The Small Business Watchdog

As the voice of small business in government, Advocacy invites you to post your thoughts on this moderated blog, provided as a forum for the small business community.

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EPA Deputy Administrator Announces Advocacy-Hosted Environmental Roundtable Examining Small Business Implications of Proposed Rules under the Clean Water Act

June 12th, 2014 · 3 Comments

At a Glance:
Who: U.S. Small Business Administration, Office of Advocacy
What: Environmental Roundable on rules proposed by the EPA/Army Corps of Engineers affecting the Clean Water Act
When: Tuesday, June 24, 2014, 9:30 – 11:00 a.m. POSTPONED
Contact: Assistant Chief Counsel Kia Dennis, Kia.Dennis@sba.gov or 202-205-6936

UPDATE: This roundtable has  been postponed, and further details about the new date will be announced soon.

The Office of Advocacy will host an environmental roundtable on Tuesday, June 24, 2014, from 9:30 to 11:00 a.m. to discuss a regulation proposed by the U.S. Army Corps of Engineers (Corps) and the Environmental Protection Agency (EPA). The proposed rule defines the scope of waters protected under the Clean Water Act (CWA).

Advocacy’s upcoming roundtable was announced on June 11 by EPA Deputy Administrator Robert Perciasepe at a hearing held by the House Transportation and Infrastructure Subcommittee on Water Resources and Environment which explored the potential impacts of the proposed changes to the CWA jurisdictional rule.

The June 24 environmental roundtable meeting is open to all interested persons, with the exception of the press, in order to facilitate open and frank discussion about the impacts of the proposed regulation on small entities. The roundtable will feature a presentation of the rule by EPA and Corps representatives and a discussion of small business implications.

Please contact Assistant Chief Counsel Kia Dennis by email at Kia.Dennis@sba.gov or by telephone at 202-205-6936 to learn more about the roundtable or to RSVP.

Background: Under the proposed rule, decisions regarding whether or not a waterbody is subject to the CWA will affect small entities which need to determine whether or not their activities require authorization and/or permits under CWA.

Under the regulations, the term “waters of the United States” would mean:

(1) All waters which are currently used, were used in the past, or may be susceptible to use in interstate or foreign commerce, including all waters which are subject to the ebb and flow of the tide;
(2) All interstate waters, including interstate wetlands;
(3) The territorial seas;
(4) All impoundments of waters as specifically identified in the rule;
(5) All tributaries of waters as specifically identified in the rule;
(6) All waters, including wetlands, adjacent to a water specifically identified in the rule; and
(7) On a case-specific basis, other waters, including wetlands, provided that those waters alone, or in combination with other similarly situated waters, including wetlands, located in the same region, have a significant nexus to a water specifically identified in the rule

Waters that do not meet this definition are not subject to the CWA. There are several programs under the CWA that would be affected by this proposed rule including but not limited to Section 311, oil spill prevention programs; Section 402, which requires permits for pollutant discharges; and Section 404, which covers permits for the placement of dredged or fill material in waters of the United States. Comments on the proposed rule are due by October 20, 2014.

→ 3 CommentsTags: Regulatory Policy

May 2014 Issue of The Small Business Advocate Released

May 30th, 2014 · Comments Off

The May 2014 issue of The Small Business Advocate is a special conference edition that highlights the events from the Office of Advocacy’s Region VI Symposium which took place earlier this month in New Orleans. The symposium brought together members of Advocacy with small business leaders and entrepreneurs from around Region VI (Arkansas, Louisiana, New Mexico, Oklahoma and Texas). The diverse participants shared their big ideas, best practices and barriers with Advocacy staff to take back to Washington, D.C. The newsletter includes details from presentations given by small business leaders, breakout sessions and site visits.

