Congressman Sam Graves, R-Mo., the chairman of the House Small Business Committee, introduced a bill on February 27, 2014 that would increase goals for awarding small business contracts and subcontracts.
Specifically, the bill (to be dubbed the ‘‘Greater Opportunities for Small Business Act of 2014’’ if enacted) would increase the government-wide goals for awarding prime contracts to small businesses from the current 23% goal to 25%.
Also, for prime contractors performing a contract requiring them to implement a small business subcontracting plan, the bill would increase the minimum small business subcontracting goals from the current 35.9% goal to 40%. Agencies can set much higher goals for particular contract competitions and it is not unusual for a solicitation’s stated goals to exceed 75%. This is especially true towards the end of the government’s fiscal year when agencies try to compensate for unachieved goals earlier in the year. Should minimum small business subcontracting goals increase, contractors may see 80% or more subcontracting goals for end-of-the-year contract competitions.
The federal government has come short of meeting small business goals every year since 2006. Prime contractors also express difficulty finding qualified, small business subcontractors in sufficient quantities and specialties to meet their goals. As the new bill does not propose any changes to make it easier to achieve small business goals, it is unclear how an even higher standard will be met.
The proposed increase in small business goals also comes at a time when the federal government has turned its attention to preventing and punishing small business fraud. As part of the Small Business Jobs Act of 2010, Congress created a “presumption of loss” to the government equal to the entire value of a contract or subcontract when a business willfully misrepresents itself as a small business to obtain a contract or subcontract. This means that the government may seek to recover the entire contract price when it later determines that a contractor misrepresented itself as a small business to obtain a contract or subcontract award. The potential for small business fraud is likely to rise with pressure on agencies and prime contractors to meet increased goals.
Alexa Santora is an associate in Fox Rothschild LLP’s Federal Government Contracts and Procurement, Construction, Infrastructure, and Litigation Practice Groups in Washington, DC and is available to assist federal contractors with issues related to small business and subcontracting plan compliance.