House Small Business Chairman Sam Graves (R-MO) today announced that a year-long investigation into a federal contracting program has uncovered that the government owes more than one thousand small businesses millions of dollars.
“Contracting with small businesses is good for the economy and it’s good for the taxpayer because small companies bring cost-savings to the federal government,” said Chairman Graves. “But when federal agencies don’t live up to their end of the bargain, small businesses are discouraged from competing and taxpayers lose the benefits of government efficiency. Although we’re extremely disappointed that this error has occurred, the General Services Administration has owned up to their mistake and will distribute payment this year.”
The General Services Administration (GSA) Multiple Award Schedule (MAS) program manages approximately 19,000 contracts for goods and services for the entire federal government. About 80 percent of the vendors are small businesses, making up 35 percent of the $50 billion in annual MAS sales. A successful MAS contract can be a boon to a small business, however, pursuing a MAS contract may cost the small business between $6,000 to $40,000 for a standard GSA proposal. Competing for a federal contract is not only time-consuming but very costly, especially for small businesses, who often don’t have a large procurement team like larger corporations may have. GSA regulation states that each business will receive at least $2,500 in sales, but requires that each small business make at least $25,000 in sales per year to keep their contract.
GSA generates revenue from fees based on contract sales. Last year, GSA proposed terminating thousands of small business contracts for not meeting the $25,000 annual sales threshold, because these contracts were not generating enough fees for GSA. The Committee was concerned about the effect on small businesses and the loss of competition, since over half of the 19,000 vendors could have lost their contracts. Further, the Committee noted that GSA’s case for cancelling these contracts in terms of dollars saved did not account for paying some of these firms the $2,500 they would be owed under their contracts. When the Committee began questioning why the $2,500 was not included in the calculations, it became clear that GSA was not adhering to its own contracts and had not paid the required termination costs to small businesses for at least five years.
Between Fiscal Year 2008 and Fiscal Year 2012, there were 3,300 of these canceled federal contracts. Of these, 1,334 were eligible for a minimum guaranteed payment from GSA; 1,281 of the eligible firms were small businesses. Because of this error, GSA will pay $3,108,888 owed to these companies. The remaining firms had not filed the necessary forms, so it is unclear if GSA would have owed them the $2,500 payment.
The Committee’s investigation began shortly after a June 2012 Small Business Subcommittee on Contracting and Workforce hearing on the GSA MAS Program, chaired by Rep. Mick Mulvaney (R-SC). A series of letters between GSA and the Committee during the Fall and Winter led to an admission of error on May 6, 2013.
The Committee has placed advocacy for small business contracting opportunities among its highest priorities under Congressman Graves’ chairmanship, especially in light of the fact that the government has missed its goal to award 23 percent of all federal contract dollars to small businesses for six consecutive years. In early 2012, the Committee introduced a series of contracting reform bills aimed at increasing opportunities for small business, creating protections to fight fraud and abuse, and empowering advocates who fight for small business during the federal acquisition process. On January 3, 2013, the President signed the legislation into law as part of the National Defense Authorization Act of 2013.