President Obama signed legislation on January 1 that encourages the federal government to hire more small business in its massive procurement program. Government contract awards are mandated to go to small business, especially businesses that are recognized by the federal government as a disadvantaged business group. For the 12th straight year, the federal government as a whole has fallen considerably short of the minimum threshold established by the Section 15(g)(1) of the Small Business Act.
Representative Sam Graves (R-MO), Chairman of the House Small Business Committee, noted in a news release after the President signed the measure. [The legislation will] “help small businesses compete in the federal marketplace, bring efficiency and cost-savings to the taxpayer, and create jobs while doing it.”
Skepticism remains, however, by many small business owners. “We’ve seen this move before,” noted Ralph Baxter, owner of BluePoint Productions, a service disabled veteran owned business out of Frederick, Maryland. “Large companies have always had the edge getting work with the federal government because the procurement system really doesn’t favor small business.” The power of mandates simply are not working within the federal government as they should.
The Small Business Act mandates that all small businesses have the maximum opportunity to participate in providing goods and services to the government. The Small Business Administration (SBA) negotiates procurement preference goals with each federal agency and annually reviews each agency’s results. SBA then publishes the results in what is known as the “SBA Scorecard.”
In theory, the statutory goals help to ensure that small businesses get their fair share. In reality, though, goals are rarely met and small business is generally sealed off from major procurements. The SBA is responsible for ensuring that mandated government-wide goals are met in the aggregate. However, as a policing agency, the SBA shares as much – if not more – of the blame as the individual federal agencies for not meeting the procurement minimums.
The statutory minimum goals that the government procurement program include a twenty-three (23) percent minimum of prime contracts; five (5) percent of prime and subcontracts for small disadvantaged businesses; five (5) percent of prime and subcontracts for women-owned small businesses; three (3) percent of prime and subcontracts for service-disabled veteran-owned small businesses.
One provision of the new law includes a small business contracting element in the performance evaluations of senior agency executives. If the established small business goals are not met, bonus awards are withheld. In addition, the legislation cracks back on the bundling of contracts. Contract bundling is stacking multiple contracts or segments of a contract into one large contract, making it impossible for small businesses to compete with large business.