A new bill that would allow more small businesses with venture capital backing to tap into federal grants is facing stiff opposition from groups that argue VCs could take advantage of loans designed to help the mom and pops.

The Small Business Investment Expansion Act of 2007, approved by the House of Representatives, would open up small companies that are majority-owned by venture capitalists to use Small Business Administration research grants.

Currently, the law doesn’t allow small businesses that are more than 49 percent owned by VCs to apply for the grants unless the company and venture capitalist employee fewer than 500 employees combined.

The Small Business Administration opposes the proposed changes because funding is supposed to help entrepreneurs, not big VC funds.

Edsel Brown, assistant director of the office of technology at the SBA in Washington, said the proposals also don’t take into account if the entire company is controlled by various venture capitalists. What happens, Brown asked, if three VC funds own a combined 90 percent of a company?

“We are concerned about firms getting financing,” Brown said, “but we feel this bill will have an adverse effect on small businesses.”

Lloyd Chapman, president of the American Small Business League, added that the bill hides behind the ruse of helping startups get capital.

But the bill’s advocates said the bill helps small businesses tap into more government resources. Ellen Sandles, president of the Tri-State Investor Network in New York City, said she supports broader availability of capital for small businesses. Sandles, however, warned that the new rules could lead to abuse because the grants would be used by groups that could just as well turn to the private sector.

Roslyn Goldmacher, president of the Long Island Development Corp., said she is for any plan that would bring additional funding to Long Island’s 98,000 smaller companies.

As a small-business-funded economy, Long Island needs as much access to small business cash as possible, she said.

“Our growth on Long Island is not major companies locating here, it’s entrepreneurs starting from here ground up,” she said.

Source: www.libn.com

A U.S. Senate committee has approved a bill that senators say would improve the process in which small businesses in Maryland are awarded federal government contracts.

If signed by the president, the bill would improve oversight of the contracting process for small businesses and expand opportunities for companies owned by minorities, women and the service-disabled, Sen. Ben Cardin, D-Md., said in a telephone interview with The Daily Record Thursday.

The bill, S 2300, was unanimously approved by the Committee on Small Business and Entrepreneurship Wednesday and will now go to the floor of the Senate for a vote, which is expected before Thanksgiving.

A similar bill has passed the U.S. House of Representatives.

The two chambers would then meet in a conference committee to reconcile differences in the legislation and create a bill that would then go to the president.

Cardin, who co-sponsored the bill with Massachusetts Democratic Sen. John Kerry and Sen. Olympia Snowe, R-Maine, said the legislation had wide bipartisan support and should pass fairly easily.

Problems with the procurement process are of particular interest in Maryland because of the large number of firms in the state that do business with the federal government. It will become even more relevant as the effects of BRAC — the military base realignment and closure process — become reality.

According to a 2005 federal government procurement report, Maryland is the fourth largest receiver of government contracts in the U.S. It trails California, Virginia and Texas and receives 6 percent of all federal government contracts, worth $20 billion.

More than half of that, $10.8 billion, comes from defense contracts.

The U.S. Department of Health and Human Services and the National Aeronautics and Space Administration also handed out more than $1 billion in government contracts to Maryland-based companies.

Cardin said the bill was written to address complaints from small business owners that government set-aside programs were not working.

The bill would create greater oversight and transparency in the procurement process and guarantee that federal agencies are meeting requirements set by the U.S. Small Business Administration, he said.

“Too many barriers exist for small, minority and women-owned businesses, and I want to ensure a level playing field in the federal contracting process,” Cardin said.

Leutrell Osborne agrees that the way contracts are handed out is broken, but he disagrees that legislation is needed to fix it.

Osborne, an Annapolis government contracting consultant and former chairman of the Federal Office of Small Disadvantaged Business Utilization Directors Interagency Council, said enforcing laws on the books would solve the problems.

“They are just reacting to pressure,” he said. “They are creating more laws for nothing and they want the SBA to do more with less.”

Federal law, he said, mandates that agencies give a percentage of their contracts to small businesses.

