Procurement

Opportunities:

A Small Business Guide

to Procurement Reform

U.S. Small Business Administration

Office of Advocacy

Office of Government Contracting and Minority Enterprise Development

September 2000
About this Publication

This guide was first published in 1996 to inform, explain and provoke. It is, in many respects, an

unconventional government publication shaped by unprecedented acquisition reform and framed by

a candid appeal for small firms to play a broader role in molding their own destiny.

The Office of Advocacy collaborated with the U.S. Small Business Administration's (SBA) Office

of Government Contracting and Minority Enterprise Development in preparing the first guide.

Advocacy also sought and accepted input and comments from other agencies and small business

groups. The second edition, an update of the first, was prepared under the direction of Chief

Counsel for Advocacy Jere Glover by Assistant Advocate for Procurement Policy Major L. Clark,

III; Rosa Sobhraj, summer law intern from the George Washington University School of Law;

Advocacy editors Phaedra Brotherton, Sherri Alms, and Kathryn Tobias.

The Office of Advocacy invokes its independent authority within the government and makes a

number of frank statements in the publication about change, competition and influence—statements

and recommendations that may not be shared by the administration or the SBA.
Foreword

The federal government spends about $200 billion a year on the procurement of goods and

services; state and local governments spend an additional $200 billion in acquisitions. Taken

together, state and federal government purchases amount to about $1,600 per American. Public

sector procurement is big business that significantly affects many small firms.

Shrinking public budgets, efforts to streamline the procurement process, and electronic commerce

are changing how and to what extent firms, especially small firms, will be able to participate in

government acquisitions.

Government procurement was a major issue at the last White House Conference on Small Business,

held in 1995. Seven of the top 60 recommendations formulated by more than 1,700 small business

delegates from around the country focused on increasing procurement opportunities for small firms.

Major procurement reforms, as evidenced in recent legislation and regulatory amendments, are

happening quickly and definitively. Some of these changes reflect the tenets of the White House

Conference and offer new opportunities for competitive small firms; others pose new and difficult

challenges. New electronic vehicles like the U.S. Business Advisor at http://www.business.gov and

other electronic formats, including the Office of Advocacy’s Web site at http://www.sba.gov/advo

make it easy and practical for small firms to stay current on pending policy changes and provide

input.

However, without managerial systems in place, or accountability measures that provide incentives

for agencies to do business with small firms, or services that make it easy for contracting officers to

find small businesses, the benefits of new Internet technologies will not redound to small business.

Thus, your ability to benefit from these and other reforms will ultimately depend on how well you

respond to and influence change. It is important that you get involved.

I hope you find this guide helpful in understanding and responding to the ever-evolving federal

acquisition process.

Jere W. Glover

Chief Counsel for Advocacy

U.S. Small Business Administration
Contents

Introduction 1

Marketing to the Government in a Changing Environment 2

 Significant Market Elements and Influencing Factors 2

 Effective Marketing Applications 3

 Understand the Customer 3

 Find the Right Opportunities 4

 Know Your Competition 6

 Provide Quality Products and Outstanding Service 6

Balanced Change: A Platform for Small Business Integration 7

 A Need for Competition 7

 Influencing Change 8

 Advocacy Recommendations 8

New Approaches to Affirmative Action in the Procurement Process 10

 Background 10

 The Adarand Case 10

 Supreme Court Decision 11

 Likely Impact of the Adarand Decision on Procurement 11

Legislative Procurement Reforms 12

 The Federal Acquisition Streamlining Act of 1994 12

 Emphasizing the Acquisition of Commercial Items 12

 Streamlining Acquisition Procedures under an Elevated Threshold 12

 A Government-Wide Electronic Commerce System 13

 Establishing Uniformity in the Procurement System 14

 New Opportunities for Women-Owned Businesses 14

 The Federal Acquisition Reform Act of 1996 14

 Modifying Competition Requirements 15

 Expanding the Use of Simplified Procedures for Commercial Items 15

 Revising Procurement Integrity 16

 Promoting International Procurement 16

 Revamping Federal Information Technology Acquisitions 16
 The HUBZone Act of 1997 16

 The Veterans Entrepreneurshipand Small Business Development Act of 1999 17

Significant Small Business Procurement Resources 18

Appendices

 I. Standard Form 129 24

 II. The Office of Advocacy 27

 III. The Office of Government Contracting and Minority Enterprise 29

 IV. 1995 White House Conference on Small Business Procurement Recommendations 33

 VI. To Our Customers: A Final Note and Invitation for Comments 36
Introduction

Will Rogers said, "You can be on the right track, but still get run over, if you just stand there..."

Small firms content to travel the same path they have traveled in the past, however productive, will

be overtaken by businesses that respond progressively to change and look for opportunities in new

ways.

This publication is about change. It is a guide to recent procurement reforms and is intended to help

interpret changes represented in two procurement laws, the Federal Acquisition Reform Act, as

included in the National Defense Authorization Act of 1996 and the Federal Acquisition

Streamlining Act.

Because change in procurement policy has been so significant in recent years, this guide begins

with a discussion on marketing to the government in a changing environment. The federal

government is fundamentally altering how it does business; small firms must also alter their

marketing approach to the public sector.

In response to the multitude of recent changes in procurement policy, this guide includes a number

of recommendations with respect to small firms. These Advocacy suggestions are intended to spark

dialog and consideration of additional reforms so that balanced change can more readily be

achieved. The guide also includes a summary of significant small business procurement resources.

Consider this guide a primer on procurement reform that is still evolving. It is also an appeal for the

small business community to get involved in the regulatory process by working closely with the

U.S. Small Business Administration (SBA), the Office of Advocacy, professional organizations,

and other associations in reviewing and influencing rules proposed as a result of procurement

reform legislation.

Will Rogers was more than an admired statesman with an uncanny sense for practical wisdom—he

was right!
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Marketing to the Government in a Changing Environment

Two recent laws, the Federal Acquisition Reform Act (FARA), as included in the National Defense

Authorization Act of 1996, and the Federal Acquisition Streamlining Act (FASA), have had, and

will continue to have, a compelling and unprecedented impact on the federal procurement process.

Some of these procurement changes will help small firms; others will not. One thing is certain: it

will not be business as usual for the government or the firms wanting to do business with the

government.

Many claim that selling to the government can be difficult, but many also attest to its being very

profitable. The reality is that even in a changing environment, winning the government as your

customer can be challenging, but worth it if you succeed.

Significant Market Elements and Influencing Factors

A multitude of new, challenging and sometimes conflicting factors must be considered when

developing a marketing strategy for public markets. As agencies implement reforms and adjust to

streamlined processing, prospective and seasoned vendors must also embrace change and make

adjustments in how they sell to the government.

Factors likely to have the greatest influence on federal government procurement in the foreseeable

future include the following:

Electronic commerce. The shift from paper-based to computer-based communications between the

government and its suppliers will significantly expedite processing, redefine minimum notice and

response times, provide quicker and broader information, including historical perspectives, and

increase competition. Electronic markets, because they are more competitive and efficient, will

make it easier for government agencies to comparison shop and arrange just-in-time deliveries

among a large number of vendors. As agencies exploit this change, they will also struggle with

finding ways to fairly evaluate a large number of bids. This could be challenging for many small

firms, especially if the competitive range is continuously downsized.

Empowered contracting officers. Front-line contracting officers will have greater authority and will

be more responsible for producing results than following rules. This is not to suggest that the

Federal Acquisition Regulation (FAR) will not be adhered to. However, contracting officers will

have more flexibility in interpreting regulations to achieve results that efficiently satisfy the

government's needs.

Best value practices. The government's buying decisions will focus more on overall best value,

performance, and quality, and less on price.

Budget constraints. The government has an overwhelming mandate to spend less and improve

services. As a result, agencies are adopting emerging commercial practices to achieve the most

efficient and cost-effective results. Such practices are demanding greater centralization of contract

administration, more commercial (off-the-shelf) buys, best overall value to the government and, in

many cases, the consolidation (bundling) of contract requirements.
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Small business goals. Contracting officers will have more flexibility in satisfying the government's

buying needs, but will continue to be required to meet statutory small business utilization goals.

