The Subcommittees on Contracting and Workforce and Investigations, Oversight, and Regulations will meet for a hearing titled, “All Work and No Pay: Change Orders Delayed for Small Construction Contractors.” The hearing is scheduled to begin at 10:00 A.M. on Thursday, May 25, 2017 in Room 2360 of the Rayburn House Office Building.
This hearing will examine the effects of change orders on small business contractors and potential solutions to alleviate the financial burden on small businesses caused by agency delay in approval and payment of change orders.
1. Hearing Notice
2. Witness List
Mr. Andy Brown
*Testifying on behalf of the Associated General Contractors of America
Mr. Greg Long
Long Electric Company
*Testifying on behalf of the National Electrical Contractors Association
WASHINGTON – Today, the House Small Business Subcommittee on Contracting and Workforce and the Subcommittee on Investigations, Oversight, and Regulations heard from small businesses and experts about the effects of change orders on small business contractors and solutions to ease the financial burden.
“In contracting, a certain degree of reasonable delay is expected when changes are made; however, this becomes inexcusable when federal agencies are unwilling to formally execute change orders and fail to pay for work that has been completed for months – or even years,” said Subcommittee Chairman Steve Knight.
“During this waiting period, small contractors are often left to finance new work out-of-pocket. Some of these expenses include: paying employee salaries, taxes, building materials, renting expensive machinery, and any other costs a small construction firm must assume. Unfortunately, this creates untenable situations and can result in financial distress and in some cases, bankruptcy,” added Knight.
“…the Committee is concerned that agencies may be engaging in unfair negotiation strategies with construction contractors. One such tactic involves delaying multiple change order payments until the end of a project to try to leverage a better price. Agencies may also be forcing small businesses to rely on the claims process to litigate their disputes,” said Subcommittee Chairman Trent Kelly.
Kelly continued, “Small businesses do not have the time or resources to litigate claims and often settle for lesser amounts than owed—rather than face thousands of dollars in legal fees for the potential benefit of being paid pennies on the dollar.”
From the Experts
“The concern rests with agencies failing to execute change orders and make payments to contractors for months – even years – at a time. Unsurprisingly, this delay causes serious harm to the project schedule and has a deleterious impact upon payment to the prime and subcontractors, especially small businesses which depend upon that cash flow to remain in business,” said Edward T. DeLisle, Co-Chair of the Federal Contracting Group at Cohen Seglias Pallas Greenhall & Furman PC.
Andy Brown, Vice President of Glen/Mar Construction, Inc., asserted, “When we [small construction contractors] don’t pay our bills our utilities shut off, our cars are repossessed, and our houses are foreclosed. However, when the government fails to pay their bills, small businesses go out of business.”
“A change order, in its simplest form, is an agreement to affect a change to the already executed contract. Often, it is necessitated by added, deleted or simply changed work from the plans and specifications already bid and agreed upon. While a change order typically adds value to the contract in exchange for the changed scope, it also can delete funds, change work without affecting price, and add or subtract time to completion of the work,” said E. Colette Nelson, Chief Advocacy Officer at the American Subcontractors Association, Inc.
Small Business Legislative Actions
Earlier this week, Small Business Committee Member Brian Fitzpatrick introduced H.R. 2594 the Small Business Payment for Performance Act of 2017 to ensure that small business federal contractors get paid in a timely manner for change orders. On May 4th, Small Business Committee Member Don Bacon introduced H.R. 2350 the Small Business Know Before You Bid Construction Transparency Act to create transparency by requiring agencies provide notice to prospective contractors regarding their change order policies and processes.Read More
WASHINGTON – House Small Business Committee Member Rep. Brian Fitzpatrick (R-PA) introduced H.R. 2594 the Small Business Payment for Performance Act to ensure small business federal contractors get paid in a timely manner for change orders.
Specifically, the legislation allows contractors to submit a request for equitable adjustment (REA) - or an increase in fee - to the agency. The contractor may then bill the agency for any actual change order work completed, while the REA is pending. Once the agency receives the REA, it must pay 50% of the billed amount immediately to offset extra costs. Currently, small businesses complete change orders without this protection.
“For small businesses, federal contracts can lead to good jobs, but can also result in many headaches. While businesses regularly deal with change orders in the private sector, contractors and subcontractors on federal construction projects are often forced to bear a financial burden by the slow process of approval. Some federal agencies routinely delay the approval process until the end of the project. That isn’t fair,” said Fitzpatrick. “The Small Business Payment for Performance Act stands up for small businesses by requiring federal agencies to make interim partial payments to contractors, allowing them to pay their own bills without being delayed until the end of the project. It’s common sense.”
