GSA Underpaid Small Business Contractors, House Probe Finds

This story has been updated with GSA comment. 

The General Services Administration erred in administering its multiple award schedules program and must now pay out $3 million in guaranteed payments to small business contractors, a House committee investigation has found. In a Thursday announcement, Rep. Sam Graves, R-Mo., chairman of the Small Business Committee, said a year-long probe of 3,300 federal multiple award schedules contracts canceled between 2008 and 2012 showed that 1,334 vendors were wrongly denied minimum guaranteed payments, 1,281 of them small business suppliers to agencies.

GSA receives revenue from contractor fees based on contractor sales, but in the past year the agency has been terminating relationships with contractors who failed to meet a $25,000 annual sales threshold. Nearly half of the 19,000 vendors in the program were not meeting the threshold, the committee noted, though each is guaranteed at least $2,500 in sales.

“GSA’s case for canceling these contracts in terms of dollars saved did not account for paying some of these firms the $2,500 they would be owed under their contracts,” Graves’ statement said. “When the committee began questioning why the $2,500 was not included in the calculations, it became clear that GSA was not adhering to its own contracts and had not paid the required termination costs to small businesses for at least five years.”

In a May 6 letter to Graves, Tom Sharpe, commissioner of GSA’s Federal Acquisition Service, confirmed the facts in a review of his agency’s approach and said henceforth, “GSA will not require contractors to request a guaranteed minimum payment.” He said his office has taken steps to educate contractors on requirements to be “successful contract-holders.”

The agency also stressed that when an eligible contractor fails to make the minimum sales requirement, GSA refunds them a minimum guaranteed payment. "Policy dating back to the previous administration required eligible small businesses to request guaranteed minimum payments,” GSA Press Secretary Mafara Hobson said in an email to Government Executive. “Under new leadership, GSA no longer requires eligible small businesses to request these payments. Instead, GSA will proactively identify those small businesses who are eligible and issue payments automatically. The agency will also issue payments to those eligible small businesses who have not requested payments within the past six years."