MSGI Clients Participate in House Small Business Roundtable to Discuss Supply Chain Issues in the Aftermath of COVID-19

Small businesses face increasing supply chain challenges due to the ongoing impacts of COVID-19. Highlighting this important issue, the bipartisan House Small Business Caucus held a roundtable with small business leaders to discuss their challenges and brainstorm solutions. 

MSGI clients Jackie Wilson, CEO of American Fashion Network; Chris Oliver, GovEvolve member and President of ID Technologies; Qin Li, CEO of Soliel LLC; and Rosemary Swierk, President of Direct Steel and Construction shared their experiences with Caucus Co-Chairs, Rep. Chris Pappas (D-NH) and Rep. Kevin Hern (R-OK). In addition, over 35 Congressional offices participated in the robust discussion. 

Issues of price increases, scarcity of raw materials, and intensified security risks were at the center of the discussion. Recommendations from the panel included adopting federal initiatives to buy products made in America, raising small business contracting sole source limits, establishing a NAICS code for IT resellers, and allowing price adjustments to federal contracts to accommodate the costs associated with price increases for goods and services.

We are grateful for the enthusiasm of the Co-Chairs to confront the challenges facing small businesses, and we look forward to continued collaboration in the future. 

Bipartisan Tone Continues in Guzman Nomination Hearing

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.  

Hearing Reveals Clues for Additional Small Business Relief

By Elizabeth Sullivan

The Senate Small Business Committee had a never-before-seen visitor yesterday: Treasury Secretary Steven Mnuchin. He joined Small Business Administration (SBA) Administrator Jovita Carranza in testifying before the Committee on the small business programs included in the CARES Act. The hearing revealed a few interesting pieces of information about how the programs have been run, as well as what the future may hold. Here were our team’s top takeaways.

 

1.    Small businesses need additional relief. While we have heard this feedback from small business owners countless times over the past month – we weren’t quite sure Congress got the message. Despite the rule changes made in H.R. 7010, many businesses that received Paycheck Protection Program (PPP) dollars are about to reach the end of their forgiveness portion. Meaning, although there was an extension of the forgiveness timeline to 24 weeks, many businesses planned for the 8-weeks and are about to/have reached the end of their funds. Therefore, another round of layoffs is to be expected this month, as many do not have the cashflow to keep their employees on the payroll. This issue was echoed by Senators on both sides of the aisle during the hearing and even the Treasury Secretary said that yes, there was going to need to be some type of additional support.

When asked by Senator Kennedy (R-LA) if relief for investors such as capital gains tax changes were on the table, the Treasury Secretary gave a lukewarm response and echoed the need to focus on getting people back to work. When further asked if he were “king for a day” what he would do moving forward, Mnuchin said, “I definitely think we are going to need another bipartisan legislation to put more money into the economy.” He suggested three things could be on the table: another round of direct payments to individuals, fixing unemployment, and more money to encourage businesses to re-hire, with targeted efforts to industries that are most impacted by COVID-19 such as  hospitality and tourism.

 

2.  Targeted relief is needed for minority-owned and women-owned businesses. Senator Maria Cantwell (D-WA) and Chair Marco Rubio (R-FL) were among many to call for targeted relief to underserved communities who traditionally struggle to access capital and resources. Senator Cantwell sent a letter to both witnesses, pushing for prioritization of these communities and smaller (10 or fewer employees) businesses in existing relief loans and any future  COVID-19-related assistance. 

 

Senior Committee Democrats Ranking Member Cardin (MD), Senator Coons (DE) and Senator Shaheen (NH) announced their intention to introduce the Prioritized Paycheck Protection Program (P4) Act. The bill authorizes new lending under the PPP to small businesses with 100 employees or less, including sole proprietorships and the self-employed. In order to be eligible, businesses must have already depleted an initial PPP loan or be on pace to exhaust the funding and must demonstrate a revenue loss of 50% or more due to the COVID-19 pandemic. This is a step in the right direction.

 

3.  SBA’s abrupt changes to the EIDL program were not random. SBA Administrator Carranza revealed the math behind the $1,000 per employee cap for Economic Injury Disaster Loan (EIDL) advances and $150,000 loan cap for EIDL loans. Based on the number of applications, SBA calculated that in order to lend to all applicants, these limits were necessary.  Ranking Member Cardin (D-MD) and others pushed her to  explain why she didn’t tell Congress more money was needed to be appropriated. She said in the hearing that all 5.4 million applications will be in the EIDL loan portal by next week. For context, a loan officer in the EIDL program typically processed 3-5 loans a day and now handles 50+ loans a day. “Into the portal” doesn’t necessarily mean all the loans will be approved by next week, but they will be out of the EIDL purgatory and processing will begin. Stay tuned.

