This week’s blog post continues the series on “Urban Myths” associated with the General Services Administration’s (GSA’s) Multiple Award Schedule (MAS) program.   There is some belief that the best way to help small business on the GSA schedules is to apply small business set-aside rules to the program.   Historically, that has not been the case.  Over the last decade the GSA schedules program has out-performed open market procurements in providing opportunities for small business with over one-third of the dollar value of MAS orders going to small business concerns.  While set-asides can be an effective tool, the historical performance of the GSA schedules demonstrates the right agency incentives combined with streamlined, flexible ordering procedures leads to greater opportunity for small businesses.   In our view, imposing set-asides or otherwise limiting the flexibility of agencies using the GSA Schedules program could result in the unintended consequence of hurting small business.

Until recently, the Federal Acquisition Regulation (FAR) did not incorporate formal small business set asides into GSA Schedule ordering procedures.  Instead, the FAR offered more general guidance that enabled agencies to structure preferences for small businesses.  Specifically, FAR 8.4 provided only that-

1.  Ordering activities could consider socio-economic status when identifying contractors for competition for an order or BPA and should consider, at least one small business when   available on contract

2.  Over the micro-purchase threshold, ordering activities should give preference to the items of small business concerns when two or more items at the same delivered price will satisfy the requirement and

3. Orders placed against schedule contracts may be credited toward the ordering activity’s small business goals.

Using these guidelines, federal agencies  issued task and delivery orders to small business concerns that equate to more than 30% (or about $15 billion in sales) of  the GSA/VA Schedule revenue.

In November 2011 the FAR Council issued an interim rule implementing Section 1331 of the Small Business Jobs Act of 2010.  As a result, consistent with the statutory language, FAR 8.4 was revised to provide that agencies, at their discretion, could set-aside orders for small business under the GSA Schedules program.   In May of this year SBA published a more detailed rule that provides additional procedures and requirements for set-asides on all multiple award contracts including the GSA Schedules program.  The SBA’s proposed rule applies new complex procedures to the GSA Schedules including definitions and processes that previously applied only on formal set-aside programs. For example, in order to qualify as a “small” on a set-aside a concern must meet the size standard and must perform more than 50% of the work.   A small concern on a very large requirement that performs only 45% of the work on a task order would no longer be eligible for award if the Schedule order were set-aside.  These complex new procedures may actually make it more difficult to use small businesses via the GSA Schedules.  Another unintended consequence will likely be a division of the marketplace as customer agencies find it easier to use contracts that are exclusively one type of contractor (e.g. small, medium or large) which will hurt small businesses under the GSA Schedules over the long term .   The GSA Schedule is a commercial item program that empowers market forces to incentivize behavior.  There are market forces that encourage collaboration between small, medium and large businesses. Small businesses are nimble.  Small businesses are innovators. Small businesses are the first adopters of our economy, flexible enough to bring the workforce to the table as needed and leaders in many vital niche markets.   Large businesses provide resources and infrastructure needed for successful major government projects.   Medium sized businesses bridge the gap between bringing characteristics of both small and large business concerns to the federal marketplace.   The current system of preferences does not adequately marshal these forces.

The Coalition for Government Procurement believes that there has never been a better time for government and industry to look for new and creative models to drive positive change for small business contractors and simplify preference programs for government.  On October 30, the Coalition will host a Small Business forum entitled New Strategies for a Changing Environment.   The event will feature a presentation by John Shoraka, Associate Administrator for Government Contracting and Business Development at the SBA.  There will also be a panel of successful small businesses to include a small business reseller, a small business manufacturer and a large business that makes utilization of small business a corporate priority.  The panel will be moderated by Joseph Hornyak, Partner, Holland and Knight whose practice includes a focus on small business.   The panel will address the topic Small and Large Business Collaboration in the Federal Market – What Works and What Needs to Work Better.  The Coalition hopes this panel will serve to jumpstart discussion of new models for utilizing small business concerns with the ultimate objective of  an acquisition system that quickly and efficiently responds to agency needs and works well for businesses of all sizes.   Click here for information about the forum.