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Government
forms plan to increase small business contract opportunities
Hoovers
November 6, 2002
The White House last week unveiled a new strategy aimed
at improving the chances of small companies to get more
prime contracts and even subcontract work on federal
procurements by seeking to limit a practice in which
two or more contracts are wrapped into a larger contract,
making it tougher for small companies to compete for
the award.
The
strategy aims achieve the intended results through a
variety of means, including closing loopholes to the
practice known as bundling, increasing accountability
of senior agency managers, setting thresholds that would
trigger reviews of proposed bundling and strengthen
compliance with plans calling for more subcontracting.
The report was prepared as part of President Bush's
small business agenda launched in March.
"The
recommendations propose a series of regulatory changes
to ensure maximum compliance with current contract bundling
laws and full use of the resources of the Small Business
Administration (SBA) and agency Offices of Small and
Disadvantaged Business Utilization (OSDBU)," Angela
Styles, administrator for the Office of Management and
Budget's Office of Federal Procurement Policy, wrote
in an Oct. 29 letter to Bush accompanying the new policy.
Contract
bundling has been on the rise over the past decade throughout
the federal government, in part driven by high levels
of Pentagon spending. Between FY '92 and FY '01, 10
percent of DoD contracts were bundled which accounted
for about 55 percent of prime contract dollars. And
it's the major defense contractors, Lockheed Martin
[LMT], Boeing [BA], Northrop Grumman [NOC], General
Dynamics [GD], Raytheon [RTN] and others that are receiving
most of the bundled contract money, according to a report
prepared last month for the SBA (Defense Daily, Oct.
11).
The
OMB report said that in FY '91 DOD awarded just over
60,000 contracts valued over $25,000 each, but in FY
'01 less than 20,000 awards.
As
bundling increases, the number of small companies receiving
federal contract awards has decreased from 26,506 in
FY '91 to 11,651 in FY '00, the OMB report said.
Bundling
refers to the combination of different tasks under a
larger contract as opposed to having separate smaller
contracts for the various kinds of work. By statutory
definition, this single, larger contract "is unlikely
to be suitable for award to a small business concern,"
said the OMB report, which cites the Small Business
Reauthorization Act of 1997. The report is titled, Contract
Bundling: A Strategy for Increasing Federal Contracting
Opportunities for Small Business.
Consolidation
of purchases previously under separate contracts picked
up speed throughout the 1990s, spurred by efforts to
reform federal acquisition policies and practices. As
the Pentagon's and other department's workforces were
either reduced or shifted to tackle other priorities,
the acquisition offices had to be more efficient.
"Increased
demands to make the acquisition process quicker and
less complex coupled with reductions in the overall
acquisition workforce have driven acquisition managers
to bundle requirements," the report said. Consequently,
the report points out, there is reduced competition
and opportunities.
The
federal government has an annual goal that 23 percent
of the total dollars spent on federal procurements go
to small businesses and for the past two years that
goal been nearly met. But smaller companies point out
that the goal is not a ceiling and that limiting prime
contract opportunities also hurts their businesses in
more systemic ways.
"Because
you're not interacting with your client directly but
through your prime contractor, you never build a rapport
with that agency to where you can develop work for yourself,
or it's very difficult to," Mary Ann Elliot, president
and CEO of Arrowhead Global Solutions, told Defense
Daily on Monday in a telephone interview. Furthermore,
as a subcontractor, she said, "You never really develop
expertise and management skills on the program because
the prime's doing it."
The
report contains a nine-point action plan, the key points
of which are outlined below. Unlike existing policies,
the OMB plan calls for ensuring accountability of senior
agency management by requiring them "to report to OMB's
Deputy Director for Management on a periodic basis on
the status of agency efforts to address contract bundling
issues." The first status reports are due by Jan. 31.
To
improve monitoring of bundling trends and practices,
OMB now requires the President's Management Council,
which consists of deputy secretaries and administrators
from the 26 major executive branches and agencies, to
help the OMB Deputy Director for Management with the
monitoring function and "ensure agency accountability
for timely and accurate reporting on contract bundling
efforts and statistics."
To
close loopholes used by agencies to bundle contracts
using mechanisms not often reviewed for bundling such
as multiple award contracts, multi-agency contracts,
government-wide acquisition contracts and the General
Services Administration's Multiple Award Schedule Program.
Since
1990 there has been a sharp increase in these types
of awards, which essentially eliminate potential new
competitions.
The
new policy requires that these types of contracts be
reviewed for bundling and that proposed regulatory changes
be prepared by Jan. 31.
No
dollar thresholds exist to prompt a review of a bundled
contract but the new policy calls for proposed changes
to SBA and Federal Acquisition Regulations (FAR) by
Jan. 31 that would trigger reviews of acquisitions based
on specific contract amounts.
The
report said these thresholds should be in the range
of $2 million to $7 million depending on the particular
agency's "volume of contracts and in consultation with
the SBA and agency OSDBU." The report also requires
an agency identify alternative strategies to bundling
when the threshold for a proposed bundled contract will
be breached. And when a bundled contract is to be used,
the agency must justify in writing the rationale for
why it didn't choose alternatives that involved less
bundling. The effect of these policies will be to factor
small business considerations earlier in the acquisition
planning process.
Where
bundling is justified, strengthen compliance with existing
regulations for increasing subcontracting opportunities
by amending the FAR "to require agencies to use contractor
compliance with subcontracting plans as an evaluation
factor for future contract awards." The report also
says that agencies will designate personnel to monitor
compliance with subcontracting plans, including work
under the various multiple award-type contracts.
The
plan would also make it easier for "teams" of small
companies to compete for bundled contracts requiring
agencies to "train and otherwise facilitate early development"
of these teams "to compete for upcoming procurements."
Best
practices will be collected by the SBA and shared with
various agencies. Finally, agency heads "will ensure
that agency OSDBU resources are dedicated to the President's
Small Business Agenda by issuing guidance, training
personnel, and reallocating resources as necessary.
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