03/27/2012 09:53 am ET Updated May 27, 2012

The COP Act: Arming Small Business Contractor "Davids" with Real Stones

If David had thrown a clump of dirt at Goliath, there wouldn't have been much of a competition. If small businesses are David and large businesses are Goliath, then the Davids in the government contracting world have been limited to hurling dirt clumps at the Goliaths.

Smaller outfits have had a tougher time winning contracts. Annually, billions of dollars are awarded to businesses in the form of government contracts. Many government requirements are bundled together to form larger contracts containing multiple government needs (and are often largely unrelated items), thereby limiting the Davids' ability to compete with Goliaths for these contracts.

But a new bill recently introduced by Rep. Sam Graves (R-Mo.) and Rep. Allen West (R-Fla.) gives small businesses hard stones to throw as they battle larger companies for government contracts. In addition to providing more opportunities to small businesses, the bill provides a more formal process for small businesses to challenge agency decisions, whether on their own or through a proxy.

Someone, though, has to be put in charge of making sure the law is followed, and someone else has to have the resources to keep tabs. Because small businesses rarely have the money to hire lawyers to challenge government decisions that don't follow the law, they need a proxy.

The Small Business Administration (SBA) and trade associations are deputized to become that proxy. Congress is on the verge of providing the SBA and small business trade associations with an important, albeit untested, tool designed to help keep government agencies, often at the urging of bigger contractors, from avoiding the rules designed to foster small business prime contractor growth.

The new Contractor Opportunity Protection Act, or "COP" Act, currently in the U.S. House has been crafted to bridge the gap between the lofty goals in the small business laws and the nitty-gritty details of ensuring enforcement. There is already a law that small businesses must be awarded federal government contracts that are less than $150,000.

There also exists a law that says that a government agency cannot "bundle" two (or more) different needs together to exceed $150,000 so that the agency would not have to set aside those awards for small businesses. For larger, more lucrative contracts, there are policies to encourage awards to small businesses in open competitions against larger competitors. But up until now, the only way to challenge an agency bundling decision was to write a letter and hope that the agency official paid attention.

Agencies possess wide discretion over what they need and how to obtain it. Intuitively it also makes sense to combine similar items together in a single contract to reduce the amount of paperwork and administrative waste for overworked agency contracting officials. Far too many contracts are managed by far too few professionals.

On the other hand, unchecked discretion to lump disparate needs together, making large contracts even larger -- and thereby less likely to be awarded to a small business competing against a larger one -- is a problem. All too often, letters claiming improper bundling fell on deaf ears. Given the important goal of fostering small business growth at the prime contractor level, as small businesses are the engine of job growth, the COP Act has been promoted to level the playing field further. Of course, it will cause agency officials more paperwork in the acquisition process and subject those officials to more time-consuming protests.

Under the proposed COP Act, the SBA itself has the authority to file a formal protest of an agency decision to bundle requirements together in a manner that renders larger contracts much more difficult for small businesses to win. If the SBA declines to file a protest, the small business may pursue the protest before the Government Accountability Office, or employ a trade association to pursue the protest on its behalf. Companies using the latter approach have the added advantage of remaining anonymous, thereby limiting fear of possible backlash or discrimination for future contracts for filing a complaint.

The new rules require agencies to carefully consider and justify bundling of contracts and to provide a rational explanation detailing why the bundled contract cannot be split among multiple small businesses. The new bill is not only dividing things up, however; it also allows small business to band together in order to facilitate bids for larger contracts without losing status as a small business.

Should the COP Act eventually pass, more Davids will have more stones to throw at the Goliaths. That's certainly good for Davids.