Agencies miss mark on small biz

Agencies are not hiring small businesses in the numbers they should in order to meet federal goals, a group of House Democrats claimed today.

Twelve agencies received grades of D or lower on a scorecard that the Democratic members of the House Small Business Committee released this morning. The committee also released a 330-page report titled "Federal Agencies: Closed to Small Business."

Contract bundling and the apathy of contracting officers are causing many agencies to miss the administration's stated goals, said Rep. Nydia Velazquez (D-N.Y.), the committee's ranking Democrat.

The Small Business Administration, ironically, scored a D-minus grade. "The grades are the worst they've ever been," she said. "There were no A's. Not one."

The departments of Agriculture, Interior, Health and Human Services and Veterans Affairs scored B grades and B-minus grades, while the Agency for International Development, Education and Energy flunked with an F grade.

The government's goal is for 23 percent of contracts to go to small businesses overall, with other set-asides reserved for woman-owned, minority-owned and other specialized designations. Agencies now are not meeting those goals, Velazquez said.

Specifically, the report states:

* 22.62 percent of contracting dollars overall went to small businesses last year, short of the 23 percent goal and cost small firms $900 million in lost contracting opportunities.

* Agencies spent 4.36 percent of their contracting dollars on small disadvantaged businesses, short of the goal of 5 percent, which cost small firms $1.5 billion.

* Women-owned businesses received 2.9 percent of the federal contracting dollars, $4.95 billion short of the 5 percent goal.

* Business based in poor areas, called Historically Underutilized Business Zones (HUBZones), received 0.71 percent of the dollars, short of the 2 percent goal, at a cost of $3 billion.

* The 8(a) program, also set aside for minority-owned firms, does not have a single set goal. However, 8(a) companies receive 2.39 percent of the contracting dollars in 2002. The high was 3.84 percent in 1995.

Steve Kelman, professor of public management at Harvard University's Kennedy School of Government and administrator of the Office of Federal Procurement Policy during the Clinton administration, noted that in most categories the failure to meet the goal was by less than 1 percent, and said he sees no real problem for small businesses in the scorecard report.

"There has been more dishonesty on government small-business numbers by the small-business lobby than any other area of government procurement," he said. "There is effort after effort to portray some sort of problem or decline in small-business participation."

But the committee Democrats said the total cost in missed opportunities totals $13.8 billion, which they see as a problem. The Bush administration is to blame for the continued struggle of small businesses to win federal contracts, Velazquez said.

"Over a year ago, President Bush announced his small-business plan, where he said 'government contracting must be more open to small business,'" she said. "Unfortunately, when he actually presented the plan, it was not a bold vision but rather weak window-dressing that even experts believe will not result in any new contracting opportunities.

She and other committee members said they will explore ways to legislatively put some teeth into the goals.

"Their budgets ought to be in jeopardy," said Rep. Charles Gonzalez (D-Texas). "If a kid keeps flunking and there's no punishment, he's going to keep flunking, or doing the minimum."

Velazquez said she will introduce a measure that will make it more difficult for agencies to bundle contracts, a practice of gathering several small awards into a single large one. Currently, the agency itself judges whether a contract is unnecessarily bundled. Her measure would require a third party to make that determination.

"We have an administration that is constantly lecturing about standards and accountability," she said. "They should apply it to themselves."