House defense bill’s contracting provision irks White House

This story has been updated.

In threatening a veto of the Defense authorization bill the House passed on Friday, the White House mentioned a host of budgetary reasons, but it also cited a little noticed provision on agency contracting to small businesses.

The fiscal 2013 National Defense Authorization Act faces an uncertain future in the Senate mostly because of its controversial provisions to restore cuts in weapons programs already accepted by the Pentagon.

But a package of eight contracting reform bills long sought by the House Small Business Committee also was included in the larger bill, which passed by a substantial majority, 299-120.

A key provision would raise the goal for agency contract awards to small businesses from 23 percent to 25 percent of contract dollars (and the goal for subcontractors from 35.9 percent to 40 percent), a change backers say will provide $11 billion in new work for small businesses. Another provision would toughen enforcement against the practice of “bundling” of contracts so that large companies can dominate the government market, which House Small Business Chairman Sam Graves, R-Mo., said is the practice that small business owners cite as their biggest obstacle to successfully competing for federal work.

The Pentagon accounts for some 70 percent of government contracts.

Still other reforms affecting the 350,000 small businesses registered to compete for federal contracts would elevate agency Small and Disadvantaged Business Utilization offices; crack down on large firms hiding behind small business fronts to win contracts; address contracting fraud by helping small businesses comply with complex contracting and size rules; and make mentor programs more portable.

But it was the provisions on percentage goals and bundling that the Office of Management and Budget criticized in its May 15 statement of administration policy. “The [Obama] administration strongly supports efforts to increase federal contracting with small businesses, but opposes Section 1631, which would establish a laudable but overly ambitious governmentwide small business procurement goal and unrealistic individual agency goals that could undermine the goals process and take away the government’s ability to focus its efforts where opportunities for small business contractors are greatest,” the White House said.

“In addition, the administration objects to the level of complexity that Section 1671 would add to the process for evaluating contract bundling, which will encourage a needless increase in litigation and place unnecessary constraints on agencies in making determinations that bundling is necessary and justified,” OMB noted

Graves said the language has broad support. “Despite the White House’s shocking objection to this effort to expand opportunities for small businesses, these provisions have been supported by more than 20 business groups and many colleagues across the aisle,” he said in a statement after passage of the defense bill. “This is further proof that both parties can work together to pass legislation that will boost the economy by helping our nation’s small businesses, and I encourage the Senate to support it.”

In the Senate, Sen. Ben Cardin, D-Md., is preparing to defy the White House and introduce his own bill to raise the agency small business contracting goal.