Evidence of meeting #118 for Government Operations and Estimates in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was contract.
A recording is available from Parliament.
Deputy Associate Administrator, Office of International Trade, U.S. Small Business Administration
That's correct. I think it comes to something like $120 billion.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
I find that's quite a high number.
Can you tell me again about the definitions of small business? How big a contract would have to fit within that cumulative $100 billion?
Deputy Associate Administrator, Office of International Trade, U.S. Small Business Administration
That's where variance comes into play because small businesses are looked at differently based on the national index code of their operations. Based on the industry's standard, a small business can be an enterprise with a revenue of upwards of a three-year average of $6 million or less; or depending on the industry, it can be a business that has 500 or fewer employees, like you see in the airline industry. That would be a small airline. There are different ways that we define small businesses and it's based on industry comparisons and revenue comparisons for industries.
Acting Director, State Trade Expansion Program, Office of International Trade, U.S. Small Business Administration
This is Jim Parker.
I'd like to just add on to what Eugene said.
There are a couple of different ways of defining small. The two broad areas are, we define small by the number of employees, and we also define small by revenue. With the number of employees, you can have as few as about 100 employees and still be considered small, or as many 1,250 employees and still be considered small. Then, on the revenue side, you can be considered small with as little as $750,000 in revenue or as much $20 billion in revenue.
There's a broad range of small. Basically, above small is large. You have large businesses, and below small are considered not competitive with large businesses.
Deputy Associate Administrator, Office of International Trade, U.S. Small Business Administration
But most of our U.S. businesses are considered small. You're almost in the 90-something percentile of U.S. businesses that are small.
Conservative
The Chair Conservative Tom Lukiwski
Thank you very much.
Our next intervention will come from Mr. Jowhari.
You have five minutes, please.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
Thanks to our witnesses.
My name is Majid Jowhari. I'm the member of Parliament for Richmond Hill. It's the northern part of the Toronto area.
We went through a lot of numbers. I'm going to try to summarize, and I have two specific questions. One is more around the definition. The other one is around how you balance between the risk and the reward.
Let me start with the first question. You talked about $500 billion spent annually. You talked about 23% of that going to small businesses. With a track record of three years, you broke down around 5% with women-owned businesses, 3% for disabled vets, 5% for small disadvantaged businesses, 3% for underutilized business, on which we spent a lot of time.
My first question is, can you explain the disabled vets and small disadvantaged businesses? What is it specifically the government is doing in helping small businesses in that area?
Deputy Associate Administrator, Office of International Trade, U.S. Small Business Administration
A disabled vet is a person who has served in the United States military, Coast Guard, or native national service and, during the time of his or her service, was disabled and was therefore discharged as a disabled veteran. We know that they have a very difficult time getting back into the workforce and being employable.
One of the vehicles for economic development in that community is, of course, entrepreneurship and starting small businesses. If we want them to start small businesses, we know that making them a loan may help.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
What types of small businesses do disabled vets usually set up?
Deputy Associate Administrator, Office of International Trade, U.S. Small Business Administration
You name it, they do it—IT, construction—there's nothing a disabled vet can't do. They run the gamut.
We know that giving a contract prolongs the shelf life and life cycle of an entrepreneur.
Liberal
Deputy Associate Administrator, Office of International Trade, U.S. Small Business Administration
A small disadvantaged business may be a business that is what we call a title 16, a minority business. An economically disadvantaged business is one that doesn't have the means, expertise, exposure, or the revenues necessary to be at the same level playing field as most prominent small businesses.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
Okay. I've got two minutes, so I'd like to move on. Thank you.
I'd like to move on to the second question.
You named what I call a number of enablers for the businesses and how you help them such as the working capital, mentorship programs, bonds, securities, and the know-how.
How does the government balance between the risk of granting bonds, securities, and working capital with the possibility of not being able to collect?
Deputy Associate Administrator, Office of International Trade, U.S. Small Business Administration
Well, we have an underwriting practice just like everyone else, but we don't make loans in the federal government. What we do in SBA—and that's a very good question—is we partner with over 7,500 U.S. banks. We will give them a guarantee if they make a loan to the small business community. We will only give them that guarantee if that small business is lacking something: for example, they are lacking the necessary collateral that the conventional bank would use to make that loan, or they're lacking the managerial experience to make that loan.
If there's something in that bank's underwriting requirement and they feel they would not necessarily have made that loan on a commercial level, then the United States SBA will come in and say, “Well, wait a minute.” We're looking at this small business. We're looking at this business plan. We believe this person can do this despite the fact of lack of collateral, or despite the level of experience you're requiring. Maybe your loan is going to have a payout over five years that is too burdensome on there. We'll give you the guarantee if you increase that loan to a seven-to-10 year payout. We do that, but we don't make direct loans.
Conservative
The Chair Conservative Tom Lukiwski
Thank you very much.
We'll now go to Mr. McCauley once again, for five minutes.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Great. Gentlemen, thank you for your information. It's been a pleasure having you with us.
I just want to go back to the simplified contract. How often are you updating it to keep it relevant? Do you find that any of the bureaucracy are trying to go backwards, like a mission creep, or add stuff back into it? One thing we struggle with here, especially with our small business, is the near impossibility of doing business with the government because of the massive RFPs, and requirements, and technicalities. I'm just wondering how you deal with it. How do you keep it from growing back again?
Deputy Associate Administrator, Office of International Trade, U.S. Small Business Administration
I don't know the answer to that. What I will say is that it's been pretty much the same for years. We have never had, really, push-back from anybody to change the amount or to push back on it.
It's been a very good tool that we use. We have employed A-123, which is an enterprise risk assessment product to make sure we are keeping it safe, and we are guarding against possible risks and mitigating where we can, but there's really been no push-back on it.
Conservative
Kelly McCauley Conservative Edmonton West, AB
One thing that a lot of our small businesses are finding, actually even the larger ones, is apparently all of our government contracts require unlimited liability as part of their bids. Do you have any such thing? Do you have a limited liability? How do you do yours? I realize this is a rather broad question.
February 8th, 2018 / 11:45 a.m.
Deputy Associate Administrator, Office of International Trade, U.S. Small Business Administration
Yes, I was going to say that. That would depend. I would not be concerned with that. Depending on the agency, for example the Army Corps of Engineers, that might be a relevant issue for them. That might be a relevant issue for the defence department and the navy, but that might not be one for education or even the SBA, for that matter. It depends on what we're buying and what we're servicing.
That's too broad for me to answer.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Do you have anything like that written into your simplified contract, for the up to $150,000?
Deputy Associate Administrator, Office of International Trade, U.S. Small Business Administration
No. Again that would depend on what we're buying, the liability of that particular product or service.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Great.
On the counselling that you provide as part of your pillars to the small businesses, can you just run us through some of the services you provide? If someone is stuck halfway through filling out their RFP, do you step in and help them with that? Do you help them at the very beginning? Do you just do seminars and walk away? Can you walk us through what counselling services you provide?
Deputy Associate Administrator, Office of International Trade, U.S. Small Business Administration
Well, we have several different counselling services. Let me go over what they all do. First of all, we have umbrella counselling services, throughout universities and colleges across the United States, called small business development centres. They help really small businesses as far as business acumen is concerned, and with everything from business plans, HR issues, to legal—
Conservative
Kelly McCauley Conservative Edmonton West, AB
Sorry, does your department coordinate with the universities and colleges for that?
Deputy Associate Administrator, Office of International Trade, U.S. Small Business Administration
Yes, through SBA, we provide grants to these universities to provide such services. Yes, we do.