Washington, D.C.— Today, the House Small Business Committee Subcommittee on Contracting and Infrastructure, led by Chairman Kweisi Mfume (D-MD), held a remote hearing examining the recent decline in the federal small business supplier base. The hearing focused on the policy of Category Management and its impact on small firms; small contractors testified on the challenges the policy presents for their businesses.
“Everyone on this committee believes in bringing more efficiency and less redundancy to our procurement system. Yet, we cannot advance these goals at the expense of small businesses, which are the backbone of our economy,” said Chairman Mfume. “That is why we must ensure the implementation of this initiative doesn’t run counter to the protections afforded to small businesses under the Small Business Act.”
Category Management is a government-wide procurement initiative that involves buying common goods and services as a single enterprise. The initiative seeks to eliminate redundancies, increase efficiencies, and deliver more savings by leveraging the federal government’s buying power. However, many small businesses have reported that the policy has left them with less access to government contracting opportunities. For example, in fiscal year 2016, 95,237 small businesses provided common products compared to just 79,114 of those same businesses in FY 2019, a drop of 17%.
The hearing allowed lawmakers to closely examine the Category Management initiative and hear from business owners about how the policy affects their business.
“Category Management has disproportionally stripped small, minority, and woman-owned businesses from access to Federal contracts,” said Alba M. Alemán, Chief Executive Officer at Citizant, Inc.. “And I fear that it is doing lasting damage to the growth and innovation engine of our economy that is driven by small businesses, which may take decades to recover.”
“Applying Category Management to small businesses has the unintended consequence of limiting Federal agencies’ access to many of the most innovative small businesses who might otherwise offer services of significant value to the public, while reducing the number and diversity small business suppliers available to meet government needs,” said Lynn Ann Casey Chief Executive Officer, Arc Aspicio LLC. “Meanwhile, this situation undermines opportunities for small businesses to enter the market and offer competitive solutions, threatening the strength of our national industrial base.”
“The governmentwide push to increase the use of category management leaves businesses shut out of opportunities to contract across the government,” said Victor P. Holt, President, V-Tech Solutions, Inc. “As government buying continues to trend toward buying through large contracting vehicles and moving away from direct contracts, the ability for small companies to win sole source awards is more crucial than ever.”
"The impact of Category Management is increasingly evident in my industry and affecting our company” said Sophia Tong, Founder & Chief Executive Officer, T and T Consulting Services Inc. “Agencies are bundling contracts that were previously performed successfully by small businesses, rolling them into larger contracts, and awarding them to large businesses. The outcome of this action is disastrous for the small supplier base.”
“If contracting opportunities continue to disappear for small businesses, it will have severe consequences, both for the Federal Government and the small business base for the procurement sector,” said Chairman Mfume. “Fewer small businesses will lead to less innovation, higher costs, and a weaker supply chain.”