Lawmakers skeptical of reported progress on small business contracting

The government has failed to meet small business contracting goals despite reports to the contrary, members of the House Small Business Committee said Thursday.

In fiscal 2003, federal agencies awarded 22.68 percent of contract dollars to small companies, less than a percentage point shy of the governmentwide goal of 23 percent, Democrats on the committee staff found after surveying purchases at 22 agencies. Minority side members published the findings as part of an annual small business contracting report card.

"While a shortfall of less than one percentage point may not appear significant, it translates into nearly $1 billion in lost contract opportunities," members stated in an introduction to the agency scores. The report is the fifth compiled by committee Democrats.

Marks on the latest card reached an all-time low, said ranking member Rep. Nydia Velazquez, D-N.Y. Out of 22 agencies rated by the committee Democrats, two earned Bs, eight received Cs and 12 drew failing marks of Ds or Fs.

On the scorecard published in June 2003, the committee Democrats rated 21 agencies based on performance in fiscal 2002, handing out four Bs, five Cs and 12 failing marks. Overall, the government awarded 22.62 percent of contract dollars to small companies in fiscal 2002, 0.4 percentage points short of the 23 percent goal. That translated to $900 million in "lost contracting opportunities," according to the committee Democrats.

The grades on the latest report card partly represented agencies' success at meeting contracting targets negotiated with the Small Business Administration. But other factors entered in, including the "reasonableness" of the goals. Overall, the government earned a D.

"Over the past year, we have seen unprecedented growth within our nation's federal marketplace," Velazquez said. "It would only make sense to expect that our nation's small businesses would receive more contracts-but unfortunately, this is not the case."

Contract bundling, a practice of combining two or more contracts into a large single agreement, remains a problem for small businesses, committee Democrats said. "The Small Business Administration-the agency that is supposed to be the principal advocate for small companies-denies that contract bundling is a problem," a report accompanying the scorecard stated.

But Frank Lalumiere, deputy to the associate deputy administrator for government contracting and business development at SBA, said agency officials are on the lookout for excessive bundling. The practice is "something that we're all very sensitive to," he said.

The only way to eliminate bundling entirely is to "flat out prohibit" agencies from combining contracts, said Cathy Garman, vice president for public policy at the Contract Services Association, an Arlington, Va., based industry group. A prohibition might backfire on some small business owners, she added.

Even if smaller companies find themselves ill-equipped to bid on bundled contracts, the larger agreements often open up enticing subcontracting opportunities, Garman explained. "There are a lot of nuances [to bundling]," she said.

But according to the House Small Business Committee minority side report, small companies also lost out on federal subcontracting opportunities in fiscal 2003. "While prime contracts have increased by more than 33 percent over the past seven years, the small business share of subcontracts has decreased by 10 percent over the same time period," the report stated.

The contracting statistics presented in the committee Democrats' report card differ from figures published by SBA in June. According to SBA, agencies granted small businesses 23.6 percent of $277.5 billion in prime contracts awarded that year, just exceeding the 23 percent governmentwide small business contracting target.

The discrepancy stems from the committee members' decision to collect statistics directly from 22 agencies for the first time as opposed to relying on information from the Federal Procurement Data System, a central repository of government purchase records housed at the General Services Administration. Velazquez cited concerns about the accuracy of the FPDS data.

"The growing divide between the federal government's contract awards to small businesses and large corporations is obscured by a structural breakdown in the government's monitoring system and inaccurate accounting practices pursued by the SBA," the committee report stated. "As a result, the true level of small business participation in the federal marketplace has been misrepresented."

But Lalumiere explained that SBA isn't attempting to skew the numbers. The June announcement on fiscal 2003 small business contracting relied on figures reported in the FPDS, he said.

The GSA database contains standardized reports from 60 agencies and is "pretty rigorous" and comprehensive, Lalumiere said. He added that he is interested to learn more about the method that Velazquez's staff members used to collect data and the discrepancies uncovered.