Small Business Committee blasts Pentagon for contract bundling

The Defense Department must do more to ensure that acquisition reforms do not drive small businesses out of the federal market, Reps. Donald Manzullo, R-Ill., and Nydia Velazquez, D-N.Y., said Wednesday. At a spirited hearing of the House Small Business Committee, Manzullo and Velazquez took turns blasting the Pentagon for falling short of its small business procurement goals and for promoting contract bundling, a practice in which federal contracts are combined with others before being put out for bid. Bundling makes it more difficult for small firms to bid on federal contracts, Velazquez said. While contract bundling saves time for procurement officials, the Pentagon should not need to use such practices when it has 19,000 contracting officers, according to Manzullo, the committee's chairman. "You tell us you don't have enough [officers] to do procurements, when you have 19,000 officers," Manzullo told Deidre Lee, director of defense procurement in the office of the undersecretary of defense for acquisition, technology, and logistics. "Maybe we should have an oversight hearing on what these people are doing." Lee replied that the Pentagon's acquisition corps has been downsized from 30,000 officers to 19,000 employees since the mid-1990s. The committee heard testimony from several small business owners who criticized Defense's procurement practices. Maurice Allain, CEO of Phoenix Scientific Corp., a small Georgia-based defense contractor, said his company has been "devastated" by a bundled Air Force contract for weapons maintenance, called the Flexible Acquisition Sustainment Tool (FAST). Manzullo pledged to review the contract. Lee reported on a number of Pentagon initiatives to create more opportunities for small businesses. Pete Aldridge, Undersecretary of defense for Acquisition, Technology and Logistics, has directed the services and defense agencies to create plans for meeting Defense's small business procurement goals, she said. The Pentagon is also putting teeth behind a requirement that all bundled contracts be justified by a cost-benefit analysis, Lee added. She said that Defense will soon allow women-owned small businesses to participate in the department's successful Mentor-Protégé program, which helps small, disadvantaged businesses learn the ropes of federal contracting. Small firms that are majority-owned by African-Americans, Hispanics, Asian Americans or Native Americans may currently participate as protégés. "We know we need to do better," said Lee. Susan Walthall, acting chief counsel for advocacy at the Small Business Administration, testified that new procurement tools are hurting small businesses. The widespread use of government credit cards has led to a decline in the share of micropurchases, or purchases worth less than $2,500, going to small businesses, according to Walthall. "Other than convenience, there is very little data to reveal that the government is getting the best price with the use of the credit card," she said. "The data strongly suggest that the credit card has had a dramatic impact on the downward spiral of small purchases from small businesses."
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