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SMALL BUSINESS OUTREACH CONFERENCE

Good morning. Thank you for that kind introduction, Glenn.

First of all, let me say I am deeply honored to have been chosen by President Bush to be

the Chief Financial Officer of the U.S. Department of Education. I am equally honored

to be a part of the Senior Leadership team at the Department of Education that is working

with Secretary Paige, you and your colleagues around the country to implement HR 1, the

No Child Left Behind Act. I believe this is the most important piece of education reform

legislation in our country in the last several decades.

Most Americans do not know that the Department of Education, which has the smallest

number of employees of any Cabinet agency, has the third largest discretionary budget,

behind only the Departments of Defense and Health and Human Services (our

discretionary budget for FY 04 is $55.1 billion and $57 billion requested for FY 05). We

are also one of the largest banks in the world, with a student loan portfolio of over $270

billion dollars, issued to 22 million borrowers.

The Department's core business functions include:

• Leadership in education;

• Grants to support state and local reforms to strengthen teaching and learning and
prepare students for citizenship, employment in a changing economy, and lifelong
learning;

• Student loans and grants to help pay postsecondary education costs;

• Grants for literacy, employment and self-sufficiency training for adults;

• Monitoring and enforcement of civil rights for recipients of federal education funds;
and

• Support for statistics, research, development, evaluation and dissemination of

To support these activities, the Department administers a budget that consists of $1.2

billion in administrative expenses. The Department manages its workload by automating

and streamlining functions, implementing management improvements and utilizing

contractor support to augment the workforce. The Department uses 1.6 contractor staff

for every employee. A growing number of these contractors will come from small and

small disadvantaged businesses.

You ladies and gentlemen have joined us at this conference from communities around the

country, and I know that each of you plays some level of leadership in the parts of the

United States from which you have journeyed.

I therefore want to ask you to support the No Child Left Behind Act because it’s good for

our kids and it’s good for your businesses.

In any discussion of public education in the U.S., there are several issues on which I

believe most people will agree.

First, African Americans, Hispanics and other under privileged youngsters score

significantly lower on math and reading assessment tools than do their peers in the general

population. Now this is not to say that some of these youngsters don’t score at the very

top of their peer group, but in general they score lower.

Second, if we look at the performance of our 12th graders on math and science assessment

tools, our kids - all of our kids not just minorities - score lower on math and science
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assessment tools than do their peers in the other western industrialized countries. Indeed,

they score lower than their peers in some non-industrialized countries.

If we look at the performance of our high school graduates, far too many of these kids are

not: 1) prepared for meaningful employment, 2) are not prepared to enter a college

academic program, 3) may be reading at an 8th grade level and 4) are not even prepared to

enter our military.

And finally, if we look at the cost of public education, adjusted for inflation, we have a

cost curve that is increasing at 35 or 40 percent and a performance curve based on NAEP

scores that is virtually flat.

National report cards show that, despite the fact we’ve spent trillions of state, federal and

local tax dollars since 1965, we still have:

• 2 out of 3 fourth graders who can’t read proficiently (67%)

• 7 out of 10 inner-city and rural fourth graders who can’t read at the most basic

level (70%)
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We will close the achievement gap by implementing HR1 with its four pillars of

accountability, parental options, flexibility and research-based instruction.

This law will help provide the well-trained work force that you and the country need to

maintain our world leadership.

As you may know, the number and size of bundled contracts within the executive branch

had reached record levels during the last administration. Although contract bundling can

serve a useful purpose, the effect of this increase in contract bundling over the past ten

years cannot be underestimated. Not only are substantially fewer small businesses

receiving federal contracts, but the federal government is suffering from a reduced

supplier base. American small businesses bring innovation, creativity, competition and

lower costs to the federal table. When these businesses are excluded from federal

opportunities through contract bundling, agencies such as the Department of Education,

small businesses, and the taxpayer lose.

On March 19, 2002, the President unveiled a Small Business Agenda that proposed

several substantive steps toward creating a dynamic environment where small businesses
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and entrepreneurs can flourish. The plan included new tax incentives, health care

options, and a reduction in regulatory barriers. And for those small businesses seeking to

do business with the federal government, the President announced several proposals to

improve the access of small businesses to federal contracting opportunities. Specifically,

the President called upon the Office of Management and Budget (OMB) to prepare a

strategy for unbundling contracts.

In late March 2002, the Office of Federal Procurement Policy (OFPP), within OMB,

created an interagency working group to develop strategies for unbundling contracts.

This group met on many occasions during the summer and early fall of 2002.

OMB and the interagency working group sought significant public comment. On May 6,

2002, OMB issued a notice in the Federal Register requesting public comments and

received 27 public comments on contract bundling and issues related to the access of

small businesses to federal contracting opportunities. On June 14, 2002, OMB held a

public meeting where interested parties were given an opportunity to express their views.

Fourteen individuals made presentations at that public meeting.

Comments received from the public, both in writing and at the public meeting, were

considered in developing the following Executive Branch actions related to contract

bundling:

1. Ensure accountability of senior agency management for improving contracting

opportunities for small business;

2. Ensure timely and accurate reporting of contract bundling information through

the President’s Management Council;

3. Require contract bundling reviews for task and delivery orders under multiple

award contract vehicles;

4. Require agency review of proposed acquisitions above specified thresholds

for unnecessary and unjustified contract bundling;

5. Require identification of alternative acquisition strategies for the proposed

bundling of contracts above specified thresholds and written justification

when alternatives involving less bundling are not used;

6. Mitigate the effects of contract bundling by strengthening compliance with

subcontracting plans;
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7. Mitigate the effects of contract bundling by facilitating the development of

small business teams and joint ventures;

8. Identify best practices for maximizing small business opportunities;

9. Dedicate agency Offices of Small and Disadvantaged Business Utilization

(OSDBUs) to the President’s Small Business Agenda.

As part of OMB’s strategy, each federal agency is required to provide implementation

strategies for unbundling contracts and report quarterly to OMB through the President’s

Management Council on its progress.

About one year ago, consistent with the action plan OMB required each Executive

Branch agency to implement, the Department’s Chief Operating Officer at the time,

Deputy Secretary Bill Hansen, appointed me to lead the Department’s unbundling

initiative. Secretary Paige, Bill Hansen (during his tenure), and I wanted very aggressive

implementation of this new endeavor.

I believe I am somewhat uniquely qualified to lead this initiative because for most of the

past 28 years, I have been an entrepreneur and small businessman, and I am a graduate of
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the SBA 8(a) program, and spent many years as a consultant under SBA’s 7(J) program. I

also once had a contract to investigate “sham” minority businesses, so I can fully

appreciate the obstacles you face.

This conference is one of our many actions to comply with the President’s directive.