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

Woman-owned IT firms seek inclusion

As the Small Business Administration considers which industries can receive set-asides, women business owners hope they won't be overlooked

Katie Sleep is training for the Ironman Triathlon in part to handle the stress of her job as chief executive officer of List Innovative Solutions Inc., a small technology company in Herndon, Va.

“The training has saved my life,” Sleep said. “If you carry that stress every day, you’ve got to get rid of it somehow.”

As part of a seven-day workout routine, Sleep runs on the Washington and Old Dominion Trail at 6:30 a.m. on Mondays and Wednesdays. She swims Tuesdays and Thursdays at 5:45 a.m., and she exercises again in the evenings and on weekends.

“Working out has given me the energy to save this company,” Sleep said.

Women who own small information technology firms, like Sleep, are under a lot of pressure to protect their companies during the current recession. Meanwhile, they are losing out on government business that could help them because there is no program that sets aside contracts for woman-owned small companies.

According to the Small Business Administration, women are underrepresented in some fields, but there are too many woman-owned businesses in the technology industry to warrant set-aside contracts.

In general, the IT field doesn’t have more woman-owned businesses competing for work than other industries, at least not on a per-dollar-spent basis, said Kevin Plexico, senior vice president of operations at Input, a market research firm. The IT industry tends to fall in the middle relative to other major industries. Some segments, such as professional services, tend to have a larger number of woman-owned businesses, but the average contract size tends to be smaller and therefore they attract small firms, he added.

SBA’s Dynamic Small Business Search directory lists 69,000 woman-owned firms. Of those, about 2,800 received prime contracts in fiscal 2008 for IT-related products and services. About 7,700 woman-owned small businesses span several types of technology-related sectors — from data processing to computer system design and computer sales — and they earned nearly $45.8 million in federal contracting in 2008, according to FedMine, a data research firm.

Persistence will pay

But women who own technology companies are not counting themselves out of getting a set-aside program.

“One thing about women is they don’t give up,” Sleep said.

In October 2008, SBA proposed expanding the set-aside program from four obscure industries, which include kitchen-cabinet making, to 31. However, IT was not included on the proposed new list. A women's advocacy organization said SBA is missing the bigger picture.

“The 30-plus [list] currently being considered still does not accurately portray what we believe to be the real situation — namely, that women in most industry sectors are underrepresented” among federal contractors, the Women’s Business Enterprise National Council wrote in November 2008 in response to SBA’s proposed rule.

Women who own small businesses battle for contracts against large incumbent companies that have strong ties to the government. They don’t have as many resources to compete for the work, especially when agencies bundle smaller projects into one large contract. Women also often stand on the outside of an exclusive club of insider companies, several women business owners said.

“Quite frankly, there are no benefits to being a woman-owned small business,” said Alison Brown, president and CEO of Navsys Corp., a Global Positioning System software engineering company in Colorado Springs, Colo. For example, women face serious barriers when they try to break into the defense contracting market, she said. Set-asides would help small businesses, but “I don’t mean to say it’s easy if you have a level playing field,” she added.

Obama raises hope

Many women are hopeful that the new president will bring change. During his campaign, then-Sen. Barack Obama said he wanted to boost contracting opportunities for women and would push to establish a contracting program for woman-owned businesses. In the past few years, Congress has sought to help women by creating such a program, but officials have yet to fully launch it.

Despite years of ignoring the issue and concerns about constitutionality, officials have tried in the past two years to create a framework of regulations for the program, but a recent regulatory proposal crushed any progress by upsetting some members of Congress and small-business advocates. Some lawmakers objected to SBA’s proposed rule that would have opened the set-aside program to only a select few industries. Senators were ready to block the regulation with a single provision in an appropriations bill.

A rule finalized Oct. 1, 2008, authorized contracting officers to restrict competition to eligible woman-owned small businesses for contracts worth less than $3 million in industries in which women were underrepresented. However, any agency seeking the set-aside must show SBA that the arrangement would meet constitutional requirements.

SBA wants better data

Under that rule, SBA must determine in which industries women are underrepresented. Officials are seeking input on what source of information would offer the clearest picture of women in business.

SBA officials are accepting comments until March 13 on whether the agency should use the Central Contractor Registration or the Census Bureau’s Survey of Business Owners. The survey includes information about demographics, type of business and gross receipts. Several experts say CCR and the survey are the only reliable sources with disparity ratio information.