Federal contracting employees, consequently, will be looking for creative ways to meet small

business goals.

Effective Marketing Applications

Although unique in many respects, selling to the government is similar to marketing to the

commercial sector. The rules are different and perhaps more complex, but the basic marketing

tenets are the same. Effective marketing demands the application of several fundamental principles:

• Understand the customer.

• Find the right opportunities.

• Know the competition.

• Provide quality products and outstanding customer service.

Understand the Customer

Understanding the requirements, needs, and idiosyncrasies of the government is critical and

paramount in developing a successful marketing strategy, especially in today's environment of

unprecedented change. Some companies market to customers they don't know or understand. These

firms are often so preoccupied with whatever they are doing—introducing new technologies,

redesigning products, automating their plants—that they ignore the needs of their end users.

Do your homework. Learn about resources that are available to help understand government buying

trends, needs, subcontracting opportunities and even federal agency phone numbers. An excellent

resource is a directory published by the U.S. Government Printing Office (GPO) that lists numerous

helpful publications designed specifically for government contractors. Resources for U.S.

Government Contractors can be obtained at no cost by writing to: U.S. Government Printing

Office, P.O. Box 371954, Pittsburgh, PA 15250-7954.

Identify agency needs. Contact individual agencies to learn of needs and unique agency

requirements. Keep in mind that most agencies operate autonomously with respect to procurements

and there is no central point to learn of all agency needs and requirements.

Know your customer. Most agencies produce a guide about how to do business with them. A

starting point might be to contact respective offices of small and disadvantaged business utilization

(OSDBUs) to inquire about available information. Each federal department and agency has an

OSDBU responsible for ensuring that the agency awards an equitable share of prime contracts and

subcontracts to small firms. See http://www.sba.gov/GC/osdbu for a list of OSDBUs.

Learn the rules. Become familiar with, but not intimidated by, the government's procurement rules.

The Federal Acquisition Regulation is the primary set of rules followed by government agencies

when purchasing goods and services. The FAR is published as Chapter 1 of Title 48 of the Code of

Federal Regulations (CFR) and can be consulted at many public libraries and most federal agency

resource centers. Also, it is important to note that many agencies produce supplements to the FAR

that address specific agency requirements. The rules differ by industry. For instance, certain
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procurement requirements for technology-based industries are different from those in the

construction industry. Trade associations are often experts in their respective industry-specific

regulations and can be excellent resources.

Find the Right Opportunities

Some say the best commercial marketing strategy is to “find a need and fill it.” This strategy also

applies in the government. Finding opportunities requires a dedicated level of diligence in

exploring public needs. It also demands a company's deliberate, systematic and persistent outreach.

True, long-lasting success is earned by seeking market-based opportunities, not government

guarantees or artificially induced markets.

Review the CBD. The Commerce Business Daily (CBD) is published every Monday through

Saturday by the U.S. Department of Commerce. This publication lists proposed government

procurement actions that are typically greater than $100,000 (or $25,000 if not yet published on the

Federal Acquisition Computer Network or FACNET), subcontracting leads and other information.

An electronic edition of the CBD is available from several sources (including www.business.gov)

listed on the first page of the CBD. Paper copies of the government publication can be found at

most public libraries and are typically available at government resource centers.

Use electronic commerce. Consider using the services of a certified value added network (VAN).

VANs are private companies, some of which are certified by the government to receive, share, sort

and electronically list all procurement opportunities processed through FACNET. It is envisioned

that most government procurements will be processed electronically through FACNET. For this

reason, it is imperative to become knowledgeable about electronic commerce and to consider the

costs and benefits of engaging a VAN. Stay current, flexible and willing to engage emerging and

advanced technologies. A current listing of all government-certified VANs and other technical

information can be obtained from one of several electronic commerce resource centers (ECRCs) at

1-800-318-9223 or the Defense Electronic Information Center at 1-800-334-3414.

Exploit outsourcing. Take advantage of outsourcing opportunities. Some successful companies will

derive their competitive edge by developing several core competencies and outsourcing all other

functions. Such firms perform only functions they do exceptionally well and contract everything

else to superior outside vendors. By doing this, firms can be more responsive, decentralized, lean,

flexible and perhaps more likely to succeed as government prime or subcontractors. Look for

opportunities with other firms where you can provide a superior product and/or service and fill a

particular need.

Apply diversity marketing. The government is committed to encouraging diversity in the workplace

and in the business environment. Agencies and prime contractors have an obligation, as well as

incentives, to meet specific diversity goals. If you are a minority or woman business owner, take

advantage of this opportunity. Don't be shy about telling agencies or prime contractors of your

availability.

Explore agency bidder lists. Arrange to get on agency mailing lists to automatically receive

solicitations for specific types of procurements. This can be achieved by completing Standard Form

(SF) 129, Solicitation Mailing List Application, and sending a copy of it to each agency you are

interested in. Such arrangements can be a very important and effective marketing tool for small

firms. A reproducible copy of SF 129 is included in Appendix I and may be found in pdf format on
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the Web at http://www.gsa.gov/forms/zero.htm. Note that in some instances, agencies require more

information than is required on SF 129. You may want to contact specific agencies to ensure that

you meet all of their internal bidder list requirements. Also, be sure to follow up with agencies to

make sure your company name does, in fact, appear on bidder mailing lists.

Check the Web. Learn about individual agency Internet Web sites and bulletin boards. The big

procuring agencies—Department of Defense (DoD), General Services Administration (GSA),

Department of Veterans Affairs (VA), National Aeronautics and Space Administration (NASA)—

and most smaller procuring agencies have electronic sources and bulletin boards that they

frequently use to profile upcoming acquisitions. These multi-purpose, often interactive electronic

vehicles are increasingly being used by agencies to inform their customers and solicit input.

Contact individual agencies via their OSDBU offices for information about specific electronic

addresses and bulletin boards, or visit http://www.sba.gov/GC/osdbu.html for a list of agency

OSDBUs.

Exploit government resources. Many excellent government resources are available to help small

businesses find procurement opportunities. Use them. The SBA, DoD, VA, NASA, and GSA, to

name only a few, are agencies that offer outstanding resources and programs for small firms. Also,

small firm owners should not overlook the value of using the many procurement technical

assistance centers (PTACs) located around the country.

Attend procurement seminars. Take advantage of procurement seminars, conferences and briefings

offered by federal agencies and other organizations. The networking and contacts developed at the

events are often as valuable as the topical discussions featured.

Advance one-on-one relationships. Send, fax, or e-mail unsolicited company brochures to targeted

contracting officers and then follow up with a phone call or personal contact. One-on-one

relationships with contracting officers are more important in the new environment. Proper

targeting, persistence and a quality presentation can pay big dividends. Note: contracting officers

more often prefer line-cards, or one-page descriptions that highlight a firm's capabilities. If

necessary, a firm can follow up with a detailed presentation.

Explore subcontracting opportunities. Target successful prime contractors and send them

information about your company, emphasizing your competitiveness, willingness to form a

partnership, mutual interest in growth and profitability, and the benefits of your products and

services. Examples of important information to send include company brochures, quality control

standards, commercial and/or government references, and, if appropriate, a detailed list of

equipment and service resources. Subcontracting opportunities for small businesses are expected to

expand, as prime contractors are under greater pressure to offer more services to the federal

government and utilize more small firms as subcontractors. Ask specific agencies for lists of their

prime contractors. For example, GSA publishes the GSA Subcontracting Directory twice a year; the

DoD publishes Subcontracting Opportunities with DoD annually; and the SBA publishes the

Subcontracting Directory, which lists numerous prime contractors for multiple agencies. Also,

agencies prepare procurement forecasts that may be helpful in identifying future subcontracting

opportunities.

Register with the CCR and Pro-Net. List your company in the Central Contractor Registry (CCR).

This is an electronic data base of government vendor firms maintained by the Department of

Defense. Federal agencies and prime contractors use the data base to locate suppliers. Also list your

company on SBA's Pro-Net, a data base specifically for small firms. For information about the
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CCR, contact the DoD Electronic Information Center at 1-800-334-3414 or visit the Web site at

http://www.ccr2000.com/. For Pro-Net contact the SBA at 1-800-827-5722 or visit the Web site at

http://www.pro-net.sba.gov.

