Affiliation rules muddy small business contracting waters

Members of the House Small Business and Veterans Affairs committees are pushing for new procurement legislation in the wake of unflattering revelations about the Veterans Affairs Department's contracting certification processes.

Spurred by a lengthy report in the Washington Post the week of Nov. 11, House Small Business Chairman Sam Graves (R-Mo.), Veterans Affairs Chairman Jeff Miller (R-Fla.), Rep. Richard Hanna (R-N.Y.) and Rep Mike Coffman (R-Colo.) said in a joint statement that they were looking into whether the firm highlighted in the Post series – Vienna, Va.-based MicroTech -- was evaluated correctly under federal small business rules.

MicroTech sells cloud computing, network integration services and IT gear to federal agencies.

Some federal acquisition experts said lawmakers should focus less on how to define a small business and more on the rules used to regulate associations between contractors.

Handing a job to a small business that then subcontracts out the work to a larger company might be within the bounds of the rules in many cases, but some argue that such behavior violates the spirit of – and purpose behind – small business set-asides.

The Post reported that MicroTech had close ties to MicroLink -- a firm operating in the same Tysons Corner, Va., office building, but which did not have a small business designation.

It has been only two years since the federal government revamped its criteria for what constitutes a small business, said Larry Allen, president of Allen Federal Business Partners. Rather than taking another swing at that, Allen suggested, the federal government instead should address the often Byzantine "affiliation rules" at issue in the MicroTech case.

Graves said his panel is looking into whether the VA inspector general is investigating possible subcontracting violations. "The VA does a lot of good things, but determining if a firm is a small business is not one of them," Graves said in the Nov. 14 statement.

Graves, Miller and Hanna back legislation introduced by Coffman that aims to boost the contracting prospects of small businesses owned by disabled veterans by standardizing the way the Small Business Administration and the VA define a small business and transferring the VA's verification responsibilities to the SBA.

"VA should be leading the way when it comes to compliance with federal service-disabled veteran-owned small business contracting rules," said Miller, who added that the Post report highlighted "a shining example of what not to do."