Buy Lines: Congress hurts small business with its help

Stan Soloway

Doing business with the federal government is tough, especially for small businesses. So it is appropriate that there are special rules and procedures to help these businesses -- which often offer exceptional agility and innovation -- navigate the federal market.

It's also appropriate that Congress and the administration exercise oversight to ensure the rules are applied properly.

At the same time, the government's commitment to small business must be balanced against broader agency needs and marketplace realities. And small-business policies must foster meaningful growth, not an environment in which these businesses cannot afford to grow.

Unfortunately, Congress is now considering the Small Business Administration authorization bill, which marks the 50th anniversary of the Small Business Act. Both the House and already-passed Senate versions contain provisions that, while of admirable intent, do not meet those tests.

For example, the Senate bill applies the "rule of two" to the General Services Administration schedules. That rule requires that for procurements below $100,000, if two or more small businesses are available and qualified, the work must be set aside exclusively for small business.

But the longstanding responsibility for meeting small-business goals has been vested properly in the purchaser. GSA schedules are not the purchaser; they are sources of providers, many of which are small businesses. Hence, applying the rule of two to the GSA schedules doesn't make good sense.

It gets even more confusing. The House bill raises the simplified acquisition threshold from $100,000 to $1 million. Under other laws, purchases under the simplified acquisition threshold are reserved for small business. As such, individual procurements and task orders under $1 million would be set aside -- a tenfold increase.

While these provisions, by definition, will limit competition, just two years ago Congress moved to expand competition on the GSA schedules and other multiple-award vehicles through section 803 of the defense bill.

There's more. There are proposals that require companies to certify their small-business standing every year. There are some cases in which exceptionally long-term contracts have enabled small businesses to remain "small" for too long. But those contracts are relatively rare, and an annual recertification is not the answer. It would put companies on a roller coaster in and out of size standards, and would place significant burdens on the companies and the government.

Periodic recertifications based on milestones make more sense. Equally important, any certification rules must exempt current contracts, since they contain terms and pricing structured around the current rules.

Finally, the Senate bill requires companies to certify their small-business plans and incorporate them into contracts. Failing to do this carries criminal and other penalties, even for cases where there is no egregious intent.

Thus, while designed to put teeth into the process, these provisions are more likely to dampen enthusiasm among bidders for proposing desirable goals for small-business participation and reduce opportunities. The risks associated with the new certifications will be too high to justify doing much more than the minimum required.

The Bush administration's small-business agenda focuses on existing policies and rules, and it has raised important objections to the legislation now under consideration. As we have seen with the Department of Housing and Urban Development's requirement that 70 percent of all contract dollars go to small business, common sense procurement policy has, in some cases, given way to overkill. Congress is rightfully concerned that the government fulfill its commitment to small business, but the current SBA bills tilt too far. What is needed are reason and balance.

Stan Soloway is president of the Professional Services Council. He previously served as deputy undersecretary of defense. His e-mail is soloway@

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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