Proposed Senate Bill S.2989 Would Require Agencies to Reconsider Bundled Requirements and Remove Obstacles to Small Business Contracting Opportunities

Many small business contractors in the area looking to break into government contracting, particularly with the opportunities presented by BRAC, experience a series of difficult obstacles to entering the government market. It is often a real challenge for small businesses to secure their first contract, or their next contract, and although BRAC brings new business opportunities to local contractors, too often the opportunities exclusively benefit larger businesses.

On March 4, 2010, the U.S. Senate Small Business and Entrepreneurship Committee unanimously passed the Small Business Contracting Revitalization Act (S. 2989) (the “Act”), and the bill is now headed for a full Senate vote. Click the link below to read the bill in its entirety:

http://thomas.loc.gov/cgi-bin/query/z?c111:S.2989.IS:

The Act aims to address four key hurdles that prevent small businesses from fairly competing for BRAC-related and other contracting opportunities: contract bundling, subcontracting, acquisition, and small business size and status integrity.

One reason small businesses are unable to pursue many contracting opportunities is the prevalence of bundling in government contracting, which unquestionably favors large businesses in the procurement process. “Contract bundling” refers to the practice of consolidating two or more contract requirements that were previously separate, smaller contracts into a single, larger contract. Government agencies tend to favor bundling requirements into larger, more comprehensive contracts because they save money and resources. At the same time, however, small businesses are often unable to compete for bundled contracts because they are too large, with diverse performance requirements that many small businesses simply do not have the capacity to cover. The Act will minimize contracting agencies’ use of contract bundling and will require agencies to consider small businesses when placing orders on large contracts. The Act also contains a provision requiring acquisition officials to review contracts worth more than $2 million to determine if they could be broken into smaller pieces so that small businesses would have a chance to compete for the work. Contracting officers must certify that bundled contracts in excess of $2 million are not suitable for small business participation, although the certification requirement does not apply to Department of Defense contracts.

The foregoing requirements would have the greatest potential impact on multiple award contracts, GSA Schedule contracts among them, since agencies would now be required to set aside orders on multiple award contracts, and would also be required to set aside at least one contract for small businesses.
Subcontracting practices are another target. The Act increases oversight of large business prime contractors to ensure they are actually using the small businesses that they proposed in their RFP responses and that they are actually meeting their small business subcontracting requirements. This provision is intended to assist small businesses that spend time and money preparing bid proposals with a large prime contractor and then never receive any part of the work once the contract is won. Once a small business is awarded a subcontract by a prime, the Act imposes strict oversight requirements to ensure that subcontractors receive payment within 90 days after the subcontractor completes work.
The Act also closes other loopholes that favor large businesses – for example, the current small business recertification requirements. Right now, small businesses are only required to recertify their size under certain circumstances, namely, after an acquisition or merger, at the end of the fifth year in a long term contract, or when options are exercised thereafter, or at the contracting officer’s request. The lax nature of small business recertification can allow businesses that are no longer small to qualify for small business set aside contracts. The Act closes this loophole. Under the Act, contractors will be required to annually recertify their size status. In addition, the Act establishes a presumption of loss to the government if a large business performs a contract set aside for the benefit of small business.

The Act also requires a GAO study to determine whether the current SBA mentor-protégé program is effectively supporting the goal of increasing participation of small businesses in government contracting and not, as many complain, simply serving the interests of large businesses which can pursue small business set aside contracts if they do so as a mentor-protégé team.

Finally, the Act relaxes regulations concerning joint ventures and teaming arrangements to encourage small businesses to partner together so that they can land larger contracts. SBA will set up a new

The Act, which has strong bipartisan support, will become part of the next jobs bill the Senate brings to the floor this spring and is expected to pass as part of that legislation.

- Heather James