“When federal agencies request unexpected work, it often puts the burden of financing the change orders on the small business – including paying their employees, buying supplies and even paying taxes. We need to ensure small business owners won’t be shackled with extra financial burdens while completing a project, and I appreciate Rep. Fitzpatrick’s leadership on this very important legislation,” said House Small Business Committee Chairman Steve Chabot.
Joining Rep. Fitzpatrick as original cosponsors are Rep. Steve Knight (R-CA), Chairman of the Contracting and Workforce Subcommittee, and Rep. Stephanie Murphy (D-FL), Ranking Member of the Contracting and Workforce Subcommittee.
WASHINGTON – Today, the House Small Business Committee heard from the Small Business Administration (SBA) about its ongoing efforts to help small businesses participate in the international marketplace. Peter Cazamias, the Associate Administration of the Office of International Trade, testified on behalf of the SBA.
“There is no question that foreign markets hold incredible opportunities for America’s small businesses. Ninety-five percent of all consumers live outside the borders of the United States, and yet, only one percent of United States small businesses actually export—about 300,000 of them,” said House Small Business Committee Chairman Steve Chabot.
“If we want to unleash America’s most significant economic force, then we must make it easier for small businesses to participate in the global marketplace,” added Chairman Chabot.
Accomplishments and Challenges at the SBA’s Office of International Trade
“Today, among our over 28 million U.S. small businesses, less than 5% can claim the title of ‘exporter.’ The Office of International Trade is charged, by statute, to improve upon this number. Its stated mission involves: increasing the number of U.S. small businesses that export, and increasing the volume of exports by U.S. small businesses,” said Peter Cazamias, Associate Administrator of the Office of International Trade at the SBA.
On Wednesday, May 17, 2017 at 11:00 a.m., the Committee on Small Business will meet in Room 2360 of the Rayburn House Office Building for the purpose of examining the United States Small Business Administration’s (SBA) 7(a) Loan Program. As a way to review the program’s ability to help creditworthy small businesses obtain capital, this hearing will offer Members of the Committee the opportunity to hear from SBA officials directly involved in administering the program.
1. Hearing Notice
2. Witness List
3. Hearing Memo
4. Opening Statement
Ms. Linda Rusche
Director, Office of Credit Risk Management
Office of Capital Access
United States Small Business Administration
Mr. William Manger
Office of Capital Access
United States Small Business Administration
WASHINGTON— Officials from the Small Business Administration (SBA) told members of the House Small Business Committee today that they are working diligently to make sure small businesses can get the capital they need to grow their companies while conducting proper oversight of the 7(a) loan program, SBA’s most common loan program, to maintain a zero subsidy cost to the taxpayer.
“As the 7(a) Program grows in terms of loan volume, loan amount, and the Congressionally-authorized loan limit, we owe it to the taxpayers and the small businesses involved to conduct vigilant oversight. We have to make sure that American small businesses who are creditworthy but cannot obtain capital elsewhere, remain the priority,” said House Small Business Committee Chairman Steve Chabot.
SBA’s 7(a) Loan Program: A Detailed Review
“SBA is particularly interested in balancing the growing credit needs of America’s small businesses with prudent lending, always ensuring that we are meeting the requirements of our mission as authorized by the Small Business Act and the Small Business Investment Act,” said Linda Rusche, Director of the Office of Credit Risk Management at the Office of Capital Access at SBA.
“SBA also continues in active discussions with primary federal regulators on such topics as information sharing and vendor management. Through exchange of information we can bring improved oversight and monitoring to our activities and theirs, minimizing duplication and burden,” noted Rusche.
“It is of paramount importance to me and our agency that our 7(a) and 504 flagship programs continue to operate at zero subsidy and remain a great deal for taxpayers. As we look to refine the programs within the Office of Capital Access – the continued zero subsidy status of our programs will absolutely be a major priority for this Administration,” said William Manger, Associate Administrator at the Office of Capital Access at SBA.
This hearing was a follow up to the House Small Business Subcommittee hearing held in March: An Overview of SBA’s 7(a) Loan Program.
WASHINGTON – House Small Business Committee Chairman Steve Chabot (R-OH) sent a letter yesterday to the Honorable Gene Dodaro, Comptroller General of the United States at the Government Accountability Office (GAO) requesting he examine the Small Business Administration’s (SBA) Office of International Trade’s (OIT) State Trade and Export Promotion (STEP) Grant Program.
“Because it is a grant-making program, the Committee wants to ensure that taxpayer-funded grants are being spent appropriately. In that vein, the Committee has concerns that SBA officials may be misusing funds for international travel under the banner of the agencies export promotion activities,” said House Small Business Committee Chairman Steve Chabot.
The full text of the letter can be found HERE.