 

4.  Changing PPP rules to allow small business owners with criminal records to apply for loans could be coming soon. Current rules on the PPP program from the Treasury Department prohibit business owners with felony convictions or who are currently on parole/probation from receiving PPP loans. In his questioning, Senator Booker (D-NJ) asked if the Secretary would be open to changing the program’s rules. The Senator highlighted his legislation, which has bipartisan support and will remove the ban on individuals with non-financial fraud felony convictions. The Treasury Secretary said rules scaling back the criminal conviction from the past five years to the past three years were going to be published shortly. However, Secretary Mnuchin also indicated that if there was bipartisan consensus, he would open to the change proposed by Senator Booker and others. 

 

All of the Senators gave accolades to the agency leaders and their staffs for implementing these unprecedented small business loan programs. They pushed for more timely responses from the SBA to the Committee. So, the question that remains – will there be further action: what will it look like and when? Committee Members expressed a sense of urgency for additional small business relief. 

 

Our suggestion – make this bill about relief and recovery. Put policy changes in place that will also have a lasting effect on the economy. For example, changes to sole source rules for individually-owned 8(a), WOSBs, SDVOSBs and HUBZone companies that have been passed in the House and were included in the draft Senate SBA reauthorization bill would get help contracts get into the hands of small businesses during recovery and into the future. Additionally, allowing equity investment in 8(a) and WOSB firms could give them a boost of capital to remain sustainable. The clock is ticking, and small businesses need these bipartisan solutions as soon as possible. 

COVID-19 Fatigue – What About All the Other Issues

By Ann Sullivan

WIPP Works in Washington June 2020

The newness of COVID-19 has worn off and, although little attention has been paid to other issues Congress must address, they haven’t gone away. Although congressional staff and Members are working remotely, business is still being conducted. I would be remiss if I did not mention the potential for social justice reform, due to protests over the weekend. However, there has been no federal action as of this writing. Here’s what to expect:

Funding the Government for FY21.The government calendar for funding has not changed. The fiscal year still ends on September 30 and Congress must pass appropriations legislation to continue to fund the government. Although the schedule has been pushed back due to the pandemic, House leadership says it plans to pass all of its appropriations bills by August. As usual, the Senate schedule is less ambitious, but the Senate Appropriations Committee plans to start deliberations in late June. 

Authorizing Defense Department Programs. The National Defense Authorization Act (NDAA) guides every defense program and sets priorities for the following fiscal year. It doesn’t fund the programs—it leaves that to the appropriators but authorizes and recommends the funding levels. Often Included in this bill are changes to small business contracting programs that are deemed important to the defense supplier base. The Senate Armed Services Committee expects to have completed its bill by the end of June/early July. The House Armed Services Committee schedule follows roughly the same timeline.

Infrastructure Funding. In addition to roads, trains and ships, water infrastructure is also on the list to fund and authorize. Although it was initially thought to be a massive recovery initiative, it now appears the Congress may tackle this piece by piece. Either way, a number of the programs expire unless Congress takes action by September 30. 

Tax Extenders. Tax deductions and credits have expiration dates. Unless Congress extends them, they expire. Action is necessary to keep them intact and the list of expiring tax cuts since 2018 is pretty long. The Joint Tax Committee publishes the list here.

Although COVID-19 related actions will continue to be front and center for the Congress, it cannot neglect its other duties. Let’s not forget that there is an election coming in November which includes the entire House of Representatives, 1/3 of the Senate and the Presidency. The Congress, adapting to the ban of large group gatherings, will spend a significant amount of time campaigning for the November elections. In the end, the government still needs to be funded, the need for a strong defense and services taxpayers expect from their government do not go away in a pandemic. Despite the public disheartening partisan rhetoric, the Congress will quietly work together to get things done.  

Opportunities in the Face of Challenge

By Elizabeth Sullivan 

While many segments of the economy are experiencing unprecedented loss, one sector of the economy, the federal government, is rapidly increasing its spending to combat the COVID-19 virus. Reported spending obligations for COVID-19 as of May 4 are about $8.5 billion and are expected to increase in the coming weeks (note: every time the numbers are updated, the previous link will reflect those updates). Here are a few of the numbers you should be aware of as a federal contractor.

