Senators consider steps to enforce small business goals

Senators and witnesses at a Senate Small Business and Entrepreneurship Committee hearing Wednesday cited a lack of enforcement as one reason federal agencies may not be giving enough contracts to small firms.

Witnesses agreed that the lack of measures to hold agencies accountable for meeting goals is the most significant hurdle facing small businesses that work with the government, ahead of bundling contracts into large agreements less attainable for small companies and payment problems in subcontracts.

Under current statutes, the government is required to award 23 percent of all contract dollars to small businesses. The Small Business Administration reported that agencies awarded 25.4 percent of fiscal 2005 contract dollars to small businesses.

But there are no penalties for agencies that do not meet the 23 percent goal, the witnesses said. Some of the larger agencies, such as the Energy and Education departments, report very low percentages

"I asked a small business representative from one of the major agencies what happens to you if you don't meet your goal," said Magdalah Silva, a small business owner who represented the group Women Impacting Public Policy. "He told me he gives himself a stern talking to. We have objectives, but nobody's enforcing it."

If agencies faced more serious consequences for not meeting the goal, then they would make a more aggressive effort to market to and work with small businesses, Silva said.

"Procurement officials throughout the country are breaking [the] statutes," said Ronald Newlan, chairman of the HUBZone Contractors National Council, a group that represents small companies operating in historically underutilized business areas. "They break them on a yearly basis, and they get away with it." "Accountability, accountability, seems to be leaping out here," said Sen. John Kerry, D-Mass., chairman of the committee. Some witnesses also expressed doubts as to whether agencies accurately report how they distribute contracts.

The Defense Department, which awards more contracts than any other agency, claims to meet the small business goal. But Todd McCracken, president of the National Small Business Association, said the numbers are misleading because the Defense Department automatically excludes small companies from lucrative overseas contracts.

"There have been a lot of doubts about those numbers," said Kathryn Seck, spokeswoman for the committee. "There might be some creative math involved in reaching those goals."

Recent legislation might change the targets altogether. A House bill introduced in April, H.R. 1873, would change the small business requirement to 30 percent of all contract dollars.

The Senate attempted to pass similar legislation last year, but the measure did not gain the necessary votes. Kerry plans to introduce a bill by the end of the year.

"We're going to do something that is measured and that has a chance to succeed," Kerry said. "It won't be perfect, but it will be a good start."

Seck said the bill might incorporate aspects of the House legislation, including language about changing the percentage. She declined to give more details because the legislation still is incomplete.

The bill also might address accountability and enforcement concerns. "Senator Kerry wants to get to the bottom of this accountability issue," Seck said. "We'll see what steps we can take in legislation that would put teeth into law."

She added that the solution might not be entirely legislative. "I don't know how far we can go in that direction," she said. "Part of it might not be changing the law but making the agencies comply with the law."

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