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Federal Document Clearing House
Congressional Testimony
May 15, 2002 Wednesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 3009 words
COMMITTEE:
HOUSE SMALL BUSINESS
HEADLINE:
PENTAGON PROCUREMENT POLOCIES AND SMALL BUSINESSES
BILL-NO:
H.R.
2867 Retrieve
Bill Tracking Report
Retrieve
Full Text of Bill TESTIMONY-BY: PAMELA BRADEN,
PRESIDENT
AFFILIATION: GRYPHON TECHNOLOGIES
BODY: Prepared Remarks of Pamela Braden, President
Gryphon Technologies
Committee on House Small Business
"PENTAGON'S PROCUREMENT POLICIES AND PROGRAMS WITH RESPECT TO SMALL
BUSINESSES"
May 15, 2002
Mr. Chairman, members of the committee.
My name is Pam Braden, and I am the president of Gryphon Technologies, a
woman-owned small business performing a range of engineering services for the
federal government, principally the Navy. Prior to forming Gryphon, I worked for
over 20 years in marketing and contracts for three different government
contractors.
I am here today on behalf of the Professional Services
Council (PSC), the principal national trade association representing
professional and technical services firms of all types and sizes that do
business with the federal government, including information technology,
engineering, scientific and environmental services, and high-end consulting. I
serve on PSC's board of directors. Many small and mid-size firms, including
other woman- owned and minority-owned businesses, are members of PSC and do
business with the federal government as both prime contractors and
subcontractors. More than seventy percent of PSC member companies have contracts
with the Department of Defense, although fully half of PSC member companies cite
the civilian agencies as their principal clients. PSC serves as a leading policy
advocate for our industry, commenting on the impact of legislation and
regulations on both our industry as a whole and on PSC members specifically. I
appreciate the opportunity to share with you today some of my observations on
the key procurement issues facing small businesses in the federal market. Today,
the federal government purchases over $
80 billion in services -
ranging from information technology, base operations and engineering services to
high-end consulting and program management. Federal agency spending on services
is rapidly approaching equality in federal spending on goods, but the federal
procurement system has not kept pace with the changing nature of the federal
government's needs.
Some firms, such as mine, prefer to be prime
contractors; others prefer to be subcontractors; still others just prefer to get
business! Small business is getting a share of the federal procurement market,
although it is not clear that we are getting a fair share. However, I do not
believe the creation of an excessive number of small/minority/veteran and woman
owned set- asides would solve this problem.
The federal procurement
process is complex and constantly changing. For instance, there has been
significant growth in the use of large multiple award contracts, task orders,
and blanket purchase agreements (BPAs), replacing the more traditional request
for proposal (RFP) process. These contracts/BPAs have significantly higher
ceiling values than the previously issued RFPs; in some instances the contract
values are measured in billions, rather than millions, of dollars.
BPAs
typically follow the GSA pre-ordained subcontractor requirements for small or
minority-owned businesses, however there is minimal enforcement even when their
contracts are included in the BPA. In addition, when evaluating proposals
submitted for a BPA, procurement officers are not required to give any
preferential treatment to small or minority-owned businesses. Therefore, we are
forced to compete head-to-head against large contractors for these contracts.
Prime contractors are becoming subcontractors, and new team
relationships are replacing the historic prime-sub relationship. Services
companies and integrators are offering increasingly complex technological
solutions in response to agency-created performance statements of work.
Competition is taking place in different places and at different times.
Commercial companies are attracted to, but later repelled from, the federal
market.
The federal procurement system is replete with intersecting and
counter-balancing policies and provisions. Changes focusing on only one element
of the procurement system often have unintended consequences in other areas.
Therefore, it is appropriate that this committee, and other specialists in the
federal procurement process, look carefully at how small businesses are
approaching the federal marketplace, and how the federal government is
responding to small business needs.
I would like to focus my remarks on
three major issues: federal sourcing policy, contract bundling, and contract
finances and payment. Each is important to the entire government services
contractor industry, but they are of particular importance to my firm, to other
PSC small business member companies, and to all small businesses.
FEDERAL SOURCING POLICIES
Over the past decade, the government
has made significant strides in its sourcing policies. The advent of best value
contracting and an increasing awareness of and desire for innovative solutions
have helped the government access cutting-edge capabilities to better serve its
many constituencies and customers. At the same time, these and other trends have
also served to help hundreds of small businesses develop and thrive.
Today, however, there are unprecedented threats to the growth and
development of small businesses in the federal market. The biggest of those
threats is HR 721, the so-called "Truthfulness, Responsibility and
Accountability in Contracting Act," or "TRAC," and related legislative
variations. Although on the surface the bill may seem to be a reasonable attempt
to ensure responsible government contracting, it is actually a radical and
devastating piece of legislation. It would do nothing to improve the quality of
government contracting, while forcing scores of companies, particularly small
businesses, out of the federal marketplace.
