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Small Business Contracts




MAY 7, 2003


Good afternoon Chairman Manzullo, Ranking Member Velazquez, and Members of the committee.

Thank you for inviting me to appear before you today to discuss a matter of grave concern to all of us - businesses classified as "other than small" obtaining Federal contracts intended for small businesses, and the accuracy of the data contained in the Federal Procurement Data System (FPDS) that specifically identifies or verifies the size status of a business.

Before I begin my testimony, I'd like to introduce a distinguished member of the General Services Administration's (GSA) acquisition team who's here with me today. Mr. David Drabkin is the Deputy Associate Administrator for Acquisition Policy, and GSA's Senior Procurement Executive. In GSA, my office and David's, work closely together to ensure that small businesses have ample opportunity to compete in GSA procurements, viewing small businesses as solutions for many of our acquisition requirements. In GSA we know that small businesses are the engine of our national economy and that they more often than not bring to the market new and innovative solutions to vexing government problems.

Let me begin by stating that GSA is aware of and shares your concern that contracts intended for small businesses are sometimes winding up with larger firms. I will explain what we are doing to address the situation - and what we think needs to be done outside GSA - in just a moment.

Increasing procurement opportunities for small businesses is a major initiative of the Bush administration, and it is an issue to which I have devoted a majority of my time and energy since joining GSA last year.

As mandated by Federal law, GSA works hard to ensure that small, minority-, women-, Hub zone-, veteran-, and service disabled veteran-owned small businesses have every opportunity possible to participate in the federal procurement process. As an agency, we actually exceed what Congress expects.

As you are aware, the government-wide goal for contracting with small businesses is 23 percent. GSA's goal for the past several years has been 40 percent. GSA recently exceeded that internal agency goal, and based on preliminary FY 2002 data, this trend will continue.

The preliminary figures for FY 2002 indicate that GSA spent $13.1 billion in procuring goods and services. Of that amount, a full 40.6 percent - almost $5.3 billion - went to small businesses, nearly $900 million of that was awarded to "small, disadvantaged businesses." In addition, GSA did nearly $650 million in contracting with small, women-owned businesses in 2001. GSA aims high in its goals and achievements, because we want everyone in the agency to know that we recognize the statutorily mandated goals to be the floor --- not the ceiling.

In addition to our agency specific procurement opportunities, GSA manages the Federal Supply Service's Multiple Award Schedules (MAS) Program. The Schedules Program is a simplified procurement process whereby contracts are established with commercial firms for commonly used supplies and services. The Schedules Program offers a broad range of products and services at prices that have been negotiated by GSA and meet accepted levels of expertise, performance and value.

Federal agencies turn to these schedules contracts to fulfill agency requirements, knowing that they can depend on the quality of the products or services these companies provide. The Schedules, in short, offer small businesses a whole new avenue of potential work with the federal government. Of the over 11,000 schedule contracts issued to date, three quarters (8,250) have been awarded to small businesses. We have several aggressive initiatives in place under this program that target small businesses and we are constantly working with the Small Business Administration (SBA) to improve the opportunities for all categories of small businesses through our program.

I'd like to address the issue of small business re-representation; that is, where small businesses are required to reconfirm their status as small businesses.

GSA realizes that a major source of complaints pertaining to large businesses receiving Federal contracts intended for small businesses involves awards made through multiple award type vehicles such as the MAS Schedules Program and Government-wide Acquisition contracts (GWAC). Under these vehicles, a contract's entire term, including the initial contract periods and subsequent options can range from five to 20 years.

Because the SBA's regulations state businesses that obtain contracts as small business will remain classified as such for the duration of the contract, some medium to large businesses are classified as small businesses for FPDS purposes.

GSA was the first agency to step forward and take aggressive measures to close the loophole regarding this re-representation. We acted as expeditiously as possible once it became apparent that current procurement policy was hindering opportunities for small businesses. We contacted SBA and worked with the Office of Federal Procurement Policy to come up with a solution that made sense and complied with the spirit, as well as the letter of, the Small Business Act.

On March 1, 2003, we implemented a new policy throughout GSA that requires re-representation of business status at contract renewal, i.e., prior to exercise of the contract option period.

Let me make our policy clear: For Multiple Award Schedule contracts and other multiple award contracts that contain option periods, GSA contracting officers must require contractors to re-represent their size status prior to exercising an option period. For existing contract periods, implementation is effective with the next exercise of any option for these contracts. We believe we have now got the policy right and the interests of small businesses protected.

One final point I'd like to make with regard to the General Accounting Office's preliminary report that is at the center of today's hearing pertains to the Federal Procurement Data System (FPDS). The FPDS is not a reliable source for determining a contractors size.

FPDS is a central repository of statistical information on Federal contracting that identifies detailed information on contract actions over $25,000, and offers summary data on procurements less than $25,000. The
System can identify who bought what, from whom, for how much, when and where.

Contracting officers manually load award data into FPDS in most cases through agency feeder systems as awards are made. Since business size status is self-represented by the contractor (except SDB, 8(a) and HUBZone), contracting officers are not required to seek verification of size status (absent a reason to suspect otherwise). Accordingly, contracting officers rely on the information contained in the "Representations and Certifications" section of the proposal. Contracting officers do not check FPDS to determine the size status of a contractor.

A firm's size status may change over the course of months or years. FPDS is designed to capture pertinent data (including size status) that exist at the time of contract award. Under SBA's size standard designation, a firm could be determined small for a particular industry, and "other than small" for another industry. SBA establishes a size standard for each private sector North American Industry Classification System (NAICS) industry.

FPDS captures information, assuming it is properly entered, at the time of award - a specific moment in time.

That information may, and we hope it does, change over time. We want small businesses to grow and graduate from the small business program. For this reason, FPDS is not used as a source of information as to whether a company is small today, rather it is used to determine whether at the time of award, we awarded the contract to a small business.

As this Committee knows, GSA recently ran a competition for a replacement for FPDS. After a full and open competition, a contract was awarded to a small business, Global Computer Enterprises (GCE) of Gaithersburg, MD. GCE will deliver a new service for FPDS, allowing data to be entered directly over the web either by the contracting officer or through a machine-to-machine interface. FPDS-Next Generation, "NG" as we call it, will give us more accurate and timely information on the Government's contract awards. The result of this competition proves yet again that small businesses can compete and win government contracts because they bring innovative solutions and a commitment to success in the government marketplace.

As an aside, I am also proud to report to you that we completed a competitive out-sourcing of the Federal Acquisition Institute in which we awarded a contract to SRA who's partner, Bowie State University, is a Historically Black University.

In closing, I would like to state that the General Services Administration is fully committed to the President's Small Business Agenda and his efforts to strengthen the sustainability of the 25 million small businesses in America. To this end, GSA will continue to monitor our contracting programs and implement initiatives that result in increased opportunities for small, minority, women, HUBZone, Veteran and Service-Disabled Veteran-owned businesses.

This concludes my remarks, and I will be happy to respond to any questions that you may have.

Thank You.