The 2019 National Defense Authorization Act contains several provisions to help small business contractors, including extending the prompt payment requirement to small primes. While the changes are only proposed at this point, not passed, we wanted to highlight these ones to watch.
Small business strategy
The bill calls on DOD to establish a small business strategy to identify contracting opportunities for small firms. While there’s some interaction between small business programs, there really isn’t an integrated DOD-wide strategy that talks to all of the different support functions given to small businesses, manufacturers, and so forth.
This small business strategy would provide for a unified management structure within the department for functions related to small business programs, manufacturing and industrial base policy, and procurement technical assistance programs.
The strategy must clearly identify opportunities for small businesses to contract with DOD and ensure these firms have sufficient access to program managers, contracting officers and other relevant DOD personnel. The policy also must promote outreach to small contractors through procurement technical assistance programs.
The strategy is important to ensure small businesses continue to enjoy robust opportunities to contract with DOD, and that everyone is working towards the same set of goals.
Prompt payment
Section 852 of the NDAA requires DOD to establish a goal of paying small business primes within 15 days of receiving a proper invoice, if the contract doesn’t establish a specific payment date (this is a change from 30 days).
“They realize that prompt payment is important for small businesses to continue performance on a contract. This provision is meant to ensure that the government does its part to support these companies.” – Mitchell Bashur, attorney at Holland & Knight
This is definitely a major thing. One downside is in the rush to make payments in 15 days, there may be invoices approved that are not correct – something the government shouldn’t be approving or something you neglected to invoice for and the government didn’t notice. With less time for review, there is more chance the invoice will be rubber-stamped.
Five additional NDAA provisions that will help small business contractors:
- Increases participation in the Small Business Administration’s microloan program, where they give smaller amounts of money with less requirement for collateral
- Codifies and reauthorizes the Defense Research and Development Rapid Innovation Program to accelerate the fielding of technologies developed pursuant to phase II SBIR Program projects; extends the SBIR and STTR programs for three years until 2022 (it seems odd they don’t just put them into law, but this has to do with money and authority)
- Increases funding for procurement technical assistance programs – this is important because this will be very local; this is someone right in your backyard whose job it is to help you negotiate through all the rules and regulations and get contracts
- Requires SBIR-covered agencies to create commercialization assistance pilot programs, under which contractors may receive a subsequent Phase II SBIR Program awards – the point is to allow the research done in SBIR and STTR to be commercialized, in other words taken outside of the government sector and into commercial application
- Increases opportunities for employee-owned businesses through SBA loan programs such as ESOPs (employee stock ownership programs) – there are problems with how these companies qualify for SBA loan programs and they’re trying to address those issues
Many of these changes are positive, but there are some possible setbacks as well, such as the recommendations put forth by the NDAA-authorized Section 809 panel. They called for eliminating or significantly reducing small business set-asides in commercial contracts and substituting a five percent price preference. The problem is that small businesses can’t qualify for the work at the size that’s usually scoped.
Keep watching this space and we’ll share updates as they arrive.
