Defense authorization bill changes small biz contracting

The 2015 National Defense Authorization bill contains several provisions that will impact small business contractors in several ways.

We review changes around reverse auctions, women-owned businesses and contract bundling. These changes and others should increase the ability of small businesses to compete and win more government contracts.

REVERSE AUCTIONS

Reverse auctions, a growing acquisition approach for small-dollar federal contracts, won’t be stymied by broad, strong language in the final version of the NDAA. Instead, the bill may make reverse auction even more widely used by government agencies.

The conference committee of House and Senate members that irons out the differences between the two versions of the bill removed much of the language in the House’s original version. Experts say the House’s bill would have restricted when agencies could use the auctioning technique and for what types of good and services. Now, however, the bill will provide the acquisition workforce with training and stop auctions with minimal competitions.

Without the House’s language “the current version is a big step towards limiting the improper use of reverse auctions, which can in fact save taxpayer money and simplify the procurement process when done right,” said Sarah Schauerte, attorney and owner of Legal Meets Practical, a law firm.

In a reverse auction, an agency posts a solicitation, and companies compete against each other by bidding lower and lower, or proposing higher-value offers, until one company emerges as the winner.

But the technique has received criticism. Veterans Affairs Department was found to have kept poor records justifying its savings and may have paid extra fees to hold auctions. In addition, the Government Accountability Office found that a third of fiscal 2012 reverse-auction competitions had no interactive bidding.

Congress has taken steps to remedy the problems. The defense authorization bill stops the Defense Department from holding single-round and single-bid auctions with no price protections. The provision does not allow third-party reverse auctions that include inherently governmental work, which is work only a federal employee can legally do, or auctions for private past performance evaluations. Lastly, DOD cannot use reverse auctions for design-build work.

Small business advocates in Congress said the improper use of the auctions have harmed firms, since about 95 percent of the auctions are for contracts of less than $150,000.

“These reforms are a positive step toward giving small contractors the ability to more fairly compete for business,” said Rep. Richard Hanna (R-N.Y.), chairman of the House Small Business Committee’s subcommittee on contracting and workforce. “We are making progress in reforming reverse auctions, which actually hurt taxpayers and small contractors.”

Joe Jordan, former administrator of the Office of Federal Procurement Policy and associate administrator at the Small Business Administration, said the “silver bullet” for fixing problems with reverse auctions is the training program that the NDAA requires the Defense Acquisition University to develop.

“Reverse auctions are not the right tool for all procurements,” said Jordan, who is currently president of public policy at FedBid, a company that hosts reverse auctions. The auctions are another tool that contracting officers can use at the appropriate time. DAU’s training will ensure the officers are using the tools correctly, as well as teaching others about the available option.

Guy Timberlake, CEO of The American Small Business Coalition, said Congress should have considered the recent VA OIG report as well as industry feedback regarding the use and negative impacts of reverse auctions before scuttling the language in the House’s original bill.

“Congress really screwed up on this one,” he said. The changed language “is a shell of the House version. Hopefully, this discussion is ‘to be continued’ on dealing with reverse auctions and protecting the small business industrial base.”

WOMAN-OWNED SMALL BUSINESSES

The NDAA also establishes a new set-aside for women. Under the law, agencies will be able award sole-source contracts to woman-owned small businesses.

The provisions allows sole-source contracts for WOSBs and economically-disadvantaged woman-owned small businesses (EDWOSBs), if there is only one WOSB or EDWOSB that can perform the work and the value of the contract is less than $4 million.

WOSBs will be a part of a select group of small businesses that can receive sole-source awards. The same authority is currently available to businesses located in depressed economic areas and service-disabled, veteran-owned small businesses (SDVOSBs).

The provision gives contracting officers another avenue to award a contract on a sole-source basis. Officers “may” use WOSBs. As a result, the impact of the provision depends on the agency and their individual goals for awarding contracts to women, Schauerte said.

Schauerte, who writes a blog for veteran-owned businesses, said the new avenue could possibly affect the other socio-economic categories, such as SDVOSBs, but she doesn’t expect a substantial impact.

“It all comes down to the goals [of the agencies], which remain the same,” she said.

Timberlake agreed, adding that the impacts will become clearer once the acquisition regulators and SBA lay out the policies, and agencies start implementing them.

SBA reported that women received $15.4 billion in federal contracts in fiscal 2013. The total equates to 4.32 percent of small-business spending. It tops 2012’s 4-percent mark. Yet it’s still shy of the 5 percent annual governmentwide goal.

DATA ON CONSOLIDATED AND BUNDLED CONTRACTS

Information keeps the lights on for oversight, and Congress wants agencies’ lights on so they’re fully aware of consolidated and bundled contracts.

The NDAA orders SBA officials to develop data quality improvement plan on consolidated contracts. These types of contracts are formed when an agency combines multiple defined requirements that could be competed separately.

Chairman of the Small Business Committee, Rep. Sam Graves said properly labeling a contract as bundled or consolidated is very important to small business competition. When a contract is labeled as bundled, agencies must go through series of reviews and mitigation steps intended to promote opportunities for small businesses.

In the bill, the plan will lay out the roles of top governmentwide acquisition officials, such as the OFPP administrator, agencies’ own procurement leaders and small business utilization advocates, in gathering data. The plan will also recommend changes to policies to properly identify and ease the impacts of bundled contracts on small businesses.

According to the congressional report on the final version of the bill, GAO will study whether agencies are correctly labeling contracts, and if the “Federal Procurement Data System (FPDS) Contract Reporting Data Improvement Plan” has been useful.

Finally, GAO will review whether the strategic sourcing initiative is decreasing the number of companies, including small businesses, actively participating in federal contracting as prime contractors.

Both chambers of Congress have approved the final version of the NDAA. It’s now under consideration at the White House.

Among the 1,600 pages of language about the military operations and Defense Department issues, the small businesses-related provisions show Congress’ view that companies deserve their share of government spending.

“Small businesses should be excited about what the contracting landscaping is looking like,” Jordan said.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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