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Opening Statements

Luetkemeyer: “Are Governmentwide Contracts Helping or Hurting Small Contractors”

WASHINGTON, D.C. – Today, the House Committee on Small Business held a full hybrid hearing on “Are Governmentwide Contracts Helping or Hurting Small Contractors.”

Ranking Member Blaine Luetkemeyer’s opening statement as prepared for delivery:

Thank you, Madam Chair. 

I think we both agree that there are many important conversations in the federal procurement space that demand Congressional attention. 

The issue we are exploring today rises among the very top. 

Like Netflix disrupting the entertainment industry or Amazon fundamentally changing the way we shop, the federal government’s use of multi-billion dollar governmentwide contracts might be permanently altering the way the government buys goods and services.

It is important to keep in mind that these contract vehicles are not inherently “good” or “bad”; they are simply tools and their use or misuse is what determines their impact on the contractor base. 

While I understand and even agree with the Office of Management and Budget’s interest in maximizing cost savings and obtaining administrative efficiencies, there must be a thorough weighing of the balance. 

Choosing to procure with these vehicles must not result in devastating impacts to the small industrial base, a base which, as this Committee has long documented, is declining at an alarming rate. 

The Department of Defense recently released a report coming to the bold conclusion that contract consolidation in the defense industrial market is a national security threat, recommending that the agency prioritize engagement with new entrants and small businesses. 

Unfortunately, one of the unintended consequences of the rising use of governmentwide contracts is the exclusionary impact this has on most small contractors and the ensuing negative ripple effect stemming from the loss of this critical cohort of businesses. 

Only a limited number of small contractors are awarded spots on these lucrative, long-term contracts. 

This leaves the rest locked out of the lion’s share of federal opportunities.  

No federal opportunities mean no incentive to remain in the federal marketplace. 

The resulting loss of small contractors means less competition and ultimately higher costs to the taxpayer, less innovation, risk of stagnation, and may snowball into broader, more debilitating concerns such as threatening our national security and economy.

The high-stakes nature of these contracts also creates a whole set of issues for small businesses themselves; for instance, small businesses have only a limited pool of resources, thus these resources must be diverted either to create the best possible bid, or to meet other business needs.

Small businesses may further feel the need to expend even more valuable resources protesting unfavorable contract terms or awards in order to protect their sizable investments, with no guarantee that the outcome will be in their favor.

On a similar note, because these contracts are so sweeping in their requirements and highly competitive, many small businesses feel forced to give up their independence, pressured to partner with large firms via joint ventures for their best possible chance at winning a coveted spot on these contracts.

This presents a host of issues, including that many large businesses are essentially legally granted access to federal dollars dedicated specifically to assist small businesses.

Unfortunately, it seems that at this point, the genie is out of the bottle and it is difficult to imagine a world returning to mostly individual, direct contract actions.

However, we can be wiser, more thoughtful, and more intentional in seeking the appropriate balance. 

I will end with this thought. 

In the struggle to simplify and manage federal spending, the federal government should not lose sight of the importance of small businesses.

Nor should it disregard the impact that increased use of governmentwide contracts may have on the industrial base.

The federal government must do more to ensure the majority of small businesses can thrive in this new environment.

Madam, Chair, I yield back.