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With government-wide spending on acquisition contracts reaching a record high in fiscal year 2023, the Office of Federal Acquisition Policy is calling on agencies to make changes that will allow a healthy number of small businesses to join these vehicles.
In a new memo from OFPP, the Biden administration urges government agencies to take concrete steps such as stand-up, apply the “rule of two,” and “best-in-class” when they negatively impact small businesses. ” contracts are not used. Manage or purchase multiple benefit contracts.
“This guidance is an important step toward ensuring our diverse small business base has access to more diverse acquisition strategy opportunities,” Small Business Administration Secretary Isabel Casillas Guzmán said in a statement released by the Office of Management and Budget today. I mentioned it in the blog I posted. “By leveraging the strategies in this guidance, the federal government will be able to increase the number of small businesses in the federal supplier base and increase contracting opportunities for disadvantaged small and medium-sized businesses (SDBs).”
OFPP also encourages better and more regular communication between small businesses and both SBA’s Procurement Center Representatives (PCRs) and the agency’s small business specialists in the development of multiple contracts.
“For these acquisitions, the agency’s requirements and acquisition personnel should invite the agency’s small business specialist and the SBA PCR to work with the agency early in the acquisition planning process during the development of the acquisition plan. “There is,” the memo states. “Agencies should include a rationale for their acquisition plans, including market research conducted, if multi-deal contracts are not reserved in whole or in part for small businesses or if reserve funds are not used. The explanation should be reviewed by the agency’s small business experts.”
OFPP’s memo comes as government agencies are spending more money than ever before on small businesses. The administration announced that small businesses received nearly $163 billion in federal contracts in fiscal year 2022, of which nearly $70 billion went to disadvantaged small businesses (SDBs).
New data for 2023 released by market intelligence firm HigherGov shows that the use of multiple benefit contracts continues to rise. The company said nearly 55.8% of all awards were made through contract vehicles with the General Services Administration’s OASIS and NASA’s SEWP V, resulting in record award amounts of $13.4 billion and $10.5 billion, respectively. GSA said its schedule contracts generated a record $46 billion in revenue last year, an increase of $4.6 billion over 2022.
Additionally, OFFP’s push for agencies to use one of its “best-in-class” contracts, such as SEWP V or OASIS, led to increased spending on several of these contracts. Deltec, another market research firm, revealed that agencies are spending more than $54 billion on BICs, or 12.7% of all raised. This is up from $37.6 billion in 2019.
Additionally, the number of small contractors continues to decline, although small businesses generally do well at best-in-class levels, with small business utilization remaining stable at 38% from 2018 to 2022. Masu. The SBA highlighted this issue in May. Since 2010, agencies have seen a roughly 40% drop in the number of small and medium-sized businesses awarded prime contracts, according to the report. Over the same period, the number of small businesses doing business with the federal government for the first time fell by about 60%, and over the past 15 years, new entrants have fallen by about 80%.
Using GSA’s Supplier Base Dashboard, Deltek found that there were 1,800 fewer small business contractors in 2022 compared to 2020. Deltec also said that what’s worse is that the number of new entrants to the federal market, defined as having won one or fewer prime contracts in the past three years, has fallen by 2,200 over the past three years. Ta.
In reality, while the proportion of small and medium-sized businesses looks healthy, especially in the case of BIC, the group of vendors winning contracts is small, and this is part of the issue that OFPP seeks to address with this new guidance. is.
“This is an important step in supporting a diverse and resilient federal market, driving cost savings, and improving the entire supply chain. will have a significant impact on expanding access to federal contracts by the United States,” Christine Harada, senior advisor at OFFP, said in a post on LinkedIN.