Articles in this issue include:

  • New Orleans Symposium Provides Valuable Lessons on Region VI Challenges and Successes, 1
  • Idea Village Connects the Local Community with Entrepreneurs, 2
  • Message from the Chief Counsel: The Gumbo of Entrepreneurship, 3
  • Advocacy Staff Dialogues With Small Business Stakeholders in Breakout Sessions, 4
  • Fostering Regional Innovation Accelerators, 5
  • Understanding the Waterways of Southeast Louisiana, 6
  • Prudhomme’s Magic Seasoning Blends: Small Business, Big Aspirations, 6
  • Historic Theater Owners Share Concerns over Regulations, 7
  • NASA’s Michoud Assembly Facility Puts Its Vast Facility to Good Use, 7

The May 2014 issue of The Small Business Advocate can be accessed on Advocacy’s web site here: http://www.sba.gov/content/small-business-advocate-may-2014

May 2014 Advocate

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New Research Report Examines Declining Self-Employment Rate Among Baby Boomers

May 2nd, 2014 · Comments Off

A new report released by the Office of Advocacy examines the decline of the self-employment rate among baby boomers nearing retirement. Authored by Bradley T. Helm, the report entitled “Understanding Self-Employment Dynamics Among Individuals Nearing Retirement” explores the reasons behind why the self-employment rate (the proportion of the labor force that is self-employed) among individuals aged 55-64 has dropped substantially in the past 20 years.

“America’s baby boomers may not be the jumping-off point for entrepreneurial growth according to this report.  However, moving forward, we can inspire this population to start the business of their dreams and take the leap of faith into entrepreneurship,” said Dr. Winslow Sargeant, Chief Counsel for Advocacy.

According to the report, the self-employment rate among near-retirees was above 18 percent in 1994, but dropped to around 16 percent in the early 2000s, and dropped further to 14.3 percent in 2012.

The study addresses two questions about the decline. First, what is the defining factor causing the decreasing rate of self-employed individuals nearing retirement? And second, what economic and policy variables help to explain the change in these factors over time? This study utilizes almost 20 years of U.S. Census Bureau data to describe in greater detail the continuation, exit, and entry rates with respect to self-employment.

The study’s key findings show that the decline in the self-employment among baby boomers over the 1994-2012 period was driven by factors such as:

  • Self-employed individuals are choosing to find a job at a firm rather than being self-employed; and
  • The rate of self-employment among 55-year-olds (who comprise about 12 percent of the self-employed aged 55-64) has decreased relative to all those age 55-64, while the share of 55-year-olds has increased.

In addition, the study finds that other factors, such as the affordability of individual health insurance, play a role. The author suggests that especially during a recession, individuals are hesitant to leave jobs that provide health insurance.

The author concludes that the findings indicate a need for policies to reduce the exits of near-retirees from self-employment to private wage and salary employment and to increase entrepreneurship among younger individuals. Policy recommendations include increasing the availability and affordability of private health insurance. The author states that an important area for future research will be to evaluate the extent to which recent changes due to the implementation of the Affordable Care Act of 2010 affect rates of self-employment.

The full report, “Understanding Self-Employment Dynamics Among Individuals Nearing Retirement,” as well as a summary, can be viewed on the Office of Advocacy’s website.

Self-employment rates

Self-employment rates

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Promising Startups Recognized by Water Technology Nonprofit

March 27th, 2014 · Comments Off

Drought

By Yvonne Lee, Region IX Advocate

On March 17, I met 12 fascinating water technology entrepreneurs from around the world. These innovative food and agricultural businesses were the finalists selected to attend the 2014 Imagine H2O (IH2O) Boot Camp in San Francisco, where they had the opportunity to meet with a network of potential investors.

Imagine H2O is a nonprofit organization that seeks to encourage innovators to solve the world’s water problems. It achieves this goal by hosting competitions and providing an accelerator program for innovative startup businesses. The boot camp was organized by IH2O’s Food and Agriculture Program, which supports emerging water businesses whose primary value proposition improves water use, treatment, supply, or discharge in the food and agriculture sector.

With much of the U.S. facing water challenges—California has suffered the driest year in history, thereby forcing many farmers to abandon their fields—these innovative businesses promise to help farmers and ranchers use innovative and clean energy to deliver cost efficient and safe food products to American consumers.

For example, one startup company recycles discarded produce from supermarkets into liquid fertilizers for farmers in less than three hours. Another growth-stage firm developed innovative manure treatment technology to recycle livestock manure into clean water. Its CEO drank the end product and lived to make a lively investment pitch the next day. A couple of other entrepreneurs offered aerial technology to help growers concentrate their water and fertilizer input/output and disease prevention down to a specific plant while maintaining production management and data.