Agencies flowing the most dollars to small businesses are the Departments of Veterans Affairs (VA), Small Business Administration (SBA), Health and Human Services (HHS), Homeland Security (DHS) and Justice (DOJ). Veterans Affairs has awarded over $580 million, while HHS and SBA are tied for second with $417 million. For the Department of Justice – of the total dollars spent so far on coronavirus, 63.5% was awarded to small businesses. That is a little over $39 million of the total $62 million spent as of May 4, 2020. 

Dollars are also being awarded to women-owned small businesses (WOSBs). Across all agencies, since March, over $490 million has been awarded to WOSBs to assist with COVID-19 relief. Just for some context – this number has exceeded the total dollars awarded for WOSBs in FY2018, which was $473.1 million. So, in a matter of months, the dollars awarded have exceeded an entire fiscal year’s previous spend. This increase has been across small business programs – service-disabled veteran-owned small businesses (SDVOSBs) also have been awarded $493 million and HUBZone companies $90 million. 

A few examples of how what federal agencies are pursuing COVID-19 assistance include HHS refocusing its research contracts to seek assistance with COVID-19 and the Army is seeking new technology to help prevent, treat and manage the coronavirus.The SBA is on a hiring spree given their new responsibility to process $620 billion in loans to small businesses.

So, how can you take advantage of this new spending? In addition to working with your existing federal customers, there are two other ways to showcase your capabilities to assist with COVID-19. The first is to sign up on the Disaster Response Registry in SAM, where you can submit your COVID-19 related capability statements and product offerings. This registry is used agency-wide. The second is to submit inquiries to the DHS Procurement Action Innovative Response (PAIR) Team. DHS created this in response to the surge of incoming industry offers of help and innovative ideas to support the fight against COVID-19. 

By the time you read this, more dollars will have been spent. Make sure you are taking advantage of these opportunities now. 

What’s Next?

By Ann Sullivan, WIPP Chief Advocate

WIPP Works in Washington May 2020

COVID-19 relief took the form of four bills passed by Congress in the last two months. All of this is centered around relief for workers and employers hit by COVID-19, including small business loan and forgiveness programs, aid to hospitals and money for test deployment, employer required sick leave, and direct payments to Americans. 

A staggering $2 trillion was spent in these four bills and the Federal Reserve Bank spent an estimated additional $4 trillion on relief. We learned the demand from small businesses for the Paycheck Protection Program (PPP) and the Economic Injury Disaster loans (EIDL) far exceeded available funding. Everyone is curious about the direction of future aid for obvious reasons. What’s going to be in the next bill or is there going to be a next bill?  

My best guess is that the next Congressional bill will be a hybrid of relief and recovery. Much is left to do on the relief side and refinement of the programs put in place by previous legislation. When programs are drafted in a hurry, unexpected issues arise that need to be addressed.  Evidence is the number of guidance documents issued by the Small Business Administration (SBA) and the Treasury/IRS surrounding small business loan programs. For federal contractors, implementation of Section 3610 relief has generated extensive documentation. The next bill will most certainly contain changes to existing programs.

Is Congress going to deliver additional relief by providing additional funding for the PPP or EIDL programs? Senate Majority Leader Mitch McConnell (R-KY) suggested that Congress slow down future relief, saying "until we can begin to open up the economy, we can’t spend enough money to solve the problem." Relief to state and localities has yet to materialize but is widely considered to be a major part of any future bill.

As Governors start loosening restrictions on stay-at-home orders and industry starts to slowly reopen, the focus is slowly shifting toward economic recovery. Congressional leaders are looking at successful programs deployed during the Great Recession (2007-2009) that could be helpful during this pandemic. Another much talked about idea is a stimulus, such as a massive infrastructure program. This would not only cover shovel ready construction projects, but broadband, telecommunications and technology infrastructure. Also bubbling up are tax deductions and credits for businesses who will need relief for many months to come. Businesses are asking for special liability restrictions due to COVID-19 in order to feel comfortable bringing employees back to work and opening their doors to consumers. The Senate has signaled this as a priority, but their House counterparts are not so sure. Lastly, the federal marketplace offers a tremendous opportunity for small business recovery, but the rules need to change to allow more dollars to flow to these businesses.

The “What’s Next” list is overwhelming because the need is so great. Our advocacy team is dedicated to ensuring women business owners have a voice in all of these deliberations. That’s the mission of WIPP – we intend on keeping it that way.