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House Committee Examines Procurement Policies at the DoD

On September 6, in the seventh of a series of hearings examining the contracting practices of federal agencies, the House Small Business Committee focused its attention on the procurement policies of the Department of Defense (DoD) and their impact on small businesses.

Chair Donald Manzullo (R-IL) noted that, “of all the federal agencies, the Defense Department is by far the largest federal marketplace accounting for over $122 billion in prime contract awards or more than 60 percent of the federal procurement dollars.” Small businesses have had problems with the “way the Pentagon does business,” he continued, adding that these problems include, “failure of the Pentagon to meet procurement goals, the bundling of contracts, and the diminished number of prime contracts going to small businesses.”

In her opening remarks, Rep. Nydia Velazquez (D-NY), the committee’s ranking Member, called the Pentagon’s contracting practices “unbalanced and unfair.” She emphasized that “this year the Department of Defense did not meet its small business goal of 23 percent,” and that “between 1998 and 2000, contracts to disadvantaged firms fell 52 percent, the 8(a) program fell 30 percent, and women-owned businesses” had a “20 percent drop in contracts during the same period.”

Representing the DoD, Col. Curtis Wright admitted that his agency “has work to do, particularly in achieving the goals established for women-owned small businesses (WOB), historically underutilized businesses, and service-disabled veteran-owned small businesses.” He said that the DoD plans to address this issue through “accountability at the highest levels,” making “each military department and defense agency responsible for annual small business improvement plans that will be rated on its performance to the plan and established targets,” he added.

Janice Hoffman of Women Impacting Public Policy recounted her experiences with the procurement practices at the DoD in her role as a woman and a small business owner. She told the committee that while “being a WOB is supposed to weigh” in the awarding of a contract, “it really makes no difference at all.” She added, “One small business office told me that if a WOB gets a contract, it is strictly happenstance.”

Ms. Hoffman urged the committee to consider “restricted competition for WOB, to keep predatory pricing from keeping us out of the game,” and that “without the tool of Restrictive Bidding, the goals that do exist make no difference. The fact that there is no way to award contracts to WOB other than luck is not an isolated attitude.”

Ms. Hoffman also urged the committee to certify WOBs, explaining that “some small companies are transferring stock and ownership to a woman hoping that it will be sufficient to get WOB contracts,” and adding that “paper ownership is not the same as running the company.” Most of the witnesses representing various aspects of the small business community complained about “bundling,” a practice that consolidates two or more contracts into one single mega-contract that favors large companies.

Bobby Gentile of Q-Mark, Inc. told the committee, “For years, small business has been a valuable partner of the federal procurement system. Now, we find ourselves in a position of being displaced due to a new initiative called contract bundling.” She urged the congressional panel to support H.R. 1324, legislation sponsored by Rep. Velazquez, that would allow bundling only if agencies met their small business goals.

Rep. Velazquez told the panel of witnesses that DoD Undersecretary Pete Aldridge said that his agency “will not achieve the 5% women-owned business goals for contracts, not even by 2006.” Questioning why he said that, she added, “I guess we’ll have to invite the Undersecretary to the next hearing.”.

The Small Business Committee is planning another hearing on federal procurement policies in October.

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