The Numbers On Small Business
The response to the posting here about small business contracting last week spurred me to take another crack at it, sooner than I had expected.
I'm now sure this aspect of federal procurement is -- how shall I put it? -- ripe for more sensible attention.
Among other things I have received is a brief report to the Senate Small Business Committee called "Impact of SBA Exclusions on Overall Government Small Business Goal Achievement." It comes from Eagle Eye Inc., which gathers and parses data about federal procurement for clients.
The report shows that billions are regularly excluded from the tallies the federal government uses to determine whether agencies are directing enough work to "small businesses." Some of the exclusions are through regulations, some through law.
The consequence of this style of math is that the government is able to give a better picture of the proportion of spending that goes to small business than it would without the exclusions: more than 22 percent versus 20 percent. The government's stated target is 23 percent.
It's all such a jumble that I can't tell exactly who wins, who loses and whether system is helping or hurting the government or small businesses. No one else seems to know for sure either.
It's safe to say that this kind of confusion sometimes opens the way for fraud and abuse by the government and contractors alike who are inclined to taking advantage of the system. As you readers know, many government officials and business officials share the sense that efforts to bolster contracting with small business is not working as some envision.
More on this before long.
By Robert O'Harrow |
August 8, 2007; 11:05 AM ET
small business
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Posted by: Michael Lent | August 8, 2007 11:49 AM
I have a favorite saying - "today's problems are the result of yesterday's solutions". However well meaning any new rules and regulations are intended, they always have unintended consequences. A lot more thought and brain cells need to be expended on unanticipated consequences before the SBA or Congress dictates new rules on small business credits, and when businesses need to re-certify. The way it works now, once an 8(a) firm graduates from the program and then grows beyond the allowable size standards they are forced to compete on a very unlevel playing ground with large corporations. To understand that, you just need to take a look at how an S Corporation is taxed versus the large Global businesses are taxed -- and that is just one example. If they force small businesses to turn over or novate contracts they won when they were small, and qualified to win the work, you are going to force a lot of them out of business -- and that's not good for the Government customers they are supporting, nor the people that are employed by the small business. The net effect of many of the current regulations (never mind those that are proposed) is that the SBA is telling successful small enterprises "Congratulations, you succeeded in growing -- now let me put a bullet in your head, while I ask you to turn over all the work that made you a success". Let's examine all the potential consequences before we act in haste to fix something that really isn't too broken.
Posted by: Jack Ward | August 9, 2007 9:06 AM
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This is another familiar hardy perennial federal acquisition issue.
Who wins or loses? That's largely self-evident, allowing that most of these redirections of intended set-asides have been legal.
While there could well be some fraudulent certifications of small-business status, it's pretty clear that the redirection of revenue to large businesses has been legal and not inconsistent with the regs based on the law. We need to be careful before applying the labels "fraud and abuse" too quickly.
Now, is the taking of revenue originally intended for small businesses "right?" It's as American as apple buy to value an acquisition, in part, based on its business base, and, to expect to keep contracts til they expire, and, not be penalized for growing.
Congress did not appear to anticipate this size-standard problem. Is it good policy? Probably not--if, and it's a big if for some people, you believe that set-asides are worthwhile and needed social engineering.
New regs took effect on July 1 to tighten up small-business size certifications. But to show how insufficient they are, SBA Administrator Preston immediately sent letters to 800 CEOs asking them to voluntarily recertify (essentially giving up the contracts before they expire) small-business contracts they acquired by buying small businesses or growing out of the small-business ranks.
My sampling of industry response to that suggests the government shouldn't expect many firms to step forward.