“EDITOR’S NOTE”
We applaud the recent article in “FCW” and “Washington Technology” by Chris Riotta identifying the risks associated with the plans for dramatic growth in procurement equity in government contracting. The risks identified in the article to both the government and to small business are real
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This posting pairs the Chris Riotta’s article with a similar article at “Smalltofeds” by Ken Larson that cites similar risks, as well challenges to the government in managing them.
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“WASHINGTON TECHNOLOGY”
“The risks of pushing for procurement equity” Jul 19, 2021 By Chis Riotta
“The expanded contracting opportunities will translate to $100 billion over the next five years for SDBs, the White House said in a fact sheet, in addition to $31 billion for mentoring and other forms of technical assistance for those small businesses.
But money doesn’t always end up in the right hands, and it remains unclear how the administration plans to oversee the robust agency-wide call-to-action, according to former NASA CIO Linda Cureton, who described in a recent interview how larger firms can take advantage of SDBs through initiatives like government mentor-protégé programs.
Under the previous administration, Congress changed the law so larger businesses can take up to a 40 percent stake in SDBs in exchange for technical and management guidance, training and networking opportunities. Those firms can then form a joint partnership to secure contracting opportunities meant for SDBs.
Larger firms have been known to abuse those programs, Cureton said, using small businesses to collect set-asides in cases that sometimes lead to criminal charges and million-dollar lawsuits.
Beyond fraud and competing against well-established firms, SDBs face institutional challenges and roadblocks in creating partnerships with the federal government: for example, SDBs cannot acquire a facility clearance without already having a contract, which requires a clearance.
Still, if implemented as written, the actions “would provide meaningful benefit to all SDB qualified entities and their communities,” according to Guy Timberlake, cofounder of the government contracting group GovCon Club.
However, Timberlake also said “the administration will need to close loopholes” to “ensure the dollars reach their intended destinations.”
SBA has taken other steps to root out misuse of its programs geared for smaller businesses, including an annual review process of the mentor-protégé relationship for all active program participants and preserving the cap on the number of protégé’s a mentor can have at three. The agency said it will continue carefully analyzing mentor-protégé agreements before approval to ensure the integrity of the program.”
“SMALLTOFEDS”
“Managing Risk In Small Business Federal Government Contracting” July 23, 2021 By Ken Larson
“The challenges and difficulties for the small business in government contracting are not so much in the areas of barriers as they are in lack of knowledge (which I concede is a form of barrier but one that can be dealt with). Large business and government agencies take advantage of the small enterprise lack of knowledge or make poor assumptions regarding what a small business knows about the Federal Acquisition Regulation (FAR) and associated Cost Accounting Standards (CAS). This leads directly to abusive practices. A prime example of an abusive practice is large corporations signing teaming agreements during proposal efforts and then not awarding subcontracts to the small enterprise as agreed, keeping the majority of work for themselves. Agencies take forever these days to put in place actual prime contracts after source selections and award to a small business. They do not realize that a small enterprise does not have deep pockets and must have cash flow to sustain a new program with new employees. Funding levels on IDIQ and Omnibus programs are insufficiently committed and the small enterprise is not adequately informed about limitation of funds and funding exposure.
I have seen enough small businesses succeed in the government contracting field that I am convinced that the government needs more active roles in education of the small enterprise and more trained contracting officers that understand the limitations of a small business. The most common traumatic situation I encounter is with newly established businesses who have won their first government contract and have no CAS compliant job cost accounting system in place to bill it out. The government has assumed that capability will materialize and when it does not they audit the bills, find no backup and shut down the cash flow until the system is fixed. At that point the business can fail. The company should have been educated much earlier in the process about these requirements.
The number of poorly performing SETA contractors in roles not suited to them in contract administration support is increasing in federal agencies. These firms need to be vetted and better managed for the omissions and commissions they contribute to the above. https://www.smalltofeds.com/2020/05/is-federal-government-system.html
Not every small enterprise can get into a class on government contracting at George Washington University, The Defense Acquisition University or send their personnel to lengthy and costly seminars conducted by organizations like the National Contract Management Association. These are great education sources but do not come close to filling the complete requirement and they cost time and money. The contracting officer and his staff as well as larger enterprises need to be upgraded in the skills necessary to guide – not abuse – the small business in federal government contracting.”
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