Report: Procurement reform hurts small businesses

Government-wide acquisition contracts have been hailed for their versatility, ease of use, and cost savings, but the new procurement vehicles are shutting small businesses out of prime contract dollars, according to the Office of Advocacy at the Small Business Administration.

The contracts, known as GWACs, were created through procurement reforms in the mid-1990s. Since then they have been widely touted as a faster, cheaper and easier means for acquisition than single-source contracts. GWACs allow agencies that pay an administrative fee to use contracts for information technology products and services operated by another agency.

The SBA office said the new approach may be more efficient, but it works against small businesses. "Contract bundling may be the most significant trend leading to the decline in small businesses' access to prime contract dollars," Jere W. Glover, chief counsel of the Office of Advocacy wrote in a recent issue of The Small Business Advocate.

While contract bundling increased dramatically from 1996 to 1998, Glover said, small business's share of federal procurement declined by roughly 10 percent in the same time period.

"Some people may not put the two [trends] together, but I'm willing to make that leap," Glover said.

GWACs often exclude small businesses because they involve multi-year commitments, include requirements for multiple products or services, and require large geographic areas of service, Glover said. Other factors have influenced the drop in small business's share of procurement dollars, Glover admits, but "bundling is a way of life and is fairly rampant, so it counts for a good bit of [the decline]," he said.

A recent Office of Advocacy report showed that in fiscal 1998, small businesses took home less than 20 percent of the $181.7 billion federal agencies awarded in prime contracts, despite a federal rule requiring agencies to spend 23 percent of their prime contract dollars in the small business sector.

Recent changes in procurement policy, however, may help small firms. The Small Business Reauthorization Act of 1997 includes rules that allow small firms to band together to bid for GWACs. And agencies are finding ways to individually push small business procurement. For example, the Department of Commerce has created a multiple award contract designed only for small, disadvantaged and women-owned businesses.

"I hope to see progressive initiatives to ensure that the federal government procures from many businesses-large and small-and enjoys a healthy environment of competition," Glover said.