While these entrepreneurs passionately believe their businesses will improve the overall availability, affordability, and safety of sustainable food, they also recognize innovative water technology is more challenging to attract capital compared to other high technology businesses. Although more venture capital firms have begun to pay attention to this industry, the main source of capital continues to come from angel investors, crowdfunding, family businesses, and foundations. Many entrepreneurs expressed interest in the Office of Advocacy’s work involving the new crowdfunding and other capital fund rules. And, since patents are central to innovative water technology development and commercialization, these entrepreneurs are also concerned with intellectual property, patent, and trademark protection.

Several of the finalists chosen to attend the IH2O Boot Camp were non-U.S. firms. I was intrigued to hear that one Australian family-owned water technology business has decided to move its manufacturing factory from China to the United States for their new business building above-ground, non-submerged bioreactors. These products can help U.S. and global agricultural businesses achieve regulated discharge standards at low energy and cost.

The owners of the Australian company told me they were attracted to the U.S. as a manufacturing hub because America produces higher quality work that is recognized around the world. More importantly, trademark and intellectual property are legally enforced, enabling small businesses to focus their resources on research, development, and marketing. As for the labor cost advantage China and much of Asia had once offered, it has gradually been eroded, making the U.S. labor force more competitive.

The owners did relate, however, that they have some concerns regarding regulations in the U.S. They said they would welcome a simpler understanding of regulatory costs, compliance, and procedures related to exporting to Asia, the European Union, and Australia without the need to employ a regulatory consultant that larger firms could afford. Their final decision on where to build their factory would factor in which U.S. region offers a friendly regulatory approval environment, competitive port charges, and time-sensitive export processing. These are significant costs to manufacturing for the global market in the U.S.

I also met with a previous IH2O competition winner who suggested the water technology industry is heavily regulated by at least a half a dozen federal agencies. He said he was concerned that any duplicative or lengthy review and approval process could slow down or detour the concept to marketing track for early-stage firms.

According to IH2O, 80 percent of the world’s water is connected to food and agriculture. These amazing water technology entrepreneurs and others will continue to find innovative ways to increase resources to support agricultural businesses. And Advocacy will continue to amplify their interests and concerns.

Yvonne Lee is Office of Advocacy’s regional advocate for Arizona, California, Nevada, Hawaii, and the territory of Guam. You can reach her at yvonne.lee@sba.gov.

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Message from the Chief Counsel: Success Stories from the 2013 Report on the Regulatory Flexibility Act

March 24th, 2014 · Comments Off

By Dr. Winslow Sargeant, Chief Counsel for Advocacy

Each year around this time, the Office of Advocacy issues the annual report on the Regulatory Flexibility Act. The report tells the story of Advocacy’s Office of Interagency Affairs, the group of administrative attorneys who track new proposed rules and encourage federal agencies to fulfill their RFA requirements to properly evaluate the impact of their proposed rules on small businesses. Our Office of Interagency Affairs consists of just over a dozen attorneys, assisted by a handful of regulatory economists. Yet Interagency tracks the work of more than 66 regulatory agencies.

RFAgraphic

While this is a herculean effort, it has a parallel in the small business world. Small business owners are the hardest working individuals I know. For many of them, the 40-hour work week and the two-week vacation are unknowns. The federal regulatory proposals that affect them are hundreds of pages long, and the time it takes to go from proposal to final rule often stretches over many years. Few, if any, small business owners are in a position to track the proposed rules that affect them and to make their views known.

Luckily, the RFA designates the Office of Advocacy as the RFA’s watchdog. Advocacy stays for the duration, monitoring rules over many years. Advocacy’s Office of Interagency Affairs monitors the Federal Register, works with agencies before and after rules are proposed, reaches out to small businesses, and conveys small business concerns in formal comment letters to agencies as the need arises.

In FY 2013, agencies finalized 14 rules that included changes in response to small business concerns raised by Advocacy. These rules affect millions of small businesses and they are a clear illustration of how the RFA works for small business. These changes saved small businesses at least $2.5 billion in first-year regulatory costs, while ensuring that agencies were able to meet their regulatory goals.

