Neal Fox | SBA goes activist

IT Contracting | Commentary

The Small Business Administration has planted itself squarely in the middle of a quagmire. Normally known for taking a reasoned approach, SBA has now sided with perennial small-business activists, in opposition to the General Services Administration, and at the expense of government interests.

If SBA and its newly found activist friends get their way, government buyers can expect huge changes when placing orders valued between $3,000 and $100,000 through the GSA schedules. That would include a huge proportion of government information technology product purchases.

What is SBA thinking?

At issue is a convoluted weaving of conflicting laws, regulations, congressional intent and long-standing GSA ordering procedures that led SBA to contend that all purchases from the GSA schedules valued between $3000 and $100,000 must be completely set aside for small businesses. That means exactly what it says. If SBA gets its way, 100 percent of purchases valued in that range must be from small businesses. Never mind that SBA has allowed the current situation to continue for over a decade before speaking up. In their Sept. 4 letter to GAO, SBA (aka Rip Van Winkle) argued that GSA schedules are not exempt from small-business set-aside requirements, even though one portion of the Federal Acquisition Regulation says they are exempt. That would mean, for instance, that a GSA customer could not buy computers, servers, monitors, printers, etc. from any large business when the total order value is between $3,000 and $100,000. Instead, that order would need to be purchased from a small business.

The net effect of this SBA action, if upheld by the Government Accountability Office and the courts, would be enormous.

Think of how federal chief information officers buy IT equipment now. When you need a few servers, your buyer checks three prices on the IT Schedule and picks the best value. Best value often means a combination of price, quick delivery, associated services, compatibility with existing equipment and software, etc. But SBA has taken a stance against best value in its newly acquired lopsided view of the world, and has aligned itself with fringe elements and narrow self-interests.

Now recall, the GSA IT Schedule consists of over 75 percent small businesses, many of which gain significant business from the federal government. Many also gain subcontracting opportunities through large businesses selling through the IT Schedule. Which leads one to wonder what is broken that needs to be fixed?

The answer seems to be that SBA cares more about placating fringe elements and activists than it does about good government. But at what cost?

Which brings up an important point. SBA should be fixing the real problem, which is that government small-business goal calculations are broken, and have been for years. They do not nearly tell the real story about small-business usage by the federal government. This is because small-business goals are calculated using only direct prime contracts, and ignore the work small businesses perform as subcontractors. And since the real niche for small businesses is generally as subcontractors, this is the real issue that is broken and requires fixing. But SBA has chosen to take the well-worn path of dictating narrow solutions and enforcing its overseer will rather than fixing problems. Hey, when did they become the new inspector general? Don't get me started on that subject.

Although this may sound like a mundane issue, it will have a huge impact if SBA gets its way. Small businesses will be used as fronts for large businesses, creating pass-through fees on top of current prices. Federal buyers will pay more for all types of products, including IT products. And since these items will cost more, fewer federal requirements will be met with the available funds, and important needs will go unfulfilled.

Can we really afford such fringe thinking and wasteful policies when we need every dollar to go toward defense, homeland security and other important needs? Thanks for nothing, SBA.

Neal Fox is the former assistant commissioner for commercial acquisition at GSA and manages Neal Fox Consulting ( Contact him at [email protected]

About the Author

Neil Fox is the former assistant commissioner for commercial acquisition at GSA's Federal Supply Service, and is now principal at Neal Fox Consulting.


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