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By Steve Kelman

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How to make a win/win for agencies and small business

One of the things I liked about meeting new Office of Federal Procurement Policy head Joe Jordan recently was that he is a taxpayer advocate and a small-business advocate at the same time. That’s good, because the two unfortunately don’t always mix. Of course, the government should make maximum use of entrepreneurial, innovative and nimble small businesses. In addition to that list of qualities, such firms are also often less expensive (because of lower overhead, among other things).

But the government small-business contractor lobby, which is dominated by firms that primarily or exclusively serve the government market rather than commercial small businesses, often seems interested mostly in asking the government to use small businesses even if they are more expensive and they are merely providing me-too body shop or reseller work that is pretty far from the image of Steve Jobs in a garage innovating the economy’s next direction.

I was inspired by the meeting with Jordan to think in his spirit about things the government could do to help both small businesses and agency missions.

Here’s my idea: raise the micropurchase threshold to $250,000 for the first five contracts a new small-business entrant into the federal marketplace has with federal customers.

Why the micropurchase threshold? Purchases below the micropurchase threshold are not subject to any government-unique requirements of the kind that often scare commercial businesses from entering the federal marketplace. The government can make a decision to go with a vendor without any complex requests for proposals or proposals of the kind that also often scare small new businesses off from federal work.

If you allowed a new small business entrant to the federal marketplace to get five contracts without special federal requirements, they could both establish good past performance to help them get larger contracts and maybe encourage many of them to take the bigger step of doing the necessary adaptations for the federal marketplace after the first five contracts. I predict that the government will get lower prices and more innovation from these businesses than they do from many of the government-only small businesses already in the federal marketplace.

There are a few implementation issues that would have to be worked out. How soon would these jobs get onto the Federal Procurement Data System so agencies could figure out whether a new contractor was up to five contracts yet? You would also need some simple certification to prevent a situation where a business got five contracts, declared itself bankrupt, re-appeared in a different name, and sought to receive five more (and so on).

This would require a statutory change, though the statutory language would be easy. Congressional small business committees, congressional procurement committees, OFPP – anybody interested?

Posted on Jun 26, 2012 at 12:09 PM

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Reader comments

Tue, Jul 3, 2012 Linda Hillmer

Steve, it's a good idea! I'd like to see it open to small businesses who are currently doing business with the gov't (not just new to gov't market) - a lot of us have very innovative ideas and approaches but can't get them "to market" in the gov't because of traditional acquisition methods. -- Linda

Thu, Jun 28, 2012 Steve Kelman

Darryl, thanks for this suggestion. :)

Wed, Jun 27, 2012 Darryl Scott Washington, DC

I like the micropurchase threshold idea. It might be simpler to administer if you allow them to operate under m'purchase rules for a limited time, say 2 years, rather than trying to track when they hit five contracts. The truly innovative, value producing firms could probably earn more than 5 contracts in that time, while firms that don't get sales should probably re-assess their marketing strategy anyway! Source selection could follow existing FAR 13.2 rules. The only legislative changes necessary would be to permit the use of FAR 13 rules for firms that have not previously performed on Gov't contracts, and to raise the m'purchase threshold for this program from the current FAR 2 threshold (generally $3000) to $250K. Best Regards, Darryl

Wed, Jun 27, 2012 Steve Kelman

Thanks Alan, Per, and Vern for your comments. Alan, would need to check further, but I'm guessing that a lot of what these companies do wouldn't be appropriate for grants -- but deserves further checking. Vern, I wasn't just saying don't be a naysayer -- I suggested three specific ways to address the concerns you suggest. I am suggesting only don't just discuss potential downsides, also try to see if you can suggest ways to make something like this work.

Wed, Jun 27, 2012 S. Witt DC area

I like your thinking on this. I can see raising the micro-purchase level to $25K and reinstituting the Test Program under FAR 13.5. I think most folks would agree this.

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