OMB wants to better protect small business contracts

White House officials want to crack down on large companies that cloak themselves as small firms in an attempt to land more government contracts.

While the extent of the problem isn't clear, Angela Styles, the Bush administration's top procurement official, said Wednesday that anecdotal evidence suggests that large companies are taking advantage of loopholes in federal procurement rules to snare contracts intended for small businesses.

"We are particularly concerned about larger contractors masquerading as small businesses in large, long-term contracts, thus depriving small businesses of significant opportunities to compete against their peers," she told the House Small Business Committee.

The loopholes largely exist on governmentwide acquisition contracts, commonly referred to as GWACs, and other multiple award contracts. These have become an increasingly popular way for agencies to gain quick access to the private sector. For these contracts, a company's size is set on the date that it submits an initial offer. Many of these contracts extend 20 years. During that time, a company may grow and no longer be classified a small businesses. Yet, according to the GWAC it is because the company's size is determined on the date it submits an initial offer.

At least four companies on the General Service Administration's multiple award schedule program outgrew their status as small businesses in 2000 and 2001, yet racked up more than $190 million in contracts set aside for small firms, David Cooper, director of acquisition and sourcing management at the General Accounting Office, told the committee.

To resolve this dilemma, OMB last February instructed the four executive agents for GWAC contracts-GSA, the Commerce Department, NASA and the National Institutes of Health-to obtain annual certifications from small businesses.

"We didn't target these agencies because of perceived wrongdoing," she said. "However, we believe GWACs, like other multiple award contracts and GSA's Federal Supply Schedules, may be vulnerable to misrepresentations because they are typically large and long term."

OMB is considering how to certify small businesses in other contract vehicles. A recently proposed Small Business Administration rule suggests annual certification of a company's size. However, business owners are pushing back, suggesting that it is not a flexible enough timeframe. Styles said that OMB is open to suggestions on how to improve the process.