If you agree with these views, tell the regulators by filing your opinion at http://www.regulations.gov or by faxing it to 202-501-4067 making sure you reference FAC 2005 – FAR Case 2011-024. Your opinion counts!

The Fairness in Procurement Alliance (FPA), representing the procurement interests of all the groups for whom Congress had determined they were economically disadvantaged, wishes to vigorously object to the Government Regulators action at attempting to make ‘simplified acquisitions' on the GSA Schedules "at the discretion of the Federal Agencies."  Our Umbrella Initiative Think Tank affirmed that Government Regulators have neither the statutes nor a choice to make such an abusive interpretation of the legislation.  No wonder why American taxpayers distrust regulations.

Small businesses have banned together under the NFIB Coalition for Sensible Regulations and have sent a letter to the President complaining about the regulators' work. The interim rule on set-asides on the GSA Schedules is equivalent to telling small businesses that their rights to ‘justice,' an inalienable right, would now be offered, but "at the discretion of the Government." How dare they!

The Exemptions on the Federal Acquisitions Regulations (FAR)

Small businesses, frankly, are ‘as mad as hell' at the regulators for, originally, establishing exceptions in the Federal Acquisitions Regulations (FAR) to begin with. They have done so to please the lobbyists and purposely restrict small businesses ‘access to contracts' without ever having any statutes to base such ‘exemptions.' 

These exemptions, each year, have been responsible for diverting, away from small businesses, $44 Billion in GSA Schedule contracts and $20 Billion in Foreign (or overseas) contracts destined for military bases and embassies in foreign soil for a decade.  That represents a total of $64 Billion each year.

The proposed Interim Rule is nothing but another attempt on the part of the Regulators to continue catering to the lobbying interests of big businesses as articulated by NaFCA on its latest summit focusing on the perpetual restrictions on ‘access to contracts.' 

Implying that Section 1131 of the Jobs Act of 2010 involve simplified acquisitions -- which are those acquisitions between $3,000 and $150,000 -- although clever, is not only very unfair but unethical.  Barrowing from the famous speech in the movie "Network":  I am as mad as hell and I am not going to take it anymore.

The Facts on the Case

The Interagency Task Force on Small Business Contracting, created by the President in April 2010, issued a report recommending that the rules on set-asides, including for multiple-award contracts, be clarified. Our Think Tank, at the request of Members of Congress, contributed to that effort with specific recommendations. The President Task Force acknowledged that there has been no attempt to create a comprehensive policy for orders placed under either general task-and delivery-order contracts or schedule contracts that rationalizes and appropriately balances the need for efficiency with the need to maximize opportunities for small businesses.

Our Think Tank has affirmed that the federal procurement data system indicates more than three out of every four simplified acquisitions are going to large businesses. The Small Business Act exclusively reserves those purchases for small businesses. If anything, regulators must articulate that all purchasing vehicles, such as federal supply schedules (FSS) and government reverse auctions, used by Agencies, which consider other than small businesses do NOT have priority or preference for simplified acquisition purchases and that is the law!              

The Small Business Act mandate on Simplified Acquisitions

The Small Business Act (15 USC 644) states that simplified acquisitions "shall be reserved exclusively for small business concerns..." and "small-business concerns with the meaning of this chapter shall receive any award or contract or any part thereof, and be awarded any contract for the sale of Government property..." Therefore, task and delivery orders under multiple award contracts -- especially reverse auctions -- between $3,000 and $150,000 "shall" be set aside for small business concerns. Discretionary and voluntary use, as you are implying on the Interim Rule is NOT an option where there are qualified small businesses.

In August 2007, I challenged the simplified acquisitions on the GSA Exemption to an Army solicitation which GAO refused to hear, declaring that "I had not standing to bring up the protest." My protest, however, convinced SBA to issue their historic February 2007 Legal Opinion, which declared the GSA Federal Supply Schedule Exemption on simplified acquisitions illegal.

