GSA probing small business

Reporting of Small Business Contract Awards Does Not Reflect Current Business Size

The General Services Administration has launched an effort to find out how many large businesses are erroneously considered small in federal contracts and to find out why errors happen.

The effort started July 14, said David Drabkin, deputy associate administrator of GSA's Office of Acquisition Policy. Nine people, including the Federal Procurement Data System team, are working on figuring out how to assess the extent of the problem.

"It's hard because there's no single list of companies that are small or other than small," he said. "When we finish this effort we should be able to tell folks what the impact is. My sense is it is a minor one, but I need to be able to prove that empirically."

Various interest groups, including industry associations, small business advocates, members of Congress and administration officials have been attacking the issue over the past several months.

When large businesses are miscategorized as small, they take small-business benefits away from legitimate small businesses and allow agencies or contractors to claim credit for hiring small businesses. Under the Bush administration's guidelines, agencies are expected to award 23 percent of their prime contract dollars to small firms.

But a General Accounting Office report, released in May, found that contracting officers in 17 contract actions out of 114 it analyzed misidentified large businesses as small ones, a 15 percent error rate.

Opinions vary on how to address the matter. Under a proposed new rule that the Office of Federal Procurement Policy published in April, small businesses on governmentwide acquisition contracts would have to recertify their size once a year. That would prevent a small business from keeping the designation for years after outgrowing it.

Drabkin said many of the mischaracterizations, however, may come down to human error. Agency staff members may check the wrong box on a form or send the wrong data to the Federal Procurement Data System, which tracks government procurement statistics for all agencies.

The FPDS logged 35.9 million transactions in 2001 and more than 34 million in 2002, he said. "Human error happens. It's a lot of data. 34 million transactions is not a small number."

Larry Allen, executive vice president of the Coalition for Government Procurement, said Drabkin has correctly identified the most likely causes of errors.

More broadly, Allen said, small businesses and their role in federal contracting has become the summer's hot political issue, at least among contractors.

"It's approaching a level of hysteria where rational thought is not necessarily going to hold the day," he said. "I think a lot of this is politically driven, and it's driven by a certain segment of small business contractors who have not adapted to the new ways of doing business and would like to go back to the old way."

Drabkin said GSA will look for some obvious examples of large companies misidentified and try to identify the causes. The results of that analysis will guide future work, he said. He promised results by September.

GSA is also developing a new FPDS system, replacing the decades-old technology now in use. With the new system, data will come directly from agencies electronically into the system, reducing the potential for keystroke errors.

"We want to provide greater confidence in our data," Drabkin said.