October 1, 2010 by cs
The small business contracting parity debate is finally over.
On Monday, President Obama signed legislation that re-establishes equality among each of the small business subcategories that competes for government contracts.
The 2010 Small Business Jobs Act, which also provides tax cuts for undersized firms and creates programs to support private sector lending, makes a technical revision to the 1953 Small Business Act by replacing the word “shall” in the Historically Underutilized Business Zone statute with the word “may.”
The old language in the Small Business Act stated that a procurement officer shall award contracts based on limited competition to HUBZone small businesses. But, the statutes creating the service-disabled veteran-owned small business program and the Small Business Administration’s 8(a) Business Development Program used the word “may” when referring to set-aside contracts.
The Government Accountability Office and the U.S. Court of Federal Claims determined the difference unambiguously established a preference for HUBZone firms.
The Small Business Administration lobbied lawmakers for months to support legislation that would place contractors in the 8(a) and service-disabled veteran-owned small business programs — and the pending women-owned small businesses program — on equal footing with HUBZone companies. HUBZone companies are located in economically depressed neighborhoods.
“This clarification will help federal agencies meet each of the government’s small business contracting goals,” said SBA spokeswoman Hayley Matz.
The agency now will work with the Federal Acquisition Regulatory Council to “put in place, as expeditiously as possible, provisions implementing parity among all of SBA’s contracting and business development programs,” Matz said.
But, some small businesses are worried the new legislation could spell the end of the HUBZone program. “This is going to seal the fate of the HUBZone program,” said Jim Slagle, executive vice president for sales and marketing at Mission Critical Solutions, a Tampa, Fla. HUBZone firm that first challenged the parity statute in court. “They are not going to prioritize HUBZone firms. I don’t know that we will survive this.”
The federal government has not met its goal of awarding 3 percent of all contract dollars to HUBZone small businesses, while it generally exceeds its 5 percent goal for small disadvantaged businesses — a category that includes the 8(a) program.
Sen. Olympia Snowe, R-Maine, and ranking member of the Small Business and Entrepreneurship Committee, sponsored the parity language in the Small Business Jobs Act. Snowe, however, did not vote for the overall legislation because of its cost and questions surrounding the structure of several lending programs.
The jobs act also:
- Directs SBA to establish a mentor-protégé program to assist small businesses owned by women, service-disabled veterans and those operating in HUBZones. The initiative would be modeled after the 8(a) mentor-protégé program.
- Requires OMB’s Office of Federal Procurement Policy to establish a governmentwide policy for contract bundling — a process in which several small contracts are consolidated and awarded to one firm, often out of the reach of small businesses. Prior to bundling a contract, procurement officials would be required to conduct market research and to have a senior acquisition official sign off on the decision. The rationale for bundling then would be publicly disclosed.
- Instructs OFPP to develop guidance that would allow agencies to set aside orders placed against multiple-award contracts exclusively for small businesses. The policy would apply to indefinite delivery-indefinite quantity contracts and task and delivery-order awards.
- Establishes a pilot program for collaboration and joint ventures involving small business contractors. Under the five-year program, $5 million in federal grants will be awarded to eligible small business teams seeking to compete for larger procurement contracts.
- Mandates small businesses recertify their size status annually. The law also establishes a governmentwide policy for prosecuting companies that fraudulently disclose themselves to be a small business.
The parity controversy was sparked in May 2009 when Mission Critical Solutions, which had lost out on an Army IT contract to an 8(a) minority-owned small business, filed a protest with GAO. The company argued, and GAO agreed, that HUBZone firms were legally at the top of the small business pecking order and the government should have given Mission Critical Solutions the first crack at the contract.
The ruling sparked a fury of activity, with the Office of Management and Budget and Justice Department issuing rare contradictory memos instructing agencies to disregard GAO’s nonbinding decision because it could “significantly limit the discretion” of contracting officers.
In a separate case, the Court of Federal Claims, a body whose rulings are binding, later decided in favor of Mission Critical Solutions. Justice has appealed that decision, although it is unclear how the new legislation will affect that case.
