Between follow-up to the pandemic, the Department of Defense’s need to expand the defense industrial base and the administration’s desire to foster new businesses, it’s a busy time for the Small Business Administration. For an update, the Federal Drive with Tom Temin spoke with SBA Administrator Isabella Guzman.

Interview transcript:

Tom Temin
Just by way of background, you yourself have a small business family that you came from, isn’t that correct?

Isabella Guzman
That’s right, I was raised in a small business family working with my family’s veterinary hospitals. And of course, I’ve started my own businesses, as well, as advised founders. And so I’ve been immersed in small businesses for most of my life.

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Tom Temin
And in the federal sense, federal contracting is a complicated matter. And there are lots of rules now, in the FAR under development, with respect to carbon footprint reporting. It’s hard to tell whether there will be relief for inflation under say, DoD contracts, it’s not clear there’s money there. It looks a little cloudy. What’s your best word to companies that are small, that would like to get into federal contracting, looking at this really daunting pathway?

Isabella Guzman
Well, the overarching message that I send to small businesses who want to do business with the largest buyer in the world, is that the government needs to build up our industrial base, we need you to be able to provide the products and services to fulfill the missions of our agencies. And we’ve seen a decline in the number of small business contractors over the past 10 years. And the Biden-Harris administration is really committed to reversing that and making sure that, small businesses can participate in federal contracting. Which is why you’ve seen a whole of government approach towards equity and procurement as a priority and making sure that in yours too. All of our small businesses, we focus on the rules and the commitments at the agency level to ensure that small businesses can participate.

Tom Temin
Because, sometimes, the rules, like for cost accounting and something trip up even the big, huge giant, federal contractors. And they get different interpretations of the rules in one court venue versus another. And I’m just wondering, is there any gambit or any discuss that issue of clearing out some of the brush of regulation about procurement, that could make it easier?

Isabella Guzman
Yes, of course, SBA has worked hard to be an advocate for small businesses across the federal procurement landscape. And I think, importantly, what we offer as well to the small businesses is, a network of centers who can provide support as a start from the process of the very beginning of getting certified and trying to develop a business development strategy. But you’re right, the challenges around ensuring that, not only your compliance, your accounting. Your entire back office is set up is really a critical stage for a small business to develop. And that includes, of course, having the legal know how to be able to bid and read a contract. And so those things are challenging for small businesses, clearly, who don’t necessarily have that full and large back office to support them. So SBA, of course, has its business opportunity specialists, as well as procurement center representatives that are focused on helping small businesses access contracts. But, clearly, the other components, through our small business development centers are, veteran business outreach centers or the grantees that participate in SBA’s 7(j) grants that focus on helping support. For example, in particular, the 8(a) Small Disadvantaged Businesses or prospective. 8(a) is an important component of our outreach and support and technical assistance that we provide to small businesses.

Tom Temin
Which is a bigger program, the 7(a) or the 7(j) loans?

Isabella Guzman
The 7(a) loans, of course, is our large signature lending program. And one other component of federal procurement is that, small business, they definitely need capital in order to deliver and be able to even go after these contracts. So the working capital loans with the 7(a) program, are really critical for small businesses, as are the bonding programs that we have at the SBA. And just this past year, with the Department of Transportation, we rolled out an initiative to focus on ensuring that our SBIC’s, our Small Business Investment Company licensees, are able to support the contractors working on building our infrastructure and making sure that they have an opportunity to participate in the funding that they need. So we’re really trying to deploy the full suite of SBA’s capital access programs across the board, to ensure that small businesses can stay competitive in this space. And, clearly, as I said earlier, competition and innovation come from small businesses and we want to make sure that they are strong and able to participate.

Tom Temin
We’re speaking with Isabella Guzman, she is the administrator of the Small Business Administration. Just the other day, you mentioned, I think in the Hill, that minority businesses, in general, not just federal contracting ones, have often a lack of access to capital. How is that? What is the mechanism for that at this day and age?

Isabella Guzman
It’s been a persistent issue under investment in our underserved communities, as a big loss to our economy. There’s been multiple studies on the total economic impact, because if they were able to produce the revenues or the employment numbers of their peers, your economy would be stronger. Morgan Stanley estimates it, as a $4.4 trillion loss for lack of investment in women and people of color, in particular. So, at the SBA, of course, we’re trying to fill gaps in the marketplace and provide loans for those who are unable to access it through traditional markets. And so we’ve been working really diligently, during the Biden-Harris administration, to solve those gaps. Early on, President Biden has been committed, to ensuring that the smallest of the small and those who are left out of early rounds of relief, were able to access capital. And so during 2021, we really leaned into ensuring that we did the proper outreach and changed our policies within PPP and COVID. [Economic Injury Disaster Loan (EIDL)] expanded that program, to make sure that we could reach those businesses. And in fact, the [Government Accountability Office (GAO)] study found that, the SBA was able to fill more of those gaps for the underserved communities, including rural communities, to really provide relief to those businesses. And so we’ve taken a lot of the same principles, in terms of access to capital and those successes and reaching more small businesses with PPP and have looked to expand our lending base, the competition in the lending base, as well as, simplified our products, because you needed to have a simple, swift product, with the strong controls, as well as, a broader distribution network in order to reach more of these small businesses. And, of course, the American Rescue Plan was really critical in helping our economy recover as successfully as it has been able to, in terms of job creation and now slowing of inflation the past six months. But we’ve definitely seen that the American Rescue Plan’s Community Navigator Pilot Program. Which expanded our Technical Assistance Network, has also been helpful in ensuring that we could reach and help smallest and small businesses navigate federal resources.

