From the July 1999 issue of Entrepreneur

Officials aren't working hard enough to persuade contractors to subcontract with smaller firms, according to recent guidelines drafted by the White House aimed at boosting small-business participation in federal procurement projects. Although recent SBA data shows subcontracts to small businesses accounted for $61.2 billion out of a $197.5 billion federal procurement pie, the gentle nudge from Deidre Lee, administrator of the Office of Federal Procurement Policy (OFPP), is a welcome one for small business.

Lee is encouraging federal procurement officers to adopt four best practices: 1) to establish award programs that recognize prime contractors who promote opportunities for small business as subcontractors, 2) to evaluate subcontracting plans, 3) to use past performance techniques, and 4) to use aggressive goaling techniques. These are only guidelines, however; there's currently no mechanism in place to ensure these practices are used.

So how badly are small businesses being hurt by contract bundling? That information is unclear. There's no question the federal government's record on awarding prime contracts to small business is still good and getting better due to congressionally mandated goals, which started at 20 percent in 1988 and were raised to 23 percent starting with fiscal 1998.

While the big picture looks good, it may be somewhat misleading. Some small companies are considered to have won prime contracts from federal cabinet departments and agencies when all they've won is a contract to install accessories on machines made by companies such as IBM and Dell. In effect, these companies aren't prime contractors at all; they fill a subcontractor's role--providing additional work to larger companies' products and services--but are classified as prime contractors because they work for the government directly.

This practice prompted the SBA to publish a proposal in April that would tighten the definition of small-business computer manufacturers. Under the proposal, companies performing supplementary work on computers manufactured by larger suppliers would have to do major modifications and offer their own warranties on the machines to qualify for the prime government contracts set aside for small businesses.

Look for more information on government contracting later this year at http://www.entrepreneurmag.com


Stephen Barlas is a freelance business reporter who covers the Washington beat for 15 magazines.

Contact Source

Small Business Legislative Council, 1156 15th St., #510 N.W., Washington, DC 20005, (202) 639-8500