GAO since has ruled in favor of two HUBZone firms that filed similar contract protests. And in August the Court of Federal Claims issued its second ruling on the matter, arguing the Air Force first should have considered DGR Associates Inc., a HUBZone firm, before awarding a contract at Eielson Air Force Base in Alaska to an 8(a) small business.
– By Robert Brodsky – GovExec.com – September 27, 2010
September 24, 2010 by cs
A presidential panel is calling for major reforms of the government’s small business contracting guidelines, procedures and regulations.
The Task Force on Federal Contracting Opportunities for Small Businesses on Wednesday released its suggestions for helping undersized firms break into the government marketplace and win federal contracts, strengthening procurement policies, enhancing training for acquisition officials and improving contracting data on federal websites.
Among its most significant proposals, the task force recommended the White House require agencies to reserve work on task-and-delivery order contracts or Multiple Award Schedule contracts for small businesses. Under existing policies, considerations for small business set-asides are made prior to the award of a contract. But acquisition policy officials have been reluctant to apply set-asides for individual orders, despite a 2008 legal opinion by the Government Accountability Office, which supported the policy change.
“Existing tools that might help direct additional work toward small businesses, such as the consideration of socioeconomic status for schedule orders and partial set-asides for contracts, appear to be underutilized and misunderstood,” the report said. “Many public comments offered to the task force voiced frustration over the continued failure of policy officials to tackle these issues.”
The panel also suggested the Small Business Administration and the Office of Management and Budget’s Office of Federal Procurement Policy issue guidance to prevent unjustified contract bundling; clarify rules for small business teaming; strengthen the requirements for developing small business subcontracting plans; review the quality of small business contracting data; and assess the impact of insourcing on small business contractors.
“While some work performed by small business contractors may need to be insourced if it is inherently governmental or is of a critical nature and the agency is at risk of losing control of its operations, the task force believes much of the work will continue to be performed by contractors, including small businesses,” the report said.
President Obama created the task force in April. Several agencies, including OMB and SBA, co-chaired the group.
“When a small business gets a federal contract, it’s a win-win,” SBA Administrator Karen Mills wrote Wednesday on the White House blog. “The business gets the revenue it needs to grow and create jobs, and at the same time, the government benefits from working with some of the most diligent, innovative and responsive people in the world.”
The task force also addressed concerns about the skills and capabilities of the acquisition workforce to implement small business guidelines. The report recommends revising core certification for procurement officials and requiring for the first time mandatory training on small business policies and regulations.
Industry has complained that the government’s small business contracting goals have no teeth. For the past several years, the government has missed its goal of awarding 23 percent of all prime contracting dollars to small businesses, but little to no enforcement was taken against underperforming agencies.
The task force encouraged the Obama administration to adopt a system of carrots and sticks, rewarding agencies and employees who successfully promote small business contracting with awards and recognition, and holding officials accountable when they fall short of their goals. The report does not, however, suggest repercussions for poor-performing agencies.
Industry officials credited the task force for addressing many top concerns, but some remain skeptical. “As long as the barriers to contracting with small businesses are allowed to exist and the laws that protect their rights are not enforced, agencies will continue to fail in their efforts at contracting with them,” said Henry Thomas, co-founder of a think tank operated by the Fairness in Procurement Alliance, an association that advocates for small business contractors.
Among its most ambitious recommendations, the task force called for a systematic reorganizing and refunctioning of two leading government procurement websites. The panel suggested making FedBizOpps, which provides industry with notice of upcoming contracts, a one-stop source for annual requirements forecasting, the posting of subcontracting opportunities, the outreach calendar of all federal agency matchmaking and training events and a directory of online agency small business resources.
The much-maligned Federal Procurement Data System, which tracks all contracts, would receive an upgrade to enhance the use of its small business information. SBA unveiled on Wednesday its new Small Business Contracting Dashboard, which breaks down spending by small business category from fiscal 2000 through fiscal 2009.
