Unrestricted loopholes: Are GWACs best feature an end-run around small business?

The federal government’s massive COVID response has quieted some of the zero-sum-game acquisition barking: That the government-contracting game is rigged in favor of the biggest players, that strategic sourcing and category management threaten the span of the small-business industrial base by elevating a few big “winners,” and that national preparedness and best-value contracting requires growing the scale and strength of the government’s supplier-partners by following longstanding policy to support small and socioeconomically disadvantaged businesses.

Under this cover, the Office of Management and Budget–designated executive agents that operate the governmentwide acquisition contracts (GWACs) have struggled to let the next generation of high-ceiling strategic-sourcing vehicles. Without much evidence, we generally accept that governmentwide strategic-sourcing vehicles deliver an array of significant benefits — streamlined procurements with a limited pool of qualified contractors, cost savings through consolidation (just don’t call it bundling), and opportunities to leverage demand management and just-in-time supply chain solutions to improve contracting speed, performance and value. These contracts have also designed a new path around small business and other socioeconomic contracting rules.

Falling short of Best in Class

First, let’s evaluate a GWAC against those last three promised benefits. Take CIO-SP4, for example:

• Speed: The contract, a follow-on to a successful existing vehicle, CIO-SP3, was to be awarded in fiscal 2021; it may not be awarded until 2024. Such unknowns introduce schedule and execution risk to acquisitions across the federal government.
• Performance: Despite years of acquisition planning and post-request for proposal releases, NITAAC drastically changed the competition’s rules around how teams qualify as small, which team member’s qualifications could satisfy mandatory technical factor 1, health IT capability and whether subcontracts could be used as past performance, among others. Such changes disrupted teaming strategies, inadvertently shifting the makeup of CIO-SP4 contract competitors, not based on careful analyses of requirements and the commercial market during acquisition planning, but under pressure of an active RFP deadline in response to offeror questions and pre-award protests.
• Value: We all now agree price competition on indefinite delivery, indefinite quantity (IDIQs) primarily functions at the task-order level, along with the technical evaluation. Perhaps agencies derive value from ordering guides, systems and templates, or maybe they shop for the lowest contract access fee. I suspect programs use the contracts they’re experienced with, even when those prior procurements ran into timeline-busting obstacles or other poor outcomes.

While we do not have an award date for CIO-SP4, we do know the future contract is best-in-class; no need to wait for final text. The “best” in best-in-class is fungible in that Lake Wobegon-Garrison Keillor way.

Structurally, all IDIQ contracts do deliver certain benefits — a limit on protests of smaller task orders, cost or pricing competition, and an escape hatch from the FAR Part 15 process model. While the FAR’s small-business requirements appear in Part 19 and apply across award approaches with notable exceptions, such as the General Services Administration’s schedules, the design of strategic sourcing vehicles exploits a loophole in the regulatory scheme and its enforcement.

Separate but equal shades bad behavior

A trend among strategic-sourcing vehicles is to create (at least) two separate contracts with the same scope: One large and one small. How a scope that satisfies the rule of two to allow for a set-aside also fails the rule of two to allow for an unrestricted competition is a matter for another time.

To keep the small businesses off the large business contracts, the RFPs’ scoring rubric include attributes only a large business can satisfy, such as audited compliance with cost accounting standards or an approved purchasing system. Small businesses are exempt from such requirements and therefore cannot earn the points.

Once the separate contract vehicles are operating, avoiding small business is as simple as following the large-business IDIQ’s fair opportunity procedures. There is no need for a sources-sought notice here, as there are no small businesses to respond. The vehicle’s small businesses are kept ignorant to the competition on their separate contract, and even should they become aware, without holding the unrestricted contract, they likely do not have standing to protest.

Incumbent-fortified small business a win-win?

Those programs interested in contracting with small business do well to publicize their requirement as a small business set-aside as soon as the acquisition strategy is locked. This allows small businesses to assess their capabilities and scale against the requirement and strategically team with larger players for expertise, experience and bench strength. Those large businesses’ capture managers now know partnering is their only shot at the contract and become eager to engage their smaller peers. Through teaming, especially with large businesses, small primes grow their capabilities and expertise, and we expand the industrial base.

In some cases, risk analysis favors a specific large contractor’s role on the next iteration of a contract; even with the limitation in subcontracting clause, that large business can perform half the effort on a set-aside. It may elect to transfer employees (and therefore revenue and capabilities) to its small-business prime contractor, so both comply with the clause.

A modest proposal

How many billions of contract dollars skip the rule of two’s set-aside requirement via the strategic-sourcing shortcut? The rule of two, from FAR § 19.502-2, states contracts must be set aside for small business when the government anticipates receiving at least two responsible offers and award will be made at fair market prices.

To know, we need the contract-holder correspondence — especially the requests for task-order quotes and notifications of award — information the contracting shops have long not shared. Such opaqueness is a feature, not a bug, no one explicitly says. If we are to live with that opaqueness, so be it, but let’s at least be clear about who benefits and knows exactly how much.

Jason Bakke is a director at Chaedrol LLC, a SBA-certified 8(a) small business that helps federal buyers and sellers navigate acquisition complexity to build win-win relationships while meeting mission requirements. An acquisition practitioner and writer, Jason harmonizes statue, regulation and common law to reduce friction in the system.

Copyright © 2024 Federal News Network. All rights reserved. This website is not intended for users located within the European Economic Area.