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Statement of the Hon. Nydia M. Velazquez on Are Governmentwide Contracts Helping or Hurting Small Contractors?

Ensuring access to federal contracting opportunities is one of this committee’s core priorities. Winning federal contracts allows small firms to create jobs, grow their businesses, and invest in their communities.

That’s why the recent decrease in the number of small firms doing business with the government is so concerning. From 2010 to 2019, the number of small companies providing common goods and services to the federal government shrank by 38%. This staggering decline not only hurts small businesses, but it also leads to less competition in our federal marketplace and less innovation nationwide.

One of the primary causes behind this trend is the Category Management initiative. Since its implementation beginning in 2016 to 2019, the number of small firms serving as federal contractors shrank by 17%. Category Management (CM) is a governmentwide procurement initiative that involves buying common goods and services as a single enterprise. It tries to make government purchasing more efficient, less redundant, and ultimately more cost-effective. However, the practice has produced many unintended consequences for small businesses.

One of the most troubling consequences of Category Management is the reduction in the use of individual contracts in favor of governmentwide contracts and those designated as Best-In-Class. These larger contracts are structured to serve multiple agencies and require businesses to provide an extensive range of products and services. As a result, small businesses are at an inherent disadvantage when it comes to winning governmentwide contracts.

Yet the concerns do not end there. For example, these contracts last many years and essentially lock out those small businesses that are not included in them. Also, the costs and resources needed to bid on these contracts are substantial and there are no assurances that the small business will receive an award.

In fact, the procurement itself might not even come to fruition. This committee has heard from numerous businesses that invested thousands preparing for a contract that fail to materialize. As if this was not enough, governmentwide and Best-In-Class contracts are relying on a self-scoring evaluation process that rewards those who come with vast experience, past performance, and certifications. Hence, only the biggest businesses or those that team up to collectively become the biggest, can successfully compete.

Given all the costs, hurdles, and uncertainty associated with these vehicles, many small businesses have been left wondering whether these are Best-In-Class contracts or Worst-In-Class.

Today, I want to take a close look at the challenges that governmentwide contracts pose for small businesses and reforms Congress can pursue to ensure attempts to improve federal procurement aren’t at the expense of small firms.
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