Develop entrepreneurial networking. Consider networking, partnering and/or forming consortia

with other firms (large or small) to meet specific, expanded or consolidated government

requirements. Such business linkages can offer benefits to both the government and the partnering

firms and are becoming more commonplace in government procurements. They are also an

excellent way for small firms to compete with big businesses.

Tap into your industry trade association. Associations generally follow industry trends, proposed

regulations, changes and related congressional initiatives and funding. They can be an excellent

resource for the latest information.

Know Your Competition

Understanding your competition is a fundamental and critical aspect of becoming and remaining

competitive.

Apply competitive advantages. Learn who your competition is and become an expert in recognizing

why they are or are not successful. Apply what you have learned in your own company.

Provide Quality Products and Outstanding Customer Service

There is no substitute for providing quality products and superior customer service in winning and

keeping customers.

Be a champion of excellence. Products and services should be outstanding in their class. The

Department of Commerce, National Institute of Standards and Technology (NIST), administers the

Malcolm Baldrige National Quality Award Program, which provides information to help

companies improve the quality of their products and processes.

Develop memorable proposals. Proposals or bid offerings in response to solicitations or letters of

interest should be well-written, responsive, easy to understand, informative, timely, and complete.

Information and tools to assist in the preparation of proposals can be obtained from your local SBA

office.

Provide incredible customer service. Small firms should be ready and willing to compete on

service. Small businesses rarely have the buying leverage or the advantage of economies of scale to

be able to compete on price. However, they are typically more agile, less bureaucratic and more

creative, and they are often in a better position to mold their product and service mix to exceed the

expectations of the customer. Providing outstanding customer service can be the most important

tool a small business has in winning and keeping both government and commercial customers.

Small firms that do not keep pace with the many changes transforming the government and expect

business as usual are destined to be left behind. Only firms that aggressively respond to change, and

are competitive and resourceful in reaching out to the government will succeed in tomorrow's

public markets.
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Balanced Change: A Platform for Small Business Integration

Although small firms offer unequaled advantages to the U.S. economy, generating competition,

lowering overall costs, creating innovations, and providing more jobs than any other sector, these

benefits are often overshadowed. Most procurements still go to large businesses.

Large firms consistently receive the predominant share of the approximately $200 billion in annual

government contracts. Fiscal year 1999 was no exception, with seven of the government's largest

contractors receiving more federal prime contract dollars than the entire small business universe

received over the same period.

Small firms annually receive about 20 percent of all federal prime contract dollars and another 14-

19 percent of the federal procurement pie in subcontracts. Large firms, representing less than 5

percent of businesses, receive more than 60 percent of all federal procurement dollars.

A Need for Competition

Competition strengthens the economy by providing profit and other incentives for firms that are

responsive to the needs of a dynamic and ever-changing customer base. The clear end result is

lower prices and better products and services—all factors contributing to the strength of the U.S.

economy. The evolution of firms, especially small businesses, entering and leaving open markets is

the essence of competition and a fundamental element of America's prowess in the world economy.

The need for open competition in federal procurement markets remains strong. The Office of

Advocacy contends that some recent acquisition reforms will have the immediate effect of reducing

procurement opportunities for many small firms. In the long term, these changes may alter the

number of firms available, willing, and able to participate in federal procurement markets. These

changes are being made in the name of government efficiency and cost savings without enough

emphasis on maintaining a strong competitive marketplace.

Small business inclusion requirements and certain allowances in the procurement process are often

viewed as obstacles to government efficiency. Certainly, some government-unique standards have

grown obsolete and should be purged. Advocacy, however, believes the federal government has an

obligation stemming from the tenets of good public policy to direct public monies in such a way

that competition is vigorously encouraged. Open competition must be preserved and all sectors of

the economy, including women and minority business owners, must have an equal opportunity to

participate in federal markets.

Free markets thrive on competition. Ensuring the free and continuous access of small and new

firms to federal procurement opportunities is a sine qua non of a dynamic and competitive federal

marketplace. It would be myopic for the government to sacrifice competition to create false

efficiencies and short-term savings. Only market-based competition can prevent monopoly

practices and the concentration of federal dollars in the hands of a few large industry giants. It is

easy and arguably more efficient in the short term for the government to contract with a cadre of

mostly large firms. In the process, however, the fate of many small firms, the entrepreneurial base

of the economy and the future of competition are jeopardized. The real policy question is: should

federal tax dollars (procurement dollars) be used to promote competition or to advance industrial

concentration?
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Influencing Change

Within free market boundaries, large businesses attentively seek ways to maintain market share and

influence change. Big business is organized, industry represented, flush with resources, active and

very close to the procurement process.

Small firms, on the other hand, are less organized, more fragmented, have fewer resources and are

further removed from the procurement process. They have no in-house government relations staff,

no government lobbyist on retainer, and their nameplate is typically not stamped on the end product

the government buys. Yet they are the essential competitive force in the procurement process.

With the stakes high and growing higher, and the procurement arena rapidly changing, it is more

and more difficult for the voices of small business to be heard. It is imperative that small firms

invest in understanding policymaking and become part of the process.

While the task of writing new procurement laws falls to Congress, it is the responsibility of the

Office of Federal Procurement Policy, the Department of Defense, the General Services

Administration, and other agency representatives, through the FAR Council, to write the

implementing rules that are articulated in the Federal Acquisition Regulation.

Big business is frequently at the table when regulatory and other changes are being formulated. The

concerns of small firms, on the other hand, have historically been overlooked or viewed as an

inconvenience in the process. Small businesses must also be at the table when regulatory and other

changes are being formulated.

Advocacy Recommendations

The concerns of small firms demand a broader, more serious focus, and must continue to be better

integrated into the change process, so that balanced change can be achieved. The Office of

Advocacy and the small business community believe that balanced change is good public policy. It

is important that the small business community get involved in regulation and other change

processes by working closely with the SBA, the Office of Advocacy, professional organizations,

and other associations. The Office of Advocacy recommends that the following additional

modifications to the procurement process be considered:

• Require agencies to include in prime contract solicitations of more than $500,000 an evaluation

factor that would measure a prospective bidder's past and planned utilization of small, minority,

and women-owned firms as subcontractors.

• Strictly monitor compliance with subcontracting plans and restrict firms that are not in

compliance from future government contracts.

• Expand the FAR Council to include the U.S. Small Business Administration. This is an

important change because small business concerns have historically not been sufficiently

considered in the development of procurement regulations.

• Increase the utilization of Pro-Net and other Internet sources as easy and inexpensive electronic

tools for small business and the contracting community.

• Increase overall small business utilization goals. Agencies should be encouraged to work with

small firms and be creative in how they meet small business goals. Let the goal, not the process,
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be the driving force. Incentives (recognition, flexibility, policy relief, etc.) should be provided

for federal agencies to exceed their small business procurement goals.

• Develop progressive small business training models. Such additional training/materials would

focus on:

• How to take advantage of electronic markets.

• How to link, partner or form a consortium with other firms to meet expanded or

consolidated procurement requirements.

• How to find and use federal procurement resources.

• How to find subcontracting opportunities.

• How to market to the government in a changing environment.

• How to write winning procurement proposals.

• How to use service excellence in leveraging procurement opportunities.

• Restrict government competition with the private sector.

All of these recommendations are fair, doable and market-based to stimulate real competition. They

represent a balanced approach and do not artificially influence government markets with new or

augmented small business preferences. Rather, they are designed to complement progressive

change and enhance access to procurement opportunities so that small businesses can compete.
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New Approaches to Affirmative Action in the Procurement Process

In searching for ways to achieve equal opportunity for all, the federal government—over a period

of years—developed a number of specific affirmative action initiatives. All of these initiatives are

currently under review by the Justice Department.

Background

Traditionally, the purpose of affirmative action has been to address the exclusion of individuals on

the basis of their gender or race. Affirmative action has been an effort to open the doors of

education, employment, and business development opportunities to qualified individuals who

happen to be members of groups that have experienced longstanding and persistent

discrimination—for the most part, women and minorities.

