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White House Opposes Small-Business Contracting Provision in Defense Bill
By Robb Mandelbaum
NY Times
October 9, 3600
Among the many objections that the Obama administration has raised to the National Defense Authorization Act, a Republican bill that passed the House Friday with a broadly bipartisan margin, 299 to 120, was one that might take small-business owners by surprise: The White House opposes a section of the bill that would direct more government contracts to small companies.
The federal government has a goal of awarding 23 percent of most federal contracting dollars to small businesses. The defense bill would raise that goal to 25 percent and increase the small-business goal for subcontracts to 40 percent, from 35.9 percent. The provision also would require that the small-business goal for each agency be at least 25 percent — currently some agencies’ goals are below the governmentwide goal and some are above, but they average out to 23 percent. The bill would also condition the bonuses of senior executives at agencies in part on reaching these goals.
The White House, in its statement on the bill, called the higher goal “laudable but overly ambitious” and said that the new inflexibility on individual agency goals “could undermine the goals process and take away the government’s ability to focus its efforts where opportunities for small-business contractors are greatest.”
The chairman of the House Small Business Committee, Sam Graves of Missouri, who first introduced the contracting legislation, registered shock at the White House’s criticism in a statement on Friday. “About 90 percent of the businesses who bid on federal contracts are small companies, yet the government only awards around 20 percent of the work to small firms,” he said. “Setting the goal at 25 percent is realistic and achievable.”
But as regular readers of this column know, the government has been unable to meet the current 23 percent goal. And, as regular readers of this column also know, some of the companies that are counted as recipients of small-business contracts are actually very large companies. Given those issues, what good would raising the percentage do? Wouldn’t it be better to first enforce the current goal?
That is the view of the American Small Business League, whose president, Lloyd Chapman, called the measure a “high-visibility publicity stunt.”
“In reality, the measure is irrelevant to small-business concerns because current federal policy still allows the federal government to award small-business contracts to some of the largest companies in the world,” he said.
Mr. Chapman was also disappointed that the final House bill weakened the accountability provision: Mr. Graves’s original bill called for denying bonuses to senior leaders whose agencies did not meet their small-business goals. (It seems to The Agenda, though, that absent tougher rules to prevent contract diversion, the harsh tack on bonuses could backfire: agency heads might be tempted to meet their goals by mislabeling more large contractors as small businesses.)
Mr. Graves, for his part, dismissed these concerns. “Procurement officials won’t change their ways unless an incentive is added to the process, which is something that has never been done before,” he said in the statement. “That’s why we have introduced this bipartisan legislation to hold agencies accountable by making goal achievement an element in their employee performance plans.”
The Democratic-led Senate will write its own defense authorization bill next week. A spokeswoman for the Senate Armed Services Committee declined to say what provisions that bill would contain, though she said the legislation might be made public in two weeks.
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