Wall Street Journal: White House Closes a Health-Care Enrollment Option
“Our goal is to reduce ACA burdens on consumers and small businesses and make it easier for them to purchase coverage,” Seema Verma, the administrator of the Centers for Medicare and Medicaid Services, said in a statement.
To read the full WSJ article, click HERE.
The House Small Business Committee has been working to increase health care options for small businesses since Obamacare placed unnecessary burdens on them.
In 2015, House Small Business Committee Chairman Chabot sent a letter to Health and Human Services (HHS) Secretary Sylvia Burwell requesting answers after the agency sent incorrect tax information to 800,000 Americans and affected many small businesses in the process.
CINCINNATI—House Small Business Committee Chairman Steve Chabot (R-Ohio) visited the Ohio SBDC this week at the Greater Cincinnati Urban League – Union Institute and University. The event was held to hear more about how the program operates and the effect it’s had on small businesses in the community.
“SBDCs are an important resource for small businesses and entrepreneurs, and we’re lucky to have them in the Cincinnati region. From credit information to business plan advice this program is here to help start-ups get on their feet, and to help small businesses continue to grow,” said Chairman Steve Chabot.
The SBDC program is the largest Entrepreneurial Development resource within the SBA.
CINCINNATI—House Small Business Committee Chairman Steve Chabot (R-Ohio) met with members of Cincinnati’s Minority Business Accelerator at a roundtable discussion this week. The event was a follow-up to the May 3rd hearing of the Small Business Committee, Empowering Small Businesses: The Accelerator Model.
“Last week at the Small Business Committee, we heard from entrepreneurs from across the United States who are using their resources and knowledge of business to help other entrepreneurs succeed.
“This week we continued the conversation and brought what we know about business accelerators full circle: entrepreneurs helping other entrepreneurs leads to success and creates new jobs in our communities. The Minority Business Accelerator is a shining example of this,” said Chairman Steve Chabot.
Chairman Chabot led the discussion with Darrin Redus, who testified on behalf of Cincinnati’s Minority Business Accelerator at the May 3rd hearing.
The Committee on Small Business and the Committee on Science, Space, and Technology are interested in collaborating on legislation making minor adjustments and improvements to the programs in 2017. The objectives of these initiatives include expansion of commercialization of federally-funded small business research and development, stimulation of technological innovation in the small business sector, and increased use of this community to meet the government’s diverse research and development needs. Government and private sector witnesses will discuss the programs and suggest potential improvements to help stimulate commercialization rates, modify reporting requirements that improve data collection, and ensure agencies are utilizing all of the tools available to help transition SBIR and STTR technology into larger contracts.Hearing Documents
Mr. Joe Shepard
Associate Administrator, Office of Investment and Innovation
United States Small Business Administration
Mr. John Neumann
Director, Natural Resources and Environment
United States Government Accountability Office
Mr. John Clanton
Chief Executive Officer
College Station, Texas
John S. Langford, Ph.D.
Chairman and CEO
Aurora Flight Sciences Corporation
Mr. Ron Shroder
Frontier Technologies, Inc.
Ms. Angela M. Albán
President and CEO
Winter Park, FL
Clinton T. Rubin, Ph.D.
SUNY Distinguished Professor and Chair, Department of Biomedical Engineering
Director, Center for Biotechnology
Stony Brook University
WASHINGTON -- House Small Business Committee Chairman Steve Chabot (R-Ohio) has the following statement regarding House passage of H.R. 1628:
The Committee on Small Business will meet for a hearing titled, “Empowering Small Businesses: The Accelerator Model.” The hearing is scheduled to begin at 11:00 A.M. on Wednesday, May 3, 2017 in Room 2360 of the Rayburn House Office Building.
The hearing will examine how business accelerators help entrepreneurs, startups, and small businesses grow and create jobs, while also offering Members of the Committee the opportunity to hear from organizations that are directly involved in offering private sector resources to small businesses.
The Committee on Small Business will meet for a hearing titled, “Storm Watch: Making Sure SBA’s Disaster Loan Program is Prepared.” The hearing is scheduled to begin at 11:00 A.M. on Wednesday, April 26, 2017 in Room 2360 of the Rayburn House Office Building.
The Committee on Small Business Subcommittee on Contracting and Workforce will meet for a hearing titled, “SBA’s Entrepreneurial Development Programs: Resources to Assist Small Businesses.” The hearing is scheduled to begin at 10:00 A.M. on March 30, 2017 in Room 2360 of the Rayburn House Office Building.
The hearing will examine the United States Small Business Administration’s (SBA) Entrepreneurial Development (ED) programs and offer Members of the Subcommittee the opportunity to review the major technical assistance programs, along with the offices at SBA charged with overseeing the programs.
Mr. Joseph C. Sharpe, Jr.
Director, National Veterans Employment & Education Division
The American Legion