Agencies get low grades for small business contracting

Federal agencies are doing a poor job of awarding jobs to small businesses, according to a new report issued by Rep. Nydia Velazquez, D-N.Y. In her second annual scorecard on small business contracting, Velazquez gave federal agencies a C minus. Five agencies-the departments of Energy, Education, Health and Human Services, Defense and the Agency for International Development-got either a D or D minus. "Agencies are failing to meet their goals," said Velazquez, ranking member of the House Small Business Committee. "Clearly more work can be done." Federal agencies in 2000 awarded 2.8 percent of prime contract dollars to socially and economically disadvantaged firms awarded contracting preference by the Small Business Administration's 8(a) program. That compares with 3.3 percent in 1999. The results mirror data from Eagle Eye Publishing, a Fairfax, Va.-based company that tracks federal procurement trends, which found that 8(a) set-aside contracts totaled $5.6 billion in 2000, down from $6.1 billion in 1999. Results are similar for women-owned businesses. A mere 2.2 percent of federal contracting dollars go to these firms, despite a governmentwide mandate setting a 5 percent target. Even when small companies are included in large contracts, they often have an inconsequential role. Cairo Corp., a Manassas, Va.-based information technology company, recently won a bid to be a subcontractor on a multi-million dollar project at the Justice Department. The company's experience is typical of what often happens to small businesses that are included on large federal contracts. Cairo figured the award meant about $5 million in revenue for the company, a 24-person, woman-owned small business. But the prime contractor thought differently. "We were told we were just window dressing and we would be lucky to see a penny," said Raymond Roberts, vice president of the company. "The prime contractor said they were going to staff the project." Cairo's story is not unique, according to company founder and CEO Alba Aleman. Too often, small businesses, particularly women-owned and minority-owned businesses, are brought on board to help prime contractors and federal agencies fulfill mandated quotas. Velazquez suggested that agencies are not truly committed to meeting mandates for contracting with small businesses. A larger problem is contract bundling, a practice that consolidates several contracts into one large contract, she said. The practice was given congressional blessing in the 1994 Federal Acquisition and Streamlining Act. "It has unintended consequences," Velazquez said. "Not once have we been shown that we are getting better quality at a better cost." All too often, she added, small businesses are being forced out of the federal market because they cannot compete for large contracts. Michael Tucker, president of George W. Allen Co., an office supply firm in Beltsville, Md., said his firm has seen a steady decline in federal business since bundling came into practice. Federal contracts use to account for 80 percent of his business. Now they account for only 65 percent. "That's cost us more than $1 million in sales," Tucker said. The firm had $17 million in sales last year.