Regs could boost small biz

Strategy for Increasing Contracting Opportunities for Small Businesses

Following through on a campaign promise to increase federal contracting opportunities for small businesses, the Bush administration last week released new reporting requirements and proposed regulatory changes that could affect billions of dollars' worth of federal acquisitions.

The administration's strategy comes amid growing concern about contract bundling — the practice of awarding one large contract to a large company, covering goods and services that could also be provided on several smaller contracts by smaller companies.

The number of bundled contracts has increased significantly in recent years, in part because agencies' acquisition staffs have shrunk drastically, and some believe it is easier to award one large contract instead of several smaller ones, officials said.

At the same time, agencies are not required to justify their decisions to bundle many of those contracts, said Angela Styles, administrator of the Office of Management and Budget's Office of Federal Procurement Policy.

The administration's nine-step strategy, which OMB released last week, requires agencies to file quarterly reports outlining their small-business contracting plans, goals, milestones and metrics. Administration officials will use the reports to hold agencies and contractors accountable for following through on the regulatory changes (see box).

The interagency task force that helped OMB create the strategy is now developing guidelines for agencies on what information needs to be included in the quarterly reports, Styles said at the release of the strategy. The agency guidance, expected to be released in the next few weeks, will outline "what is success," she said.

The guidance, however, will not include specific, governmentwide goals for the dollar amount or percentage of federal contracts that should be awarded to small businesses, Styles said. Any goals that are set will be specific to each agency, she said.

"We want to get a good feel for the agency plans before we develop goals," she said.

Many of the regulatory changes focus on making sure that agencies justify their multimillion-dollar bundled contracts, particularly those for information technology products and services awarded off multiple-award contracts that are not reviewed under current regulation, Styles said.

The new strategy drew praise from small-business advocates, but also words of caution and concern from longtime market observers.

Bundling "has prevented small businesses from having the opportunities they deserve," said Hector Barreto, the Small Business Administration's administrator.

"This is a giant step forward," said Robert de Posada, president of the Latino Coalition, a nonprofit policy organization.

Others, including Rep. Tom Davis (R-Va.), chairman of the House Government Reform Committee's Technology and Procurement Policy Subcommittee, believe that "bundling has brought needed efficiency to the government marketplace," according to his spokesman, David Marin.

Although ensuring competition is a worthy goal, "adding additional burdensome requirements on [multiple-award contracts] negates the intent of creating them," Marin said.

Instead of hamstringing agencies, the administration should focus on better training for contracting officials about how to maximize the participation of small businesses, he said.

OMB and SBA officials will submit the proposed changes to the Federal Acquisition Regulation and SBA regulations by Jan. 31, 2003.

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Getting a piece of the pie

The Bush administration's strategy for increasing opportunities for small businesses in federal contracting is composed of nine action items, including:

* Agencies must submit quarterly status reports to the Office of Management and Budget outlining how they will limit contract bundling and oversee subcontracting compliance.

* OMB will lead the preparation of modifications — to be submitted by Jan. 31, 2003 — to the Federal Acquisition Regulation and regulations at the Small Business Administration to require contract bundling reviews for task and delivery orders under multiple-award contracts.

* OMB will submit modifications to the FAR and SBA regulations to require multiple reviews of proposed bundled acquisitions valued at $2 million to $7 million.

* OMB also will amend the FAR to require agencies to include contractor compliance with subcontracting plans as part of the past performance evaluations.

For the full report and all nine action items, go to www.omb.gov.