Senate passes bill with HUBZone change

Bill deals with small-business equality issue


The Senate has passed its fiscal 2010 National Defense Authorization Act (S. 1390) with a provision that would remove the “shall” in the law that some government attorneys say gives small businesses in historically underutilized business zones (HUBZones) first preference when a contracting officer considers setting aside a contract for small businesses.

The mandatory “shall” would become a “may,” which would give the officers more discretion in awarding the contracts.

Since May, the Government Accountability Office, the Small Business Administration and the Office of Management and Budget have been debating whether HUBZone businesses should get priority over service-disabled veteran-owned small businesses and firms in SBA's 8(a) program. Read the story. The Senate passed the legislation July 23.

Rep. Roscoe Bartlett (R-Md.), co-chairman of the HUBZone Caucus, today said he supports the statutory change.

“Small-business owners from these three categories endure different types of disadvantages, but they all create invaluable opportunities and magnified benefits in our communities. They deserve equal priority consideration for federal government small-business contracts,” he said.

The Senate passed the legislation July 23.

Also regarding acquisition reforms, the bill would require a Defense Department contracting officer to justify why a contract worth more than $20 million should be awarded on a sole-source basis. For example, the officer would have to show that the anticipated costs are fair and reasonable. The bill would also tighten restrictions on public/private competitions for government work. The competitions pit the two sectors against each other to see who can do the work best for the lowest price.

The House passed its version of the bill in June. A conference committee of senators and House members will work out the differences before sending the legislation to the president.

Read the story: FCW.com News - Senate passes bill with HUBZone change

Senate deal will level small-business contract preferences

HUBZone companies would not get priority over 8(a) companies and service-disabled veteran business owners

Senate leaders have agreed to include a provision in the next defense authorization bill to do away with the current debate over which categories of small businesses should be given priority in federal contracting.

The amendment, introduced by Sen. Mary Landrieu (D-La.), would remove the special preference given to small businesses in historically underutilized business zones (HUBZones), putting those firms on a par with companies owned by service-disabled veterans and those in the Small Business Administration’s 8(a) program.

“All small businesses should be given an equal opportunity to succeed,” said Landrieu, chairwoman of the Small Business and Entrepreneurship Committee.

The Senate is currently considering the fiscal 2010 National Defense Authorization Act ( S. 1390 ). The House passed its version in June.

Landrieu said her amendment is in response to a May ruling by the Government Accountability Office that HUBZone companies had to be considered before other categories of business when conducting a set-aside procurement. She said the ruling has caused contractors to pull back business from 8(a) and service-disabled veterans programs.

In its decision, GAO said the Army made a mistake when it didn’t consider whether at least two HUBZone businesses would bid on an information technology contract. Mission Critical Solutions, a HUBZone company, protested the award after the Army awarded a one-year, $3.45 million sole-source contract to Copper River Information Technology, a company owned by Alaska Natives.

SBA and administration officials also object to GAO’s decision. They say it conflicts with SBA's long-standing regulations and its view that 8(a) companies and those owned by service-disabled veterans and HUBZone companies are all equals. On July 10, OMB told agencies to disregard GAO’s decision.

“If agencies were to follow the GAO decisions, the federal government’s efforts to procure goods and services from 8(a) small businesses and from [service-disabled, veteran-owned small businesses] through the other statutory programs may be negatively impacted,” Office of Management and Budget Director Peter Orszag wrote on July 10.

Read the story: WashingtonTechnology.com News - Senate deal will level small-business contract preferences

Congress, administration move into protected territory

The governmnent is having an ongoing debate about certain small businesses with big advantages

Congress and the Obama administration have stepped into a well-guarded territory of small-business contracting: special advantages.

The Senate Homeland Security and Governmental Affairs Committee’s ad hoc Contracting Oversight Subcommittee has questioned whether the explosive growth in Alaska Native Corporations’ (ANCs) contracting dollars in the last eight years through unique set-aside rules has given ANCs too much of an advantage. The subcommittee held a hearing July 16 that has become part of an ongoing debate about some categories of small businesses that live by special rules.

“The current situation is out of balance, and it may be time to swing the pendulum back the other way,” said Mark Lumber, senior vice president for federal program for Cirrus Technology, a historically underutilized business zone (HUBZone) small business in Huntsville, Ala.

Sen. Claire McCaskill (D-Mo.), the subcommittee chairwoman, asked several representatives for ANCs if they would agree with changes to make ANCs abide by the same rules as Indian tribes and other socially and economically disadvantaged companies.

If there is no difference between them, she said, “Then I hope that you would accept a change in the law that would make sure that you are on completely equal footing."

The ANC representatives at the hearing remained neutral. “We are not in a position today, through our organizations, to negotiate on behalf of our people. We need to go through an extensive tribal consultant process,” said Susan Lukin, executive director of Native American Contractors Association.

Officials believe ANCs are getting a disproportionate amount of money compared to other small businesses, according to reports. Because of ANCs’ rules, the amount of contracting dollars going to ANCs have grown by 1,386 percent since fiscal 2000 and have tripled from $1.1 billion in 2004 to $3.9 billion in 2008, according to the Small Business Administration’s inspector general. In SBA’s 8(a) small business program in 2008, ANCs were awarded 26 percent of the total dollars flowing into the program, although they are only 2 percent of the total number of companies in the program, according the IG’s July 10 report.

