commercial items (including COTS) and contracts at or below the simplified acquisition threshold (SAT) must also adhere to this prohibition. Definitions are key. Definitions are critical to the implementation of this rule, which defines words such as “backhaul” and “roaming,” but leaves contractors with uncertainty over what constitutes a covered technology. FAR 4.2101 covers some of these definitions, however there was no further clarity in the rule regarding who is considered “any subsidiary or affiliate of such entities” of the five listed companies (Huawei, ZTE, Hytera, Hikvision and Dahua). It seems problematic that a small business contractor is expected to research all of the subsidiaries and affiliates of these companies to make sure they are not utilizing any prohibited components. Note to government: why not just provide a list? Another definitional bone I have to pick is the meaning of “reasonable inquiry.” The rule says that a company is compliant if a “reasonable inquiry” by the company does not show any use of the prohibited equipment or services. So, what exactly does that mean? According to the rule, a reasonable inquiry is something that is designed to uncover any use of these covered telecommunications equipment or services and does not need to be an internal or third-party audit. While I am not a lawyer, I can imagine that every procurement attorney would advise contractors to have some type of legitimate audit of systems in case compliance risks arise. The waiver process is laborious. Although a waiver sounds reasonable and gives contractors added time to comply (until August 13, 2022), it doesn’t seem designed for small or midsize contractors. In order to get a one-time waiver, the head of an agency has to grant it. Before this happens, a senior agency official for supply chain risk management has to discuss the waiver with the Federal Acquisition Security Council (FASC). And consult with the Office of the Director of National Intelligence (ODNI) to make sure conditions are met. And provide notice to the ODNI and FASC 15 days before granting the waiver. And notify appropriate Congressional committees within 30 days. The FAR Council does acknowledge that this process could take a few weeks and advises to enter at your own risk because “agencies may reasonably choose not to initiate one and to move forward and make award to an offeror that does not require a waiver.” A quick data point: there are 387,967 companies registered is SAM, 74% of which are small. That would mean if every small company decided to submit an offer for a federal award and sought a waiver, that would be 287,096 waivers. Six contractor actions are necessary for compliance. A chunk of the rule outlines contractor compliance recommendations. After reading and re-reading these six actions in the rule, I’m left with the same feeling: small contractors need something more detailed than just general guidelines. Generalities like “read and understand the rule and necessary actions for compliance” and “corporate enterprise tracking” sound great, what exactly does that entail? During more normal times – let alone a pandemic – building out a compliance program can be complicated, not to mention costly. It is important contractors have the detailed information to get it right. Finally, I see dollar signs. The rule completely underestimates the time it will take contractors to implement and remain compliant with this rule. A whole section is dedicated to this analysis – and quite a few estimates left me scratching my head (you can find these in Section III, Part D). Companies aware of the rule have been spending months trying to prepare and continue to evaluate the components in their government offerings. An important part of complying with the rule to highlight is that a company cannot use any of these prohibited systems/equipment, even if they are not used in its federal contracts. That means no split networks or having one system for U.S. federal business and a difference one for commercial or contracts with other countries. I see more dollar signs. The FAR Council is seeking public comment on the rule – and federal contractors should respond. In Section IV of the rule you can find a list of questions the Council wants industry to answer, and it is worth taking a look at them. One that is also found in the beginning of the rule is whether an expansion of the prohibition should be made to include all company subsidiaries and affiliates. Feedback is also requested on subjects like challenges, costs and insight into existing systems. One thing all contractors, regardless of size have in common – they want to be compliant so they can compete. Given the uphill battle small and midsize contractors face when it comes to compliance with Section 889 and many other contracting requirements, advocacy on this issue is critical.