Methods for achieving better representation of women and minorities have included the institution

of goals and timetables, targeted outreach, training and recruiting, the use of special selection

procedures emphasizing racial and gender diversity, and the use of management tools including

preference standards and reporting requirements.

Some who have studied affirmative action agree that it has helped close gaps in economic

opportunity in American society, thereby strengthening the entire economy.

The tenets of the government's affirmative action efforts have been tested on numerous occasions.

The 1995 Supreme Court case, Adarand Construction, Inc. v. Pena, in particular has had an impact

on targeted preferential programs. The Adarand decision came six years after the 1989 ruling in

Croson v. the City of Richmond, which imposed strict scrutiny standards on state and local

procurement set-aside programs.

The Adarand Case

The central focus of the Adarand debate was the provision in the Small Business Act requiring

federal agencies to set contracting goals for small disadvantaged businesses (SDBs). The law

requires that the Department of Defense establish SDB goals that represent at least 5 percent of the

total value of its prime contract awards.

The Federal Highway Administration, within the Department of Transportation, sought to achieve

its SDB goals in part by providing financial incentives to prime contractors who utilized small

disadvantaged firms as subcontractors. On September 15, 1989, the Federal Highway

Administration awarded a $1 million prime contract to the Mountain Gravel Construction Co. for a

highway project in Colorado. The prime contractor awarded a subcontract for a guardrail system to

the Gonzales Construction Co., a qualified SDB. In so doing, the prime contractor rejected a lower

bid from the Adarand Construction firm. The Mountain Gravel Construction Co., by awarding the

subcontract to an SDB, earned a bonus of approximately $10,000.

Because the Adarand bid was rejected by the prime contractor in favor of the higher SDB bid, the

Adarand Construction Co. filed suit. Both the District Court in Colorado and the Tenth Circuit

Court ruled against Adarand. However, the case was elevated to the Supreme Court, which ruled in

Adarand's favor.
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Supreme Court Decision

The Adarand decision did not dismantle affirmative action or set-asides. In fact, while setting

stricter standards mandating reform, it actually reaffirmed the continued existence of systematic

discrimination in the United States and the need for affirmative action.

What the Supreme Court did was to order the federal government to meet the same, more rigorous

standard for affirmative action programs that state and local governments were ordered to meet

under the earlier Croson decision. Many of the best-tailored state and local government programs

are still in place after having been challenged under that standard.

More specifically, the Supreme Court held that many affirmative action programs, under the equal

protection clause of the Fifth Amendment's due process clause, must be reviewed by the courts

using strict scrutiny. To meet this standard, a program must be shown to meet a compelling

governmental interest and must be narrowly tailored to meet that interest. That is a more

demanding test than had been previously applied to federal affirmative action programs.

Likely Impact of the Adarand Decision on Procurement

No one knows for certain how the Supreme Court decision will affect procurement opportunities

for small disadvantaged, women-owned, and other firms over the long term. However, based on

interpretations of the Adarand decision, it is likely that procurement will be affected in the

following ways:

• Procurement set-aside and other preferential programs for minority-owned firms are more

likely to be focused on particular regions and business sectors where the problems of

discrimination or exclusion are provable and can be quantified.

• The requirements for procurement preference programs will be tightened such that once a firm

has had a fair opportunity to compete, the preference will be terminated. Long-standing,

permanent set-asides will likely not be supported.

• Procurement preference programs sponsored by the federal government will echo the more

rigorous affirmative action standards state and local governments were ordered to meet several

years ago.

• Preference programs will focus on assisting disadvantaged people and distressed communities,

whatever their race or gender.

The Justice Department continues to review all federal affirmative action initiatives to make certain

they are in compliance with the Adarand decision.
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Legislative Procurement Reforms

The Federal Acquisition Streamlining Act of 1994 (FASA) and the Federal Acquisition Reform Act

(FARA), as included in the National Defense Authorization Act of 1996, have had, and will

continue to have, a compelling and unprecedented impact on the federal procurement process.

The Federal Acquisition Streamlining Act of 1994

The Federal Acquisition Streamlining Act of 1994 repealed or substantially modified more than

225 provisions of law to reduce paperwork burdens, facilitate the acquisition of commercial

products, enhance the use of simplified procedures for small purchases, transform the acquisition

process to electronic commerce, and improve the efficiency of the laws governing the procurement

of goods and services. FASA was signed into law by President Clinton on October 13, 1994.

The most significant provisions of FASA included:

• Emphasizing the acquisition of commercial items

• Streamlining acquisition procedures under an elevated small purchase threshold

• Implementing a government-wide electronic commerce system

• Establishing uniformity in the procurement system

Emphasizing the Acquisition of Commercial Items

The law strongly encouraged the acquisition by federal agencies of commercial end-items and

components, including the acquisition of commercial products modified to meet government needs.

Definition of commercial items. The law enhanced the government's access to items from the

commercial sector by expanding the scope of products and services that qualify for treatment as

commercial items.

Preference for commercial items. The law established a statutory preference for commercial items

and required that, to the maximum extent practicable, contract requirements and market research

facilitate the use of commercial items.

Streamlining Acquisition Procedures under an Elevated Threshold

The law increased the small purchase threshold from $25,000 to a new simplified acquisition

threshold of $100,000. This higher threshold expanded streamlined processes, making it easier for

contractors to do business with the government, while making it simpler and more efficient for

agencies to solicit and process procurements.

Special rules for using simplified acquisition procedures. To take full advantage of the simplified

acquisition procedures, an agency must become certified by the Office of Federal Procurement

Policy (OFPP) that it has implemented an interim FACNET capability. This means that an agency

can perform certain functions electronically, using FACNET.
13

General provisions of the simplified procedures. The simplified procedures exempt purchases at or

below the $100,000 simplified acquisition threshold from paperwork and recordkeeping

requirements included in more than 15 statutes. Note that FARA subsequently expanded the

simplified procedure provision to allow its use with purchases of commercial items, property, and

services valued at up to $5 million. Some of the key provisions exempted in the simplified

procedures include:

• Contingent fee certification

• Contract audit requirements

• Procedural requirements of the Anti-Kickback Act

• The Miller Act

• Contract Work Hours and Safety Standards Act

• Drug-Free Workplace Act of 1988

• Prohibition limiting subcontractor direct sales to the U.S. government

• Inventory accounting requirements

• Identification of suppliers and sources

The law permits agencies to adopt streamlined procedures for providing notice of contracting

opportunities.

Micro-purchases. Government purchases up to $2,500 are now classified as micro-purchases,

allowing for significantly simplified procedures. Purchases of $2,500 or less:

• Are no longer reserved for small firms;

• Can be made without obtaining competitive quotations; and

• Are not subject to the requirements of the Buy American Act.

A Government-Wide Electronic Commerce System

The fully implemented electronic commerce system will significantly simplify and streamline the

purchasing process, promote greater customer service, and increase cost effectiveness. The

electronic exchange of acquisition information between the private sector and the federal

government is also increasing competition by providing improved access to procurement

opportunities for thousands of vendors currently doing business with the government. While this

system may be of particular benefit to small businesses, it can also help many other vendors who

found access to bidding opportunities difficult under the pre-electronic system.

Federal Acquisition Computer Network. The law established the Federal Acquisition Computer

Network. FACNET is helping ensure that the government's paperwork-driven acquisition process

evolves to an expedited system based on electronic data interchange. The electronic system is

intended to provide a single face to industry and interoperability within the federal sector. The law

established parameters for a FACNET system built along functional lines, with parameters set forth

for government and private users. These functions were to be implemented by agencies within five

years of FASA's enactment. The government-wide FACNET system is designed to:
14

• Inform the public about federal contracting opportunities;

• Outline the details of government solicitations;

• Permit electronic submission of bids and proposals; and

• Facilitate responses to questions about solicitations.

It was envisioned that many firms would use the services of a value-added network (VAN) to

access the FACNET system. VANs are private companies certified by the government to receive,

share, sort, and electronically list all procurement opportunities routed through FACNET. Vendors

can select from a variety of certified VANs to access procurement opportunities and exchange

information.