Similarly, McCaskill’s subcommittee analyzed information from 19 ANCs and found similar results. ANCs received $6.6 billion in 8(a) multi-million-dollar sole-source contracts between 2000 and 2008, according to its report.

The increases are a result of agencies’ small-business contracting goals and, more importantly, a quick way to award a contract, officials say. Rules that are unique to only ANCs allow agencies to award them sole-source contracts of any size without competition, and no fear of bid protests.

Sen. Susan Collins (R-Maine), the subcommittee’s ranking member, said Congress needs to carefully consider whether the 8(a) program rules offer too many benefits to ANCs at the expense of the others.

In the private sector, many business owners are upset by the set-aside partiality ANCs receive. Lumber said few people would object to ANCs having some type of procurement preference, but not that allows for this much advantage.

At the same time, HUBZone businesses get a deal that upsets many other business owners and the Obama administration. It’s a difference of a word: "Shall" versus "may."

Office of Management and Budget Director Peter Orszag on July 10 told agencies to disregard the Government Accountability Office’s (GAO) May 4 bid protest ruling that said HUBZone small businesses get first crack at a contract set-aside. GAO rejected SBA's request to reconsider its rulings.

Because of language in a 1997 authorization law, GAO sustained two bid protests in favor of HUBZone businesses. As a result, GAO ruled that those companies get priority over all 8(a) small businesses and companies owned by service-disabled veterans.

“You’ve got to live by the ‘shall,’ ” said Robert Burton, former deputy administrator of the Office of Federal Procurement Policy and now a partner at the Venable law firm.

While GAO believes the “shall” in the law is a mandate, SBA officials said the 8(a) companies, service-disabled veterans, and HUBZone companies should all be equal to each other.

John Moliere, an advocate service-disabled veteran contractors and president of Standard Communications, said, "I envision the lawyers at GAO smugly pleased with their decision."

Meanwhile, the HUBZone Contractors National Council isn't talking about the disagreement between GAO and OMB.

If Congress or the administration tries to make any changes to these sensitive areas, Burton said it won’t be an easy legislative fix. There are members of Congress who will fight to keep things as they are. Both of Alaska’s senators, who weren't members of McCaskill's subcommittee, took advantage of the special privilege to question witnesses at the ANC hearing. They both also thrust their strong support behind the Alaska Natives.

Over all, Moliere said, “This is not the end of this skirmish. It will erupt in a full-fledged battle.”

Read the story: FCW.com News - Congress, administration move into protected territory

GAO rejects request to review HUBZone decisions

SBA and OMB contend GAO overreached its authority in ruling that HUBZone businesses have priority

The Government Accountability Office today denied Small Business Administration officials’ request to reconsider recent bid protest decisions that give some small businesses priority over others.

SBA’s request “is denied where newly raised information fails to show that our prior decision contains any errors of fact or law,” GAO’s Acting General Counsel Daniel Gordon wrote in a decision released today.

SBA and the Office of Management and Budget Director Peter Orszag contended GAO overreached its authority when it ruled that firms in historically underutilized business zones (HUBZones) should get priority over small businesses in the SBA’s 8(a) program or service-disabled, veteran-owned small businesses.

GAO’s rulings are not binding on federal agencies and are contrary to SBA regulations, Orszag wrote in a memo released to agencies July 10.

“If agencies were to follow the GAO decisions, the federal government’s efforts to procure goods and services from 8(a) small businesses and from [service-disabled, veteran-owned small businesses] through the other statutory programs may be negatively impacted,” Orszag wrote.

He also wrote that the rulings remove contracting officers' discretion to set aside a contract. Until administration attorneys finish their legal review, Orszag wrote that contracting officers should continue using SBA's view of the three types of small businesses. Federal agencies should not “prioritize HUBZone small businesses over” 8(a) or veteran-owned companies, he wrote.

The administration’s concerns come from a May 4 ruling on a protest by Mission Critical Solutions, a HUBZone company. GAO ruled that the Army made a mistake and didn’t consider whether at least two HUBZone businesses would bid on an information technology contract. Instead, the Army awarded the one-year, $3.45 million sole-source contract to Copper River Information Technology, a company owned by Alaska Natives. Law allows Alaska Native corporations to receive sole-source contracts of any size.

GAO based its decision on the Small Business Reauthorization Act of 1997. The legislation states that “a contract opportunity shall be awarded” on the basis of a set-aside competition among HUBZone companies. Meanwhile, Congress didn’t afford companies in SBA’s 8(a) program or companies owned by service-disabled veterans the same mandate. The law only says contracting officers may set aside a contract to those types of companies.

“We do not think SBA’s regulatory implementation of HUBZone and 8(a) statutes is reasonable since it fails to give effect to mandatory language of the HUBZone statute,” the decision in the Mission Critical Solutions case states.

GAO reached a similar conclusion in September 2008, when it considered a bid protest from International Program Group, another HUBZone company. The Marine Corps set aside a contract for service-disabled veterans before considering whether a HUBZone set-aside would be appropriate. GAO ruled against the Marines.

Read the story: Washingtontechnology.com News - GAO rejects request to review HUBZone decisions