Proposal means small businesses learn the rules or suffer the cost

Small businesses may not be ready for the level of scrutiny headed their way under proposed reporting rules and the contracting accountability Web site, a former contracting official said.

Emily Murphy, the General Services Administration's former chief acquisition officer, said small businesses need to make sure they understand the details of contracting rules and are following the law fully, especially regarding subcontracts. The coming scrutiny could find them violating the rules. Breaches could leave them with harsh penalties or banned from government contracting.

"This is really their window of opportunity," before the database is fully functional, said Murphy, counsel at the law firm Miller and Chevalier.

Under the proposed rule, contractors would have to report specific subcontract awards to a public database to assess the quality of the reported information, according to a notice in the March 21 Federal Register. The rule in the Federal Acquisition Regulation coincides with requirements in the Federal Financial Accountability and Transparency Act, which was signed into law in 2006.

Murphy said many small businesses have not mastered the intricacies of their contracts. For example, FAR small-business set-aside provisions limit how much of the contract's subcontracting work can go to large businesses.

In the past, regulations have lacked a lot of oversight. But now "it's going to give the government a lot more information ? and it's going to give taxpayers a lot of transparency into how dollars are being spent," she said.

The proposed rule applies to contracts of $500 million or more and requires reports on all first-tier subcontractor awards of more than $1 million. In 2009, businesses would have to report on contracts worth $100,000 and subcontracts worth more than $25,000. Those thresholds were chosen because they would bring in an adequate number of award reports without adding a significant burden, the notice states. The figures will be posted on FederalSpending.gov, OMB's Web site for financial information.

The comment period on the proposed rule ends May 21.

Matthew Weigelt is a reporter with Federal Computer Week, an 1105 Government Information Group publication.