Lending a Hand?

Small-business contracting post-Katrina sparks debate.
Magazine Contributor
3 min read

This story appears in the April 2006 issue of Entrepreneur. Subscribe »

The massive post-Katrina rebuilding effort has re-ignited an ongoing complaint among entrepreneurs-small companies do not get a fair share of federal contracts. Entrepreneur grilled congresswoman Nydia Velázquez (D-NY) and congressman Rick Renzi (R-AZ), our "Point/Counterpoint" team, about what could be done to help entrepreneurs win more contracts.

Entrepreneur: Have the Bush Administration and the SBA committed to fulfilling small-business set aside goals for government contracts?

Rep. Renzi: Yes. It wasn't until President Bush laid out the specifics of his small-business agenda in March 2002, [which] included opening up more of the federal procurement process to competitive bidding to allow more participation by small business, [that we saw] results. The government achieved the overall small-business prime goal of 23 percent.

Rep. Velázquez: Absolutely not. When you look at the promises made by the Bush administration to increase contracting opportunities for small firms, and then you see the decline in contracts awarded to small businesses over the past five years, it is clear that promises have not been kept.

One of the major obstacles small businesses face in accessing the federal marketplace is contract bundling. The President released a policy initiative in 2002 to break up bundled contracts. However, reports released by the SBA's inspector general in May 2005 show that federal agencies have failed to follow through on breaking up these contracts.

Have small businesses received a fair share of the reconstruction contracts in the Gulf Coast?

Renzi: It did not start off well, but I am pleased to see that the small-business share of reconstruction contracts in the Gulf Coast is growing.

Velázquez: Small and minority-owned businesses in the Gulf Coast region lost out on $2 billion in contracting opportunities when recovery contracts were awarded to four large corporations at $500 million each; they were no-bid contracts, so small businesses were not able to get them.

Given the Gulf Coast problems, should SBA Head Hector Barreto Resign?

Velázquez: When an agency charged with helping small businesses fails to ensure small firms are included in the rebuilding contracts and declines unprecedented amounts of disaster loans in a time of need, there is clearly a problem. The agency needs a leader committed to entrepreneurs.

Renzi: Hector Barreto is a good fit for the agency. He grew up in a family-owned small business, owned a small business, and has served in vari-ous small-business advocacy groups.

Let's look at it more broadly. What steps need to be taken to address small-business contraction?

Renzi: There needs to be a constant education campaign among government contracting officials and federal [agency leaders] that procuring goods and services from small businesses will provide the best value to the U.S. government. The biggest stumbling block is a fear of the unknown: A contracting official often would rather procure a good or service from a well-recognized large company [than] deal with a small company.

Velázquez: To truly improve the situation, this nation's federal contracting system needs to be entirely revamped. There are myriad issues that need to be addressed to improve the credibility and efficiency of the nation's contracting system for small businesses. The problems that have culminated with the Federal Procurement Data System and the lack of accountability that exists in the current system must change. If we want to ensure that small businesses receive their fair share of opportunities, then there must be repercussions for those agencies that fail to meet their small-business contracting goals.

Joshua Kurlantzick is a writer in Washington, DC.
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