Establishing Uniformity in the Procurement System

FASA amended several procurement laws to promote the uniform treatment of Department of

Defense and civilian agency procurements. To accomplish this, the law did the following:

• Amended the Federal Property Act to establish contract cost principles for civilian agencies.

Contract cost principles provide that certain types of costs, such as entertainment costs,

lobbying expenses, advertising, and so-called golden parachute payments, are not allowable in

federal contracts.

• Established cost certification procedures and penalties identical to those that have long been

applicable in DoD procurements.

New Opportunities for Women-Owned Businesses

In addition to these key provisions, FASA established a 5-percent government-wide procurement

goal for women-owned businesses. Under this provision, women-owned firms were specifically

incorporated into the procurement goaling process established by statute for all government

agencies.

Each federal agency is required to establish a goal for participation of small business concerns

owned and controlled by women at not less than 5 percent of the total value of all prime contracts

and subcontract awards for each fiscal year. On May 23, 2000, President Clinton signed Executive

Order 13157, which requires all federal agencies to take immediate steps to meet or exceed the 5

percent government contracting goal.

The Federal Acquisition Reform Act of 1996

The Federal Acquisition Reform Act was signed into law by President Clinton on February 10,

1996, less than 16 months after President Clinton signed the Federal Acquisition Streamlining Act

on October 13, 1994. FARA is a major reform law, but was not expected to bring the same level or

magnitude of sweeping change to the procurement process as FASA did. The small business

community can and should continue to participate in the implementation of the law through the

regulatory process. Key provisions in FARA include:

• Modifying competition requirements
15

• Expanding the use of simplified procedures for commercial items, services and property

• Revising procurement integrity

• Promoting international procurement

• Revamping federal information technology acquisitions

Modifying Competition Requirements

The law retained the Competition in Contracting Act (CICA) requirement for full and open

competition. However, the legislation directed that the Federal Acquisition Regulation be revised to

ensure that the CICA requirement was implemented in a manner consistent with the need to

efficiently fulfill the government's procurement requirements.

The statute carried minor revisions to the previous competition standard. However, the new focus

on government efficiency gave greater latitude to contracting officers to limit competition and, in

some circumstances, to use simplified procedures not requiring full and open competition.

Greater efficiency, tighter competition. Contracting officers were given greater authority to control

the number of proposals considered. The revised statute provided that, if a contracting officer

determines that the number of offerors exceeds the number at which an efficient competition can be

conducted, the contracting officer may limit the number of proposals in the competitive range, in

accordance with the criteria specified in the solicitation, to the greatest number that will permit an

efficient competition among the offerors rated most highly. The competitive range determination is

made after the initial evaluation of proposals. Offerors excluded from the competitive range are

entitled to a pre-award briefing.

Design-build selection procedures. The law provided an alternative two-phase selection process for

the award of a single design and construction contract for public buildings. The two-phase process

differs from the traditional design-build approach, established under the Brooks ArchitectEngineers Act, by using two distinct procurement review phases to screen and limit the number of

proposals for final review. This change was intended to minimize the costs that firms incur in

developing proposals.

Expanding the Use of Simplified Procedures for Commercial Items, Property, and

Services

FASA significantly changed the way the government buys commercial items. The 1994 law

provided the foundation for establishing commercial-like procedures within the federal

procurement system, called simplified procedures. FARA expanded what FASA began by further

establishing simplified procedures for the purchase of commercial items, property, and services,

and exempting commercial item purchases from certain government-unique requirements. These

reforms were intended to bring public procurement into alignment with private sector procurement

practices and reduce the cost of doing business with the government.

Simplified notice procedures. These provisions allow the use of simplified procedures for purchases

of commercial items, property and services up to $5 million.
16

Exemptions from certain laws. This provision requires that the FAR be revised to include a list of

provisions that are inapplicable to contracts for commercially available off-the-shelf items. The list

would include provisions of law that, in the opinion of the head of the Office of Federal

Procurement Policy (OFPP), impose government-unique policies, procedures or restrictions on

contracting officers. Commercial item contracts and subcontracts are exempted from Truth in

Negotiations Act (TINA) requirements of submitting certified cost or pricing data to the

government. Cost Accounting Standards (CAS) would also no longer apply.

Revised definition of commercial services. This section broadens the definition of commercial

services with respect to prices, such that market prices would mean current prices established in the

course of ordinary trade between buyers and sellers and that could be substantiated from sources

independent of the offeror.

Revising Procurement Integrity

Procurement integrity statutes, under FARA, were revised to specifically prohibit agency

employees and others not authorized to do so from obtaining or disclosing contractor bid

information or agency source selection information. The law also eliminated all remaining agencyspecific post-employment restrictions and provided standard, government-wide one-year postemployment restrictions for designated officials involved in procurements over $10 million. FARA

increased the penalties for violating these laws.

Promoting International Procurement

The reform law provided authority to the president to waive a provision of law requiring that a tax

or recoupment fee be paid to the U.S. government on foreign sales of products and technologies

originally developed under contracts with the federal government. This fee can be waived when the

competitiveness of U.S. firms is threatened.

Revamping Federal Information Technology Acquisitions

FARA eliminated the procurement authority of the General Services Administration (GSA) for

information technology (IT) investments and vested the authority in each executive agency. It

established a chief information officer in each agency, required agencies to change the way they did

business before making IT investments, and encouraged agencies to break information technology

acquisitions into smaller, more manageable pieces. In addition, FARA repealed the authority for the

General Services Board of Contract Appeals to decide bid protests for IT acquisitions. The General

Accounting Office (GAO) was assigned to handle all bid protests.

The HUBZone Act of 1997

The HUBZone Empowerment Contracting Program was created by the HUBZone Act of 1997,

which is contained in Title VI of Public Law 105-135, enacted on December 2, 1997 (111 Stat.

2592). This program is different from other procurement programs because it focuses on job

creation in high employment and poverty-level communities. The HUBZone Act set the

government contracting goal for the HUBZone program initially at 1 percent of all federal prime
17

contracts with a gradual increase to 3 percent by the year 2003. The U.S. Small Business

Administration was given authority to manage this program.

The Veterans Entrepreneurship and Small Business Development Act Of 1999

This act expands existing assistance programs and establishes new programs for veterans who own

or operate small businesses. The act creates a 3 percent government-wide goal for participation by

small business concerns owned and controlled by service-disabled veterans.
18

Significant Small Business Procurement Resources

Knowledge is power! It is an asset that can help overcome uncertainty and open new avenues for

opportunity. It is also a powerful tool that can help small firms create value and make money in

government, commercial and other markets. Because information and resulting knowledge are so

critical, this guide lists numerous and varied small business resources.

The U.S. Small Business Administration

409 Third Street, S.W., Washington, DC 20416, (800) 827-5722, http://www.sba.gov

Office of Government Contracting (202) 205-6460.

The SBA provides a wide range of services to help small firms obtain and fulfill government

contracts. The agency seeks to increase the number of contracts awarded to small businesses

through set-asides for small businesses, subcontracting opportunities with larger companies and

many other programs.

SBA has procurement center representatives (PCR) stationed at many federal installations, both

military and civilian, that have major buying programs. In addition, the agency's commercial

marketing representatives (CMR) monitor large business prime contractors to ensure that

subcontracting opportunities are available for small and small disadvantaged businesses.

CMRs also can refer small businesses to prime contractors. For the names and locations of PCRs

and CMRs in your area, contact SBA's government contracting area office nearest to you.

Area I includes the states of Connecticut, Maine, Massachusetts, New Hampshire, New Jersey,

New York, Rhode Island, and Vermont, and the Commonwealth of Puerto Rico. Contact Janette

Fasano, Boston, MA, (617) 565-5622; or Tom Dey, New York, NY, (212) 264-1452.

Area II includes the states of Delaware, Maryland, Pennsylvania, Virginia, and West Virginia, and

the District of Columbia. Contact Joseph May, King of Prussia, PA (215) 580-2766.

Area III includes the states of Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina,

South Carolina and Tennessee. Contact L. A. Symasek, Atlanta, GA (404) 331-7587.

