Concerns over NASA’s SEWP VI small business strategy come to surface

Concerns about NASA’s sixth iteration of its governmentwide acquisition contract known as SEWP have been bubbling underneath the surface for much of the past few months.

Industry experts have quietly been wringing their collective hands over NASA’s plans for the small business size standard it detailed in the draft solicitation. The worry is the new size standard would exclude or make it nearly impossible for a large swath of small businesses to compete on the contract.

Those fears broke through the surface in a new letter from Reps. Roger Williams (R-Texas) and Nick LaLota (R-N.Y.), chairman and a member of the Small Business Committee.

“The committee is concerned that the revenue-based size standard proposed for use in SEWP VI limits small business’ ability to service task orders without compromising their size status,” the lawmakers wrote in a letter to NASA Administrator Bill Nelson. “The previous vehicle iteration, SEWP V, showed remarkable small business inclusion with small entities winning an estimated 80% of contract dollars. The apparent success of SEWP V makes the decision to use a revenue-based overall contract NAICS code even more concerning. This decision could restrict the ability for small businesses to access task orders and prevent them from fully participating in SEWP VI.”

Williams and LaLota are asking NASA to answer two basic questions and provide a staff level briefing by Jan. 18.

The questions are:

• A detailed rationale on the decision to use NAICS code 541512, including any effort to reconsider its use;
• A detailed narrative describing concerns or limitations of understanding related to the use of the nonmanufacturer rule as it relates to NAICS code 541519.

“We have heard concerns that these changes by NASA will prevent small businesses from partnering with the space agency,” said Williams in an email to Federal News Network. “All small businesses deserve the right to compete for government contracts, and we must ensure the fine print in these large deals allows them to do so. I look forward to hearing from the agency about these changes and how they believe it will benefit small businesses.”

A NASA spokesperson said in an email to Federal News Network that the space agency is reviewing Williams’ letter.

“NASA’s SEWP plays a critical role in helping the agency innovate for the benefit of humanity with the help of small businesses. Currently, under SEWP V, 106 small businesses collectively received approximately $9.7 billion of the total $12.2 billion spent in fiscal 2023,” the spokesperson said. “The SEWP program provides several ways for NASA to assist small businesses, including providing direct support to small businesses that do not have the sales and technical resources available to them. The agency has a goal of dedicating more than 60% of SEWP VI award dollars to small businesses. NASA continues to provide effective oversight of this program to help ensure small businesses get an opportunity to work with the agency.”

Potential long-term consequences

Stephanie Geiger, the CEO and founder of the Geiger Consulting Group, a federal marketing and communications expert, said if NASA continues to use the current small business size standard, it would be a major blow to small firms.

“Based on the revenue size standard currently included in the draft RFP, many small businesses have already met and surpassed that size standard making it difficult for small businesses to pursue SEWP VI without JVs or mentor/protege agreements unless they want to shift categories,” Geiger said. “We predict there will be no small businesses left within three years of contract award.”

Eric Crusius, a partner with Holland and Knight, said the changes NASA is suggesting would have far reaching consequences on the vendor community for many years.

“Small businesses with few employees will now be competing with the largest contractors in the world for those contracts,” he said. “The change in the NAICS Code may result in lower performance metrics because the companies that will qualify as small businesses will be much smaller and may not have the experience of providing large scale product orders to the government.  It may also cause more turnover because smaller companies handling these orders will more quickly size themselves out of the small business thresholds.”

NASA outlined its initial plan for SEWP VI earlier this fall. It said SEWP VI will, again, be a 10-year contract and expand to more than just products and related services, but offer more complete IT services. The draft RFP includes three categories:

• IT solutions to include products in the information and communications technology (ICT) and audio visual category.
• Enterprise-wide IT solutions and services, to include everything from managed services to program integration to cloud and cyber services.
• IT professional services solutions focused on ICT and audio visual services.

NASA held an industry day in October to receive feedback and plans to release the final request for proposals sometime in 2024 with an award by May 2025.

The concerns over the changes to the small business size standard is concerning because of the success of the SEWP program over the last 30 years, where it has been one of the most successful governmentwide acquisition contracts. The latest version, SEWP V, which is in year 8 out of 10, has 142 companies, 100 of which are small businesses, and expects to top more than $10 billion in sales in fiscal 2023.

Other options for NASA

Jeremy Nusbaum, the founder and principal consultant of the Luminary Consulting Group, a firm that provides proposal and capture planning help to contractors, said NASA should look at similar contracts that have successfully utilized NAICS code 541519 and received waivers to the non-manufacturer rule.

“Two years ago, the Homeland Security Department obtained a waiver from the Small Business Administration for its FirstSource III procurement that involves a similar mix of products and services. Sources at the SBA confirmed as recently as last week that the process DHS followed for FirstSource III was excellent, and it would benefit NASA if they followed a similar approach requesting a waiver for SEWP VI,” Nusbaum said.

Crusius added another way to solve these concerns is to have a separate track using the products NAICS code for orders focused on products.

“This will allow NASA to keep doing what it has done so well while offering additional solutions building upon the strong base they have made with the previous versions of SEWP,” he said. “It is not surprising to see Congress taking an interest in this because the impact of the changes in NAICS codes will impact dozens of businesses owned by service-disabled veterans that have been trusted partners with NASA for many years.”

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