Obama Signs Legislation Encouraging Federal Government to Hire More Small Businesses

Government contracting opportunities could increase for small businesses in 2013 based on a new piece of legislation signed by President Obama on January 1 which encourages the federal government to hire more small businesses in its massive procurement program.

Government contract awards are currently mandated to go to small businesses, especially businesses that are recognized by the federal government as a disadvantaged business group. However, the federal government has fallen short of the minimum threshold for awarding its contracts to small businesses for more than a decade.  The change comes after the federal government missed its stated small business contracting goal (23 percent of total procurement across all agencies) for the eleventh straight year in 2012.

Although lawmakers stopped short of imposing penalties like reducing budgets or cutting senior level compensation for agencies that fall short of the annual goals, as had been previously proposed in both chambers, this is the first time they have provided formal incentives to encourage agencies to deliver on their annual pledge to small businesses.
The new legislation should help small businesses compete more successfully in the federal marketplace.

The Small Business Act mandates that all small businesses have the maximum opportunity to participate in providing goods and services to the government. The Small Business Administration (SBA) negotiates procurement preference goals with each federal agency and annually reviews each agency’s results. SBA then publishes the results in what is known as the “SBA Scorecard.”

The statutory minimum goals require the  government procurement program to award a twenty-three (23) percent minimum of prime contracts to small businesses with five (5) percent of prime and subcontracts for small disadvantaged businesses; five (5) percent of prime and subcontracts for women-owned small businesses; three (3) percent of prime and subcontracts for service-disabled veteran-owned small businesses.

One provision of the new law includes a small business contracting element in the performance evaluations of senior agency executives.  If the established small business goals are not met, bonus awards to executives are withheld.  The legislation will also limit the bundling of contracts. Contract bundling is stacking multiple contracts or segments of a contract into one large contract, making it impossible for small businesses to compete with large businesses.

The General Services Administration has also launched  a new program to help small technology firms break into the contracting market and to streamline the purchasing process for procurement officials across all agencies. Through the National Information Technology Commodity Program, the federal government has recently awarded 43 large contracts to small businesses, including women- and veteran-owned companies.

The help for small firms arrives just as contractors of all sizes are bracing for another round of government spending cuts.  While the legislation won’t break down all the hurdles for small contractors, business advocates say the new legislation is an optimistic sign that policy makers are beginning to live up to some of their campaign promises for small business owners.
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