Area IV includes the states of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri,

Nebraska, North Dakota, Ohio, South Dakota and Wisconsin. Contact Robert Murphy, Chicago, IL

(312) 353-7381; or Malin Francksen, Kansas City, MO (816) 374-6815, ext.290.

Area V includes the states of Arkansas, Colorado, Louisiana, Oklahoma, New Mexico and Texas.

Contact John Bateman, (817) 684-5301; Jose Martinez, Denver, CO (303) 844-0513.

Area VI includes the states of Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada,

Oregon, Utah, Washington, and Wyoming and Guam. Bob Paccione, San Francisco, CA (415) 744-

6828; or call WA, (206) 553-8546.
19

Office of Minority Enterprise Development, (202) 205-6410

The primary responsibility of this division within the SBA is to promote business ownership by

individuals who are socially and economically disadvantaged and to promote the competitive

viability of such firms. This office oversees the 8(a) business development program.

Office of Advocacy (Procurement Policy), (202) 205-6532

The Office of Advocacy is an independent office within the SBA. It seeks to ensure that

government policy decisions, whether legislative or regulatory, enhance the economic viability of

small businesses. See Appendix II for more information.

The U.S. Business Advisor, http://www.business.gov

On June 14, 1995, at the White House Conference on Small Business, President Clinton and Vice

President Gore announced a new way for businesses to work with government the U.S. Business

Advisor, an on-line service on the Internet. The U.S. Business Advisor offers businesses one-stop

access to government forms, business development software and business-specific information

from the SBA and other agencies. Among the types of information included are the following:

• The Commerce Business Daily and other procurement information;

• SBA's LowDoc, Export Working Capital and pre-qualification loan applications;

• The Service Corps of Retired Executives (SCORE) counseling request forms;

• Business development software to help prepare a business plan, do a marketing strategy, or

create a financial statement; and

• Business-specific information on women-owned businesses, minority enterprise development,

international trade, government contracting, financial services and disaster support.

The U.S. Business Advisor allows access to a full range of plain-language regulatory guidance and

compliance assistance to help businesses understand regulatory requirements, environmental, safety

and health statutes, international trade, taxes and customs regulations. The Internet address for the

U.S. Business Advisor is: http://www.business.gov

Government Electronic Commerce

Procurement Web Sites

The following web sites are good sources for procurement policy and other procurement

information:

Acquisition Reform Network, http://www-far.npr.gov

U.S. Business Advisor, http://www.business.gov

GSA Advantage http://www.gsa.gov
20

Federal Acquisition Regulation, http://www.farsite.hill.af.mil/

Department of Defense Central Contractor Registry, http://www.ccr2000.com

U.S. Small Business Administration, http://www.sba.gov

Pro-Net, http://www.sba.gov/pro-net/

Procurement, http://www.fedmarket.com/sales

U.S. Army, http://www.army-acquisition.net

Electronic Commerce Resource Centers

The following centers provide information and assistance to small firms interested in understanding

and participating in the government's electronic commerce system. See the Web site at

http://www.ecrc.ctc.com/ for more details.

National ECRC - Technical Hub, (800) 318-9223

Fairfax, VA, (703) 691-1507

Palestine, TX, (800) 209-2772

Atlanta, GA, (404) 894-7772

Dayton, OH, (513) 449-6060

Oakland, CA, (800) 231-2772

Orange, TX, (409) 882-3950

Bremerton, WA, (206) 478-0333

Cleveland, OH, (800) 991-3272

San Antonio, TX, (210) 732-1141

Scranton, PA, (800) 867-2772

DoD Electronic Commerce Information Center

 (800) 334-3414

Procurement Technical Assistance Centers (PTACs)

There are about 100 Procurement Technical Assistance Centers (PTACs) around the country. The

procurement centers are supported by the DoD-Defense Logistics Agency, state and local

governments, and private entities. Some PTACs operate within SBA Small Business Development

Centers. Their mission is to assist local businesses in marketing and selling products and services to

federal, state and local governments. PTACs specialize in providing technical assistance and

electronic bid-match services and other electronic services that link firms with procurement

opportunities. Center locations and contacts can be obtained by calling (409) 886-0125 or (703)

767-1650.
21

Offices of Small and Disadvantaged Business Utilization

Each federal department and agency has an Office of Small and Disadvantaged Business

Utilization (OSDBU) responsible for ensuring that the agency awards an equitable share of prime

contracts and subcontracts to small firms. See also http://www.sba.gov/GC/osdbu.html for an

electronic listing.

Department of Agriculture, (202) 720-7117

Department of Commerce, (202) 482-3387

Department of Defense, (703) 614-1151

Department of the Air Force, (703) 697-1950

Department of the Army, (703) 695-9800

Department of the Navy, (703) 602-2700

Army Corps of Engineers, (202) 761-0725

Ballistic Missile Defense Organization, (703) 693-1553

Space and Naval Warfare Systems Command, (703) 602-6091

U.S. Marine Corps, (703) 696-1022

Department of Education, (202) 708-9820

Department of Energy, (202) 586-7377

Department Health and Human Services, (202) 690-7300

Department of Housing and Urban Development, (202) 708-1428

Department of the Interior, (202) 208-3493

Department of Justice, (202) 616-0521

Department of Labor, (202) 219-9148

Department of State, (703) 875-6824

Department of Transportation, (202) 366-1930

Department of the Treasury, (202) 622-0530

Department of Veterans Affairs, (202) 565-8124

Agency for International Development, (703) 875-1551

Environmental Protection Agency, (703) 305-7777

Export-Import Bank of the United States, (202) 566-8111

Federal Trade Commission, (202) 326-2258

National Aeronautics and Space Administration, (202) 358-2088

General Services Administration, (202) 501-1021

Office of Personnel Management, (202) 606-2240
22

Small Business Administration, (202) 205-6410

Tennessee Valley Authority, (615) 751-6269

U.S. Information Agency, (202) 501-7708

U.S. Postal Service, (202) 268-4633

General Services Administration (GSA)

One of GSA's primary responsibilities is the procurement of many goods and services needed by

federal agencies. Many government procurement opportunities are available through GSA.

GSA Business Service Centers (BSC), (202) 708-5804

BSCs promote the participation of businesses, especially small firms, in government contracting.

The centers provide information and counseling on how to obtain government contracts.

Atlanta, (404) 331-5103

Boston, (617) 565-8100

Chicago, (312) 353-5383

Denver, (303) 236-7408

Fort Worth, (817) 334-3284

Kansas City, (816) 926-7203

Los Angeles, (213) 894-3210

New York, (212) 264-1234

Philadelphia, (215) 656-5525

San Francisco, (415) 744-5050

Seattle, (206) 931-7956

Washington, DC, (202) 708-5961

GSA Federal Supply Schedules, (202) 708-5804

These schedules list goods and services government agencies purchase on a regular basis as well as

possible vendor sources. Small businesses may also apply to be listed on GSA schedules.

U.S. Department of Veterans Affairs

National Acquisition Center (703) 786-5157
23

U.S. Department of Commerce

Minority Business Development Agency (MBDA)(202) 482-1015

The MBDA seeks to assist minority business owners in obtaining federal contracts. There is a

network of MBDA centers around the country.

State Government Procurement Assistance Programs

Most state and many local governments provide procurement assistance programs to help local

businesses receive federal, state and/or local government contracts. The programs are generally

operated through economic development offices. For information about state procurement

assistance programs, contact your local economic development office.

Selected Publications

Commerce Business Daily (CBD). This publication, published by the Department of Commerce, is

the most common vehicle used for finding federal procurement opportunities valued at more than

$100,000. The publication is available at many libraries and on several on-line services. Contact the

U.S. Government Printing Office at (202) 512-1800.

Procurement Assistance. Published by the SBA, this booklet provides guidance to small firms

interested in seeking federal contracts. Contact SBA's Government Contracting Office at (202) 205-

6460 for more information.

Selling to the Military. This publication is designed to walk you through the procurement

requirements of the military branches. Contact the Department of Defense at (703) 614- 1151 for

information on how to obtain a copy.

