Panelists say bias a barrier for minority-owned contractors

Discrimination permeates the federal marketplace, playing a role in preventing small, minority-owned firms from securing an adequate number of agency contracts, a panel of small business advocates told lawmakers Wednesday afternoon.

At a hearing of the House Oversight and Government Reform Subcommittee on Government Management, Organization and Procurement, officials from trade groups representing minority entrepreneurs testified to the obstacles their members face when breaking into the government procurement market.

"The reasons minority-owned firms are not fully participating in the market are many, not the least of which is discrimination," said Anthony Robinson, president of the Minority Business Enterprise Legal Defense and Education Fund.

While using somewhat softer language, Allegra McCullough, a former associate deputy administrator of government contracting and business development at the Small Business Administration, agreed that race plays a role in procurement.

"There is … evidence of departments within agencies that refuse to believe that small businesses -- particularly minority businesses -- can perform certain capabilities," McCullough said. "There is little if any evidence to justify this attitude."

Subcommittee members did not ask participants in an earlier panel of agency officials and small business procurement executives directly about the issue of discrimination in federal contracting. The group focused more on the strides that agencies have made in providing assistance to small, disadvantaged businesses.

Calvin Jenkins, the current deputy associate administrator of government contracting and business development at SBA, cited the success of the 8(a) Business Development Program. Roughly 9,000 certified small businesses participate in the program, receiving $12.4 billion in contracts in fiscal 2006 -- an increase of $6.1 billion since 2001.

Representatives from the Defense Department and the Census Bureau testified that their agencies had taken steps to mitigate barriers facing minority entrepreneurs, noting that they are exceeding the governmentwide statutory goal of awarding at least 5 percent of contracts to small disadvantaged businesses.

The Pentagon has met or exceeded the 5 percent goal every year since 2000, while the Census Bureau has employed a host of small business entities to support major technical contracts as part of the 2010 census.

Both panels, however, seemed to acknowledge that 8(a) and similar programs that support small businesses suffer from a dearth of accountability that allows agencies to go unpunished for not meeting small business goals.

McCullough suggested that bonuses could be rewarded or denied to procurement executives on the basis of small business contracting performance. Michael Barrera, president of the U.S. Hispanic Chamber of Commerce, suggested that contracting managers and prime contractors that fail to meet their subcontracting goals should be forced to go before Congress and explain why the requirements were not met.

"It is clear that additional incentives and disincentives are required other than assessing punitive damages on prime contractors that don't achieve their subcontracting goals," Barrera explained. "Despite punitive damages being on the books for over 20 years, USHCC knows of no single instance wherein this approach has been used. Therefore, it is totally useless."

Preston Waite, deputy director of the Census Bureau, said his agency includes caveats in its contracts allowing it to withhold up to a third of a contractor's award fee if the company does not meet small business subcontracting requirements.

Among the other ideas suggested to boost up small, disadvantaged businesses were eliminating contract bundling, removing the net worth ceilings that determine access to the 8(a) program and increasing the size limits for sole-source small business contracts.

As with many discussions on the Hill about assisting small business, the topic eventually turned to Alaska native corporations. ANCs, which were created in 1971 to assist disadvantaged tribal businesses, have no limitations on the size or quantity of their sole-source contracts and unlike other 8(a) firms, do not have to prove an economic disadvantage.

"These ANC special privileges go far beyond the intent of the program and have limited competition while undermining the SDB goals developed by Congress," Barrera said. SBA's Jenkins, however, argued that he didn't see any "negative impact" for small businesses because of ANCs.

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