My effort inspired other small businesses to follow my lead and challenge the exemption on the ‘simplified acquisitions on the GSA Schedules.' In October 2008, GAO ruled against the GSA Exemption in the Delex case against the Navy (pdf) followed by the Aldevra decision (pdf) in October 2011 against the VA. Most recently, in December 2011, GAO ruled on the Kindomware Technologies protest also against the VA.  All these decisions involved simplified acquisitions on the GSA Federal Supply Schedule (FSS) and, in all of these decisions; GAO has ruled that the exemption on simplified acquisitions was illegal.

Audacity of Federal Agencies to Challenge the GAO Decisions

Small businesses were dumbfounded, after the GAO Delex decision, with the action of the then GSA Chief Acquisition Officer, David Drabkin, who in a Memo to his staff said: "GSA does not agree with GAO's decision in this matter" and then GSA proceeded to ignore the GAO decision. Also with the action of Jan R. Frye, VA Deputy Assistant Secretary for Acquisitions and Logistics who, after the Aldevra GAO decision, distributed a Memo ordering the VA Contracting Community to ignore the GAO decision.  Frye's memo stated, "VA is of the opinion GAO's interpretation is flawed and legally incorrect. Executive Branch agencies are not bound by GAO's legal advice."

Small businesses are so mad,' that this time, veterans business groups joined together and filed a lawsuit against the VA for their refusal to set aside contracts.  "The federal government can't be sued for not meeting its goals [to set aside contracts], but it can be sued for not adhering the law, and that is what this committee is concerned about," said Rep. Bill Johnson, R-Ohio, who serves as chairman of the House Oversight and Investigations Subcommittee.

The SBA views on Simplified Acquisitions

The Small Business Administration (SBA) in a Legal Opinion dated February 2007 offered to GAO stated that "according to statute and regulations, small business set asides are mandatory for acquisitions valued from $3,000 to $100,000 (upgraded to $150,000 in 2011) and take priority over GSA Schedule contracts. This interpretation is consistent with the declared and unambiguous intent of Congress as it relates to Federal procurement and small businesses."  In other words, Agencies do not have any latitude on the matter. 

The Jobs Act of 2010

Section 1331 of the Jobs Act calls for the issuance, within one year of the law's enactment (September 27, 2010), of "a regulation, to establish guidance under which Federal agencies may, at their discretion, set aside task-and-delivery orders under multiple-award contracts, use partial set-asides under multiple-award contracts, and reserve one or more contracts under procurements awarded using full and open competition."   Section 1331, however, did not make any reference to ‘simplified acquisitions,' which are those requisitions valued from $3,000 to $150,000.  The Small Business Act unequivocally requires that they be reserved for small businesses.

Backgrounder on the GSA Federal Supply Schedules (FSS)

The GSA Federal Supply Schedule holders, to begin with, represents less than 2% of ALL small businesses registered on the CCR database. GSA claims that 90% of ALL GSA Schedule holders are small businesses yet their actual number is less than 15,000.

Small Business Participation in Government Contracting at the Federal Level as of March 2011

** The Umbrella Initiative Think Tank claims these total should be reduced by 10-15 % because they

 include non-active businesses meaning they are not bidding or have not received  contracts over the last year. 

Small businesses demand that government regulators refrain from giving an unfair advantage to GSA Schedule suppliers on simplified acquisitions. Schedule holders represent a very small share of all small businesses contracting with the federal government. Our Think Tank believes that small businesses, not on the GSA Schedule have the right to team-up with Schedule holders in accordance with the SBA teaming arrangement guidelines and GSA currently prohibits such teaming arrangements on their rules,

What Small Businesses Want on the Final Rule

We realize that SBA and OFPP, which are vested by Congress under section 1331 with the authority to issue regulations, intend to draft the actual final rule that will set forth more specific guidance. Small businesses trust that our views - which represents not only the view of 34 organizations on the FPA coalition, but the view of The Umbrella Initiative Think Tank and Legal Center - will be incorporated into a final ruling.

The Regulators at DoD, GSA, and NASA are required, Pursuant to 41 U.S.C. 1707 and FAR 1.501-3(b),  to consider public comments received in response to this interim  rule in the formation of the final rule. 

