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Federal Document Clearing House Congressional Testimony

May 15, 2002 Wednesday


LENGTH: 3009 words



H.R. 2867             Retrieve Bill Tracking Report
                      Retrieve Full Text of Bill



Prepared Remarks of Pamela Braden, President Gryphon Technologies

Committee on House Small Business


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.


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.


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.


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.


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.


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

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