House Small Business Committee Chairman Sam Graves (R-MO) today introduced the Make Every Small Business Count Act of 2013 (HR 2232). The bill enhances opportunities for small businesses by adding an incentive for prime federal contractors to consider small firms for more subcontracts.
Small businesses play an important role in federal contracting, both as prime contractors and subcontractors, so the federal government has a goal of awarding 23 percent of prime contract dollars and 35.9 percent of subcontracted dollars to small companies. To meet the subcontracting goal, large prime contractors are contractually bound to award an agreed upon number of subcontracted dollars to first tier small businesses subcontractors, and to encourage their large subcontractors to use small businesses as subcontractors at lower tiers. The dollars awarded to any small business subcontractor help the federal government to meet its 35.9 percent subcontracting goal, but the prime contractor can only count the subcontracts it awards to the contract specific goal. Unfortunately, this often means that there aren’t as many opportunities for small businesses as lower tier subcontractors, even though these businesses create jobs, increase competition, promote innovation, and ensure the health of our industrial base.
The Make Every Small Business Count Act of 2013 (HR 2232) would ensure that there are opportunities for small businesses at every level of federal contracting. It allows government to goal prime contractors on all levels of subcontracting, and it lets large businesses count any award to a small business. This simple change will encourage all large business contractors to make sure small businesses have opportunities to compete for subcontracts. The change is supported by large and small businesses alike.
“Small businesses should get a real chance to compete throughout the federal contracting process,” said Chairman Graves. “The purpose of the federal contracting goal is to ensure small businesses get a fair opportunity, and this bill applies the goal down the line to every subcontract. The change will encourage prime contractors to fully consider the merits of small business bids. Promoting competition in federal contracting is great for innovation, cost containment, and job creation.”
The bill increases availability of lower tier subcontracts to small businesses by counting every subcontracted dollar toward the negotiated small business contracting goal.
Current law requires that any large business receiving a federal prime contract or a subcontract for more than $650,000 (or $1.5 million for construction contracts) must provide “maximum practicable opportunity” for small business participation as subcontractors.
Agencies negotiate small business subcontracting goals with the prime contractors, and prime contractors pass down the requirement to use small businesses their own large subcontractors. The dollars reported are then applied to the government’s goal of awarding 35.9% of subcontracted dollars to small businesses.
While the government receives credit for all tiers of subcontracting, prime contractors are currently only given credit for first tier subcontractors. Ironically, this ensures opportunities at the first tier for small businesses, but not for lower tier subcontracts – often the most suitable for developing businesses.
Current law also prevents an agency from negotiating the subcontracting goals beyond the first tier. By basing the goal on all tiers, the bill allows for higher goals in that contract.