Small businesses do not object to the real Congressional intent on the Jobs Act of 2010 to make FSS contracts, above $150,000, subject to the discretion of Agencies, which is what the Jobs Act of 2010 had called for.  Even for that to happen, however, the following issues must be articulated on the final rule to make sure that the contracting community, on the one hand, complies with the regulations and small businesses, on the other, receive "maximum practicable utilization" (MPU) in accessing contracts including due process on their protests.  Below are our recommendations:

• Simplified Acquisitions, on any and ALL procurement vehicles, shall be set-aside for small businesses. This is a non-negotiable issue.
• Clauses on the FAR and the SBA Regulations that protect the rights of small businesses - including their access to contracts; their access to accelerated payment; contract financing and prompt pay, among others, must be incorporated in ALL set-aside solicitations and in the actual contracts.
• Market research - compliant with FAR 10 - must be performed in such a manner as to avoid ‘unfair justifications' by the requestors as OFPP has demanded four times.
• Small business coordination -- by the appropriate SBA Procurement Center Representatives -- must be performed on ALL solicitations regardless of the procurement vehicle used, especially FSS and government reverse auctions Buys. No exemptions.
• The rules of the government reverse auction (i.e., FedBid) - which operates under a GSA contract - must be overhauled as the SBA Office of Advocacy recommended on their 2008 r3 Initiative and as FPA had detailed on a November 2011 Demand for an Investigation on their alleged abusive use.
• The GSA Contract Teaming Arrangement (CTA) must be revised as to align with the SBA views on teaming arrangements. In short, small businesses which are not GSA Schedule Holders have the right to team up with GSA Schedule holders for mutual benefit. They have been doing so for years on Fedbid.
• The contracting community MUST advertise their solicitations for simplified acquisitions; identify the selection criteria; provide at least 15-30 days for responses and provide contact information, on Fedbizopps. Most importantly, they MUST post ALL the results in likewise manner.

• The entire contracting community must undergo specialized training and certification - either live or on-demand - on small business issues from firms which specializing on set-asides in the private sector (not the government) to ascertain that the contracting community both understand and has an incentive to be responsive to small business needs.
• The OSDBU Director must regain direct reporting to the Agencies respective Secretaries as mandated by Congress and they must actively advocate - within their agencies - the issues brought to their attention by procurement watchdogs and small business advocates in the private sector.
• ALL complains and protests against procurement units involving small business issues shall be tracked down through both Size Protests and a public database in the private sector.
• Requestors or end-users caught - through protests or complaints - offering preferential treatment to brands or suppliers shall be held accountable for disciplinary action.
• Procurement units challenged through protests for abusive procurement practices shall not be allowed to cause any protest against them to become ‘academic' without properly compensating the protester.
• Small businesses which win their protests - involving abusive procurement practices - must receive tangible compensation in the form of the contract they fought for or - at least - twice the contract value in future contracts, over a specified amount of time, for bona-fide needs of the Agency as long as the price offered is competitive.
• Agencies caught through protests or complains violating the rights of small businesses shall suffer repercussions, including but not limited to the loss of funding for the contract(s) or force to compensate the protestor.
• Regulations must incorporate transparency into teaming and subcontracting agreements
• Contracting Officers (CO) must acknowledge written requests and/or correspondence involving reverse auctions; publicize their Buys on FedBizOpps and allow reasonable time to fulfill the contracts.

Conclusion

Small business leaders are as mad as hell at these regulations, and they are not going to take their abuse anymore.Should regulators persist at not removing the ‘exemptions' (both the GSA Schedule and the foreign exemption, avoid addressing small business barriers, and/or continuing to restrict our access to contracts, they shall expect a) lawsuits; b) massive protests and c) a public database  which will identify both the Procurement Units including the contracting personnel (by name) caught engaging in abusive procurement practices.  We have had enough abuses through unfair regulations!

Raul Espinosa is the Founder of the Fairness in Procurement Alliance (FPA) whose mission is to bring fairness to public procurements so that small and disadvantaged businesses (SDB) can receive "maximum practicable utilization" (MPU) as prescribed by P.L. 95-507. He  is also  the Managing Partner of The Umbrella Initiative whose mission is "to double the number of small businesses contracting with the governments by the year 2020."  Raul  has been championing the fight against the Exemptions since 2007. He can be contacted at raul@umbrellainitiative.org