House subpoenas four agencies for small-business noncompliance

Four federal agencies were issued subpoenas by the House Small Business Committee on Oct. 20 for not complying with the Small Business Act’s procurement policies, according to a committee staffer.

The departments of Justice, Agriculture, Treasury and State were summoned to appear before the the Small Business subcommittee on contracting and workforce on Nov. 1 to testify why they are in noncompliance.

At issue is the “structure” of these agencies’ Small and Disadvantaged Business Utilization Offices (OSDBU) and “the fact that they are not reporting to the agency head or deputy head,” wrote Darrell Jordon, house committee spokesman, in an e-mail to Washington Technology.

OSDBUs were conceived in 1978 with the purpose of having federal agencies set aside contracts for small and disadvantaged businesses. The Small Business Act also has requirements that agencies report their procurement activities with small and disadvantaged businesses.

Justice, Agriculture, Treasury and State were warned of their missteps and given a chance to remedy the situation after a June Government Accountability Office small business contracting report found seven agencies not in compliance.

Following that report, letters to agencies were sent by subcommittee Chairman Mick Mulvaney (R-SC). As a result, the Interior Department and Social Security Administration are now in compliance, and a third, the Commerce Department, was pardoned due to an administrative issue.

In September, agencies were reminded of their noncompliance by memo and a hearing was held on Sept. 15 by the subcommittee to examine the GAO report and the economic impact of noncompliance.

As part of the subpoena procedure, the four agencies must produce a number of documents, including paperwork relating to their small business procurement programs, attainment of small business goals or challenges to decisions not to restrict competition to small business between Jan. 20, 2009, and Sept. 30, 2011.

About the Author: Alysha Sideman is an online content producer with 1105 Government Information Group. Published by Washington Technology – Oct. 21, 2011 at http://washingtontechnology.com/articles/2011/10/21/small-biz-committee-subpoenas.aspx

SBA planning to add vets, women and HUBZone firms to mentor-protégé program

The Small Business Administration will expand the reach of it mentor-protégé programs it was announced during testimony on Sept. 15 during the House Small Business Committee Subcommittee on Contracting and Workforce.

At a hearing titled “Helping Small Businesses Compete: Challenges Within Programs Designed to Assist Small Contractors,” Joseph Jordan, SBA’s associate administrator for government contracting and business development, testified that the Small Business Jobs Act of 2010 gave the SBA authority to implement additional mentor-protégé programs for HUBZone, women-owned, and service-disabled veteran-owned small businesses.

In the past the SBA’s program was only open to disadvantaged businesses that participated in the 8(a) business development program.

“We are in process of implementing these new programs,” Jordan said at the hearing. “We conducted robust public outreach via a 13-city Small Business Jobs Act Tour and have held several meetings with various agency and public stakeholders to collect input and feedback on the implementation of these programs.”

SBA is now drafting proposed regulations for public comment.

The mentor-protégé programs arranges relationships between experienced contractors and inexperienced small businesses to provide them business development assistance. The program provides incentives for mentor participation, such as credit toward subcontracting goals.

This hearing reviewed three recent Government Accountability Office reports including one that criticized the mentor-protégé programs for not tracking the results of the mentor-protégé relationships after they are formed.

About the Author: Alysha Sideman is an online content producer with 1105 Government Information Group. Published by Washington Technology on Sept. 16, 2011 at http://washingtontechnology.com/articles/2011/09/16/sba-to-expand-mentor-protege-program.aspx?s=wtdaily_190911.

Government gets a B in 2010 small business contracting

The Small Business Administration gave the government a B grade for its attempts to reach small-business contracting goals, including the annual 23 percent overall goal, an agency official said June 23.

The government awarded 22.7 percent of its contracting dollars to small companies in fiscal 2010, compared to 21.9 percent the previous year. It awarded $97.9 billion to small businesses in 2010, compared with $96.8 billion in 2009, a $1.1 billion increase.

The B grade means that the government met 90 percent to 99 percent of its goals for the year.

In 2010, the government improved in four of the five categories of small businesses compared to SBA’s previous score card. There were increases in contract dollars and performance against statutory goals, except in the Historically Underutilized Business Zone (HUBZone) category.

Small disadvantaged businesses received $34.4 billion, or 8 percent of contracting dollars. The government surpassed the 5 percent goal for the category, as it did in 2009.

Woman-owned small businesses received $17.5 billion, or 4 percent of contracting dollars, in 2010. It was less than a point short of the 5 percent annual goal. In 2009, such companies received 3.7 percent of contracting dollars.

Small businesses owned by service-disabled veterans received $10.8 billion, or 2.5 percent of contracting dollars. The government was 0.5 percent below the 3 percent goal for such companies, although the percentage increased from just under 2 percent in 2009.

The HUBZone small-business category was the only one to experience a decline in 2010. Such companies received $11.97 billion, or 2.77 percent of contracting dollars. The goal is 3 percent. In 2009, the government had awarded HUBZone businesses $12.41 billion, or 2.81 percent of contracting dollars.

Joe Jordan, associate administrator of government contracting and business development at SBA, said the parity issue played a part in the HUBZone decrease.

Last year, Congress settled a disagreement among the administration, lawmakers, the U.S. Court of Federal Claims and the Government Accountability Office about whether agencies are required to offer small-business set-aside contracts to HUBZone companies first. The debate was over the word “shall” in the law. In legislation passed toward the end of the year, Congress replaced the word with “may,” clearing up any confusion about the equality of small-business categories. Read more about the debate.

“I think the confusion around parity during 2010 had some contracting officers skittish around HUBZones and what they should and should not do,” Jordan said. “And that’s why it’s so great that parity is now the law of the land. There is no more confusion.”