The
TRAC
Act would require that every government service contract, task order,
option, re-competition or renewal be subjected to a public-private competition
under the prolonged, expensive, patently unfair and widely discredited OMB
Circular A- 76 process without regard to whether the work is being performed by
an incumbent federal workforce. The A-76 process was designed to provide a
method for those workers whose jobs are being considered for possible
outsourcing to compete with the private sector to retain their jobs. These
competitions amount to less than two percent of all government services
contracting, since the vast majority of services contracting is for new
requirements or for already contracted work, for which there is no affected
government workforce.
There are many reasons to be deeply concerned
about such a major change in policy; many of them are tied to the unfairness and
expense of the A-76 process. For a small business such as mine, whose bid and
proposal resources are constrained, and the diversion of limited resources for
high-risk opportunities would be enormous, this would be an untenable situation.
Companies estimate that the cost of competing under A-76 is as much as 75 to 100
percent more than a traditional government procurement. These A-76 procurements
also take exorbitant amounts of time -- an average of over two years for even
the smallest, most discreet requirement, and four years or more for more complex
requirements. Moreover, A-76 competitions, by design, award work to the low
bidder, rather than to the bidder offering the best combination of quality and
price, despite the fact that government procurement is principally governed by
such best value considerations.
From a small business perspective, the
calculus simply does not work. A business such as mine cannot afford exorbitant
costs to compete. Much of the work for which we compete is announced, competed,
and awarded in a relatively short time, often weeks, and certainly no more than
a few months. I simply could not build my business if every procurement on which
we bid was not only exorbitant in bidding expense, but also took two, three, or
four years to complete. Finally, for small businesses in particular, best
value-that is, the consideration of a variety of cost, technical, quality and
other factors-is the key to our success. It is through such considerations that
my firm's innovation and excellence is recognized. A-76 specifically is designed
to focus on a cost-only comparison between the private sector and the public
sector. While I have to disclose my price and be held accountable for it, the
General Accounting Office has stated repeatedly that the government does not
even know its own costs and is not held accountable for its bid. The A-76
process thus creates a false, wildly-tilted playing field that negatively
affects both the government and all private sector bidders.
If A-76 or a
similar process were to be applied to all government service contracts, many of
us in the small business community could not survive as government service
providers. Therefore, my most pressing message to this committee is, do all you
can to ensure that the
TRAC Act, or any part or variation of
it, NEVER sees the light of day. To do otherwise would hasten the demise of the
small business services sector in the government marketplace. Attached is a copy
of a letter that small business owners have written to the Congress in
opposition to the
TRAC Act. In response to
Congressional direction, last year the Comptroller General convened a Commercial
Activities Panel consisting of government and private sector experts, including
the presidents of both of the federal employees' unions and the president of the
Professional Services Council, to review the government's sourcing policies and
to make recommendations for policy and actions. That report was issued on April
30, 2002.
The Panel unanimously adopted as its first recommendation a
set of ten principles to guide the federal government's sourcing activities. A
copy of the principles is attached. In addition, a supermajority of the panel
adopted three additional recommendations for implementing these sourcing
principles. I encourage all members of the committee to review the Commercial
Activities Panel's recommendations and to support efforts to quickly implement
all of its recommendations.
CONTRACT BUNDLING
This committee has
often debated and discussed contract bundling - those situations in which
requirements previously suitable for award to small business are consolidated,
resulting in a set of requirements that is unsuitable for award to small
business. There is no question that small businesses are deeply concerned about
the impact of contract bundling on prime contract opportunities. This committee
has initiated legislation that provides a solid foundation for addressing the
issue in a balanced and fair manner. In the Small Business Reauthorization Act
of 1997 (Public Law 105-135), Congress authorized contract bundling only if it
is necessary and justified based on a benefit analysis. More importantly, the
law puts real teeth into small business subcontracting rules.
This
structure provides incentives to the marketplace to engage aggressively with
small businesses, but also limits regulatory measures that could otherwise help
to achieve similar goals. I have attached to my statement a summary of the
existing government-wide Federal Acquisition Regulation provisions that apply to
bundled contracts. However, more than four years after the law was passed, PSC
is concerned that precious little guidance or training has been provided to the
acquisition workforce to enable them to understand and follow the bundling
rules.
