Small Business Needs More Contracts

Posted May 20, 2007 at 11:00pm

Our nation’s defense is a team effort. The men and women in the armed services rely not only on the support staff back home, but on contractors to deliver the equipment necessary to keep them safe in battle and accomplish their missions.

Both small businesses and the larger contractors have an important role to play. Large contractors can offer unparalleled production and sophistication. Small contractors offer flexibility and out-of-the-box ingenuity difficult to achieve at larger companies. Today, however, small businesses are being left behind by shortsighted

defense procurement policies — to the detriment of both our national security and our economy.

Working with the federal government is not easy for small businesses. I recently attended a workshop where dozens of small defense contractors raised concerns about their viability in the face of an increasingly erratic supply process. Because of their size, these firms need to rely on a consistent flow of incoming work and are highly sensitive to changes in procurement patterns. When the government postpones the release of new solicitations or delays response time, task orders or payments, small businesses suffer and their work force is at risk.

We don’t need a radical change in procurement policy to bolster the ability of small business to compete for defense contracts; we just need to enforce the rules and regulations that are already in place. Currently, 23 percent of federal contracts are intended to go to small businesses. Rather than sticking to these guidelines, the reality is that today, large businesses are being awarded contracts intended for smaller companies. In fact, the American Small Business League recently concluded that half of all the funds intended for small businesses actually are going to large companies.

It won’t surprise anyone that the number of defense contracts is growing. A recent report by the Government Accountability Office said the “Department of Defense increasingly relies on contractors to provide a range of mission-critical services from operating information technology systems to providing logistical support on the battlefield.” The same GAO report goes on to state that Defense’s obligations on service contracts rose 78 percent in a single decade, from $85.1 billion in fiscal 1996 to more than $151 billion in fiscal 2006.

While the number of defense contracts has risen significantly, they have been distributed to a small and shrinking number of contractors. In fact, a 2004 report by the Center for Public Integrity found that 80 percent of all defense contracting dollars awarded by the Pentagon were won by 1 percent of defense contractors, equaling approximately 737 out of nearly 100,000 contractors.

Additionally, there is a need for a more effective method of budgeting and planning for future projects, which impacts manufacturers as well as contractors. Small-business manufacturers are faced with the challenges of purchasing raw materials and long-lead-time items in anticipation of future orders. When the government fails to order quantities based on documented estimates, it is impossible for small businesses to accurately budget and align their own resources.

My district on Long Island, an area rich in history for defense manufacturing, relies heavily on small businesses to fuel the local economy. There needs to be a partnership whereby the needs of small business and the government are understood. The lack of enforcement of the current procurement laws is crippling many of these small companies. The unique capabilities of these smaller defense companies cannot be replaced by larger defense companies. We need to ensure that these companies are protected so the critical parts and services they provide can be supplied to our men and women in uniform.

In addition to targeting the small-business set-aside goals, we need to maintain a consistent flow of new contracts to small businesses, decrease the lag time between the bidding process and the award date, improve the government response times and improve budgeting and planning for future resources.

The good news is that this Congress is doing something about the situation. Last week, for the first time in a decade, the House passed the Small Business Fairness in Contracting Act (H.R. 1873) to help open up the $380 billion federal marketplace to small businesses across the country. This will bring strong economic growth and create jobs.

The Small Business Fairness in Contracting Act sets a government-wide goal of awarding 30 percent of contracts to small businesses. The current goal is 23 percent. The bill also reduces the creation of “mega contracts” that are too large for small businesses to compete, increases the participation of small businesses in the federal marketplace and stops the practice of large businesses obtaining small-business contracts. The measure also helps ensure that large companies can’t take advantage of small-business contracting programs, by specifically mandating the Small Business Administration reach out to small businesses and advise them of the opportunities to compete for government contracts. This is important because last year, $12 billion in small-business contracts actually went to large corporations.

The flexibility, innovation and sheer diversity of quality products and services supplied by small businesses cannot be replaced. Protecting these small companies is vital as they play an integral role in our economy and in the defense of our country. As many executives have pointed out to me, when Defense says it needs something quickly, the small contractors pull overnight shifts to get the project done fast. They remember who they are working for. We should remember that, too.

Rep. Steve Israel (D-N.Y.) is a member of the Appropriations subcommittee on State, foreign operations and related programs.