Commerce makes commitment to small biz

Before procurement reform, using 8(a)s was almost the only game in town for government agencies to use to award contracts quickly and with a minimum of red tape. This encouraged too many 8(a)s to develop the unfortunate "business model" of seeking work on the back of an inefficient procurement system.

While small information technology businesses in the commercial marketplace typically succeed based on specialized skills that others can't match, many small businesses in the federal space have been generalized body shops - rent-a-programmer operations with little to differentiate themselves.

These approaches to the federal marketplace have had a tough time surviving procurement reform. The 8(a) program has lost its comparative advantage in allowing agencies to award contracts quickly. Some firms critical of procurement reform have the unexpressed hope that the process will revert to being as awful as it used to be so that the comparative advantage will be restored. That's hardly the response of companies that see serving their customers as a prime responsibility.

Small, nimble IT firms have many advantages in the federal market, just as they do in the commercial market. Given that bad government policies in the past nurtured the problems that many small and 8(a) firms now face in the market, it is government's responsibility to help these firms adapt to the new federal market so that they can win business and the federal customer can be served.

In this context, the Commerce Department's recently awarded small and minority business governmentwide acquisition contract - Commerce Information Technology Solutions (Commits) - represents a crucial turning point in an effort to help small and minority businesses in a constructive way. Commits provides a streamlined vehicle to give government customers quick access to small and minority businesses.

Twenty-nine vendors have received awards under Commits. Fifty percent of those vendors are 8(a)s; 15 percent are other small, disadvantaged businesses; 20 percent are woman-owned businesses that are not 8(a)s or small, disadvantaged businesses; and 15 percent are other small businesses.

Commits is not just another contract vehicle for 8(a)s or small businesses. The Commits strategy showcases high-quality, customer-oriented small and minority businesses that represent models of where the federal small business community as a whole needs to go. Commits differentiates itself from the crowd in a number of ways:

* Not everybody who showed up got an award. The 29 winners were chosen from a field of 126 teams that bid on Commits. Many GWAC vehicles, as well as the GSA schedules, are not nearly so selective.

* Past performance was the principal evaluation factor in choosing the winners. Commerce was serious about helping spread the message - and send the signal - that there are significant numbers of top-notch small and minority businesses in the federal market and that small and minority businesses must concentrate on high performance to succeed.

* Most of the winning firms are specialized players, not body shops. One of the three award areas is IT security, which is a hot topic, and Commits includes some small, high-quality security firms. Bob Welch, the Commerce procurement executive, told me that evaluators at the oral presentations were so blown away by the skills of the six-person Hispanic-owned information security firm Nieto Engineering that they wanted their agencies do business with the company immediately, without even waiting for Commits to be awarded. Other winners specialize in business process re-engineering, independent validation and verification, e-commerce and software life-cycle management.

* Commerce is committed to performance-based contracting. The Commits program office will scrub statements of work submitted by customer agencies and work with agencies to make sure the work is performance-based. Commerce also is committed to competing task orders. These policies increase the chances that an agency will get good results at fair prices.

Commerce used a strategy for judging past performance that was different from the approach used by many federal agencies and that was controversial among some small-business vendors that bid, or planned to bid, on the contract. Instead of looking at references involving work that the firms had done, Commerce looked for awards and quality recognitions. Winners included companies selected for the National Small Business Contractor of the Year by the Small Business Administration and the Treasury Department's Small Business of the Year as well as for the Wharton School of Business 100 Award. Winners also are on various lists of the fastest-growing small high-technology businesses and include firms that are ISO 9000- or Software Engineering Institute Capability Maturity Model Level 3-certified.

There's room for legitimate debate about whether this approach or the traditional approach to past performance - or a mixture of the two - is most appropriate. ISO 9000 and CMM Level 3 certifications are input-oriented, not results-oriented, and CMM is a largely government-only program that will exclude predominantly commercial firms.

But I applaud Commerce for experimenting with a new approach to past performance evaluation. More importantly, I applaud the agency for placing such a high importance on past performance in selecting firms for Commits.

Because of the way Commits winners were selected, and because of the policies of the Commits program office, this should be a vehicle that federal customers can use with confidence. That kind of branding is something that will be helpful to small and minority businesses in this environment.

Commerce deserves the gratitude of the government and of the small-business community for initiating a renaissance for small and minority businesses in the era of procurement reform.

--Kelman was the administrator of the Office of Federal Procurement Policy from 1993 to 1997. He is now Weatherhead Professor of Public Management at Harvard's Kennedy School of Government.