Provisions could hurt contractors

Industry groups are opposing two amendments to the Defense Department authorization bill that they say would hinder contractors. One proposal would limit prime contractors' flexibility in charging for services that subcontractors provide, and the other would force agencies buying from the General Services Administration's schedule contracts to get at least two price quotes from small businesses.

The latter amendment, proposed by Sen. Olympia Snow (R-Maine), is based on a misconception that small businesses are not getting purchases through the schedules, said Larry Allen, executive vice president of the Coalition for Government Procurement.

"If this amendment were to go through, you'd be hurting more small businesses than you help because you create a hurdle that isn't there for any other contract process," he said.

Too many small companies believe that just getting a schedule contract should bring them business, Allen said.

"What it comes down to is your ability to sell and get yourself in front of the customer," he said.

The other amendment, which Sen. Carl Levin (D-Mich.) proposed, is an attempt to settle an old debate between GSA and the Defense Contract Audit Authority over whether prime contractors can charge customers more for services provided by subcontractors than the subcontractors themselves charge.

The amendment would allow prime contractors to charge only the rates that are included in the original contract. The Professional Services Council and the Information Technology Association of America have objected.

"These are fixed labor rates," said Stan Soloway, president of the council. "Once you've established that the fixed labor rate is a fair rate, the burden shifts to the contractor, who is going to lose money if the [actual] rate turns out to be higher than that."

Congress shelved debate on the bill before the summer recess, so the proposals will remain unresolved until lawmakers return to Washington, D.C., after the Labor Day holiday.

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