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New legislation addresses issue of bundling

Reforming federal government has presented new challenges for small business

When it comes to the enormous smorgasbord that is government procurement, some are beginning to wonder whether or not small business even has a seat at the table.

But if they do, two things are becoming increasingly clear: they better not be finicky nor gluttonous eaters. In other words, take what you can get even if it’s only a sliver of the pie.

“Right now what is happening in procurement is that the opportunities that small business could take advantage of are disappearing,” said Richard Speights, executive director of the Mississippi Contract Procurement Center in Biloxi at the Business Technology Center.

Speights and others note that due to certain reforms in government, particularly in the way the nearly $200 billion in federal procurement contracts are written and awarded, many small business that once might have vied for, or even been eligible to bid on, those contracts are being squeezed out.

One big issue arose a couple of years ago when the practice of bundling contracts, or consolidating several small contracts into a large one, pushed the hot buttons of many small business groups.

Although the practice is illegal, according to Janita R. Stewart, district director for the U.S. Small Business Administration, there is no doubt it occurs.

Congress acted on the bundling issue last year when it passed legislation that gives the SBA some teeth to fight the practice.

“It is something that should not be done,” Stewart said. “When certain agencies started doing this, [the project] was too big for them to get it.”

The result were jobs too large for a mom-and-pop operation who maybe cut the grass for a few U.S. Postal Service offices, or contracts so large that they exceeded the bonding capacity for even a sizable construction company.

The SBA maintains an 800 hotline for small businesses to report when they feel they have been squeezed out of getting a procurement because of bundling, Stewart said.

Although familiar with the practice and the affect bundling could have on small business, Speights said he was not aware of a case where a Mississippi business was unable to get a contract due to bundling. But he said in areas such as landscaping, maintenance, janitorial and construction it makes some sense.

“From a business perspective of saving dollars it makes senses, but from an economic development standpoint it isn’t a good business practice,” Speights said.

Despite this one hurdle, government procurement for small business is still big business but one that is shrinking.

Based on responses from about 35% of the procurement center’s 2,000 clients — both firms seeking contracts and those awarding them — Mississippi firms got over $30 million in procurement contracts from the Department of Defense alone in 1997. But that is down from the nearly $102 million in contracts awarded by DOD in 1995, Speights said.

On the positive side, he said, that appears to be headed up considerably in 1998. And then there are state contracts, which became more accessible in 1991 after the procurement center began posting potential state and local contracts for small business.

Prime and sub contracts with state and local governments awarded to small business now average around $25 million a year, Speights said.

For small businesses seeking federal government contracts, new legislation in Congress could also be welcome news.

In the same bill signed by President Clinton that addressed the bundling issue and reauthorized the SBA for another three years, was the creation of something akin to the popular Empowerment Zones, created by Congress three years ago to help spur job creation in rural and economically depressed areas.

Called HUBZones, an acronym for historically underutilized business zones, the new program will target inner-city and rural areas where the median household income is not more than 80% of the statewide median.

The goal of the program, which has not yet received funding and is still in the development stages is to increase to 23% from 20%, the amount of government contracts awarded to small business. To help do that, starting Oct. 1, 1998, 1% of the annual federal contracts will be available for business located in the yet-to-be-identified HUBZones. That percentage will increase by 0.5% each year through 2003.

Stewart said much of Mississippi, because of the income requirements, is likely to be a big winner in the program.

“I would say we would stand to get our fair share,” Stewart said.

Exactly how big of a share will have will become more evident after May 27 when the final regulations for HUBZones are completed, she said.

“There are just a lot of things happening in the procurement area right now — that’s the way I look at it,” she said.

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