But many business owners don’t approve of using CCR to determine the number of woman-owned small businesses that are ready to handle government contracts. They note that many companies don’t enter their names in the registry until they require payment for contracted work. And many of them are subcontractors that are not paid directly by the government.

“From personal knowledge, the CCR as indicative of truly woman-owned companies is some kind of stupid joke,” wrote an anonymous woman business owner in a comment to SBA about its proposal. The writer said CCR’s data is suspect because companies enter the information themselves. “Bad data is worse than no data,” she said.

However, SBA officials say the Census survey might overestimate the number of companies that are ready for set-aside contracts.

“The glass ceiling is still there,” Sleep said. “The question is how are you going to be creative and get around it.”

Alba Alemán, president of Citizant Inc., a company based in Chantilly, Va., that specializes in enterprise architecture, said women aren’t respected as federal contractors. Nevertheless, she has noticed more women in business these days, increasing the importance of having a set-aside program for IT companies.

“Set-asides support an emerging market,” she said.

Women business owners say they intend to continue fighting for set-asides, even if they only succeed in helping the next generation of entrepreneurs. As Sleep put it, “You always want to make it better for the people who are coming behind you.”

Read the story: Washingtontechnology.com - Woman-owned IT firms seek inclusion

Bill would kill rule on women-owned business

The Senate may stop a controversial proposal from the Small Business Administration that would limit the type of set-aside contracts given to women-owned small businesses.

A 40-word provision in the Senate’s version of the fiscal 2009 Financial Services and General Government Appropriations Act (S. 3260) would block the proposed rule. The rule would allow agencies to set aside some contracts for women-owned small businesses, but the proposal would only allow the set-asides in four select industries, such as kitchen cabinet manufacturers.

Read the story: FCW.com News - Bill would kill rule on women-owned business

SBA measures economic impact on HUBZones

Small Business Administration officials have developed a new method for measuring the economic impact of small-business contracts on poor areas, SBA’s chief economist said today.

SBA officials want to measure the effect on employment and household incomes of people living in Historically Underutilized Business Zones compared with the amount of federal contract money that goes to HUBZone businesses.

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SBA faulted on set-aside check

“Faith-based contracting” doesn’t bring out the best in people. In those situations, “we sit back and hope and pray the company we’re doing business with isn’t ripping us off too badly,” said Bruce Causseaux, a senior-level specialist for forensic audits and special investigations at the Government Accountability Office.

Causseaux said the Small Business Administration appears to be taking that approach with its Historically Underutilized Business Zone program, which is designed to provide federal contracting opportunities to businesses in low-income areas.

During a recent investigation, GAO auditors found numerous examples of ineligible companies being accepted into the HUBZone program.

Read the story: FCW.com News - SBA faulted on set-aside check

Officials: HUBZone program is open to fraud

Investigators uncovered serious lapses in a Small Business Administration contracting program after they received set-aside small business status by using false identification, officials said today.

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Commerce delayed new contracting policies

Acquisition officials at the Commerce Department have been slow in applying new contracting policies, letting some polices sit idle for more than a year, a report by the department's inspector general's office has found.

Commerce officials failed to tell its contracting officers about monitoring certain subcontracts, and they allowed training deadlines to slip by.

Read the story: FCW.com News - Commerce delayed new contracting policies

Commerce official nominated to head SBA

Santuanu “Sandy” Baruah has been nominated to head the Small Business Administration. Baruah is now assistant secretary of economic development at the Commerce Department. The White House announced the nomination June 25.

Read the story: FCW.com News - Commerce official nominated to head SBA

Lawmaker opposes agencies proving their own discrimination

Two main parts of the Small Business Administration’s proposed rule on setting aside contracts for woman-owned small businesses could snuff out any hope for the program, said one lawmaker.

For one, the rule would excessively reduce the number of industries in which woman-owned small businesses could receive set-aside contracts, wrote Rep. Nydia Velázquez (D-N.Y.), chairwoman of the Small Business Committee. Second, it would require each agency to prove its own discrimination in procurement, she said.

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Senators blast rule for woman-owned businesses

Six senators have criticized a rule recently proposed by the Small Business Administration’s that would limit set-aside contracts for woman-owned small businesses to four industries.

In a letter sent Feb. 1, the senators said SBA fashioned the rule by selectively reading a recent study that measured if and where women business owners are underrepresented in federal contracting.

The rule would determine that woman-owned businesses are underrepresented in national security, engraving and kitchen cabinet manufacturing and as motor vehicle dealers.

