Homeland Security officials defend small business procurement strategy

The Homeland Security Department routinely favors large contractors, passing up inexpensive and innovative technologies offered by small businesses, owners of two small companies told a House subcommittee Tuesday.

Marian Sabety, who owns the Flywheel Group, a Washington-based consulting company specializing in wireless technology and document protection, said Homeland Security has not responded to a strong contract bid she submitted several months ago, or answered questions on the status of the bid. Sabety, who testified before the House Small Business Subcommittee on Rural Enterprises, Agriculture and Technology, acknowledged that the department likely received other promising bids, but said she was disappointed that her submission received no "airtime."

Patricia Driscoll, chief executive officer of Frontline Defense Systems LLC, a Nevada-based business providing screening devices and other homeland security products, echoed Sabety's concerns. "We don't do a lot of work with DHS," she said. "After looking at our qualifications, you [would] see that we should."

But according to the Small Business Administration, DHS is making substantial efforts to grant small businesses contracts. In meetings with SBA, Homeland Security officials have suggested a goal of awarding 23 percent of the department's prime contracts to small companies, said Michael Barrera, associate deputy administrator at SBA's Office of Government Contracting and Business Development.

This is the same target required of other federal agencies by law. But Congress exempted Homeland Security from the official mandate to allow the new department to get a fast start on procurement.

Data collected for the third quarter of fiscal 2003 indicates the department is meeting its prime contracting goal, said Kevin Boshears, director of the department's Office of Small and Disadvantaged Business Utilization. Homeland Security will also attempt to award 40 percent of subcontracts to small companies, he said.

Homeland Security is also working to ensure that small companies receive adequate information about contract opportunities, Boshears said. For example, the department plans on hosting a series of local outreach sessions and quarterly workshops on doing business with the department. In addition, Homeland Security officials are working on a directory of available subcontracts, he said.

Lawmakers focused on Homeland Security at Tuesday's hearing to ensure that the department does not "follow the bad example other departments set by not meeting their goals," said Rep. Sam Graves, R-Mo. the subcommittee's chairman. Overall, agencies awarded 22.6 percent of prime contracts to small businesses in fiscal 2002, falling just short of the mandated 23 percent target, according to SBA.

On Monday, SBA published final regulations designed to limit contract bundling, the process of combining two or more contracts into a large single agreement. Bundling can make it difficult for small businesses to meet a contract's requirements. The final rules are similar to rules proposed earlier this year.

Under the final regulations, effective Nov. 19, SBA will subject bundled contracts valued at or above specified thresholds to additional review to ensure that the agreements could not be broken apart. SBA will require scrutiny of contracts exceeding $7 million at Defense, $5 million at NASA, the Energy Department and the General Services Administration and $2 million at other agencies. The thresholds remain unchanged from the draft rule, despite some public comments proposing different figures.

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