In August, the SBA issued a status report that rated agencies on a “stoplight scale.” It found that when it came to handing small-business contracts, DoD, NASA and DHS failed to meet the basic standards. All three received a red rating for how they do business, meaning they did not meet any of the SBA’s goals.

Gloria Berthold, president of TargetGov at Marketing Outsource Associates Inc., a Baltimore government procurement consultant, said that while she said she applauded the Senate’s efforts, the bill lacked teeth.

She said government agencies are too short-handed and underfunded to do the oversight required by the new law or the existing ones.

The shortage in procurement officers also makes it easier for short-handed agencies to “bundle” contracts and let the big companies handle subcontracting.

Bundling is where small contracts are included in larger ones that are picked up my prime contractors, like Northrop Grumman Co.

In theory, the smaller contracts would trickle down to small business that would do the work as subcontractors.

But that doesn’t happen, she said.

The SBA did not return calls Thursday.

Source: www.mddailyrecord.com

Legislation aimed at expanding contracting opportunities for small businesses by updating and expanding existing programs passed the Senate Small Business Committee Wednesday.

Similar legislation passed the House last week.

The Small Business Contracting Revitalization Act (S. 2300) was drafted by Sens. John Kerry, D-Mass., and Olympia Snow, R-Maine, the chairman and ranking member of the committee. It includes provisions to unbundle contracts, enforce protections for subcontractors and expand opportunities for minority, women and service-disabled veteran owners of small businesses. Many of the provisions were taken directly from legislation that passed the committee last year but did not reach a vote in the full Senate.

A key provision aims to reduce contract bundling, in which several contracts are consolidated into one offering, by improving reporting and oversight. Lawmakers and small business advocates have argued that bundling creates a disadvantage for small businesses in competing for awards.

Like the House bill (H.R. 3867), the Senate legislation would mandate the implementation of existing programs and augment them, not create new ones. Small business contracting goals are already well defined and promoted through several programs, but agencies are by and large failing to meet them.

"Currently, small businesses are eligible for $340 billion in federal contracting dollars, yet they receive only $77 billion," Snowe said in a statement.

The Senate bill mandates that the Small Business Administration implement the women's procurement program within 90 days. The program, created by Congress seven years ago to help agencies award 5 percent of contracting dollars to women-owned small businesses, still has not been fully implemented and has been the subject of renewed scrutiny recently. In announcing passage of the House legislation, Rep. Nydia Velazquez, D-N.Y., said the women's program has "languished in the current administration's endless delays" and urged immediate implementation.

In early October, lawmakers and the Women's Chamber of Commerce criticized SBA for initiating a new round of rulemaking for the program. The SBA defended that decision in a U.S. District Court of the District of Columbia status hearing Wednesday, arguing that further interagency review was necessary to ensure all aspects were legal and could be practically implemented. The Women's Chamber, however, maintains that the latest regulatory step was an unnecessary delaying tactic. The court ruled against the SBA in a 2005 case brought by the Women's Chamber, calling the program delay "unreasonable" and ordering the agency to develop and meet deadlines for implementation.

Judge Reggie B. Walton said he was "not happy with the pace of how the program has proceeded" and scheduled a follow-up hearing in late January. Walton said he hoped by that time the Office of Management and Budget will have finished the review process and the SBA could report on implementation.

Small business advocates, including the American Small Business League, lauded the recent legislation.

"I am pleased to see that S. 2300 includes all of the changes that have been recommended by the ASBL since 2002," ASBL President Lloyd Chapman said in a statement. "Every small business in the country needs to realize that they owe Senators Kerry and Snowe a debt of gratitude for drafting this legislation."

The ASBL has launched a national campaign in support of the Senate bill, asking its members and all small business owners to encourage their representatives to vote in favor of the legislation.

Kerry spokeswoman Kathryn Seck said it is unclear when the legislation will be considered. "Sen. Kerry is working with members who still have concerns about the bill and will address them before bringing the bill up for full Senate consideration," she said. She said a vote is extremely unlikely before Thanksgiving recess but that Kerry is hopeful the legislation will be considered before the end of the year.

Source: http://www.govexec.com/dailyfed/1107/110707e1.htm