SBA supports repeal of contractor health care provision

The Small Business Administration has urged Congress to reconsider a provision in the 2005 Defense Appropriations Act that prohibits the Pentagon from giving an advantage to companies that offer lower bids in job competitions partly because they provide less comprehensive health coverage to their employees than federal workers get.

In a letter sent to Rep. Jerry Lewis, R-Calif., chairman of the House Committee on Appropriations, SBA Administrator Hector V. Barreto asked Lewis to oppose renewing the provision in the fiscal 2006 Defense appropriations bill because doing so "will have the unintended consequence of limiting small businesses' ability to compete for DoD contracts, which make up the largest percentage of federal contracting opportunities."

The health insurance provision has generated a heated controversy between federal unions and their congressional allies, who support the provision, and contractors, who tend to oppose it. Contractors and their supporters argue that the provision places too heavy a burden on small businesses, which cannot always afford broad health insurance packages.

John McDowell, spokesman for SBA's Office of Advocacy, said small businesses often offer less comprehensive health care than the Defense Department.

"DoD health benefits are the Cadillac gold standard," McDowell said. "Small businesses as a rule do not offer as much health care as a larger business."

He said SBA has not yet studied the impact of the provision on small businesses, but the agency has received complaints about it from small business trade associations.

The Pentagon has pushed for repeal of the provision. Deputy Undersecretary of Defense Philip Grone sent a letter to the Office of Management and Budget in November stating the rule was difficult to implement and would reduce competition.

The provision's supporters argue the central issue in the debate is equal access to health care and fairness in job competitions. In an interview last month, Rep. Martin Olav Sabo, D-Minn., one of the provision's leading supporters, said the federal government should not add to the 43 million uninsured Americans through its competitive sourcing efforts.

SBA's Tuesday letter to Lewis stated that OMB did not object to it.

"Making sure that small businesses have a level playing field at the Defense Department is one of our legislative highest priorities. We are actively working with the Hill to address their concerns in a way that allows A-76 competitions at Defense to move forward in a fair way," said David Safavian, chief of the OMB's Office of Federal Procurement Policy.

He declined to disclose his position on the health provision.

A spokesman for Lewis said he had no record of receiving the letter, which was hand-delivered to Lewis' Rayburn House Office Building, adding it might have gone directly to the appropriations committee.