The memo comes as House members have noted growing concerns over the past two weeks about how small businesses are calculating new high-cap, multi-award contracts from NASA and the Department of Veterans Affairs. There is. Leaders of the House Small Business Committee sent a letter on January 12 regarding the small business size standards that NASA plans to use in SEWP VI GWAC. And on Thursday, House Veterans Affairs Committee leaders asked the Department of Veterans Affairs to increase the number of small business awardees under the Transformation Twenty One Total Technology Next Generation 2 (T4NG2) contract vehicle. We sent a letter asking for more details about the department’s decision not to increase.
This memo also comes in advance of new rules in the Federal Acquisition Regulations. OFPP stated that the FAR Council and SBA are developing regulatory amendments to address the steps outlined in the memo.
“While notice and comment will be required prior to finalization of any such regulatory amendments, OFPP encourages agencies to adopt these control procedures early; “Memorandum M-24-01” will help achieve the SDB contract goals negotiated with SBA in 2024 in accordance with OMB,” the memo states.
One of the biggest impending changes is the application of the “rule of two” to multiple benefit contracts. Under FAR Part 19 and 13 CFR, the “two rule” provides that small business concerns have a reasonable expectation that offers and awards will be made from at least two responsible small business concerns. It is required that the acquisition must be put on hold regarding the concerns. fair market price.
Significant changes to the “two-person rule”
For the first time, this memo broadly applies this concept to multiple award contracts.
“Except for orders that cite the competition exception (FAR § 16.505(b)(2), the fair opportunity exception, or the agency’s procedures reflecting an appropriate exception), the agency may not use the small purchase threshold (MPT). If it is reasonable for the contracting officer to obtain offers from two or more small business contractors under multiple contracts that are competitive in terms of market price, quality, and delivery time. applicable to small and medium-sized business contractors if we determine that this is expected to be the case,” the memo states. “If a hold order is not used, such as when there are multiple contracts with no or only one small business contractor, the contracting officer must follow agency procedures to document the basis for the decision. there is.”
The documentation should also include details about the agency’s market research efforts, such as investigating small businesses that do not have multiple contracts and why it decided to use a particular method, and It should be shared with the agency’s small business specialist to give them time to consider it. and respond.
“Small business professionals must notify PCR of any non-pending orders that exceed the standards negotiated between the agency and the SBA,” the memo added.
Larry Allen, president of Allen Federal Business Partners, expressed deep concern about the change in the “rule of two.”
“This memo reverses policy that has been established for more than 30 years. OMB ruled several years ago that the two rules apply to contracts, not the task order level. The Federal Acquisition Streamlining Act (FASA) also contained language clarifying that the increased small business acquisition thresholds included in the bill do not in any way change the procurement priorities outlined in FAR 8.4. ” Allen wrote in an email to Federal News Network. “Government contractors have invested millions of dollars in indefinite delivery, indefinite quantity (IDIQ) contracts, which are a quick and easy way to buy. Where can those companies go to get their money back? This administration touts transparency, but this is a big, substantive policy shift that no one outside of OMB and SBA seemed to know about. How can industry think that the government is serious about transparency and wants to partner with them when it comes to change? Can you do that?”
As part of this overall effort, OFPP is collaborating with GSA’s Office of Shared Solutions and Performance Improvement and SBA to develop standard reports to track and manage how agencies are meeting the memorandum’s goals. He says he will create a tool.
“Furthermore, OMB and SBA are committed to improving supply chain enhancements that can be improved, as data shows that small businesses are undervalued in the federal market segment relative to the overall economy and are significantly more expensive on the dollar.” “We will work together to identify priorities,” the memo said. “The proportion of dollars that are concentrated in a small number of market participants or that flow to small businesses is much higher through the public markets than through multiple contracts.” is stated.
The memo also follows a series of initiatives launched by OFFP in 2021 to address small business contracts. In June 2021, President Joe Biden issued an executive order to increase contract spending to disadvantaged small businesses by 50% over the next five years, reaching 15% of all prime contracts by 2025.
Last February, we launched two tools, the Supplier Base Dashboard and the Procured Capital Tool, to help agencies replenish their industrial base and find companies that could compete for federal jobs.
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