By: Edward T. DeLisle & Maria L. Panichelli
On March 7, 2012, a package comprised of six bills, (H.R. 3850--112th Congress: Government Efficiency through Small Business Contracting Act of 2012 (2012); H.R. 3851--112th Congress: Small Business Advocate Act of 2012 (2012); H.R. 3893--112th Congress: Subcontracting Transparency and Reliability Act of 2012 (2012); H.R. 3980--112th Congress: Small Business Opportunity Act of 2012 (2012); H.R. 4121--112th Congress: Early Stage Small Business Contracting Act of 2012 (2012); H.R. 4118--112th Congress: Small Business Procurement Improvement Act of 2012 (2012)), each designed to increase the number of federal contract opportunities for small businesses, cleared the House of Representatives’ Small Business Committee.
The most notable of the bills is the Government Efficiency Through Small Business Contracting Act (H.R. 3850). It would raise the government’s business goals for procurement contracts awarded to small business concerns, codified at section 15 (g) of the Small Business Act, from 23% to 25% of all prime contract awards per fiscal year. In addition, the bill proposes to increase the current goal of subcontracting to small business from 35.9% to 40% percent. Government-wide goals for procurement contracts awarded to small business concerns owned and controlled by service-disabled veterans (3%), qualified HUBZone small business concerns (3%), small business concerns owned and controlled by socially and economically disadvantaged individuals (5%), and small business concerns owned and controlled by women (5%) will remain the same. An amendment proposed by Rep. Gary Peters, D-Mich., would have raised the set-aside for economically and socially disadvantaged businesses from 5% to 7.5%, but it was withdrawn.
The Small Business Advocate Act (H.R. 3851) elevates agency Small and Disadvantaged Business Utilization offices both in terms of salary and duties. Specifically, it amends the Small Business Act to require the Director of Small and Disadvantaged Business Utilization (established in each federal agency having procurement powers) to be compensated at least at the GS-15 rate and allows such a position to be compensated up to a Senior Executive Service level. It also adds, as additional duties of each Director, the following:
(1) reviewing and advising on decisions to convert an activity performed by a small business to an activity performed by a federal employee;
(2) providing advice and comments on acquisition strategies, market research, and justifications related to small business;
(3) providing training to small businesses and contract specialists;
(4) carrying out exclusively the duties enumerated under the Act and, while Director, not holding any other title, position, or responsibility, except as necessary to carry out such duties; and
(5) reporting annually to the congressional small business committees on the provision of small business and contract specialist training.
Lastly, it amends the Federal Acquisition Streamlining Act of 1994 to require the Small Business Procurement Advisory Council to: (1) conduct reviews of each Office of Small and Disadvantaged Business Utilization to determine compliance with Small Business Administration (SBA) requirements, (2) identify best practices for maximizing small business utilization in federal contracting, and (3) report annually to the small business committees on such reviews and best practices.
The Subcontracting Transparency and Reliability Act (H.R. 3893) would amend the Small Business Act to prohibit a small business receiving a guaranteed loan through the Small Business Administration from expending more on subcontractors than: (1) 50% of the loan amount received, in case of a contract for services other than construction; (2) 85%, in the case of a contract for general construction; (3) 75%, in case of a contract for construction by a special trade contractor; and (4) 50%, in the case of a contract for supplies (other than from a regular dealer in such supplies). This bill would require the small business, in case of a contract for supplies from a regular dealer, to supply the product of a domestic small business manufacturer or processor, unless the SBA grants a waiver. The Bill authorizes the SBA Administrator to: (1) modify the above percentage limits when necessary to reflect conventional industry practices; and (2) establish a subcontractor percentage limit for contracts not covered by (1) through (4), above, and provides penalties for violations of such limits.
