Another View: Sad state of affairs for small business

Jonathan Cain

Congress has set agencies the goal of contracting 23 percent of their business with small entities. In 2002, only 19.3 percent of government work went to small businesses, 3.5 percent less than in 2001.

The Small Business Administration recently reported that the picture improved in 2003, with 23.6 percent of federal contract dollars going to small businesses.

But the gain may not hold up. Audits by the Government Accountability Office of the Federal Procurement Data System have uncovered widespread errors in the FPDS data, and GAO warns that the data is not reliable for procurement policy decisions.

Moreover, GAO audits of Defense Department procurements over the past 10 years show a steady decline in the percentage of contract dollars going to small business.

Since 2000, the total amount of federal procurement money going to small businesses essentially hasn't changed despite big growth in overall government procurement'at some agencies, the funds have even decreased.

The Defense Department hands out the most small-business contracts, but there has been a marked decline in both the number of contracts awarded to small companies and the total contract dollars awarded. The Energy Department is the second-largest federal contractor in dollars awarded, but it gave only 4 percent of its contracts to small businesses in 2003.

Federal agencies have tools available to help responsible small businesses compete for government work and receive suitable prime contracts. Agencies committed to continuing gains in small-business participation must make use of these tools.

In July, for example, a decision in a case that had been making its way through federal courts since 1998 upheld the constitutionality of the 2003 reauthorization by Congress of the so-called Section 1207 price evaluation preference for small, disadvantaged businesses.

The Section 1207 preference, enacted in 1987, requires at least 5 percent of Defense contracts to go to small businesses, and that bids by large businesses should be adjusted upward by 10 percent.

The preference had been deemed not sufficiently race-neutral under Supreme Court precedents from the early 1990s. The recent decision held that Congress had enough statistical evidence that socially and economically disadvantaged contractors were not getting a fair share of federal contracts when it reauthorized the program and crafted it narrowly to help federal agencies meet their small, disadvantaged contracting goals.

GSA took a positive step this year when it addressed the fact that many of its Federal Supply Schedule contractors that offer products as small businesses long ago grew grew into large businesses.

Because size is determined at the beginning of schedule contracts awarded with multiple, five-year, evergreen renewal options, a business could continue to be considered small 15 or more years later, even if it had outgrown the criteria.

Congress and the Office of Management and Budget must address contract bundling. Bundling creates fewer, larger contracts unsuitable for small businesses, and these contracts usually do not offer small businesses opportunities, even as first-tier subcontractors.

Congress and OMB must match their rhetoric with support for proven tactics to enhance small-business opportunity.

Jonathan Cain is a member of the law firm Mintz Levin Cohn Ferris Glovsky & Popeo PC in Reston, Va. He is a regular columnist for GCN's sister publication, Washington Technology.

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