Buy Lines: Striking the right balance

Stan Soloway

The January release of two proposed rules on contract bundling again draws attention to the debate over procurement strategies and their impact on small business. But the new rules are not the only manifestation of that focus.

For instance, the Department of Housing and Urban Development is requiring 50 percent of its prime contracting dollars, and 40 percent of its subcontracting dollars, be reserved for small business. At other departments, entire categories of work are being set aside to help agencies reach or exceed small business targets.

It is entirely appropriate to set serious goals to support and foster small-business growth. As such, it is also appropriate for the administration and Congress to pay close attention to how procurement practices impact those goals.

In the case of bundling, the goal is to ensure that contract requirements are bundled only for the right reasons, while ensuring that government acquisition professionals have the flexibility to make the right decisions for a given requirement.

Appropriately, the new bundling proposals largely demonstrate the administration's recognition that we do not need vast, new regulatory hierarchies; rather, the focus is on enforcing existing statutes and rules.

However, the administration's bundling proposals, HUD's extreme set-aside requirements and the increased congressional attention are stark reminders that the government views the marketplace as divided into only two categories: small and large. In reality, the market is far more diverse, and looking at it in such binary terms is a recipe for trouble.

For example, the HUD requirements are having a devastating impact on companies that are no longer small by official government definitions, but are far from large.

Some firms have exited the HUD market; others have lost existing work and experienced enormous revenue losses, as HUD's acquisition professionals scramble to meet the extreme set aside requirements. Moreover, small businesses that now benefit from HUD's actions face the prospect of graduating from these programs with little to sustain them in the "full and open" world.

At other agencies, whole categories of work have been set aside for small business, including work long done by small to midsize companies that no longer qualify for set asides.

And midsized companies are also being squeezed by ever-larger consolidated (as opposed to bundled) requirements for which they cannot compete. In many cases, such large, integrated procurements are completely appropriate. In other cases, they may be driven more by convenience than a business case.

In short, we could be approaching the point where the government services industrial base is shaped more by the government's binary perspective than by market forces. Preserving a balanced and robust services base is, however, important, and requires the government to better understand that base and to integrate that greater understanding into the procurement mind-set and process. The government should take several initial steps to begin that effort.

First, the government should track by size categories all prime and subcontract dollars to provide insight into government contracting expenditures.

Second, agency leaders should implement small business and other goals agencywide to the maximum extent possible, and not limit the goals to a few selected business areas.

Finally, because acquisition strategies play a critical role in shaping the services industrial base, government acquisition professionals need additional support and training to help them better understand how their behaviors affect that base.

Bundling rules and socio-economic goals are important, but they are only pieces of a larger mosaic. It's time to look at the whole mosaic and recognize that our actions today will determine what it looks like in the future. *

Stan Soloway is president of the Professional Services Council and served as deputy undersecretary of defense in the Clinton administration. His e-mail is soloway@pscouncil.org.

About the Author

Stan Soloway is a former deputy undersecretary of Defense and former president and chief executive officer of the Professional Services Council. He is now the CEO of Celero Strategies.

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