SBA Office of Advocacy : hearing before the Committee on Small Business, House of Representatives, One Hundred Fourth Congress, first session, Washington, DC, April 4, 1995

172 Pages·1996·4.9 MB·English

by  United States. Congress. House. Committee on Small Business

SBA OmCE OF ADVOCACY
4.8111:104-23
Y
SBd Office of ddvocac!), Serijl Ho.
HEARING
BEFORETHE
COMMITTEE ON SMALL BUSINESS
HOUSE OP REPRESENTATIVES
ONE HUNDRED FOURTH CONGRESS
FIRST SESSION
WASHINGTON, DC, APRIL4, 1995
Printed forthe use ofthe Committee on Small Business
Serial No. 104-23
WAV
6 fSSS
O^ «^.
U.S. GOVERNMENT PRINTING OFFICE
WASraNGTON :1996
ForsaJebytheU.S.GovernmentPrintingOffice
SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC20402
ISBN 0-16-052433-4

SBA OmCE OF ADVOCACY
Y 4. 5M 1:104-23
%M Office of Advocacj, Serial «o.
HEARING
BEFORETHE
COMMITTEE ON SMALL BUSINESS
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTH CONGRESS
FIRST SESSION
' WASHINGTON, DC, APRIL4, 1996
Printed for the use ofthe Committee on Small Business
Serial No. 104-23
U.S. GOVERNMENTPRINTINGOFFICE
WASHINGTON :1996
ForsalebytheU.S.GovernmentPrintingOffice
SuperintendentofDix'uments,CongressionalSalesOffice,Washington,DC20402
ISBN 0-16-052433-4
COMMITTEE ONSMALLBUSINESS
JANMEYERS,KansaB,Chair
JOELHEFLEY,Colorado JOHNJ.LaFALCE,NewYork
WILLIAMH.ZELIFF,JR.,NewHampshire RONWYDEN,Oregon
JAMESM.TALENT,Missouri NORMANSISISKY,Viiginia
DONALDA.MANZULLO,Hlinois KWEISIMFUME,Maryland
PETERG.TORKILDSEN,Massachusetts FLOYDH. FLAKE,NewYork
ROSCOEG. BARTLETT,Maryland GLENNPOSHARD,Illinois
LINDASMITH,Washington EVAM.CLAYTON,NorthCarolina
FRANKALoBIONDO,NewJersey MARTINT.MEEHAN,Massachusetts
ZACHWAMP,Tennessee NYDIAM.VELAZQUEZ,NewYork
SUEW.KELLY,NewYork CLEOFIELDS,Louisiana
DICKCHRYSLER,Michigan WALTERR.TUCKERIII,California
JAMES B.LONGLEY,JR.,Maine EARLF. HILLIARD,Alabama
WALTERB.JONES,Jr.,NorthCarolina DOUGLAS"PETE"PETERSON,Florida
MATTSALMON,Arizona BENNIEG.THOMPSON,Mississippi
VANHILLEARY,Tennessee CHAKAFATTAH, Pennsylvania
MARKE.SOUDER,Indiana KENBENTSEN,Texas
SAMBROWNBACK.Kansas KARENMCCARTHY,Missouri
STEVENJ.CHABOT,Ohio WILLIAMP.LUTHER,Minnesota
SUEMYRICK,NorthCarolina PATRICKJ.KENNEDY.RhodeIsland
DAVID FUNDERBURK,NorthCarolina
JACKMETCALF,Washington
JeniferLoon,StaffDirector
JeanneM.Roslanowick,MinorityStaffDirector
(II)
CONTENTS
Page
HearingheldonApril4, 1995 1
WITNESSES
Tuesday, April4, 1995
Galles,John,president,NationalSmallBusinessUnited 27
Glover, Hon. Jere W., ChiefCounsel forAdvocacy, Small Business Adminis-
tration 2
Kerester, Hon. Thomas P., former ChiefCounsel, Office ofAdvocacy, Small
BusinessAdministration 8
Kerrigan,Karen,president.SmallBusinessSurvivalCommittee 23
Satagaj,John,president.SmallBusinessLeffislativeCouncil 21
Stewart, Hon. Milton, formerChiefCounsel, Office ofAdvocacy, Small Busi-
nessAdministration 4
Swain,Hon. FrankS., formerChiefCounsel, OfliceofAdvocacy,Small Busi-
nessAdministration 6
Thayer,Bennie,president.NationalAssociationfortheSelf-Emploved 19
Voi^t,David,Director,SmallBusinessCenter,U.S.ChamberofCommerce .. 25
APPENDDC
Openingstatements:
Meyers,Hon.Jan 37
Poshard,Hon.Glenn 39
Preparedstatements:
Galles,JohnW 40
Glover,Jere 48
Kerester,ThomasP 73
Kerrigan,Karen 79
Satagaj,John 85
Stewart,Milton 90
Swain,FrankS 150
Thayer,Bennie 155
Voi^t,David 163
(III)

SBA OFFICE OF ADVOCACY
TUESDAY, APRIL 4, 1995
House ofRepresentatives,
Committee onSmallBusiness,
Washington, DC.
The committee met, pursuant to notice, at 10 a.m., in room 2359,
Raybum House Office Building, Hon. Jan Meyers (chairwoman of
the committee) presiding.
Chairwoman Meyers. The committee will come to order. This
morning's hearing is the committee's last in our series ofhearings
which have focused on the Small Business Administration's pro-
grams and policies.
Since the focus of our hearing this morning is the SBA's Office
ofAdvocacy, many might say that we have saved the best for last.
The Office ofAdvocacy was created by statute in 1976. The oper-
ation ofthe Office ofAdvocacy is directed by the ChiefCounsel for
Advocacy who, by statute, must be a Senate confirmed. Presi-
dential appointee.
This office was designedto serve as a smallbusiness ombudsman
advocating the interests of small business throughout the Federal
Government. In that capacity. Advocacy has played an important
role in pursuing legislative and regulatory solutions for problems
facedbythis Nations smallbusinesses.
The Office of Advocacy also serves the important function of
monitoring Federal Agencv compliance with the Regulatory Flexi-
bihty Act. This role will be markedly enhanced once the amend-
ments to the RFA, contained in H.R. 926, which was overwhelm-
inglypassedbythe House lastmonth,becomelaw.
We are pleased to have with us today the four Senate confirmed.
Presidential appointees who have served in the key position of
ChiefCounsel for Advocacy. Milton Stewart, the first ChiefCoun-
sel, has a legendary reputation throughout the Small Business
Community.
Frank Swain, who served the longest as ChiefCounsel, likewise
commands respect as an advocate for our Nation's small busi-
nesses. In fact, I can remember hearing Mr. Swain's name men-
tioned over and over again from small business men and women
when I firstcame to Congress.
Tom Kerester, who unfortunately served only a short time as
ChiefCounsel, accomplished much during his tenure and was par-
ticularlyactive in tax issues ofimportanceto small business.
Last, but not least, our current ChiefCounsel, Jere Glover, who
has been an active voice for small business interests since he was
Mr. Stewart's deputy about 15years ago.
(1)
2
Our second panel today is comprised of leading representatives
of the small business community who will share with us their
views on Advocacy's mission, its history, how itmightbe improved,
and its future as an important and independent voice for small
business throughoutthe Federal Government.
Ourfirstwitness this morningwillbeJere Glover.
I will set the lights and ask you to try to hold pretty close to 5
minutes, ifyouwill.
TESTIMONYOFHON.JEREW.GLOVER,CHIEFCOUNSELFOR
ADVOCACY,SMALLBUSINESSADMINISTRATION
Mr. Glover. Good morning, Madam Chairman, members ofthe
committee. It's an honor to behere to talk about the subject ofthis
hearing, the Office ofAdvocacy.