“Implementing these new tools and recommendations won’t be easy,” Mills said in the blog post. “But our message today is clear: We’re going to build on what works in small business contracting. We’re going to implement new tools to help more small businesses compete and win.”
The task force will report to White House by the end of the year on progress with implementing the recommendations.
– by Robert Brodsky – GovExec.com – September 15, 2010
September 3, 2010 by cs
Federal agencies are failing to maximize opportunities to make contracts competitive, often because of poor management or because officials have grown comfortable with incumbent contractors, according to a new report from the Government Accountability Office.
The watchdog reviewed trends in noncompetitive contracts during the past several years and discovered a number of questionable business practices by contracting officials and program managers. GAO found 44 percent of all federal contracts in fiscal 2009 either were not placed up for competition or attracted only one bid.
The report (GAO-10-833), which the House Oversight and Government Reform Committee requested, highlighted contracts that appeared to be written with such narrowly defined requirements that only one company could reasonably compete. In other instances, program offices pressed for follow-on contracts to be awarded without competition to the existing company because it would be more expeditious since the offices already had formed a relationship with the firm.
“A Navy program official stated that, when one contractor has been performing a requirement for many years, it is easier to go back to the contractor personnel who understand the requirement rather than taking the time to find a new vendor,” the report said.
From fiscal 2005 to fiscal 2009, the reported obligations for noncompetitive contracts declined from 36 percent of total procurement spending to 31 percent, investigators found. But contracts in which only one offer was received remained steady at around 13 percent.
The report cited a host of reasons for contracts with only one bid. Often, companies are scared off by a competent incumbent contractor considered an overwhelming favorite to continue with the work, the watchdog said. Other times, solicitations might appear to favor one company, the report noted. In addition, some vendors that might have competed for work are forming teams to submit one offer, industry officials told GAO.
“Given the nation’s fiscal constraints, it is not acceptable to keep an incumbent contractor in place without competition simply because the contractor is doing a good job, or to resist legitimate suggestions that competition be imposed even though it may take longer,” the report said.
GAO recommended the Obama administration assess the reasons contracts are receiving only one offer. Daniel Gordon, administrator of the Office of Federal Procurement Policy at the Office of Management and Budget, has argued that one bid is not enough to constitute competition and that the practice limits agencies’ ability to consider qualified alternatives.
Recent OFPP guidance requires agencies to begin separating data collected on these contracts and to code them as “noncompetitive procurements using competitive procedures.” Gordon concurred with GAO’s recommendation.
But, it might be difficult to get sound data on contract competition. GAO randomly selected a sample of 107 contracts and orders that were coded as noncompetitive or receiving one bid, and reviewed the contract files. Eighteen percent of the contracts were coded incorrectly — as either not competed when they had been, or as competed with one offer received when they had not been competed at all, the report said.
In fiscal 2009, the Navy and the Air Force had some of the worst competition rates, with about 45 percent of contracts not competitive, GAO said. The Energy Department and Office of Personnel Management had among the lowest rates of noncompetition, at 7 percent and 5 percent, respectively.
The most common explanation for failing to conduct any competition was that “only one reasonable source” was available to perform the work, according to the GAO sample. In some cases, such as an Immigrations and Customs Enforcement contract for communications equipment and supplies, one contractor essentially owns the market.
In other instances, particularly with Defense Department weapons programs, the government is hamstrung by a lack of access to proprietary technical data, according to the watchdog. Companies’ expertise, experience and reluctance to sell technical data for a reasonable price generally preclude the possibility of competition, the report said.
Several contracting officials blamed the lack of competition on receiving short notice from program offices for acquisitions. With little time to conduct market research or properly define requirements — elements of a robust acquisition process — contracting officials often turn back to the incumbent, investigators said.
The second most frequently cited exception to competition was the authority to award sole-source contracts to firms in Small Business Administration’s 8(a) business development program. Through the program, agencies are encouraged to award participating 8(a) firms noncompetitive contracts worth less than $3.5 million when procuring services, or less than $5.5 million for manufacturing.
– by Robert Brodsky – GovExec.com – August 26, 2010