One of these rules concerned proposed changes to the On-site Consultation Program of the Occupational Safety and Health Administration (OSHA). Complying with every OSHA requirement can be a formidable challenge for a small business. OSHA’s On-site Consultation Program provides free, confidential advice to small employers looking to create safe workplaces. On-site Consultation services are separate from enforcement and do not result in penalties or citations. In 2010, OSHA proposed changes potentially opening participants to enforcement actions. Advocacy’s November 2010 comment letter expressed concern that this would discourage participation in a highly effective program. In August 2013, OSHA withdrew the proposed rule, leaving this successful program intact.

While the savings due to this action have no precise price tag, the benefits are clear. One person commented on Advocacy’s blog, “Small businesses often lack the funding or resources to hire an outside consultant so this program is very beneficial. It is so important to remain within OSHA compliance and it is a relief to read that OSHA is keeping the wall of separation between the consultation and enforcement departments.”

A second important rule change came from the Internal Revenue Service. In January 2013, the IRS announced a simplified option for claiming the home-office deduction. Over half of America’s small businesses are based at home, and they have long been subject to a great deal of paperwork if they wanted to take the business use of their home as a deduction on their taxes. Advocacy pressed this issue for decades. Most recently, in a 2009 letter to the Presidential Economic Recovery Advisory Board’s Tax Reform Subcommittee, Advocacy submitted a proposal to simplify the home-office deduction. The IRS estimates that this change in the rule will reduce the paperwork burden on small businesses by 1.6 million hours annually, which Advocacy estimated as saving $32 million. In announcing the change, the IRS called it “common sense.”

A third regulatory success story concerns home mortgages. The Consumer Financial Protection Bureau (CFPB) was created in the wake of the 2008 financial crisis to guard against the practices that brought the U.S. financial system to the brink of collapse. Advocacy has been involved in several of the agency’s rulemakings on home mortgages. In January 2013, the CFPB finalized the Mortgage Servicing rule. In issuing the final rule, CFPB recognized that small mortgage servicers were not the cause of the problem the rule was meant to address. As such, the CFPB exempted 96 percent of small servicers from certain requirements in the final rule, resulting in savings of between $1 billion and $2.3 billion.

These three examples represent years of vigilance by Advocacy’s Office of Interagency Affairs. Thanks to the RFA, this dedicated effort continues on rules of great importance to small businesses. Advocacy’s FY 2014 efforts are in high gear. The RFA continues to be small businesses’ best defense in the rulemaking process.

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Forum Seeks to Transform Maryland’s Small Business Ecosystem (Rescheduled to February 28)

February 12th, 2014 · Comments Off

On February 28, the SBA Office of Advocacy is visiting the state of Maryland, for the Voice of Small Business Forum to meet and learn from the state’s small businesses about the current business environment they are working in. It is the Office of Advocacy’s goal to engage, listen, and document the “big ideas, barriers, and best practices” that can influence policies to ensure future small business success.

The event will be held on Friday, February 28, from 8:00am to 4:30pm at the University of Maryland Baltimore County Research Center, 1450 S Rolling Road, Baltimore, MD 21227.

The six sessions will include discussions on:

  • Clean Technology
    • Business products, services and processes related to reducing/eliminating negative ecological impacts and improving use of natural resources
  • New Economy
    • Using the internet as a medium to support online business plans and domestic and international e-commerce
  • Cyber Defense/IT
    • Business innovators focused on supporting systems and networks that help ensure organizations anticipate and withstand system attacks
  • BioScience
    • Businesses addressing and innovating solutions for the life science and  human health sectors
  • NexGen Entrepreneurs
    • Entrepreneurs and inventors younger than 35 who are establishing a presence in the small business arena
  • Women, Veteran, Minority and Small Business Government Contractors

To register to attend and find out more about the event, visit the Voice of Small Business Forum website.

Note: This event was rescheduled from an earlier date due to bad weather.