The Office ofAdvocacyhas been characterized as Small Business'
pit bull in Washington's dog-eat-dog bureaucracy. When I was
sworn in 11 months ago, I will have to admit that the Small Busi-
ness' pitbull was a sad-lookingmutt. Ithadbeen basically starved,
beaten, neutered, and prettymuch leftfor dead. And thatwasbasi-
cally because in the previous 6 years', there had been six different
ChiefCounsels forAdvocaQr, all but one ofwhich were acting. The
first task that we had to do was reestablish the credibility ofthe
Office of Advocacy with the small business community, with the
Congress, and within the Government.
Hopefully, I've begun that process. I've pulled together a strong
team of leaders and I would like to introduce that team to you.
First of all, Dean Fred Tarpley is the chief economist. He's from
Georgia Tech on loan to us. Next to him is Susan Walthall, who
heads up the Office ofInformation. Nextto her is Bob Berney, who
is on loan from Washington State University where he was the
chief economist. Bruce Phillips is the director of Economic Re-
search, and Kay Ryan, who is my deputy. Kay brings a significant
amount ofmanagement experience and is one ofthe best managers
1 know. She used tobe mybossyears ago at the Consumer Product
Safety Commission. Not with me today is Doris Freedman, who is
also my deputy. She's in New Jersey at the White House Con-
ference on Small Business.
Also with me is Russ Orbin who is Director of Tax Policy and
heads up the House legislative activities for us. Russ has worked
with this committee for manyyears and knows many ofyou.
I would like to say that without a strong team ofleadership, it
wouldbe very difficult
Mr. LaFalce. I wonder, Madam Chair, might Ijust interruptfor
2 seconds?
Chairwoman Meyers. Yes.
Mr. LaFalce. I just want to say how much ofa pleasure it is to
be here to see four long-time friends, each of whom did such a
greatjob. I'm sorry thatI couldn'tbehere at 10 for the sharp open-
ing. You'll have to miss those eloquent words that my staff pre-
paredfor me, but I knowthatvou can do withoutthat.
But it's just great seeing all ofyou again, and especially at one
time. Thankyou.
Mr. Glover. It would be difficult to reestablish the credibility of
the office quickly without a strong team ofexperienced leadership.
I think I'mveryhonored and privileged to have that.
When Congress created the Office ofAdvocacy, it did something
very right. Small business in Washington has been
underrepresented and Congress recognized that when it created
the Office ofAdvocacy. Ifwe look at the situation where there's be-
tween 10,000 and 30,000, depending on whose numbers you be-
lieve, lobbyists in Washington, small business has less than a
dozen that work fall-time for small business. When you look at the
economists and economic help that other businesses and other in-
terests in this town have, there's only one full-time economist that
works for a small business organization. So, clearly, there was a
needtohave abetterrepresentation.
Another thingj that Congress did in setting this office up is re-
quired the position be filled with someone from the outside ofGov-
ernment, some civilian. That becomes very important because the
ability to communicate and imderstand what small business is say-
ing can only be learned through that experience ofhavingbeen on
the outside andhavingbeen involvedinbusiness. I think that's one
of the important things that Congress did when they set up this
office.
I will say that the small business community, given its small re-
sources and the number ofsmall business associations, has done a
remarkablejob ofprotecting and assisting small business. Without
the small business leaders that are goingto be testifyinghere later
todayin the small business community, the condition ofsmallbusi-
ness would have been far worse than it is right now. I think the
Office ofAdvocacy throughout the past almost 20 years has been
helpful in providing the economic research, the analysis that has
been able to provi^ these groups with ammunition and this com-
mittee with ammunition, tohelp fightfor smallbusiness.