Under the bill, each subcontracting plan submitted to federal agencies is required to contain assurances that the offeror or bidder will: (1) report on subcontracting activities throughout the life of the contract, and (2) cooperate with any study or survey required by the federal agency or the SBA to determine the extent of compliance with the subcontracting plan. The bill directs the Administrator to ensure that the federal subcontracting reporting system to which such reports are submitted is modified to notify the Administrator, the appropriate contracting officer, and the appropriate Director of Small and Disadvantaged Business Utilization if an entity fails to submit a required report. It also provides that a contractor’s failure to submit such a report constitutes a breach of contract for which appropriate action may be taken. If an agency procurement center or commercial market representative determines that a subcontracting plan fails to provide the maximum practicable opportunity for small businesses to participate, under the bill, such representative may delay acceptance of the plan for a 30-day period for plan alteration.
The bill also allows a federal agency to convert a function from performance by a small business to performance by a federal employee only if: (1) the agency has made publicly available the procedures for such a decision, and (2) the procedures require such decisions to be reviewed by the appropriate Office of Small and Disadvantaged Business Utilization and procurement representative. (H.R. 3893--112th Congress: Subcontracting Transparency and Reliability Act of 2012. (2012).
The Small Business Opportunity Act (H.R. 3980), amends the Small Business Act to replace the position of “breakout procurement representative” within the Small Business Administration with the position of “procurement center representative.” Pursuant to the bill, such representatives must review any acquisition plan for a procurement requirement and make recommendations regarding procurement method determinations and acquisition plans. The bill would remove the requirement that these representatives review restrictions on competition, instead requiring them to review barriers to small business participation in federal contracting, as well as any bundled or consolidated solicitation or contract. The representatives must: (1) have electronic access to any acquisition plan developed or in development with respect to a procurement activity, (2) be an advocate for the maximum practicable utilization of small businesses in federal contracting, and (3) be notified of and included in all applicable acquisition planning processes.
The bill directs the Defense Acquisition University and the Federal Acquisition Institute to each provide a course on contracting requirements under the Small Business Act, and requires each federal department or agency having contracting authority to: (1) enumerate opportunities for participation by small businesses during all acquisition planning processes and in all acquisition plans, and (2) invite the participation of the appropriate Director of Small and Disadvantaged Business Utilization and procurement representatives in such planning processes and provide Director and representative access to all acquisition plans in development.
The Early Stage Small Business Contracting Act (H.R. 4121) would amend the Small Business Act to direct the Administrator of the Small Business to establish and carry out a program to provide increased access to federal contract opportunities for early stage small businesses (a business with no more than 15 employees and average annual receipts of no more than $1 million). The bill requires the Administrator to identify appropriate federal procurement contracts for award under the program and allows a contracting officer to award: (1) a sole source contract under the program if an entity is determined to be a responsible contractor and the officer does not reasonably expect that two or more early stage businesses will submit offers, and (2) contracts on the basis of competition restricted to early stage businesses if the officer reasonably expects that at least two early stage businesses will submit offers and that the award can be made at a fair market price. It requires all program contract awards to be counted toward goals for small business participation in federal procurement contracts.
Small Business Procurement Improvement Act (H.R. 4118) would amend the Small Business Act to provide for increased small business participation in multiple award contracts, and for other purposes. Specifically, the bill would add to section 15(g) of the Small Business Act a requirement that the President shall establish “government-wide goals for the total dollar value of all task orders and delivery orders placed against multiple award contracts, blanket purchase agreements, and basic ordering agreements awarded to small business concerns, small business concerns owned and controlled by service disabled veterans, qualified HUB-Zone small business concerns, small business concerns owned and controlled by socially and economically disadvantaged individuals, and small business concerns owned and controlled by women.”
What does all this mean? Based upon the bi-partisan nature of the support for these bills, it means that there is agreement across the aisle that small businesses are deemed an important factor in the country’s economic recovery. Expanding the government’s goals for small, and small disadvantaged, businesses, for example, will assist in steering federal dollars to those who may not have otherwise had access to those dollars. Small companies benefitting from the receipt of federal contracts will hire employees and buy goods and services to support those contracts. Large businesses will, and certainly should, play a role in the legislative process as the bills wind their way out of committee. We will follow the progress of each bill and report back with any findings.
Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group. Maria L. Panichelli is an Associate in the firm’s Federal Practice Group.