North Carolina small firms might be able to obtain additional federal business if lawmakers change the rules surrounding the government’s process of awarding contracts.
Those businesses have been struggling to win the lucrative contracts, in part because officials tend to give them to firms that have long-term relationships with the federal government. That is why House Small Business Committee Chairman Steve Chabot, R-Ohio, wants to tweak the rules that govern the Small Business Administration. Chabot has crafted legislation, known as the Defending America’s Small Contractors Act of 2016, to make those changes.
▪ The legislation would make it easier for small-business advocates to review contracts and delivery orders set aside for fledgling companies.
▪ It would improve the process by which those companies are educated on small-business rules.
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▪ Large mentor firms would be barred from having relationships with smaller firms before pairing up with them in a mentor-protégé program.
F.O.C.U.S. Resources President Lea Strickland, who advises small businesses – and even a few fledgling defense contractors – on how to navigate contracting issues, says the new congressional support is welcome but falls short of addressing some of the bigger problems.
More than anything, those contractors need the federal government to provide them with clear statements on contract requirements and time commitments, she said. Small businesses that pursue federal contracts experience difficulty competing for them due to that lax guidance, Strickland said.
“It’s even more critical to a small business, because they have less opportunity to absorb any timing differences and financing differences,” she said.
The government should also consider offering advance payments to those contractors so that they can pay up front for inventory and staffing increases, she said.
Small business contract actions plummeted almost 60 percent from fiscal years 2011 to 2014, according to a July 25 congressional report. Additionally, the number of companies registered to perform contract services has dropped by over 100,000 since 2012, Rep. Alma Adams, D-Charlotte, said in an email.
Some of that attrition may be due to the fact that some firms do not know how to apply for federal contracts or navigate the federal contract process, Adams said. Regulations surrounding that process can sometimes be overly complicated and inconsistent, she said.
The percentage of contract dollars awarded to small businesses at DoD increased from just over 16 percent to just over 19 percent, but the actual dollars only fluctuated by about 10 percent. The number of small business contract actions at DoD fell by almost 70 percent, and the value of those contract actions rose by nearly 290 percent.
“I think there are many reasons (for that trend), including perhaps of a lack of knowledge or understanding on where and how to apply for federal contracts,” she said.
Adams is the only North Carolina lawmaker with a seat on the House Small Business Committee.
Fighting for and winning a Defense Department contract is particularly difficult for fledgling firms. At the Defense Department, the percentage of contract dollars awarded to small businesses has plummeted by almost 70 percent, while the value of those contracts has spiked about 290 percent.
Some of those contracts are being scooped up by large companies that have bought small companies.
“We’ve found that there have been reports of instances where federal contracting dollars were being awarded to a large business, but counted towards federal small business contracting goals,” Adams said.
H.R. 4341 fixes this issue by including a reporting mechanism requirement for the SBA to report the value of contracts credited to each goal if the contract is being performed by a company that is no longer small or no longer qualifies for the procurement program.
Rep. Alma Adams, D-Charlotte
National Small Business Association spokeswoman Molly Day said it was a natural part of the cycle for businesses to grow and be sold off.
“I don’t think always you know some nefarious large corporation is doing it to fleece the federal contractors into getting small business contracts,” she said.
The American Small Business League sees things differently. Small businesses have been fighting an uphill battle for decades and have received little help from lawmakers who have accepted donations from big companies, said league President Lloyd Chapman. He questioned Chabot’s effort to improve conditions for small businesses.
“The House Small Business Committee hasn’t done anything good for small business in 30 years,” he said.
Whether it is waiving upfront fees for veterans who want to become entrepreneurs or helping small companies ravaged by natural disasters get back on their feet, members of this committee will continue to work in a bipartisan manner to help the owners, employees and patrons of America’s 28 million small businesses to prosper and thrive.
House Small Business Committee spokesman Joe Sangiorgio
The American Small Business League has filed multiple lawsuits on behalf of small companies. This year, its members sued Small Business Administration Administrator Maria Contreras-Sweet, accusing her of using “creative accounting” to compile its annual reports. Each federal agency is required to send a report to the administrator at the end of every fiscal year that explains why that agency was able to achieve its small-business goals or why it wasn’t.
The lawsuit accuses the administration of failing to ensure that the required 23 percent of the lead contract awards went to small businesses from 2006 to 2012.
Maggie Ybarra: 202-383-6048; @MolotovFlicker