New policy pushes pacts to SDBs

The Defense Department has proposed a new policy to promote contract awards to small, disadvantaged businesses (SDBs) that would expand the use of price preferences for these firms and grade prime contractors on their work with minority- and woman-owned suppliers.

The proposed amendment to the Defense Federal Acquisition Regulation Supplement replaces a direct set-aside program, known as the "rule of two," that DOD suspended in October after the Justice Department found it to be unconstitutional.

The program did not conform to a recent Supreme Court decision, Adarand v. Pena, which requires the government to prove contract set-asides designed to counteract specific patterns of discrimination.

The proposed new rule does not apply to civilian agencies. Steven Kelman, administrator for the Office of Federal Procurement Policy, said, however, that "if DOD is using this approach, it is certainly an approach that will be considered government-wide."

Earlier Kelman said DOD and civilian agencies would follow the same policy, but no governmentwide policy would be issued until after DOJ completes an ongoing review of federal affirmative-action programs.

Under the proposed rule, DOD would expand its practice of allowing SDBs a 10 percent price preference in competitive bids. Currently, the preference applies exclusively to procurements that are awarded based on price and related factors; the proposal would make the preference mandatory in other procurements as well.

Defense spokeswoman Beverly Baker said the 10 percent preference would be mandatory for all contracts except those for construction and for DOD commissaries. The preference also would not apply to contracts that are otherwise set aside for small businesses or procurements conducted using simplified procedures.

She said it would be up to each contracting activity to define the weight that past performance will have in the evaluation of bids.

The proposed regulation also would boost procurement officials' power to make subcontracting with minority- and woman-owned suppliers a factor in evaluating the past performance of prime contractors.

Although current DOD policy encourages vendors to use small, minority- and woman-owned businesses as suppliers, source-selection officials do not have a formal way to determine whether vendors actually award contracts to the firms they say they will use.

"There has been some frustration that once a contractor gets awards, they never come close to fulfilling their subcontracting plans," said Bob Dornan, senior vice president of Federal Sources Inc. "I guess this is another attempt to say that the good guys have a business plan that shares the wealth with the small, disadvantaged businesses."

The proposed rule would require vendors to tell the department whenever they replace a small business, an SDB or a woman-owned company. Baker said the proposal would cover past performance on all contracts, not just those awarded once the rule takes effect.