We compliment the DoD Office of Small and Disadvantaged Business
Utilization for its January 2002 "Benefit Analysis Guidebook" that acquisition
teams can use in assessing the elements of the bundling law and regulations,
analyzing the substantial benefits standard required by the law, and describing
ways to mitigate the impact of bundling on small businesses. Overall, the
Guidebook is reasonable and will be useful to procurement officials, even though
it does not address BPA contracts. However, it does not appear that procurement
officials are using or enforcing it.
Therein lies what we believe to be
the most important issue---the need for more aggressive and focused guidance and
training so that the sensible statutes this committee developed are actually put
into practice.
Rather than consider new legislation, we recommend that
this committee focus on ways in which agencies can be encouraged and driven to
better understand and aggressively implement existing rules. The problem is not
in the law or in the rules; it is that too few members of the acquisition
workforce understand or implement them.
In addition, Congress should
evaluate the administration of multiple award contracts. Typically, multiple
award contract bidders must submit subcontracting plans with their proposals.
However, compliance with these plans is often difficult to verify. The result is
that small business subcontractors often do not receive any benefit from the
primes, even though the previously individually-awarded contracts are included
in the larger procurement. Reasons for this should be explored.
H.R.
2867
We read with interest legislation (H.R. 2867) that was unanimously
reported favorably by this committee on May 2, 2002. The bill would replace the
current decision-making by the head of the procurement agency under an SBA
appeal with a referral to the Director of the Office of Management and Budget
who must render a decision within ten days after receiving the matter. In
addition, the bill would extend the minimum bidding time for small business on
bundled contracts from the current thirty days to sixty days.
PSC does
not have a position on whether it is more appropriate to have OMB as the
decision-maker of an appeal from SBA. Resources and capability should be taken
into account in making that decision. However, in our experience, it is critical
that the procuring activity making the purchase - which has the mission
requirement and the ability to assess the appropriateness of the instant
procurement - is fully involved in the appeal decision process. It is not clear
under the legislation whether the procurement agency has such a role in the OMB
review and decision.
Furthermore, we must recognize the agency's need to
meet its procurement objectives. We would be concerned if the beneficial aspects
of the minimum bidding time for bundled contracts are obviated if an agency has
to frequently use the urgent and compelling exception in order to complete its
work in a timely manner. While having a reasonable period of time to respond to
any procurement is important, it is not the only factor that I have to take into
account when deciding whether to submit an offer. Other equally important
factors include the scope of the requirement and whether I can meet those
requirements, my assessment of my chances of being awarded the contract, and the
financial elements of bidding, including the cost of bidding and the cost of
holding open my bid for an extended period of time.
THE PRESIDENT'S
SMALL BUSINESS INITIATIVE
In a March 19, 2002, speech, the President
talked about saving taxpayer dollars by ensuring full and open competition on
government contracts. He offered three specific proposals to improve small
business access to government contracts.
First, he instructed the
Director of the Office of Management and Budget to review contracting policies
at agencies with significant procurement activities to determine whether their
contracting practices reflect a commitment to full and open competition. A
report on this is due to the President by mid- September.
Second, he
instructed the Director of the Office of Management and Budget to prepare a
federal government strategy for unbundling. However, the President did not
establish a specific timetable for that strategy to be developed.
Finally, the President proposed to consolidate eight civilian agency
boards of contract appeals into a single board.
The Office of Management
and Budget has already established two working groups, one focusing on full and
open competition, and one focusing on bundling. In addition, on May 5, OMB
published a notice in the Federal Register of a public meeting to be held on
June 14, 2002, and a request for written comments on the first two elements of
the President's program. That notice also highlighted specific topic areas of
particular focus.
The Professional Services Council has requested an
opportunity to make a presentation at the public meeting and we will be
submitting written comments to OMB in response to their notice.
CONTRACT
FINANCE AND PAYMENT ISSUES
Contractors should be paid on time for work
performed according to a contract. All government service contractors face the
issue of late payments, but for obvious reasons, it is an issue of special
concern to smaller companies that do not have the resources and reserves to
cover expenses when payments from government customers are late. Payment has
improved because of changes to the Prompt Payment Act, but it still remains a
problem. In addition, there have been special payment challenges for services
contractors.
Over the past two years, thanks to the leadership of
Senator Warner, late payments on interim billings for services contracts at the
Department of Defense are now subject to interest under the prompt pay rules.
The Department of Defense has yet to fully implement the December 2001 statutory
provisions. Nevertheless, this authority is applicable only to the Department of
Defense; small businesses providing services to the civilian agencies do not
receive the benefits of this law. PSC urges Congress to extend government-wide
the benefits of the interim payment provisions now applicable only to DoD.
CONCLUSION
Mr. Chairman, thank you again for the invitation to
the Professional Services Council and to me to present our views on these
important matters. I would be pleased to respond to any questions the committee
may have.
LOAD-DATE: May 16, 2002