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Agencies lower bar to meet small-business contracting goals

By Elise Castelli
Federal Times
November 4, 2008

One way to meet the government’s goal to increase small-business contracting is to lower the bar. That’s how three agencies met their mark in 2007.

The General Services Administration met four of its five small-business contracting goals for fiscal 2007, according to the Small Business Administration, which negotiates and monitors each agency’s smal-business contracting goals. That’s one more than it met the previous year.

What changed? GSA convinced SBA to lower its small-business contracting goal by 11 percentage points. Instead of having to repeat its 2006 goal of awarding 45 percent of its contracting dollars to small businesses — a goal it missed by 13 percentage points — GSA’s goal in 2007 was lowered to 34 percent. In 2007, GSA spent 34.2 percent of its contracting dollars on small businesses.

In 2004 and 2005, GSA’s goal was 43 percent. It nearly reached that goal in 2004, spending 42.3 percent of dollars on small businesses, but fell short in 2005, spending only 33 percent on small firms.

SBA set GSA’s 45 percent small-business contracting goal for 2006 by reviewing its past contracting data, which included GSA’s building lease deals.

However, GSA was not allowed to count those leases toward its small-business goal because they are not regulated by the Federal Acquisition Regulation, which sets rules for small-business competitions and procurements, said Michael Rigas, associate GSA administrator for the Office of Small Business Utilization.

If goals are lowered, as GSA’s goal was, it is not with the intent to allow agencies to get good report cards, said Karen Hontz, director of government contracts at SBA. But neither are the goals meant to be punitive.

“We want the goals to be realistic,” Hontz said.

Three other agencies that didn’t meet their 2006 goals — the State Department, Health and Human Services Department and Agency for International Development — also asked SBA if they could aim lower in 2007. Two of those — State and HHS — succeeded. In 2006, State missed its goal of 40 percent by less than one percentage point. In 2007, it exceeded its lower 36 percent goal by 6 percentage points.

Similarly, HHS missed its 30.3 percent 2006 goal by nearly 7 points, but exceeded its 20 percent 2007 goal by 2 points.

Like GSA, the three agencies claimed special circumstances altered their contracting landscape and justified the lower goals, Hontz said.

For example, State awarded long-term contracts for foreign law enforcement and security training services, which only large businesses can perform, Hontz said.

Similarly at HHS, $1.5 billion worth of vaccine contracts require significant capital investment that small businesses cannot provide, Hontz said.

Although allowed to negotiate lower goals, GSA and State still have goals that are higher than the governmentwide statutory goal to award 23 percent of contracting dollars to small businesses.
Some agencies, like AID, have goals lower than 23 percent because the nature of their work does not lend itself to many small-businesses contracting opportunities, Hontz said.

Though AID may do business with foreign small businesses, those contracts can’t be counted toward the small-business contracting goal, Hontz said.

AID’s goal was lowered from 44 percent in 2006 to 23 percent in 2007 and again to 19.6 percent in 2008.
It contracted with small businesses on 10.4 percent of the $216 million it spent in 2007, giving the agency a red rating, indicating failure, on SBA’s goal achievement report cards.

In renegotiating its goals, AID wanted to set goals that were attainable but still challenging, an AID spokesman for the Office of Small and Disadvantaged Business Utilization said.

To reach the new goal of 19.6 percent, the agency is stepping up outreach efforts to small businesses, the spokesman said. The office held a conference in June and has been holding monthly meetings to let small businesses know about domestic opportunities at AID, he said.



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