Agencies that miss small-biz goals could face penalties

Under a new bill, a department that misses a set goal to contract with small businesses could lose 10 percent of its budget as a penalty.

Rep. Bill Owens (D-N.Y.) introduced the Small Business Growth and Federal Accountability Act (H.R. 3779) Jan. 18, saying the government’s annual 23-percent small-business contracting goal is regularly ignored by agencies.

He said his bill would “ensure that Washington lives up to its promise to foster an environment of success for small businesses.”

Owens, a member of the Small Business Committee, said federal agencies typically fail to meet their small-business contracting goals and they currently face no penalties for the shortfalls.

Under his bill, if an agency misses the set small-business contracting goal, their budget would decrease by 10 percent in the following fiscal year, with that percentage of funds going to pay down national debt.

“It is critical that federal agencies be held accountable,” Owens said.

The bill also would offer agencies more authority to give “preference” to small companies when awarding contracts. The term “preference” is not defined in the bill.

The bill has been sent to the Small Business Committee for consideration.

It is true that the government struggles to meet its annual 23-percent contracting goal. In the most recent scorecard from the Small Business Administration, the government reached 22.7 percent in fiscal 2010.

That year, agencies awarded a total of nearly $100 billion in contracts to small businesses. However, it was an increase in prime contract dollars going to small businesses for the second year following four years of decline.

SBA gave the government a B on the scorecard for its efforts in contracting with specific types of small businesses, such as those owned by a service-disabled veteran or located in an economically depressed area.

Owens’ bill could have several repercussions though.

In a post on the Government Contracts Legal Forum blog, Tiffany Wynn, an associate at the Crowell and Moring law firm, said agencies may decide to reduce their contracting goals to avoid the 10-percent penalty.

As a result of the bill, officials would have to weigh the penalties for missing the small-business goal against awarding a contract to a large company if the agency could save money.

Wynn also questioned whether this legislation would lead to penalties on companies that don’t meet their own annual small business subcontracting goals.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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Reader comments

Fri, Feb 10, 2012 Jimmy Oklahoma

Why is it a struggle to meet such a low goal of 23 percent?

Fri, Feb 3, 2012 Kevin D. James

I applaud the move, but still fails to fix the problem. The penalty must include time in prison. Law makers must induce fear. A $2.00 fine and verbal reprimand is worthless. Get serious and get it right!

Thu, Jan 26, 2012 Raul Espinosa

This is the type of pro-active action which is very much needed to help level the playing field. Penalties should also be considered against Agencies caught using abusive procurement practices. One of the greatest barriers against small businesses involve unfair justifications. Raul Espinosa Founder and CEO Fairness in Procurement Alliance (FPA)

Thu, Jan 26, 2012 Brad

It's about time someone does something to force government agencies to be more accountable. DCAA hovers over industry like a hawk...government has very little oversight. Ditto on the previous comment regarding large primes; they rarely, if ever, execute their small business plans.

Thu, Jan 26, 2012 OccupyIT

I love it! Much better than Sequestration! Let's use the same penalty system for Large Business prime contractors that fail to execute their Small Business Plans as well! Direct solutions to direct problems.

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