Federal Contracting: End SBA's Procurement Role

Should the U.S. Small Business Administration be in the business of helping small-business owners procure federal contracts? Its critiques allege that SBA’s procurement program is rife with fraud. More specifically they say that affiliates of large businesses are gaming the system to glean contracts meant for small businesses. Additionally, most of the small businesses that apply, fill out the multitude of forms, register and follow SBA’s instructions, and wait for government procurement officers to call them. But the phone never rings.

SBA is charged with helping small-business owners get 23 percent of all federal contracts. That is in accordance with the "goaling" mandate passed by Congress and signed by the President. Of the 23 percent, the goal is further subdivided to give disadvantaged groups a leg up.

Five percent of prime and subcontracts are targeted to small (minority-owned) disadvantaged businesses. Another five percent of prime and subcontracts are targeted to women-owned small businesses. Three percent of prime contracts are targeted to small businesses in historically underutilized business zones called "HUBZones." And three percent of prime and subcontracts are targeted to service-disabled, veteran-owned small businesses.

In fiscal year 2008, the federal government awarded $93.3 billion in contracts to small businesses. That was 3.5 percent short of its 23 percent mandate. Even though it is close to meeting its goal, The American Small Business League claims that some of the businesses are actually larger than SBA’s definition of "small." ASBL has been fighting SBA in the courts for full disclosure of all contract recipients.

But, in my opinion, whoever wins is of little consequence. That is because by meeting the mandate, federal procurement officers have to bypass some larger, more experienced and better-qualified contractors. In other words, almost 25 percent of the contractors making weapons, armor and other combat paraphernalia, are chosen based upon company size rather than who is best for the job. Is that how we want to equip our troops going off to war? The Defense Department and our federal agencies should choose their contractors based upon quality and bid price -- not business size and disadvantaged status.

My recommendation is to let small-businesses compete for government contracts based on their ability to do the job. As a result, small businesses may have to spend a few years subcontracting, forming relationships with federal procurement officers and convincing them that they are worthy of bidding for prime contracts on their own.

Furthermore, SBA should get out of the procurement business altogether so that they can concentrate on what they do best -- guaranteeing loans against default. The agency is well endowed with the full faith of the federal government behind its loan guarantees. That makes it uniquely qualified to induce lenders to make loans by reducing their risk.

With the money it saves by ending its procurement outreach, SBA can increase its lending programs. And even though it is politically unattractive, the agency should make direct loans to marginally qualified applicants when its approved lenders will not. That includes loans for start-ups and fledgling companies that pay their bills on time but have insufficient collateral or lack a significant history of profit.

According to a quote that is often attributed to Albert Einstein, "Insanity is doing the same thing over and over again and expecting different results." Continuing SBA’s failed procurement program is also ‘insanity." Karen Mills, SBA’s new administrator should discontinue it instead of expecting different results.

Jerry Chautin is a volunteer SCORE business counselor, business columnist and SBA’s 2006 national "Journalist of the Year" award winner. He is a former entrepreneur, commercial mortgage banker and business lender. Follow Jerry on Twitter, www.twitter.com/JerryChautin.

Follow Jerry Chautin on Twitter: www.twitter.com/JerryChautin

Comments

[dadw5boys]

M4's and Machine Guns are locking up in Battle !!!!!! OVERHEATING ~~~~

Were they outsourced ? CHEAP METAL USED WHEN METAL PRICES WHERE SKY HIGH ?????

[Uriah Maynard]

The reality is that these requirements were put in place to ameliorate the corrupt cronyism that prevents minority-owned small businesses from competing on a level playing field. It will do no help to the economy to feed public monies to those who are already wealthy, particularly in a nation where 70% of job creation comes from small businesses, even if it is less expensive. To argue against giving contracts to minority-owned small businesses is to argue against the existence of the very real difficulties that these small business owners face in building the strong networks necessary to create a profitable and growing business.

You argue that eliminating this requirement would free up funds to do more work helping small business owners in other areas, yet this need not be done at the expense of contracts for small business owners. What Congress needs to do is instead to recognize that the SBA is one of their very best investments in the American economy, right up there with food stamps and unemployment benefits, and to accordingly expand the money available to the SBA as part of a badly needed Main Street Economic Stimulus. Then the SBA can expand its lending efforts, its counseling efforts, AND its assistance with gaining government contracts, all with the end result of creating millions of jobs and stimulating honest competition.

[dadw5boys]

Under the Central Banking System the Government must SPEND money back into the Economy for people to pay interest on Debts.

here this explains it

http://vodpod.com/watch/2046618-money-as-debt-2

[Conk]

That's right. Our dollar is just debt. That's why the debt can't be paid off. No debt, no money. There must be increasingly more debt to pay the interest on the debt from yesterday. Fiat money is the ultimate Ponzi scheme. It is designed to fail and the bankers know it. They have played the game for centuries, Up and down we go. We lose fortunes. Banks make fortunes. Some scam, eh?

Back on track. I was a Contracting Officer for over 30 years, buying missile systems for DoD. I've had so many contract awards to inept small businesses crammed down my throat, it's laughable. Most all of them went bust or had to be terminated for default. The SBA almost ALWAYS throws their support to a small company, even in light of egregious facts supporting the company's shortcomings. And the SBA has the final word on the matter! Funny too is how the SBA disappears when the small business struggles during contract performance.