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High Tech and Viniculture on Display During Tour of New Hampshire Women-Owned Businesses

February 5th, 2014 · Comments Off

On January 10, a group of intrepid New Englanders braved the weather (including a major highway closure due to ice and accidents) to join U.S. Senator Jeanne Shaheen (D-N.H.) and Acting SBA Administrator Jeanne Hulit for a roundtable discussion and business tour outside Manchester, New Hampshire. The day focused on women-owned businesses. While business owners’ concerns were diverse and wide-ranging, a single common theme emerged—the very limited availability of microloans.

Following the roundtable, Regional Advocate Lynn Bromley joined Senator Shaheen, Acting Administrator Hulit, and other SBA officials for a tour of two small businesses owned by women.

First was LaBelle Winery, where the roundtable was held. Winery owner Amy Labelle was named New Hampshire’s 2013 Woman Owned Small Business of the year, and for good reason. She and her husband, cellarmaster Cesar Arboleda, have grown their business from an idea 10 years ago to today’s ambitious enterprise. The business now employs 45 people in a facility that includes a store, café, tasting room, and the large post-and-beam function hall where the roundtable took place.

Before moving to her new location, LaBelle was bottling 18,000 gallons a year. One year and 27 stainless steel tanks later, she is producing 30,000 gallons. And she hopes to expand further.

LaBelle spent $5.3 million dollars on the new winery, a sum she calls “terrifying.” She calls her effort to secure financing a “study in persistence.” She and her husband pitched their plans to five banks before successfully arranging financing.

The second stop on the tour was Ion Beam Milling, a precision manufacturer of high-tech thin film products. These include standard microwave circuits as well as custom products built for specific applications.

Gail Quagan and her husband Bob founded Ion Beam Milling in 1982. Gail (the businesswoman) and Bob (the scientist) grew their business from a small facility with one miller, one machine, and two employees to today’s larger, modern facility with 13 full-time employees. CEO Jim Barrett now runs the day-to-day operations, Bob remains the chief science officer, and Gail the CFO.

As we were packing up to go, Barrett put in a plug for another local woman-owned business. Jim’s wife, Claudia Barrett, is the founder of a home-based coffee roasting business, CQ Coffee Roasters. That business is in full swing too—and fast outgrowing its space.

Pictured: In the lab at Ion Beam Milling, one of the company’s technicians explains their manufacturing process to the tour group. The group includes (from left) Ion Beam CEO Jim Barrett, Region I Administrator Seth Goodall, Sen. Jeanne Shaheen, Region I Advocate Lynn Bromley, and Acting SBA Administrator Jeanne Hulit.

Pictured: In the lab at Ion Beam Milling, one of the company’s technicians explains their manufacturing process to the tour group. The group includes (from left) Ion Beam CEO Jim Barrett, Region I Administrator Seth Goodall, Sen. Jeanne Shaheen, Region I Advocate Lynn Bromley, and Acting SBA Administrator Jeanne Hulit.

—Lynn Bromley, Region I Advocate

Lynn Bromley is Office of Advocacy’s regional advocate for Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont. You can reach her at lynn.bromley@sba.gov.

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Advocacy Asks SEC to Add Essential Small Business Analysis to Crowdfunding Proposal

January 22nd, 2014 · Comments Off

On January 16, the Office of Advocacy filed a public comment letter with the Securities and Exchange Commission (SEC) regarding the agency’s proposed rule on crowdfunding. The proposed rule provides the framework for the practice of crowdfunding, a method of financing by which small businesses and startups may offer stocks to a wide variety of investors online through funding portals and broker dealers.

Advocacy based its comment letter on feedback from small businesses. Specifically, Advocacy hosted small business roundtables in New York City (December 16, 2013) and Washington, D.C., (January 15, 2014) to gather input from small business representatives about the proposed rule. Advocacy also hosted several conference calls on this issue.

Assistant Chief Counsel Dillon Taylor facilitates a discussion of small business concerns with the SEC’s crowdfunding proposal at the New York City roundtable in December.

Pictured: Assistant Chief Counsel Dillon Taylor facilitates a discussion of small business concerns with the SEC’s crowdfunding proposal at the New York City roundtable in December.

