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OMB to rate agencies on efforts to break up large contracts

By Jenny Mandel
August 18, 2006

The Office of Management and Budget is taking steps to address the concerns of small businesses by developing a score card to focus agency attention on "unbundling" large contracts and designating a senior official to address small business issues, a senior official told lawmakers recently.

In an Aug. 3 letter to Sen. Olympia Snowe, R-Maine, chairwoman of the Senate Small Business and Entrepreneurship Committee, OMB Deputy Director for Management Clay Johnson laid out steps that the Office of Federal Procurement Policy will take to improve opportunities for small businesses to obtain federal contracts.

"I assure you the [OMB] remains firmly committed to providing maximum opportunities for small business in federal contracting," Johnson wrote, highlighting a March 2002 policy statement by President Bush that "wherever possible, we're going to insist that we break down large federal contracts so that small business owners have got a fair shot at federal contracting."

Johnson said OFPP would be directed to develop a score card, in consultation with relevant agencies and congressional committees, to hold agencies accountable for achieving small business procurement goals and to satisfy an initiative announced by the president in 2002 to reduce contract bundling. That practice, in which agencies roll several small contracts into one mega-contract, is a top complaint of small businesses because it makes it harder for them to qualify or compete for work with the federal government.

OMB also will consult with relevant agencies and committees on the possibility of adding the anti-bundling initiative to the quarterly President's Management Agenda score card, Johnson said. The procurement policy office will designate a senior official to take the lead on small business issues and to "aggressively explore" ways to increase staffing at the Small Business Administration's procurement center, he said.

Johnson said he would ask OFPP to prioritize efforts to develop rule changes that could guard against misrepresentation, miscoding and manipulation of the system through which businesses certify themselves as small for preferences in government contracting. That system has been widely criticized for counting deals with huge, international corporations toward small business procurement goals.

Johnson said he would report to Snowe by Nov. 15 on actions OMB had taken on these issues.

Jake Ward, Snowe's press secretary, said it was his understanding the committee had received the letter, though with key staffers away for the August recess he was unable to comment Friday afternoon on its contents. An OMB official said the letter was issued in response to concerns raised by Snowe during a confirmation hearing for Paul Denett, who the Senate approved as OFPP administrator earlier this month.

"It's substantive, but it's a letter, and it doesn't really deliver results until they follow through," said Angela Styles, former head of OFPP and now a government contracts attorney at the Washington law firm Miller and Chevalier.

Calling the letter "a good first step," she said "none of the things listed are minor," and real plans and actions would be required to accomplish them.

Styles added that the idea of adding contract bundling to the management score card was floated when the administration first looked at the problem, but political will at that time was lacking. "The most important piece of all of it is evidence of leadership at the top -- evidence that they're going to push back with agencies to make it happen," Styles said.

She said the easiest way to solve problems associated with small business size status would be to require companies to recertify their size annually, or whenever major business decisions like mergers or acquisitions affect it. "The rule changes are controversial. How long do you let a small business that became large be counted as small? Believe it or not, a lot of people believe you should be allowed to continue to count that as small," she said.

Lloyd Chapman, president of the American Small Business League, said the administration should be judged by its actions, not by its announcements. "I know that the Bush administration has no good intentions for small businesses," he said.



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