John Kerry (D-Mass.), the ranking Democratic member of the Senate Committee on Small Business and Entrepreneurship, has been working with the committee's chair and ranking Republican member, Senator Olympia Snowe (R-Maine), to introduce legislation designed to help small businesses get a fair shake in government contracting.
Along with Snowe, Senator Kerry is drafting this year's Small Business Administration reauthorization, the formal review of that agency's policies and programs, to which he hopes to add language helping small businesses get their share of government contracts. He's working on the Small Business Federal Contractor Safeguard Act, designed to curb contract "bundling" and add other protections for small businesses.
Senator Kerry has also been working to expose what he says is inaccurate reporting by the SBA when it states that 25.4% of government contracts were set aside for small businesses in the 2005 fiscal year. Kerry says that number does not account for a whole set of categories, known as exclusions, that could be awarded to small businesses.
Kerry recently spoke with BusinessWeek.com reporter Jeffrey Gangemi about the challenges currently faced by small businesses looking to get into government contracting and how he's trying to ease them through policy change. Edited excerpts of their conversation follow:
What are the biggest challenges facing small business contracting, as it relates to the SBA?
It's a lack of enforcement on meeting the targets for contracting to small business, and the lack of enforcement on the types of businesses that are getting the contracts.
The SBA reports over 25% of contracts going to small businesses, which exceeds the goal of 23%. Isn't that a good thing?
The reporting is fake reporting—it's inaccurate. The correct number is 17%. The administration is exaggerating because they don't take into account foreign contracts. You have overseas contracts, and you have the Homeland Security Dept. contracts domestically. I just offered an amendment on [the Transportation Security Administration]. They left out [those contracts], and that is an enormous amount of procurement—at least several billion dollars. I'm trying to change that law so that they are not now excluded, for next year's budget.
You also have a significant number of small-business contracts that are going to large firms. That was admitted by the inspector general of the SBA at a recent hearing. That's been a game they've played to the great detriment of a lot of small businesses around the country.
Whose interests are the SBA procurement officials looking after?
It's the big contractors—they've got friends in high places and connections, and that's how it works. So they play it off within the agencies, and the politics of Washington intervene.
Is there any indication that the SBA will back any new size-enforcement technique?
We don't have any indication yet. We do have a new administrator coming in, and I think he's genuine in wanting to change this. I give him the benefit of the doubt. We're hoping there will be a real transition over there (see BusinessWeek.com, 7/21/2006, "The New SBA Chief's Honeymoon Period").
To fix the problem, could small businesses do a better job of bidding on contracts? Or is this something that has to come from the SBA?
You can always analyze your bidding process and contracting expertise. And there are certainly some things that small businesses could do more effectively. But in a lot of cases, you've got companies that have traditionally done business with the government that have a solid background and record, and they're not getting the contracts. This is not a case of neophyte or beginner mistakes or something.
What are bundled contracts, and why do you oppose them?
Let's say one company puts in a number of different bids. When [a federal agency] puts out a request for proposals, they'll accept bids. Bundling means that they'll purposely put together a number of different tasks, that could go out as individual contracts, into one contract.
It ought to be divided into separate requests for proposals from separate businesses, but the [a federal agency] finds it simpler, easier, and more expedient to simply put them all together and go for one. [President George W.] Bush announced his intention to break up bundled contracts four years ago. That's the SBA's fault, because they bundle them. Or, they accept the bundling. Let's put it that way.
What legislation might be on the horizon?
We're going to try to strengthen the contracting process against fraud and abuse. We're going to try to make sure we have transparency and accountability with respect to the targeted contracting. Those are the two most critical things—anti-bundling, and appropriate contracting targets.