Rep. Chabot takes new approach to increasing small business contracting

Instead of just trying to increase the governmentwide small business contracting goal, the House Small Business committee is taking a more nuanced approach.

Rep. Steve Chabot (R-Ohio), chairman of the committee, is calling for a new small business scorecard methodology that focuses not only on prime contracts, but also subcontracts and under-represented industries across the federal procurement spectrum.

Chabot details this new methodology in one of the most wide-ranging small business contracting reform bills in a long time.

Chabot brings together some of the ideas from five separate legislative initiatives in the Small Contractors Improve Competition Act (H.R. 1481).

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“Small business contracting policies are intended to make sure we have a broad spectrum of small firms working with the government across industries, and when those policies are undermined, it is imperative that we find appropriate solutions,” Chabot said in a release. “These commonsense reforms move us in the right direction.”

In the past, lawmakers have tried to raise the governmentwide small business goal to 25 percent from 23 percent to help bring as much as $10 billion more to small firms.

But instead of trying to force agencies into a higher goal that they likely will not meet — 2013 was the first time in nine years that the government reached the 23 percent goal — Chabot’s bill would require the Small Business Administration to increase the number of industries in which small businesses compete for contracts by identifying gaps in the base and figuring out how best to attract those firms to government procurement.

Additionally, the bill would require SBA to create a new scorecard methodology by Sept. 30, 2016, that establishes an annual goal for each agency.

Starting in fiscal 2017, the bill calls on SBA to begin using the new approach to evaluate how agencies are creating maximum opportunities for small businesses to win prime and subcontracts, and measure departments’ success in awarding contracts to small firms across all socioeconomic areas.

The committee also sets its sights on reverse auction and the impact this approach to acquisition is having on small firms.

The bill would “limit the use of reverse auctions when using small business contracting authorities. Specifically, it requires training of contracting officers, and prohibits the use of reverse auctions for sole source contracts or contracts with inadequate competition. It also states that reverse auctions should only be used when the good or service being purchased can be considered only either technically acceptable or unacceptable,” the committee wrote in an analysis of the bill.

Additionally, the committee said the reverse auction provisions would require the government to “communicate honestly with bidders regarding the ranking of offers, as some reverse auctions have misled offerors regarding the status of bids. The bill also makes it clear that when using a third-party reverse auction service, the government must still follow all of the normal procurement rules, as there are cases where a third party provider is excluding companies from competing or using third party data to inform responsibility determinations.”

The bill also calls for agencies to ensure the third-party contractors are not performing “inherently governmental” functions and any past performance data created and collected by the third party meets existing laws and regulations.

These provisions are, in many ways, a reaction to the uproar over FedBid and what some say are its unfair practices in the market. A recent series of bid protest decisions highlighted the continued challenges agencies face in using this platform.

The Government Accountability Office called on the Office of Federal Procurement Policy to issue guidance to agencies for using reverse auctions.

In the legislation, Chabot also wants SBA to better focus on contract bundling and consolidation that has impacted small firms over the last decade.

SBA would have to develop a plan for collecting better data on bundling and contract consolidation, and certify annually to the House and Senate small business committees that the data reported was accurate. GAO would study the strategy and results.

Agencies also would have to have their chief acquisition officer or senior procurement executive justify the bundle or consolidation and publish that rationale on a public website within seven days of the decision to move forward.

Chabot also wants to make it’s easier for small firms to team up under joint venture agreements to bid on larger contracts.

Chabot said the changes outlined in the bill are necessary because small business industrial base and contract base is shrinking. He said the number of contracts available for small firms is down by 60 percent between 2011 and 2014. Over that same period, he said the average size of a contract increased by 230 percent.

“The number of companies registered to do business with the federal government has dropped by over 100,000 from 2012, so that only 273,072 small businesses are still registered to compete for federal contract,” Chabot wrote in the fact sheet. “This speaks to a greater problem in the industrial base — a declining participation rate. SBA’s Office of Advocacy recently highlighted this small business participation problem. Specifically, advocacy identified 23 industries in which the government spends over $500 million per year, but where less than 10 percent of procurements are awarded to small businesses. These are areas important to the industrial base where small businesses are not participating, but this is not reflected in the current scorecard process.”

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