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Tom Temin
And of course, the unfortunate downside of a lot of those COVID related era programs, is the billions of dollars now the GAO has, kind of done, a metasurvey of everything going on of fraudulent loans and so forth. I think the SBA has about five or 600 investigations going right now. Do you have the manpower and both in the IG Office and in your regular auditor function to ensure program integrity, that you can at least find some cases and claw that money back?

Isabella Guzman
I will, clearly, the president has prioritized ensuring that the funds get into the hands of the those that was intended to serve and has prioritized making sure that fraud is addressed, within his administration. And so, SBA has strengthened its ability, clearly, using the scale that we were able to achieve to disperse these loans, we’ve had to continue to maintain those portfolios. And, in addition, put some of the common sense fraud prevention measures back in place. Like the Treasury Do Not Pay database and have focused on combating fraud, changing the the organization’s prioritization of these issues. As well as, implementing some strong controls and processes, as well as, structure within the agency to have a strong progress management framework and aligned with GAO’s recommendations. And so, the SBA’s new scale is, obviously, something that we continue to advocate for additional support, as well as, support for our Office of Inspector General. And that’s has been reflected in previous budgets, as well as, our continued support for those efforts.

Tom Temin
And earlier you mentioned the fact that the number of small businesses doing business with the government has decreased. And yet over the last several years, the government has managed to meet or exceed it’s small business contracting goals. One of the ways I guess, maybe, is the Category Management Program, that operates in DoD and in through [General Services Administration (GSA)] for the civilian agencies. But now, DoD is telling all of its components, that they can get the credits toward category management, even using vehicles that are not category management vehicles. So does that help the cause or hurt the cause? Or what does that all mean? Do you think?

Isabella Guzman
Yes, well, when the whole of government approach to federal procurement, I mentioned earlier. SBA corroborated and leaned in with the White House, as well as other federal agencies, key buying agencies, to ensure that we were implementing policies that would help support small businesses and as well achieve the president’s goal of 15% for Small Disadvantaged Businesses by 2025. We are definitely focused on, of course, helping more in entrance, simplifying certification, SBA just took over the veteran certification, for small businesses to expand across the whole of government from the Veterans Administration. And we’ve focused on simplifying that process, as well as, currently have regulation put forward. It was through proposal and now we’re finalizing it for the 8(a) program. So we are focused on simplifying process on the front end, but the the whole government approach to figuring out how we can ensure that there are more small contracts available for small businesses to to enter, as well as, opportunities for them to participate. And so it’s a question of making sure that, for example, as you mentioned, through category management. We are changing the policies to allow for all socioeconomic disadvantage firms, to be able to access category management vehicles and they’re given automatic tier two level prioritization. Within category management, is a result of changes in the Biden- Harris administration. So we hope that that makes a difference and allowing more contracts, opportunities for our small businesses to participate in. And that’s all of our socioeconomic categories.

Tom Temin
And by the way, I wasn’t aware of the 8(a) proposed rule change, what’s your goal there?

Isabella Guzman
I think across the board, we want to make sure we address concerns in the community, as well as, streamline and simplify as much as possible, while providing strong prudent management. And so, across the board, we’re just trying to make sure that we modernize as much as possible across our certification programs, leveraging technology, to simplify the process, as we have with our new rolled out. That cert, which we believe is the gold standard for certification and continue to do that across the board, so that we can ensure that we’re certifying firms, where the programs exist and that we continue to attract more small businesses for agencies to be able to to deploy and achieve their missions.

Tom Temin
And for the SBA itself, what are your human capital needs? Let’s say, what kind of talent do you need? The agency grew a lot, as a result of pandemic spending.

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Isabella Guzman
We’ve, definitely, tried to prioritize leveraging this moment, where SBA reached an incredible scale with COVID administrative dollars. But, we’ve obviously had to ensure that we have the folks on the technology front, to address modernization across our programs. Whether that be capital or our government contracting or grants management across our entrepreneurial development space. So we have definitely had to step up our game, in terms of our ability to deploy. And my priority has been and aligns with the president’s executive order and customer experience, is ensuring that we are customer centric and technology forward and equitable across our programs. And so, we need to be able to better meet our businesses where they are and not only that, but meet them everywhere that they are. And so we are constantly deploying to make sure that that customer experience at the SBA. From the time they walk through their doors, through the entire processes, is as simple and of a process as possible and supported. As that’s how we’re going to be able to help support small businesses.

Tom Temin
By the way, do you like your job?

Isabella Guzman
I love my job. Of course, I was raised in small businesses. And so it’s a passion area for me. I served previously during the Obama-Biden administration, as deputy chief of staff and senior advisor at the SBA. And so in many ways, I’ve come home and I have a real passion, as do many of the of the employees at the SBA. Very mission focus on helping small businesses do what they do best, which is to create jobs and innovate and build our communities and our neighborhoods and give us the products and services that we all love and depend on. And so, my job is incredible. And the Biden-Harris administration has really laid out a strong economic plan that we’re seeing results from and ensuring that small businesses are part of that vision, is an area of focus that the SBA aims to deliver.

Tom Temin
And when you left after the Obama administration, returned for the Biden. I’m guessing a lot of the same workforce, permanent workforce, career workforce, people were there. Because that’s one of those agencies where, the mission itself kind of keeps people for a very long time.

Isabella Guzman
That’s correct. I’ve been able to return to a family workforce that I’m familiar with some prior prior experience, as well as some new leaders and new employees. And so it’s an incredible team, we were able to check some strong talent, of course, during the pandemic, that has been converted, in some cases to permanent workforce. And so we have a really, it’s been remarkable the work that they’ve done over the last several years. And I, consistently, give them kudos for still running hard after all this time, after the massive $1.2 trillion released that the agency put out. But to continue to stay committed and focused towards implementing the changes and the process improvements across the board to make sure that we can deliver for our small businesses.

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