Now, whathave we accomplishea in ourfirstyearas ChiefCoun-
sel? Let mejust run through a few things because I think it's sort
of important to highlight some of those accomplishments. We've
done three special reports to Congress. The first one was on pro-
curement. The second one was on oankruptcy. The third one is on
capital gains. Fve testified before Congress on seven occasions. I've
spoken with over 15,000 small businesses. We've completed abank-
ing study that, for the first time, ranked every bank in every State
based on its performance in small business lending. We've fought
for a number of regulatory improvements for small business and
had some significantimpactin avariety ofthose regulations.
We've tried very hard to file an amicus brief, despite the fact
that every time we announce our intention to file a brief, the agen-
cies seem to give up and change and do what we want them to do.
Butwe are still committedto accomplishingthat.
We've begun a study on the future of small business and com-
pleted a study on the small business in the year 2005. We've rees-
tablished the annual legislative conference which brings State and
local leaders in to discuss the impacts ofState regulations on small
business.
Ofcourse, we've been doing the task that Congress charged the
Office of Advocacy with, including reviewing, monitoring, and re-
portingon compliance with the Regulatory FlexibilityAct, ensuring
that the White House Conference gets good, solid issue informa-
tion. We've published the President's report. We've maintained and
disseminated statistics on the role of small business in the econ-
omy. We are well on our way to completing analysis on the cost of
Government regulations on small business. We could not have ac-
complished all this without the strong support of Erskine Bowles
and Phil Lader, the administrators of SBA, and quite frankly,
PresidentClinton.
For me, it has been an exciting and productive firstyear. I hope
that the Office ofAdvocacy continues to be a strong, independent,
vocal advocateforthe smallbusiness community. Forthe rightper-
son, this is the most excitingjob in Washington and I'm honored
to be able to serve the small business community, the Congress,
and the PresidentoftheUnited States.
Thankyou.
Chairwoman Meyers. Thankyouvery much, Mr. Glover.
[Mr. Glover's statementmaybe foundin the appendix.]
Chairwoman Meyers. Mr. Milton Stewart?
TESTIMONY OF HON. MILTON STEWART, FORMER CHIEF
COUNSEL, OFFICE OFADVOCACY, SMALL BUSINESS ADMIN-
ISTRATION
Mr. Stewart. Madam Chairman and gentlemen, it's 14 years
since I served in the post of Chief Counsel. That explains why I
have taken the trouble to give you an appendix in great detail
about a single case involving a small business competitor in the
SBIR Program, a good company in Utah, which won an award in
the roboticsfield. Then piece-by-piece, the rooffell in.
The award was won from NASA and in the prospectus announc-
ing the competition, NASA said very carefully and specifically,
"competitors may be assured that we will not make their propri-
etary data public without their expressed written consent." That's,
ofcourse, very important to people on the cutting edge offrontier
technologies. What this company, Bonneville Sciences ofUtah, de-
veloped is clearly abreakthrough. NASArecognized it as such until
apointcame where they were in disagreement.
They were approvedfor a Phase 2. Then as you will see, theyfell
apart over several matters, one of which, the operative one, was
thefailure ofthe companytofile areporttimely aboutits intention
to retain its proprietary right. The Agency called it about 2 years
later and said, "yo^ never filed this piece of paper." Bonneville
promptly filed the piece ofpaper p—erfecting the whole matter. Nev-
erth—eless, the Agency went ahead and I've never heard ofthis be-
fore wrote the patent office, taking/advantage of some authority
they say they have, and asked them to assign the patent to NASA,
even though this private companyhadfiledforitlong since.
They did not go to the ChiefCounsel. I have this in here to un-
derscore that the ChiefCounsel gets plenty ofhelp, including from
Congress. Because there was no Chief (Jounsel, Presidential ap-
pointed when this arose, this company chose to go to its senior sen-
ator, Senator Hatch. You'll find several communications from him
aboutthis matter in the appendix. The Senator weighed in the way
you all do, thank goodness, with the Agency and began an edu-