Perlowitz: Let’s be small biz-friendly

Subcontracting 'goals' should become requirements with penalties

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Small businesses play a crucial role in employment and bring innovation to the government and the nation. Why is it then that the government continues to fail to provide real incentives to large businesses to use small businesses as government subcontractors?

I believe that this is a systemic problem and it is time to start thinking outside the box.

If we wish to make small business a part of government contracting, there have to be real incentives and disincentives. There should be a holistic, consistent and unambiguous approach to using small businesses governmentwide. My experience indicates that the consistency of small-business subcontracting varies widely because there are no governmentwide minimum mandatory contracting incentives and disincentives.

Although there are small-business goals, the use of the word "goal" sends a message to acquisition officers and prime contractors that any subcontracting plan a company offers at contract award is merely an objective that they can reassess when circumstances change.

Intentionally and unintentionally, business and contract requirements change frequently, and there are no mandatory penalties for businesses that consistently fail to meet contracted small-business utilization numbers.

It is important that the government put some teeth into small-business goals — for example, by changing the words "subcontracting goal" to "subcontracting requirement" and including mandatory rewards for large businesses to subcontract with small businesses.

Making these mandatory and governmentwide will create homogeneity among acquisition officers, which will lead to consistency among the measurements made to ensure compliance.

Performance-based contracts should include small business subcontracting as a nontrivial percentage of the overall performance score, which would automatically invoke the incentives and disincentives built into the contract.

It is also important that the government be clear that small-business subcontracting requirements are to be in terms of "contracted dollars" and that the amount of subcontracted work be consistent throughout the life of the contract.

If subcontracting requirements are permitted in terms of subcontracted dollars instead of contracted dollars, prime contractors are able to allocate little work to this pool, which thwarts the intended small-business utilization goals.

Similarly, if prime contractors are allowed to shift a majority of their subcontracting requirements to the end years of a contract, they may elect to absorb penalties or contract termination after multiple years of performing on a contract with little or no small-business participation.

With 25 million small businesses nationwide accounting for two of every three new jobs created, there are small businesses out there to be used as subcontractors. Good reasons are needed for large businesses to seek them out and use them.

Perlowitz is founder, president and chief executive officer of Reliable Integration Services, a small woman-owned business that provides network design, and implementation and remote managed services to government and commercial enterprise customers.


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