U.S. Government Purchasing and Sales Directory. Prepared by the SBA and available through the

U.S. Government Printing Office (GPO), this excellent directory lists nearly 4,000 products and

services bought by defense and civilian agencies. It also explains how to do business with the

government and profiles SBA's contracting programs. Contact SBA's Government Contracting

Office at (202) 205-6460 for more information.

Doing Business with GSA. Available from GSA's Business Service Centers (BSCs)), this

publication describes the types of goods and services purchased by the government and explains the

process of selling to the federal government. Contact the BSC closest to you or call (703) 708-5804

to obtain a copy.

Resources for U.S. Government Contractors. This excellent publication is available free from the

U.S. Government Printing Office. It lists numerous procurement-related publications that are for

sale by the government. The GPO directory can be obtained by writing to the U.S. Government

Printing Office, Mail Stop SM, Room 3132, Washington, DC 20402 and referencing Government

Books - Resources for U.S. Government Contractors. Copies of the publication are also available at

some GSA Business Service Centers.

Success often depends on what we know and how well we apply what we have learned. Use this

information to find opportunities, be competitive and profit from government procurement markets.
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27

Appendix II

The Office of Advocacy

The Office of the Chief Counsel for Advocacy within the U.S. Small Business Administration

works to reduce the burdens that federal policies impose on small firms and to maximize the

benefits small businesses receive from the government. Advocacy's mission, simply stated, is to

encourage policies that support the development and growth of American small businesses.

Advocacy is a voice for a software firm in Burlington, a manufacturer in Phoenix, a trucker in

Memphis, a printer in Seattle—a voice for the small business community. The office is directed by

the chief counsel for advocacy, who is appointed by the president and confirmed by the Senate. As

a representative for the nation's small businesses, the chief counsel advances the views, concerns,

and interests of small business before the Congress, the White House, and federal and state

regulatory agencies. Under the chief counsel's direction, the offices of Interagency Affairs amd

Economic Research perform specific duties to achieve Advocacy's goals.

Office of Interagency Affairs

The Office of Interagency Affairs pursues legislative and regulatory initiatives, recommending

specific measures for creating an environment in which small businesses can compete effectively

and expand to their full potential. The office prepares comment letters and testimony on federal

initiatives that may affect small firms. The Interagency Affairs unit also monitors government

compliance with the Regulatory Flexibility Act, which requires federal agencies to analyze the

impact on small firms of proposed rules and regulations.

Office of Economic Research

Critical to Advocacy's efforts to create a healthy environment for small business is the work of the

Office of Economic Research. The office collects data on the nation's small businesses and

compiles it into a small business data base. The office produces the President's annual report on the

state of small business, a comprehensive presentation of small business performance in the

economy. It also publishes a compendium of current economic indicators and state economic

profiles. In addition, the office does research that informs policy discussions. The office also

produces and publishes other information that specifically addresses the concerns of the nation's

small businesses.

Regional Advocates

Communication between the small business community and the chief counsel for advocacy is

enhanced by regional advocates. Covering the 10 federal regions of the nation, regional advocates

help identify new issues and problems of small business by monitoring the impact of federal and

state regulations and policies on the local business communities within their regions.
28

How to Contact the Office of Advocacy

Chief Counsel for Advocacy: Jere W. Glover (202) 205-6533

Office of Interagency Affairs, (202) 205-6532

Office of Economic Research, (202) 205-6530

Regional Advocates

Region I, Boston, (617) 565-8415

Region II, New York, (212) 264-7750

Region III, Philadelphia, (215) 580-2805

Region IV, Atlanta, (404) 347-3081

Region V, Chicago, (312) 353-6070

Region VI, Dallas, (817) 684-5579

Region VII, Kansas City, (816) 374-6380

Region VIII, Denver, (303) 844-0503

Region IX, San Diego, (619) 557-7250 X 1118

Region X, Seattle, (206) 553-5231
29

Appendix III

Government Contracting and Minority Enterprise Development:

Programs and Initiatives

The SBA's Office of Government Contracting and Minority Enterprise Development (OGC/MED)

administers a number of programs designed to increase the share of government prime contracts

and subcontracts awarded to small businesses. The primary programs include prime contracts, 8(a)

minority small business set-asides, subcontracting assistance, certificates of competency, small

business innovation research, the procurement automated source system and natural resources sales

assistance. This discussion includes a brief overview of basic government contract types as well as

a description of OGC/MED small business programs.

Types of Government Contracts

The government employs three basic procurement methods in buying goods and services:

simplified acquisition purchases, sealed bid purchases and negotiated procurements.

Simplified Acquisition Purchases

Government acquisitions under $100,000 are generally considered small purchases and simplified

acquisition procedures are applied. Small purchases are typically reserved for small businesses and

follow special simplified procedures, which include limited competition, streamlined processing

and limited notice requirements for the government. Many small purchases are made through

purchase orders, government-wide credit cards and blanket purchase orders.

Purchases under $2,500. For a product or service valued at less than $2,500 (a micro purchase ), a

contracting officer does not have to obtain competitive quotations. Note that these micro purchases

are no longer reserved for small firms.

Purchases between $2,500 and $100,000. Purchases valued between $2,500 and $100,000 are

generally, but not always, handled in one or two ways:

• Oral quotations. The contracting officer may solicit oral quotations from potential suppliers.

Generally, at least three suppliers are consulted.

• Written or electronic quotations. The contracting officer solicits written or electronic quotations

from potential suppliers through a Request for Quotation (RFQ). This procedure is used if

unusual specifications or a large number of different items are involved.

Sealed Bid Purchases

The government uses fixed-price sealed bid contracts to buy standard, easily defined products or

services generally worth more than $100,000. A sealed bid purchase involves competitive bids and

public opening of bids. This type of purchase is used when:

• The award will be made on the basis of lowest price;

• There is no need to clarify or discuss the requirements of the procurement with bidders; and
30

• The government expects to receive more than one bid.

Negotiated Procurements

The most flexible, but sometimes most complicated, method for procuring goods and services is

negotiation. This approach is used when contracting officers can't define all of the requirements of

a procurement or when factors other than price are important enough to require evaluation.

Negotiated procurements take many forms. They may call for competitive proposals, may involve

restricted competition, or be sole source.

Small Business Procurement Programs and Initiatives

The government is committed to the fullest possible participation of small, small disadvantaged,

and women-owned businesses in its procurement programs.

Public Law 95-507

Many laws applying to federal procurement have some special provisions about small firms.

However, no law has had more profound effect than Public Law 95-507. This 1978 law made

sweeping revisions to the Small Business Act. It requires, in part,:

• A strong and specific commitment to subcontracting with small and small disadvantaged firms

by large prime contractors;

• Detailed subcontracting plans for large government contracts over $500,000 ($1 million for

construction contracts) and monitoring of the plans by the SBA;

• Establishment of an Office of Small and Disadvantaged Business Utilization to assist small

firms in each federal agency; and,

• Annual goals for contracting with small firms, set by federal agencies.

Agency Small Business Goals

All federal agencies are required to establish goals for awarding contracts to small firms. These

goals are negotiated with the Small Business Administration annually. Targeted annual goals

include:

• 23 percent of an agency's prime contracts should be awarded to small firms;

• 5 percent of an agency's total prime and subcontracts should be awarded to small disadvantaged

businesses; and,

• 5 percent of an agency's prime and subcontracts should be awarded to women-owned firms.

To meet these goals, agencies apply a variety of small business preference programs.
31

Small Business Set-Asides

Under this initiative, government acquisitions are set aside (reserved) for small firms when there is

a reasonable expectation that:

• Offers will be obtained from at least two responsible small businesses; and,

• Awards will be made at fair market prices.

Only small businesses are allowed to compete for reserved contracts. If the requirements have an

anticipated contract value of $100,000 or less (most such contracts are always set aside), simplified

acquisition procedures are used. If the anticipated requirements have a value that exceeds $100,000,

the contract is negotiated under standard contracting procedures, but reserved for small business, if

it is anticipated that offers can be obtained from at least two responsible small firms.

