By J.D. Harrison May 25

Sometimesit's the nuance in a phrase that matters most. For small governmentcontractors, that appears to be the case in the federal procurement rulebook.

TheFederal Acquisition Regulation, a long list of contractingrules established by the heads of several agencies, requires alllarge companies bidding on prime contracts to specify what percentage of themoney awarded would flow through to small-business subcontractors.

The ruleis meant to ensure that small firms "have the maximum practicable opportunityto participate in performing contracts," according to the compendium, and tohelp the government meet its annual goalof awarding 35.9 percent of all subcontracting dollars to small companies.Collectively, federal agencies have missed that mark each of the past fiveyears.

Bob Justissays that one odd word on Page 1,343 in the rulebook isn't helping.

"Out ofall your planned subcontracting dollars, you're required to set aside somepercentage of that for small businesses," said Justis, head of JustisConsulting, a contracting proposal development firm based in Washington."However, it's required to be stated as a percentage of your total subcontractdollars — not as a percentage of the total contract dollars."

It's asubtle but important distinction, Justis said, because a large prime contractorcan, based on that rule, pledge to commit 40 percent of its subcontractingdollars to smallbusinesses. If the company then handles all the work itself,resulting in a subcontracting spend of zero, it still met its small-businesssubcontracting goal.

After all, 40 percent of nothing is nothing.

More often, Justis said, the wording leads toconfusion between agencies and their prime contractors. Contracting officersexpect to see, for example, a $10 million contract with a 40 percentsmall-business subcontracting goal to deliver $4 million to small companies. However,the total often comes in much lower, because the prime contractor is shootingfor a goal based on a different formula.

"It makes a very big difference as to how muchmoney ultimately goes to small businesses," Justis said.

The push to tweak the language comes aspolicymakers and federal agencies are looking for ways to reserve moregovernment work for small companies.

The House last week passed a defense spendingbill that included several changes to long-
standing small-business contracting rules. Most notably, the proposal wouldlift the government's annual small-business contracting target from 23 percentto 25 percent and its total subcontracting goal from 35.9 to40 percent.

The legislation would also streamline some ofthe bidding requirements for small firms, with the intent of saving them timeand money, and take new steps to prevent federal departments from bundlingcontracts into projects that are too large for competition by small businesses.

House Small Business Committee Chairman Sam Graves(R-Mo.), a co-author of some of the proposals, called them ­"common-sensereforms that will provide opportunities for small companies trying to breakinto the federal marketplace."

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