Bill would have feds feel the bite of missed contracting goals

The chairman of the House Small Business Committee would like to put some sharp teeth into the rules on small-business contracting goals. He has proposed increasing the annual goal and putting senior executives on the hook when their agencies miss the mark.

Rep. Sam Graves (R-Mo.) introduced the Government Efficiency Through Small Business Contracting Act Jan. 31. The legislation boosts the annual governmentwide small business contracting goal from 23 percent—a goal rarely reached—to 25 percent.

The federal government spends nearly $540 billion through contracts each year, so the 2-percent increase could potentially yield about $11 billion to small companies -- if agencies actually meet the goals. The legislation would set a goal of awarding 40 percent of all subcontracted dollars to small businesses. It’s an increase from the current goal of 35.9 percent.

The Small Business Committee said early data appears to show the government missing the 23-percent goal by more than 3 percent in fiscal 2011.

As a result, government officials would feel the pinch if their agency comes up short. The bill would withhold the agency’s senior executives from receiving bonuses. Executives also could possibly miss out on a sabbatical the following year, if the agency doesn’t award enough contracts to small business.

“Small businesses have proven time and time again that they can perform a service or produce goods for the government cheaper and often quicker than their larger counterparts. However, various bureaucratic impediments remain for small contractors. Any avenue to save taxpayer dollars, increase competition and spark growth is the route we should be taking,” Graves said.

Alan Chvotkin, executive vice president and counsel at the Professional Services Council, said the bill has good intentions, but this and another new piece of legislation on set-asides may impose a consequence on agencies that wasn’t initially intended.

Rep. Bill Owens (D-N.Y.) introduced a bill that would cut an agency’s budget by 10 percent for missing a small-business contracting goal. It and Graves’ legislation may be encouraging agencies from the wrong angle.

“Cuts in pay are rarely a motivator,” particularly when the senior executives who have no way of influencing small-business contracting decisions are affected, Chvotkin said.

Agencies may decide to reduce their contracting goals to avoid the 10-percent penalty in Owens' proposal, Tiffany Wynn, an associate at the Crowell and Moring law firm, wrote in a post on the Government Contracts Legal Forum blog about the legislation.

These bills would only add to the frustration among officials in agencies that don’t meet their contracting goals, Chvotkin said. In addition, agencies shouldn’t face increased percentages without additional tools from Congress to help them achieve the new measure.

"The small-business set-asides are just goals," not formal requirements, so tough consequences may not be the best option, he said.

Further, the goals are set within a federal procurement system built around other objectives, Chvotkin said. The system’s core objective is to get agencies quality products and services on schedule at the best price.

Set-asides are a factor in procurement decisions, and the system needs a balance between contracting goals and meeting the central objective, he said.