Many of the 21 federal agencies that have accounted for 96 percent of all federal procurement dollars in recent years are falling short of "very modest" minority and small-business contracting goals, according to the report. While small businesses continue to receive nearly 23 percent of federal contracting dollars (the goal set by Congress in 1997), the number of contracts awarded to such firms fell from 6.4 million in 1997 to 4.9 million last year.
"As a former college professor, I am used to handing out grades, and it's clear many agencies need to go back to school," Ms. Velázquez says. "The average grade for the federal government was a 'C,' which, if you ask any of my former students, would never have made it in my classes.
"Latinos are starting businesses faster than any other ethnic groups, with a phenomenal growth rate of 114 percent over the last five years. In the move to 'reinvent' government, we should not streamline small business out of business," she says.
The report castigates the Department of Defense for purchasing just 21 percent of its goods and services from small businesses. Of those businesses, only 6 percent are certified as disadvantaged. The report faults the DoD for failing to set higher standards and for placing what it said was a disproportionately heavy burden on other agencies to make up the difference – a challenge they have not met, the report notes.
"This shows that many federal agencies are not meeting their commitments to women-owned and minority-owned companies. The clear message is that as far as the billions of dollars' worth of contract money is concerned, they need not apply," the report says, in part.
In annual negotiations with the SBA, federal agencies regularly pursue minority contracting goals that are lower than those established by federal mandate, the report points out. For instance, of the 83 goals reviewed, 12 were found to be "unreasonably low," with another 17 below federally mandated standards. Additionally, the report criticizes what it calls a "lack of accountability" and "a lack of commitment" to follow through with goals, to the detriment of the fast-growing small-business sector.
"These groups [small, disadvantaged, and women-owned firms] are in danger of losing what little ground they have gained from the dismantling of the 'good-old-boy network' that still exists in federal contracting," the report says.
"Moreover, the failure to meet small-business goals comes at a potential cost to taxpayers in terms of higher costs and reduced efficiency. … These setbacks for small businesses have disproportionately hurt women- and minority-owned enterprises."
Ms. Velázquez adds, "It's clear that the federal government needs a lesson from the private sector when it comes to using small businesses to get the job done – and get it done well – especially when it comes to women and minorities."
The report blames contract bundling, the process of lumping together multiple contracts under one large purchase, ostensibly to save time and paperwork. But bundling, the report says, represents "a loss of clout [with] devastating effects on small businesses. They must depend on the large prime contractor to plead their case … and most importantly, they frequently don't get paid in a timely manner."
Ms. Velázquez has introduced legislation to address the problem of contract bundling. One bill would require federal agencies that bundle contracts to justify the savings and to receive approval from the SBA, which could block bundling requests. Another bill, introduced by House Small Business Committee chair James Talent (R-MO) would require the SBA to collect data on contract bundling and require the agency to compile a list of small businesses hurt by the practice.
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