At a time when billions of federal dollars are being spent to create new jobs, eliminating a single federal program might create 400,000 jobs, says a small business advocacy group.

The program targeted by the American Small Business League of Petaluma is the Comprehensive Subcontracting Plan Test Program, which was established over 20 years ago with the mission of increasing subcontracts for small businesses.

The ASBL contends the program actually allows large defense contractors to circumvent small business subcontracting goals.

The ASBL estimates that elimination of the program would redirect approximately $10 billion a year in additional subcontracting opportunities for middle class firms.

When first coming into office, President Obama estimated that every billion dollars spent on federal infrastructure projects would create 40,000 jobs. Based on these estimates, ending the program would create roughly 400,000 new jobs, says ASBL.

The U.S. Census Bureau says small businesses are responsible for more than 90 percent of all net new jobs, 50.2 percent of the non-farm private sector workforce, 50 percent of the gross domestic product (GDP) and 90 percent of exports and innovations.

In October, five members of the House of Representatives, lead by Rep. Yvette Clarke, D-N.Y., requested the U.S. Government Accountability Office to investigate and evaluate the Comprehensive Subcontracting Plan Test Program to determine if the program was meeting its stated goals. After being in place for over two decades, the CSPTP has never been evaluated by the Pentagon or any federal agency.

“This program has done the antithesis of what Congress said it would. It needs to be eliminated and investigated to determine how much fraud has occurred over the past 21 years,” says ASBL President Lloyd Chapman. “If President Obama and Congress were serious about job creation, they would end programs like the Comprehensive Subcontracting Plan Test Program and ensure that federal contracts meant for small businesses actually go to middle class firms who create over 90 percent of all new jobs.”

One of the bills that’s still likely to come up in the lame duck session is the 2011 Defense Authorization Act. It includes the “Don’t Ask, Don’t Tell” repeal language and it’s generally considered a must-pass bill (it’s been 48 years since Congress has failed to pass the annual Defense bill).

It’s a big bill — 981 pages authorizing about $725 billion in spending — and since it’s considered essential legislation to keep the Defense Department functioning there’s often a lot of controversial stuff that gets thrown into it without thorough vetting. The American Small Business League is raising a red flag on Sec. 815 of this year’s bill, which they say would “create ‘de facto’ debarments of small businesses across DoD federal contracting programs, with potential for these ‘de facto’ debarments to touch every corner of federal government contracting, thus creating a blacklist where businesses would be debarred from working with the government.”

The section is titled, “Reduction of supply chain risk in the acquisition of national security systems.” Basically, it empowers two people in the DoD — the Director of the Defense Intelligence Agency and the Assistant Secretary of Defense for Networks and Information Integration — to decide that a company poses “an unacceptable supply chain risk” and then block that company from being awarded government contracts. The bill specifically states that debarments under the provision would be exempt from disclosure under the Freedom of Information Act and review by the Government Accountability Office or federal court. Congress would be shown a “statistical summary” of how many companies have been blocked from working with the government, but they would not be told which companies have been blocked and why.

Now, there’s no doubt that reducing risk in the Defense supply chain is a necessary and worthy goal, but this particular arrangement seems absurdly ripe for abuse. It would establish a clear path for anticompetitive influence-peddling and bribery while at the same time restricting the public from the tools they need to hold government officials accountable.

When decision-making is centralized, like it would be here (at the “sole discretion” of two DoD officials), corporations that want to sway the decision makers know exactly where to focus their efforts and can play the influence game much more effectively. In this case, we have a small group of huge, politically-connected Defense contractors — Lockheed Martin, Northrop Grumman, Boeing, etc. — that have invested in lobbying policymakers as a major component of their business. These giant and savvy companies have a financial interest in convincing the Defense Department that their smaller competitors do low-quality work and that doing business with them would present “an unacceptable supply chain risk.” This provision makes it easier for them to do that and protects them from ever having the public find out.

Source: http://www.opencongress.org/articles/view/2123-Defense-Bill-Includes-Secretive-Contractor-Blacklist-

The Senate Armed Services Committee is considering proposed legislation that would allow the Defense Department to blacklist certain companies that might risk a break in the department’s supply chain.

Under the legislaton, a DOD agency would be able to exclude a company from competing for a contract, task or delivery order, or even a subcontract, if the company seems to pose a risk to the supply chain of IT systems. The agency would not be required to disclose who’s on the list, according to the Senate’s National Defense Authorization Act (S. 3454).

The bill under consideration states that the director of the Defense Intelligence Agency and the assistant secretary of defense for networks and information integration would make the decision “that the exclusion of a particular source is necessary to avoid an unacceptable supply-chain risk."

Furthermore, it states that a company “shall not be subject to disclosure.”

The committee’s concern for the supply chain stems from a 2009 DOD report on trusted defense systems. DOD found that the globalization of the IT industry has increased the department's IT systems vulnerability. The report found a growing risk that systems and networks critical to DOD could be exploited through counterfeit systems or malicious code and other defects introduced by suppliers.

“The committee concludes that the secretary should have the authority needed to address this risk,” according to the committee’s report, which sheds light on the bill’s provisions.

However, the current Senate is unlikely to pass the bill and will have to revisit the legislation when the new Congress convenes in January.

“The new Congress will have to start over, but the delay will not have any significant impact,” said Robert Burton, former deputy administrator in the Office of Federal Procurement Policy and now a partner at the Venable law firm.

Nevertheless, the provision has raised concerns in the acquisition community, which fears DOD could go too far extending its authority.

“It is stunning. Basically, any contractor can be excluded from a competition because of an ‘unacceptable supply-chain risk,’” Burton said. “I think the provision is overly broad and could be abused.”

Companies on such a list also could be included in similar action by other agencies, even beyond the defense community, and might lead to their questioning a company’s reputation, said the American Small Business Association. This could start de facto debarments across the government without due process.

Alan Chvotkin, executive vice president and counsel at the Professional Services Council, said the government can find better options for keeping a check on supply-chain risks.

“Exclusion should be the last approach,” he said.

Chvotkin acknowledged that the DOD has a legitimate concern for malicious IT systems. But the legislation's standards are too broad when determining a risky system, he said, and added that those standards need to be worked out. 

PSC and other industry groups have met with the Senate committee, and Chvotkin said the committee staff members have been open, substantive discussions.