A pair of misguided bills
- By Steve Kelman
- Sep 18, 2000
As the 106th Congress winds down, lawmakers are considering bills that,
in the name of helping small firms compete in the federal marketplace, could
cost taxpayers billions of dollars each year.
One of those, H.R. 4890, is an "anti-bundling" bill that would give
the Small Business Administration veto power over the contracting strategies
of all government agencies anytime a new contract "would result in the displacement"
of a small firm. If SBA — an agency with no stake in the ability of an agency
to buy — doesn't accept an agency's justification for the contracting strategy,
it could prevent the solicitation from being issued, subject only to appeal
to the Office of Management and Budget.
Furthermore, any agency not meeting all its small-business goals — currently
every agency for woman-owned businesses — would be prohibited from using
Contract consolidation, or bundling, is a powerful tool for achieving
lower prices. Agencies get huge discounts on information technology when
they negotiate long-term deals with a small number of vendors rather than
buying onesies. By standardizing requirements for a number of drugs and
medical devices and bidding them out as single contracts, the Department
of Veterans Affairs saves 20 percent or more over previous prices.
Bundling also saves money and improves performance in some service contracts.
If one contract comprises many different kinds of work, a single prime can
more easily shift work to respond to peaks and valleys in demand than a
bunch of uncoordinated individual contractors. And the ability to pinpoint
responsibility to one prime encourages better performance by minimizing
opportunities for finger pointing.
That doesn't mean bun-dling is always appropriate or that abuses don't
occur. But over-regulation would condemn the federal government to paying
the same retail prices individual consumers pay. This is nonsensical.
A second bill, H.R. 4943, states that every "acquisition of goods or
services" using credit cards "shall be from small business concerns." This
would effectively end the credit card program.
Agencies give cards to program people because they do not need the expertise
of contracting folks to conduct those transactions. Put back a requirement
to buy from small firms and you lose that ability.
Agency legal offices simply won't permit program people to suffer the
exposure this new requirement would create. We'd return to the days when
every little purchase went through the contracts shop. Aside from the huge
cost of eliminating credit cards — the government saves about $1.1 billion
annually in administrative costs — this would create chaos because the procurement
people who processed those transactions are no longer part of the workforce.
These taxpayer-ripoff bills are being promoted as answers to an alleged
crisis for small business in the government marketplace. But there is no
such crisis. The idea that procurement reform has made it more difficult
for small firms would come as a surprise to the many high-tech start-ups
swarming into the government market.
According to Dendy Young, chief executive officer of GTSI Corp., which
markets IT products from vendors to federal customers, his firm is being
deluged by requests from high-tech start-ups to help sell their products.
"The interest of small, innovative IT firms in the federal marketplace is
at an all-time high," he said.
The dot-com invasion demonstrates a basic truth: In the procurement-
reform environment, small companies will prosper the way they always have — by offering something special to customers. By eliminating many previous
government-unique requirements, reform has actually made it easier for small
firms to compete.
To be sure, some small firms are suffering. But most ailing small firms
are having problems because they developed a niche in government business
for reasons other than customer satisfaction. Such firms need to reinvent
themselves — not ask for taxpayer-funded bailouts.
—Kelman, administrator of the Office of Federal Procurement Policy from 1993
to 1997, is Weatherhead Professor of Public Management at Harvard's John
F. Kennedy School of Government.