Draft rule clarifies government’s procurement priorities with respect to small business

A proposed change to the Federal Acquisition Regulation clarifies the government's approach to assigning priority levels when awarding contracts to different types of small businesses.

On Monday, the Civil Agency Acquisition and Defense Acquisition Regulations councils filed a rule that specifies there is no order of award preference among disabled veteran-owned businesses, those located in underserved or low-income neighborhoods, or those owned by socially or economically disadvantaged individuals. The rule guarantees that the acquisition regulations reflect the Small Business Administration's interpretation of the 1953 Small Business Act and agency regulations on the management of socioeconomic contracting programs, members of the councils said in the proposal.

"It has been unclear to the acquisition community if there is an order of precedence that applies when deciding whether to satisfy a requirement through an award to small business, HUBZone [historically underutilized business] small business, service-disabled veteran-owned small business, or a small business participation in the 8(a) Business Development program," the proposal stated.

For acquisitions of more than $100,000, contracting officers must consider setting aside the procurement for one of these three types of businesses before making it available to other small businesses. While this practice already is encouraged by SBA, it is not currently mandated by the acquisition regulation.

HUBZone businesses operate in urban or rural areas with low average wages or high levels of unemployment. Businesses participating in the 8(a) program are owned by socially or economically disadvantaged individuals. Both categories, along with service-disabled veteran-owned businesses and small businesses in general, are eligible for set-aside contracts under certain conditions.

Contracting officers are required to reserve acquisitions between $3,000 and $100,000 for small businesses unless they do not anticipate a robust competition among qualified small businesses. The draft rule clarifies that while the government is not required to set aside these contracts for any specific category of small business, it also does not preclude such awards.

According to the proposed rule, there are 313,512 small businesses; 13,000 HUBZone firms; 9,947 8(a) firms; and 9,614 service disabled veteran-owned small firms registered to do business with the government. The councils expect that the rule change will positively affect some firms, but not others.

"Viewed as a whole, there is not [an] impact on the small business community, as this rule does not increase or decrease the number of contracts awarded to small businesses," the councils noted.

The National Small Business Association and other small business advocates said they had not analyzed the rule in depth yet, but an NSBA spokeswoman said the group was focused more on leveling the playing field between small businesses and their large contracting counterparts.

"Small businesses … face a disproportionate competitive disadvantage against larger companies in their industry and are frequently relegated to subcontractor roles," the spokeswoman said. A recent NSBA survey of small business owners showed that one reason small businesses did not contract with the federal government was their inability to compete with larger companies, she added.

SBA did not respond to requests for comment.

The draft rule is open for comment until May 9.