Hill weighs small-biz rules

A bill under consideration by the House would expand restrictions on contract bundling — the controversial practice of bringing a group of contracts together into a single one in hopes of getting better prices.

The bill would also broaden the definition of Historically Underutilized Business Zone (HUBZone) firms.

The changes are intended to make it easier for small companies to enter the federal market by winning contracts either as prime contractors or subcontractors, and to allow more firms to take advantage of small-business set-asides.

The provision is part of the Small Business Reauthorization and Manufacturing Revitalization Act of 2003 (H.R. 2802), which calls for sweeping overhauls of many Small Business Administration programs, said Stan Soloway, president of the Professional Services Council.

"It's a complete rewrite of the Small Business Act," he said.

The new bill redefines contract bundling so that protections against unwarranted bundling apply to every mechanism that agencies use to buy products and services, including the General Services Administration's schedules and other governmentwide contracts.

Bundling is the practice of grouping several contracts, which might be suitable for small businesses, into one larger, more complex package that is beyond the reach of smaller firms. Often, large companies win those awards and hire smaller firms as subcontractors to carry out the individual components. Agencies are supposed to review their contracts to eliminate unnecessary bundling.

GSA schedule contracts have not been subject to such examination.

"The bundling language is very troubling, particularly the part where it says that all task orders issued under existing contracts would be considered bundled procurements," said Larry Allen, executive vice president of the Coalition for Government Procurement. "That's so overreaching that it's a farce, and I suspect most people see it as such. However, since it is in the bill, we will have to work to take it out."

Allen said he was unsure why the House Small Business Committee approved a measure that, he believes, would defeat the schedules' purpose.

However, Soloway said the potential impact on small businesses is not clear.

The bundling measure is sparking the same kind of controversy that surrounds the Senate's Small Business Act reauthorization bill. That legislation would apply small-business set-aside rules to GSA schedule purchases.

Both cases illustrate the importance of the schedules and other governmentwide multiple-award contracts. "The theory is that the schedules are such a significant procurement source now" that they should not be excluded from examination, Soloway said.

Although he is not familiar with the bills, Joe McLoud, sales manager of Chicago-based Collins Consulting, said agencies should be limited in their ability to bundle contracts. Small firms, such as Collins, a 100-person firm that provides information technology services, do not get enough opportunity to approach agencies directly, he said.

"We have to go approach the primes and attempt to be selected by them as part of the group they want to deliver that service. That's a real challenge," he said. "It's easier for [agencies] to manage the process, and it simplifies their procurement process. But nobody's doing a stellar job of meeting small-business goals."

Bundled contracts make it even harder for agencies to meet set-aside goals, he said, because the prime contractors choose the small-business subcontractors.

The House bill would also expand the definition of HUBZone firms to include businesses owned and controlled by Alaska Natives or American Indian tribal governments.

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Bundle of changes

Recent legislative efforts to change the small-business climate:

* House bill 2802 would apply contract bundling safeguards to General Services Administration schedule purchases and add American Indian and Alaska Native-owned businesses to the Historically Underutilized Business Zone program.

* Senate bill 1375 would require agencies to use only small businesses for purchases that total less than $100,000.

* House bill 1460 would allow businesses owned by veterans with disabilities to receive sole-source contracts of up to $5 million for manufacturing and up to $3 million for other procurements.

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