Based on small business stakeholders’ feedback, Advocacy’s comment letter expresses concern that the initial regulatory flexibility analysis (IRFA) contained in the proposed rule lacks essential information required under the Regulatory Flexibility Act (RFA). Advocacy’s comment letter notes that the IRFA does not adequately describe the costs of the proposed rule for small entities. In addition, the IRFA fails to offer significant alternatives which accomplish the SEC’s stated objectives and minimize the proposal’s significant economic impact on small entities.

Advocacy recommended that the SEC republish a supplemental IRFA for public comment before proceeding with the rulemaking and that the agency consider small business representatives’ suggested alternatives to minimize the proposed rule’s potential impact.

Dillon Taylor, Assistant Chief Counsel

Pictured: Advocacy held a second roundtable in Washington, D.C., on January 15. Addressing the group is Samuel S. Guzik, a California-based securities attorney. Guzik provided a small business perspective on the SEC proposed rule.

Pictured: Advocacy held a second roundtable in Washington, D.C., on January 15. Addressing the group is Samuel S. Guzik, a California-based securities attorney. Guzik provided a small business perspective on the SEC proposed rule.

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Positive Small Business Indicators in 2013 and the Challenge Ahead

January 7th, 2014 · 3 Comments

The Year in Review: Implications for Small Businesses

Two important economic indicators released late in 2013—employment and interest rates—give us some optimism about small business and economic growth trends. Both of these indicators are key to consumer spending, which drives two-thirds of our nation’s economic activity.

At 7 percent, the unemployment rate in November 2013 was at its lowest level since 2008. Small businesses are responsible for 63 percent or 4.3 million of the 6.9 million jobs created since the recovery began. Interest rates rose slightly during the year but remain at historical lows. This has benefited the interest-sensitive construction and automobile industries, which had suffered sharp downturns following the Great Recession. In November 2013, building construction employment reversed its downturn and increased 3.3 percent over the prior year; 85 percent of these jobs are in small businesses. While automakers are typically large businesses, 74 percent of jobs in motor vehicle and parts are found in small businesses; these have benefited from 5.4 percent employment growth in this sector.

In addition to these promising trends, lower interest rates and dwindling inventories have led to double-digit increases in home prices in major metropolitan areas. The S&P/Case-Shiller Index of property prices in 20 cities climbed 13.6 percent from October 2012, the biggest 12-month gain since February 2006. Home equity is an important source of capital for small business, so improvement in home prices and home equity should boost access to capital. 

[Read more →]

→ 3 CommentsTags: Research & Statistics

Advocacy Testimony: Small Business Needs Improved Guidance on Reverse Auctions

December 20th, 2013 · Comments Off

Capitol dome detail

Every year, the federal government spends hundreds of billions of dollars on products and services across the country, making it the largest goods purchaser in the United States. Although this is a great opportunity for small businesses, it is often times an unrealized one. Small businesses create 60 percent of the net new jobs in this country and employ half of the private-sector workforce. So if America provided more federal contracts to small businesses, it would grow the economy of the United States. The federal government is already working to encourage small business participation in the procurement sector.

For example, a new GSA program by the federal government will hopefully increase the availability of government contracts to small businesses. The reverse auction program puts a request of goods and services online and gives businesses the opportunity to bid on providing the goods and services. Through the auction process, federal agencies award contracts to the lowest bidder while increasing the savings to the American taxpayer.

Although the intention of the program is good, the results have had mixed reviews. Many believe it works for the purchase of goods or simple services. However, when entering into more complex agreements and services, some believe the program is flawed.

Last week, the Office of Advocacy’s Assistant Chief Counsel Major Clark testified on the subject during a joint hearing of two subcommittees, the House Small Business Subcommittee on Contracting and Workforce and the Veterans’ Affairs Committee’s Subcommittee on Oversight and Investigations. In his testimony, Clark stated that the Office of Advocacy is not in opposition to reverse auctions in the federal marketplace; however, the office is committed to making sure that small business stakeholders have full opportunity to participate.

Moving forward, Advocacy believes we can continue to encourage participation by small businesses in the federal procurement process. For this particular program, Advocacy believes it is necessary that the Office of Federal Procurement Policy give clear guidance for reverse auctions to small businesses. Once small businesses are able to fully understand how reverse auctions will be carried out, small businesses will be able to not only participate, but also, gain these lucrative contracts.

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