The small business community’s ongoing struggle to increase its access to federal contracting and its share of the federal spend is facing yet another challenge. We say that small businesses are more robust then larger firms and are more able to adapt and mobilize in less time. Well the fact is that they have to be–particularly in our current environment.
As the pie shrinks and agencies struggle to do more with less, a new or recycled term has emerged as the soup de jour: strategic sourcing. It seems to encompass a variety of best practices for the federal government to procure its goods and services more smartly to increase efficiencies and save taxpayer dollars. It is effectively contract consolidation or bundling with a twist–an agency or agencies may be required to use contracts awarded through this model as the only vehicle to procure the goods and services offered under that vehicle.
As an example, in January 2014, the General Services Administration (GSA) issued a solicitation that will result in multiple indefinite quantity, indefinite delivery contracts to provide the federal government with office supplies. According to papers filed by the GSA and the Small Business Administration in response to protests filed with the General Accountability Office (GAO), the solicitation, Office Supplies Third Generation (OS3), uses the strategic sourcing model to leverage industry purchasing and increase internal efficiencies. GSA also believes that the solicitation will increase opportunities for small businesses. But according to the protests, the solicitation violates the Small Business Act because GSA failed to consider the economic consequences on the hundreds of small businesses that will not receive one of the contract awards. SBA filed comments (which are posted on our website) agreeing with the protestors and suggesting that GAO sustain the protest arguing that, in issuing the OS3 solicitation, GSA failed to prepare a consolidation analysis that assessed what, if any, negative impact the solicitation will have on small businesses. The cases are pending and GAO is scheduled to issue its decisions by June and July of this year,
So, on the one hand, our federal government has a real need to control spending and get its fiscal house in order. On the other hand, the government has a statutory obligation under the Small Business Act to:
Aid, counsel and protect, insofar as is possible, the interests of small business concerns in order to preserve free competitive enterprise, to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the Government be placed with small business enterprises…[in order] to maintain and strengthen the overall economy of the Nation. (P.L. 85-536)
If small businesses play a vital role in strengthening our national economy and should have significant access to government contracts, then it seems critical that our federal government should conduct a proper analysis before eliminating small business access to a significant portion of the federal budget through strategic sourcing, contract consolidation, bundling or some other means. The Small Business Act and additional requirements enacted through the 2010 Jobs Act require agencies and the SBA to track contract consolidation through a data base. According to the October 10, 2013 testimony of Women Impacting Public Policy (WIPP) before the House Small Business Subcommittee on Contracting and Workforce, that data base does not appear to be complete or accessible. Without this data, we really cannot know how damaging consolidation is to small businesses. WIPP recommends full implementation of the database. WIPP also recommends that the Administration complete the regulatory actions required in the National Defense Authorization Act (NDAA) for fiscal year 2013 and the Small Business Jobs Act of 2010. These actions include adding bundling justifications to agency websites and procedural details on advance notice to small business vendors whose contracts may be consolidated.
In the meantime, there are tools available for small businesses to effectively compete for these larger contracts. The SBA has eased its affiliation rules for certain larger contracts so that small businesses may joint venture to compete for these contracts. Under SBA joint venture rules, two or more small businesses may form a joint venture to compete as a prime contractor for a limited number of contracts without having to aggregate their size for purposes of determining whether or not the joint venture is eligible to participate in a particular small business set-aside. In addition, under the SBA’s mentor protégé program for Section 8(a) program participants, Section 8(a) companies and their mentors (whether the mentor is large or small) may joint venture to compete for set-aside contracts.
The SBA has been tasked by Congress to develop similar mentor protégé programs for all small businesses but SBA has not yet issued a proposed rule. New mentor protégé programs for all small businesses could be a game changer in the way companies work together to win awards and in how agencies view whether or not a particular requirement may be appropriate to set aside under one of the small business programs.
Finally, under the fiscal year 2013 NDAA, Congress enacted a provision allowing for similarly situated small businesses to team together to satisfy the performance of work requirements that place limitations on the amount of work that can be subcontracted where a contract has been set aside. SBA has not yet issued regulations to implement this provision but once new regulations are in place, small businesses and small businesses participating in the 8(a), WOSB, HubZone, or SDVOSB programs may team with other similarly situated businesses to compete for contract set-aside for those programs. These arrangements will satisfy the requirement that prime contractors participating in those programs perform a certain percentage of the contract with their own workforce.
By necessity, some form of contract consolidation is here to stay. Agencies can help shape the plight of our vital small business community by conducting careful consolidation analyses prior to making procurement decisions. Small businesses need to remain nimble and innovative in this environment–and vigilant to protect their share of the federal pie.
About the Author: Pam Mazza is the managing partner of PilieroMazza. She may be reached at pmazza@pilieromazza.com.