About the Author: Matthew Weigelt is acquisition editor for Federal Computer Week – June 24, 2011 at http://washingtontechnology.com/articles/2011/06/24/sba-small-business-score-card-2010.aspx?s=wtdaily_270611

SBA makes first major revision to 8(a) program in a decade

The Small Business Administration has finalized the most comprehensive changes to its 8(a) small and disadvantaged business contacting program in more than a decade, with a sharp focus on reforming and improving the transparency of Alaska native corporations.

The long-awaited final rules, published Friday in the Federal Register, closely mirror — except for minor technical changes — the proposed rules offered by SBA in October 2009.

The lengthy final rule, which takes effect on March 14, attempts to tackle a host of 8(a) concerns, from the threshold to enter and remain in the program to tightening the rules for joint ventures and mentor-protégé relationships.

“SBA has learned through experience that certain of its rules governing the 8(a) [Business Development] program are too restrictive and serve to unduly preclude firms from being admitted to the program,” the rule states. “In other cases, SBA determined that a rule is too expansive or indefinite and sought to restrict or clarify those rules.”

The agency conducted public meetings in 10 cities and consulted with tribes in two others. SBA received more than 230 comment letters.

“Through public meetings held in cities throughout the country, SBA gained valuable input from members of the small business community on ways to strengthen the program to provide the best opportunities for eligible firms, while also stepping up efforts to combat waste, fraud and abuse,” said SBA Administrator Karen Mills.

Arguably the biggest change affects ANCs, controversial 8(a) subentities that can win sole-source contracts of any size. For the first time, firms owned by ANCs or by Indian tribes, Native Hawaiian organizations and community development corporations will be required to report the financial benefits flowing back to their communities. Several recent news reports and congressional investigations have questioned whether the profits from ANCs are reaching disadvantaged Native Alaskans.

Each firm now will be required to submit information relating to their funding of cultural programs, employment assistance, jobs, scholarships, internships and subsistence activities, SBA said. In a change from the proposed rule, only the parent company, rather than the individual businesses or subsidiaries, will be required to report. Also, the agency delayed implementation of this provision for six months to allow further meetings with the tribal and ANC community, said John Klein, SBA’s acting director of government contracting and assistant general counsel for procurement law.

Devon E. Hewitt, a partner in the Washington law firm of Piliero Mazza, said the change recognizes the intense scrutiny ANCs are facing from Congress and watchdogs. “The question is whether they have done enough,” Hewitt said.

But some lawmakers want to go further in reforming the ANC program. On Thursday, Rep. Bennie Thompson, D-Miss., ranking member of the House Homeland Security Committee, introduced a bill that would put ANCs on equal footing with all other small businesses operating in the 8(a) program. The bill is a companion to legislation previously introduced by Sen. Claire McCaskill, D-Mo.

“All too often, small businesses are crowded out of opportunities by Alaska native corporations that receive uncapped, no-bid contracts under a special provision of the 8(a) program,” Thompson said. “This bill will assure that ANCs cannot continue in a privileged status that both protects them from legitimate competition from other businesses and fails to return a fair share of profits to Native Alaskan shareholders.”

The SBA regulations make other attempts to regulate the behavior of ANCs. Firms graduating from the 8(a) program no longer will be allowed to hand off contracts to a new subsidiary owned by the same ANC. “There is a perception that these contracts are being passed from one firm to another,” Klein said.

Several ANCs that have proposed changes to the 8(a) program applauded the rules change. “The rule-making process has been long and difficult for the Alaska native community,” said Rex Rock Sr., president and chief executive officer of Arctic Slope Regional Corporation. “The SBA struck a meaningful balance by protecting government and taxpayer interests while continuing to provide economic opportunities for disadvantaged businesses.”

The final rule also makes several significant changes to the rules guiding joint ventures, which are created when a small business partners with a non-8(a) firm, typically a larger business. These joint ventures are considered small businesses eligible to receive high-value contracts without competition.

The rule attempts to assure that the nondisadvantaged firm does not unduly benefit from the program. The 8(a) partner of the joint venture must now perform at least 40 percent of the work, including those awarded through a mentor-protégé agreement. The previous statutory language required only that the small business perform a “significant portion” of the work, Hewitt said.

Joint ventures awarded to an 8(a) firm also will not be allowed to win more than three contracts during a two-year period, and these entities cannot subcontract work to a non-8(a) joint venture partner. Plus, mentors who do not provide assistance to their protégés could face consequences ranging from stop-work orders to debarment.

Other proposed changes would clarify the size, income and familial determinations needed to be eligible for the 8(a) program, including those:

  • Excluding the individual retirement accounts from the strict net worth calculations that are used to determine eligibility for the program;
  • Raising the adjusted gross income to enter into the program from $200,000 to $250,000 (the total value of the participant’s assets needed to enter the program was increased from $3 million to $4 million);
  • Increasing the adjusted gross income for continued eligibility for the program from $300,000 to $350,000 (the asset level was bumped from $4 million to $6 million);
  • Allowing immediate family members of a current or former program participant to own an 8(a) firm if they are qualified to run the business and are judged not to be a front for their family member’s company;
  • Requiring that a firm’s size status remain small for its primary industry code during its participation in the 8(a) program;
  • Limiting the type and amount of fees an agent or representative can charge for assisting an 8(a) firm (the rule prohibits unreasonable fees as well as arrangements in which the fees are a percentage of the contract award or revenue); and
  • Allowing owners of 8(a) firms called to active military status to elect to be temporarily suspended rather than lose any of their nine-year term in the program.

– by Robert Brodsky – GovExec.com – February 11, 2011