By Maya Shavit MSGI Intern Last week the House Small Business Committee heard from long-anticipated witness, James Rivera from the Small Business Association (SBA) Office of Disaster Assistance, testifying before Congress about the Economic Injury Disaster Loan Program (EIDL). The EIDL program is originally designed to provide economic relief to businesses experiencing difficult times. But in response to the hit many have felt from the COVID-19 pandemic, for the first-time small businesses nationally can apply for the relief. While in theory this seems like a surefire way to receive aid in this unprecedented time, business owners have faced tremendous frustration with the EIDL’s process and the little assistance they have received from the SBA. Throughout the hearing, the Committee Members highlighted the lack of transparency between the SBA and small business owners. Every Member on the Committee was perplexed by SBA’s lack of communication. Chair Nydia Velázquez (D-NY) and Ranking Member Steve Chabot (R-OH) opened the hearing mentioning that small business owners were not updated on the progress of their loans. The EIDL portal used in the loan process confuses many business owners and its supposed “help centers” provide little to no support. Mr. Rivera contributed this flaw to the “angst to get it out” as the pandemic ramped up to injure businesses nationally and the SBA’s forced three stops through March and April. Of particular inconvenience was the sudden change by SBA to exclusively allow agricultural businesses to apply for the loans. Ranking Member Chabot later continued to address this point as he noted that the SBA should have run the decision by Congress, which Mr. Rivera agreed to. If Congress is left in the dark, the general public is even further removed and strained by a lack of information. Representative Angie Craig (D-MN) brought up a personal experience with the “lack of accountability” that her constituents experienced. After a constituent in her district was left with no response for weeks from the SBA about their loan, Representative Craig used the congressional “24hour” email line, where she also never received a response. If this was the response that she as a congressperson received, she could only sympathize with the upset of a small business owner waiting for weeks or months in the processing que. Another issue highlighted by Representatives Judy Chu (D-CA) and Dwight Evans (D-PA) was that the program did not provide equal opportunity to minority-owned businesses. Congresswoman Chu indicated that while SBA has translated the EIDL program into 17 languages, this excludes many languages that the Asian American business owners with a lack of English proficiency can understand. Twenty-five million dollars was appropriated to the Agency specifically for program translation, yet no progress has been made. Additionally, Member Evans noted minority struggle as he asked Mr. Rivera to “rate the way African Americans have been given a chance,” to which Mr. Rivera could not answer his question. Concluding the hearing, Members of Congress asked Mr. Rivera how he thought the SBA was doing with EIDL. Representative Dan Bishop (R-NC) questioned why Mr. Rivera believed the 41-day average he noted to the Committee was more than adequate. He cited that while the “historically based” numbers are “much better” than they were in previous disasters, it is clear that the COVID-19 pandemic is not similar to previous national disasters and economic crises that the population has faced. SBA staff members focused on approving EIDL applications are allotted 15 minutes, far less than the hours spent before the COVID-19 pandemic. While there have been beneficial changes, there is no denying that there were many hurdles at the start of the new process and there still are many issues that the SBA is not fully aware of. While no members argued that those numbers were more satisfactory, the frustration in the room was not alleviated as, on both sides of the aisle, people were not excited by the answers provided. Ultimately, Mr. Rivera expressed that while EIDL had some difficulty getting off the ground, the SBA is proud of its progress, but it strives to do much better. Chair Velázquez concluded the discussion by noting that the SBA must do better, “Especially when it comes to the communication between the SBA, Congress, and the constituents.” The SBA must listen to the lost business owners and work with Congress members to improve the EIDL program.

By Ann Sullivan | WIPP Works In Washington, July 2020 If you have been attending WIPP’s Monday webinars on all things COVID-19, it should be pretty obvious that WIPP is on top of Congressional and federal agency actions related to the pandemic that continues to plague us personally and professionally. Not as evident, perhaps, is the role of advocacy beyond reporting the latest news. We give you five reasons why your support for WIPP is important. 1. There’s More to Come. The government isn’t finished providing assistance to businesses. The Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) remain key to retaining employees and providing capital but expect another stimulus bill later this summer. 2. If You’re Not at The Table, You’re on the Menu. In other words, there are consequences to sitting on the sidelines. If you aren’t represented in decision-making, you are vulnerable to adverse consequences—you are at risk. WIPP is at the table. 3. Interpreting Federal Actions Requires Context. A perfect example of this are the actions the Small Business Administration (SBA) and the Department of Treasury issued on PPP. Much was made of an audit of loans over $2 million— Treasury guidance (see question #31) issued in response to high profile public companies who got the PPP loans. Unfortunately, small companies got scared of a government audit and returned money they needed and should have kept. This could have been avoided, had they understood the intent of the rule/Congress. 4. Access to Decision-Makers Requires Consistent Attention. Advocacy requires constant communication with a consistent message. It is not all that different than a business relationship—you need to remind people who you are and what you offer. Cold calling during a crisis is unlikely to be effective. WIPP’s advocacy team keeps women business owners front and center so Congress turns to WIPP for its point of view during a crisis. Big difference. 5. A Combined Voice is Far More Effective Than One Voice. The mission of WIPP is to provide a voice for women business owners. Its message resonates with policymakers because we represent women from all over the country, from different political views and every size of business. Your individual message to Congress is important. But as Helen Keller once said, “Alone we can do so little, but together we can do so much.”