On March 5th, the Small Business Committee, headed by Chairman Sam Graves (R-MO), held a markup of small business bills, including several that will change the contracting process to be more beneficial for small business federal contractors.
We’ll cover two of the bills today, and the rest in future posts.
H.R. 4093 – Greater Opportunities for Small Business Act of 2014
This bill increases the small business prime contracting goal from 23% to 25% and establishes a 40% subcontracting goal. We’ve written before about efforts to increase the small business contracting goal, which should be an unalloyed good thing, except when you recall that weapons and big product contracts are often going to large businesses because they can’t be done by small businesses.
And even though this is the first year in 7 that the government made the 23%, through the use of mostly small businesses, not all categories were successful across the board. Contracts to woman-owned businesses, for example, fell short of the 5% goal and came in at 4%.
The second half of this legislation, establishing a 40% subcontracting goal, is a big deal and a really good thing from a small business standpoint. Today, most large business procurements (unrestricted procurements) require you to meet the prime contracting small business percentage within your activity. As an unrestricted contractor, 23% of my revenue has to go to small businesses in the percentages established.
This new legislation will establish a substantially higher goal of 40% – a big increase for small businesses. It is definitely going to ratchet up the pressure on large businesses and here’s why
Typically an unrestricted team will include this 23% small business component; the prime typically does around 40% of the work, leaving basically 25-30% for other large businesses. These teams include not just the prime and bunch of small businesses, but the prime, some other very key customer-connected large businesses AND some small businesses.
Establishing a 40% small business subcontracting goal will cut the large business group’s percentage from a potential 35% down to 20%. That’s a big cut. There are many unrestricted procurements that ask for this, but unless specified, the goal is this 23%.
H.R. 4094 – Contracting Data and Bundling Accountability Act of 2014
This bill improves transparency and accountability in contract bundling and consolidation to better adhere to the current laws intended to protect small businesses. The purpose is to improve information flow when bundling or consolidating contracts.
This relates to some controversy there’s been around a GSA initiative called strategic sourcing. The GSA has found that in cases where they have 4,000 contracts on a GSA schedule, they can streamline their process by establishing 20 regional contracts or 20 master contracts, and letting everyone else be a subcontractor to those guys. This saves GSA from administering all of those 4,000 contracts. This strategic sourcing practice had the small business community up in arms because they’re been shoved under the door under this effort.
So in combination with the 40% subcontracting goal in H.R. 4093, this bill protects small businesses in getting the data about these available contracts and prohibiting consolidating contracts unless you’ve met this improved subcontracting standard.
In future posts, I’ll be talking about more new small business legislation that affects small business federal contractors in construction, and two other bills that affect specially certified small business federal contractors.