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SBA chief: Tougher times ahead for agency contracting scores

Federal agencies will find out late this spring how well they contracted with small businesses in fiscal 2007, and receiving good grades is getting tougher, the Small Business Administration’s top official said.

Read the story: FCW.com News - SBA chief: Tougher times ahead for agency contracting scores

Lawmakers call for a do-over

Lawmakers couldn’t be clearer about how they feel about the Small Business Administration’s proposed
regulation for creating the Women’s Procurement Program: They hate it.

House Small Business Committee members expressed their disappointment with the agency’s strategy for opening up more federal contracts to woman-owned small businesses last week at a hearing.

The proposed regulation took SBA seven years to develop.

Read the story: FCW.com News - Lawmakers call for a do-over

Lawmaker calls SBA's rule 'silly'

The House Small Business Committee chairwoman today called a proposal regarding a women’s procurement program “silly” and said it won’t do much to send more contracts to women-owned small businesses.

Rep. Nydia Velázquez (D-N.Y.) said Small Business Administration “should scrap the rule and go back to the drawing board to provide a wider path” for women join the federal marketplace.

Read the story: FCW.com News - Lawmaker calls SBA's rule 'silly'

SBA rule aims to protect employee e-mail

Managers at the Small Business Administration now must have several levels of approval before accessing an employee’s e-mail inbox.

On Dec. 21, SBA officials approved the rules regarding when managers can look at SBA employee e-mail messages after a report from the agency’s inspector general showed SBA had no clear policy about accessing e-mail messages without authorization. Now managers must have written authorization from the chief information security officer before looking at e-mail messages, the notice said.

The notice comes after a report from SBA’s inspector general, which was released in October. The IG said managers looked at an employee’s e-mail inbox after that employee gave testimony anonymously.

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Sen. Kerry: SBA must protect whistleblowers

When Small Business Administration officials pried into the e-mail inbox of an employee supplying anonymous testimony to the Senate Small Business and Entrepreneurship Committee, the committee chairman said the result could have a chilling effect on oversight.

Employees can’t be guaranteed confidentiality when managers arbitrarily look into employee’s e-mail messages, Sen. John Kerry (D-Mass.) wrote in a letter, which he sent today to SBA Administrator Steve Preston.

The letter is based on a report from SBA’s inspector general that was released in October. The IG found that a manager in the Office of Disaster Assistance retrieved e-mail messages from an employee who was a confidential source for the IG and Kerry’s committee.

Read the story: FCW.com News - Sen. Kerry: SBA must protect whistleblowers

SBA needs money, senators say

Congress gave the Small Business Administration more money in its fiscal 2008 appropriations bill than President Bush requested for the agency, which some senators say is a signal to the president that SBA needs more funding in 2009.

In the omnibus appropriations bill, Congress gave SBA $569 million — $105 million more than the president's request and $40 million more than Congress provided in 2007.

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SBA rule a 'slap in the face' to women, lawmaker says

The Small Business Administration’s attempt to give women who own small businesses better odds of getting a government contract may not help after all, lawmakers say.

On Dec. 27, SBA issued a proposed rule for setting aside contracts for women-owned small businesses. The rule would limit the contract set-asides to four industry areas: national security and international affairs; coating, engraving, heat treating and allied activities; household and institutional furniture and kitchen cabinet manufacturing; and motor vehicle dealers.

Congressional leaders want the rule thrown out.

It “is a slap in the face to women business owners,” said John Kerry (D-Mass.), chairman of the Senate Small Business and Entrepreneurship Committee.

Read the story: FCW.com News - SBA rule a 'slap in the face' to women, lawmaker says

SBA plans to keep pressure on agencies

The Small Business Administration does not intend to let agencies wriggle out of their small-business contracting goals.

The agency has no authority to enforce the government's small-business mandate. But as SBA Chief of Staff Joel Szabat sees it, the agency wields two "hammers" that it can use to force the issue: the small-business score card and the Office of Management and Budget’s authority.

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SBA stumbles on e-mail privacy

The Small Business Administration has issued a temporary directive to prevent officials from accessing employees’ e-mail inboxes without prior approval from the chief privacy officer. SBA published the directive after officials discovered the agency had no e-mail policy to protect whistle-blowers.

SBA officials, with help from the agency’s general counsel and inspector general, also are drafting an agencywide policy that would establish rules for conducting an administrative review of an employee’s e-mail messages and the appropriate authorization needed for such a review.


Read the rest of the story: FCW.com News - SBA stumbles on e-mail privacy