(Updates with House committee’s approval of bill in ninth paragraph.)

(Bloomberg) -- The largest advocacy group for federal service contractors is opposing a bill that would eliminate bonuses for government executives whose agencies don’t meet small-business goals.

The Professional Services Council, an Arlington, Virginia-based organization that represents government vendors such as Lockheed Martin Corp. and Raytheon Co., criticized the measure in a letter yesterday to Representative Sam Graves, a Missouri Republican who chairs the House Small Business Committee. Graves introduced the bill in January.

The legislation would prevent all senior government executives, even those who aren’t involved in acquisition, from receiving bonuses the year after their agencies miss targets for small-business contracting. Eleven of 24 agencies didn’t meet those goals in fiscal 2010, according to the Small Business Administration.

“It would be the equivalent of you not getting a bonus because one of your other colleagues wasn’t doing a very good job,” said Roger Jordan, vice president of government relations at the contractor group.

More than 20 business groups, including the U.S. Chamber of Commerce, support Graves’ bill, committee spokesman Darrell Jordan said in an e-mail yesterday to Bloomberg News. “We respect the opinion of groups who represent large contractors, but the focus of our committee is to advocate for small businesses,” he said.

Boost Awards

The bill would also boost the share of contracts that the federal government aims to award to small businesses to 25 percent from 23 percent.

The government shouldn’t increase the goals because it doesn’t yet have a clear picture of how much work small businesses actually do for federal agencies, the organization said in its letter.

“Accurate data about small business participation at the subcontracting level has remained elusive and there is little confidence in the accuracy of the limited subcontracting data that has been reported to date,” Stan Soloway, the group’s president, said in the letter.

Graves’ committee approved the bill today by a voice vote, according to a statement from the panel. The committee also approved five other bills that deal with small business contracting.

No Incentives

Small companies received $98 billion in federal contracts in 2010, or 22.7 percent of eligible awards, according to the Small Business Administration. Graves’ legislation seeks to increase the share of contracts that are considered eligible for small businesses.

The bill is “a step in the right direction,” said Brian Reeder, communications director for the American Small Business League of Petaluma, California. The organization supports increasing federal awards to small companies.

“As far as we know, before now there was not really an incentive to hit these goals,” Reeder said of the provision that would withhold government executives’ bonuses.

There were 7,893 senior executives in the federal government as of December 2010, according to a Congressional Research Service report published last April. They include chief information officers and strategic advisers for intelligence and space programs.

Top-Earning Executive

The executives, who act as links between political appointees who lead federal agencies and the civil servants who staff them, earn between $119,554 and $179,700 a year and may be eligible for performance bonuses of as much as 20 percent of their salary.

A top-earning executive would be eligible for performance pay as high as $35,940. The maximum annual amount an executive is permitted to receive, including special recognition such as a Presidential award, is $230,700, according to the CRS report.

The government’s definition of small business varies. For example, highway construction companies are allowed to have annual revenue as high as $33.5 million to be considered small businesses, while the maximum for life insurance carriers is $7 million.

Graves introduced a similar bill in January 2010, when the Democrats controlled the House. The full chamber didn’t vote on the proposal.

The bill number is H.R. 3850.

To contact the reporter on this story: Nick Taborek in Washington at ntaborek@bloomberg.net

To contact the editor responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net