The SBA 8(a) Program

Section 8(a) of the Small Business Act empowers the Small Business Administration to enter into

prime contracts with other federal agencies for goods and services. The SBA then subcontracts the

actual performance of the work to socially and economically disadvantaged small businesses that

are certified by SBA to receive such programs. The selection of an 8(a) contractor by the SBA can

be either on a sole source or a competitive basis. To participate in the 8(a) program, a small

business must be at least 51 percent unconditionally owned, controlled, and managed by either:

• An individual(s) who is a socially and economically disadvantaged citizen of the United States;

or

• An economically disadvantaged Indian tribe, including an Alaskan native corporation or an

economically disadvantaged native Hawaiian organization.

SBA offers managerial, technical and financial support to qualified 8(a) contractors. Note: All

minority preference programs are being reviewed by the Justice Department for compliance with

the June 1995 Adarand v. Pena decision.

Subcontracting Assistance Program

Firms with large federal contracts are required by law to establish goals for awarding subcontracts

to qualified small firms. Each prime contract of $500,000 or more ($1 million for construction

contracts) must include subcontracting goals and a plan for meeting those goals. SBA operates a

number of initiatives to monitor subcontracting plans and to help small firms secure subcontracts.

Certificate of Competency Program

The SBA certificate of competency (CoC) program provides an appeal procedure for small

businesses that face the loss of government contracts because purchasing officers question their

capability of meeting contract requirements.
32

Small Business Innovation Research Program

The Small Business Innovation Research (SBIR) program is designed to stimulate small business

technological innovation, use small firms to meet federal R&D needs and increase private sector

commercialization derived from federal R&D. The program is conducted in three phases. Phase I

solicits proposals from small firms on specific agency R&D needs. Phase II is funded to further

develop the proposed ideas that are selected. Phase III is conducted to commercialize the ideas

developed in Phases I and II.

Procurement Marketing and Access Network (Pro-Net)

Pro-Net is an Internet-based data base of small businesses nationwide that are interested in federal

procurement opportunities. Information on each company includes a summary of capabilities,

ownership and qualifications. Contracting officers can use Pro-Net to search and target sectors of

small businesses and electronically send solicitations, information and/or other requests to selected

businesses. Small firms can also respond electronically.

Natural Resources Sales Assistance Program

The timber set-aside program assists small businesses in the forest products industry by providing

them with preferential bidding opportunities for purchasing timber offered by the federal

government. The program is jointly operated by the SBA and federal timber-selling agencies

throughout the United States.
33

Appendix IV

1995 White House Conference on Small Business Procurement

Recommendations

#144 Support fair competition: Congress should enact legislation that would prohibit government

agencies, tax- and antitrust-exempt organizations from engaging in commercial activities in direct

competition with small businesses.

#153 Congress should enact legislation to designate a national certification organization. This

organization will be initially funded by Congress to establish a data base of certified small business,

small disadvantaged business and small business owned by women. It will serve as a one-stop

clearinghouse that will assist all federal agencies by disseminating information in conjunction with

their outreach efforts. To assure the credibility of federal procurement procedures:

 a. Congress will endorse one set of criteria for all local, city, state and national agencies, adopted

by a task force utilizing purchasing agents and small business owners, for uniform certification of

small business, small disadvantaged business and small business owned by women where contracts

involve federal funds.

 b. All federal agencies must establish standardized monitoring and compliance procedures.

 c. Independent decentralized, advisory boards should be established.

 d. State and local governments should be encouraged to recognize this certification on a reciprocal

basis.

 e. All federal agencies should sponsor training to increase contracting/procurement awareness and

use of reciprocal certification and data base.

#161 The President and Congress should continue to support the Minority Small Business Capital

Ownership and Development Program, SBA 8(a), and should enact legislation to make

improvements with particular emphasis on:

 a. Increase length of time.

 b. All federal minority procurement policies and procedures must be incorporated and applied to

any recipient of federal funds and become mandatory.

 c. Increase utilization of 8(a) contractors by enforcing accountability of federal agencies in

achieving their 8(a) goals

 d. The establishment of procedures for immediate relief in the event of catastrophic circumstances

including but not limited to:

• total dissolving of government agencies;

• natural disasters
34

• base closures

 e. Relief to be in the form of extended participation in the 8(a) program for a reasonable time to

recover from catastrophic circumstances.

 All of the above will follow the intent of the SBA 8(a) program to raise 8(a) businesses to a

threshold allowing them to graduation to the open competitive market.

#164 The Davis-Bacon Act of 1931 and the Service Contract Act of 1965 should be completely

repealed.

#167 Prompt Payment Act: The Office of Management and Budget must penalize federal agencies

and/or their grantees for incurring interest debt generated through delayed bill payment. Congress

should modify this Act to include subcontractors. In cases of dispute between the government and a

prime contractor, the subcontractor's payment must be promptly released as long as the

subcontractor is not part of the dispute.

#360 Increase Procurement Opportunities: Increase the opportunities for all small businesses to

equitably participate in federal procurement. Require that:

 a. Not less than 35 percent of all government procurement monies (35 percent of prime and 35

percent of subcontracts) be awarded to small firms, such that at least:

• 10 percent of prime and 10 percent of subcontract monies be awarded to minority groups;

• 5 percent of prime and 5 percent of subcontract monies be awarded to women-owned

businesses; and,

• 10 percent of the government's total R&D budget be awarded to small businesses;

 b. Small businesses be provided free and easy access to the government's electronic commerce

system, FACNET, which profiles federal procurement opportunities;

 c. Competition not be stifled by permitting federal agencies to bundle contract requirements

beyond the reach and capability of many small firms; and,

d. Government agencies and tax-exempt entities not be allowed to unfairly compete with private

firms by strengthening and expanding OMB Circular A-76 to apply to all federal monies used

directly or indirectly in the provision of goods and services and by increasing the scope and

improving the enforcement of the unrelated business income tax (UBIT).

 e. On sole source purchases above $100,000, a query of PASS must be done by federal agencies

and prime contractors.

 f. Require strict enforcement of the Rule of Two, which requires federal agencies to restrict

competition when two or more small businesses are capable and available to compete in price,

quality and product/service for contracts of $100,000 or more.

 g. Require the Department of Defense and the Small Business Administration to sponsor EDI

training through the already established small business assistance centers located nationwide.
35

 h. Require the SBA to review and revise the size criteria downward to reflect the true small

business.

#437 In rendering a decision on Adarand v. Pena, the U.S. Supreme Court has potentially dealt the

minority and women business community a severe and in some cases potentially fatal blow. While

we recognize the separation of functions between the three branches of government, we are

compelled out of an immediate and overwhelming sense of concern to recommend the following:

The President and Congress should proactively and aggressively respond to support the minority

and women business community, and not use this decision in any way to influence any legislative

action that would reduce support for our country's long-standing commitment to promote fair and

equitable opportunity for all of its citizens regardless of race, color or gender.
36

Appendix V

To Our Customers: A Final Note and Invitation for Comment

The Office of Advocacy and its partners within the SBA hope this publication was informative,

interesting and helpful in explaining the reforms that are significantly changing how the

government does business. We also hope the guide has provided a fresh perspective on marketing,

and has given the reader a useful set of market-based tools and resources that can be used to tap

into changing public markets.

Advocacy acknowledges invoking its independent status within the government in making a

number of candid statements about procurement reform. However, these statements, and especially

the recommendations, are included as an integral part of this discussion to highlight important, yet

often overlooked, perspectives and provide alternative solutions to achieving efficiencies without

stifling small business competition.

For those who disagree with Advocacy's opinions, we hope you respect their intent and look for

opportunities where compromise and balance can be achieved. For those who agree, we hope you

acknowledge the magnitude of change at hand and actively engage your rights to influence

regulatory and other acquisition reforms.

The Office of Advocacy values its customers and welcomes your opinions, suggestions and

comments on procurement issues as well as other initiatives that would benefit small businesses.

You can communicate with us via the following address:

Office of Advocacy

U.S. Small Business Administration

Att: Procurement Policy / Major L.Clark,III

409 Third Street, S.W.

Washington, DC 20416

Fax (202) 205-6928