New preference policy may change little
- By Elana Varon
- Jun 28, 1998
Changes announced to federal affirmative-action policies last week may not spark more business for minority-owned firms, according to agencies and industry.
The Clinton administration's new policy extends governmentwide a program authorized for the Defense Department, NASA and the Coast Guard that allows agencies to give small, disadvantaged businesses (SDBs) a 10 percent price advantage when they compete for government contracts. Large businesses typically can offer lower prices because of economies of scale.
Whether firms are eligible for the 10 percent price advantage will depend on whether the Commerce Department has determined they are in industries where discrimination exists.
The administration issued the policy three years after the Supreme Court ruled in Adarand Constructors Inc. v. Pena that the government could give preferences only to minority-owned firms in industries or markets in which they faced discrimination.
With the exception of computer manufacturers, most information technology vendors that are SDBs would meet that test, but agencies would have the discretion of whether to apply the price advantages.
According to an IT industry executive, other procurement reforms are resulting in more opportunities for minority-owned companies. Mark Magnussen, vice president of business development with computer-maker Win Laboratories, Manassas, Va., said price preferences could "even the playing field" for SDBs against large firms in traditional solicitations. However, with new procurement vehicles such as blanket purchase agreements, agencies often simply negotiate with a vendor on a price that is based on the General Services Administration schedule.
Most vendors in IT-related industries such as telecommunications and business services continue to qualify for the Small Business Administration's 8(a) program, which, among other benefits, provides for contract set-asides for firms owned by "socially and economically disadvantaged" individuals, usually minorities.
SBA has yet to determine how it will restrict firms from industries such as computer manufacturing that do not meet the test.
Mike Hatcher, a Washington, D.C.-based lawyer who represents the National Coalition for Minority Business, said any limitation on 8(a) participation would hurt firms because the goal of the program is to help businesses develop, not just help them win contracts. "It's a different consideration than just trying to give people business," he said.
Nevertheless, Hatcher said, the way Commerce accounted for discrimination probably helped more IT industries become eligible for preferences and set-asides.
These benchmarks are based on a comparison of the amount of federal business that minority-owned firms in a broad industry category are receiving compared to their presence in the marketplace, taking into account the age and size of all the firms.
AT A GLANCE
Elements of affirmative-action policy:
* 10 percent price preference for SDBs.
* SBA determines SDB status; firms no longer self-certify.
* Easier for nonminorities to qualify for programs.
* Preferences only for industries where discrimination exists.
* Subcontracting incentives for SDBs are forthcoming.