STATEMENT OF ANGELA B. STYLES
ADMINISTRATOR FOR FEDERAL PROCUREMENT POLICY
BEFORE THE
COMMITTEE ON VETERANS AFFAIRS
UNITED STATES HOUSE OF REPRESENTATIVES
FEBRUARY 5, 2003
Chairman Smith and Members of the Committee, I am pleased to appear before
you today to discuss the participation of service-disabled veteran-owned
small business concerns in federal contracting and subcontracting. Specifically,
you have asked about the implementation of section 502 of Public Law 106-50,
the Veterans Entrepreneurship and Small Business Development Act of 1999,
(“the law”). This section of the law sets a 3 percent government-wide
goal for participation by small business concerns owned and controlled by
service-disabled veterans in federal contracting and subcontracting. Before
addressing the specifics of how we are implementing this requirement, I
would like to briefly discuss our small business agenda in the procurement
arena. Procurement
and Small Business
This Administration is working hard to place the interests of small businesses
and new entrants to the procurement system at the forefront of our policy
agenda. We seek to create a dynamic atmosphere where competitive and innovative
small businesses can flourish and apply their talents to the many pressing
needs facing our government. We are exploring ways of restructuring the
system to allow for greater participation, competition and diversity of
capabilities that spring from this underutilized segment of our economy.
For small businesses, the primary issue is access to the federal marketplace
and the opportunity to compete. And, for us, as policymakers, the issue
is a dramatically reduced contractor base, and the mounting lost-opportunity
cost of choosing among fewer firms with fewer ideas and innovations to deliver
products and services at lower prices.
We have already taken a number of significant steps to establish a more
competitive environment and one in which small businesses can flourish.
1.
Bundling
We are increasing federal contracting opportunities for small businesses
by eliminating unnecessary contract bundling. Contract bundling is the consolidation
of agency procurement requirements into contracts that are unlikely to be
suitable for performance by a small business because of the size or performance
requirements of the contract. Although contract bundling can serve a useful
purpose, the negative effects of contract bundling over the past 10 years
cannot be underestimated. Not only are substantially fewer small businesses
receiving federal contracts, but the federal government is suffering from
a smaller supplier base. When small businesses are excluded from federal
opportunities through contract bundling, our agencies, small businesses,
and the taxpayers lose.
As we have broadened the scope of requirements into fewer and fewer contract
vehicles over the past decade, small businesses have become increasingly
marginalized. The pool of small business contractors receiving new contract
awards has declined from 26,000 in 1991 to about 11,600 in 2001.
To aggressively resolve this problem, the Administration unveiled a strategy
to address contract bundling at the end of October. With successful implementation
of this strategy, we will have reduced a significant barrier to entry and,
in doing so, allowed small businesses to bring their innovation, creativity,
and lower costs to the federal table.
Currently, my office is heading an interagency task force to develop regulations
that will amend both the Federal Acquisition Regulation (FAR) and Small
Business Administration (SBA) bundling regulations to help implement the
strategy. Proposed regulations were published in the Federal Register on
January 31, 2003. Our office will continue to take a lead role in developing
these regulations, through resolution of public comments and issuance of
final rules.
Our "hands-on" involvement in this effort does not end with regulatory
development.
To ensure agency accountability, we have asked agencies to report quarterly
to the Office of Management and Budget (OMB) on the status of their efforts
to address contract bundling issues. Our office will be monitoring agency
actions, and we will provide additional guidance or revise reporting requirements
as necessary.
2. Competitive Sourcing
We are opening the government's commercial activities to expanded competition
between public and private sources. Today, most of the 850,000 full-time-equivalent
employees that agencies have identified as performing commercial activities
(i.e., nearly half of all federal employees) are insulated from the dynamics
of competition.
To improve and expand competition for these activities, OMB has proposed
significant revisions to OMB Circular A-76, the process to determine whether
commercial activities will be performed by public or private sources. Among
other things, the proposed revisions, which were publicly announced in November
and are available at www.omb.gov, would eliminate exceptions that have permitted
federal agencies to provide services to one another on a sole-source basis
without considering the capabilities of the private sector. This step alone
should benefit small businesses. On average, small businesses receive more
than 60 percent of the awards made to private sector firms through the A-76
public-private competition process.
3. Competition Practices
We are working to ensure that the benefits of competition are routinely
applied in our everyday buys. At the request of the President, the Office
of Federal Procurement Policy (OFPP) is leading an interagency working group
to review agency competition practices. The review is based, in part, on
recent evaluations conducted by the GAO, agency inspectors general, and
agency management, that have looked at acquisition planning, pricing practices,
and use of limited competitions among pre-qualified contractors. The group
is in the process of developing recommendations to ensure that current procurement
flexibilities facilitate access to the full range of marketplace capabilities
-- especially those of small businesses -- and are used effectively to consistently
reap good quality at lower cost to the taxpayer.
Implementation of Section 502
Now let me turn to your questions about the expansion of opportunities for
service-disabled veteran-owned small businesses in the federal marketplace
and, specifically, the implementation of section 502 of the law. To fully
appreciate how the goaling requirement is being addressed by the Administration,
it is useful to review the respective responsibilities of the SBA and my
office for small business issues.
OFPP is responsible for providing overall direction of government-wide procurement
policies, regulations, procedures, and forms for executive agencies and
to promote economy, efficiency, and effectiveness in the procurement of
property and services by the executive branch of the federal government.
The SBA has responsibility under section 15(g) of the Small Business Act
(15 U.S.C. 644(g)) for overseeing the federal small business procurement
goaling process, including the government-wide, cumulative 3 percent goal
for participation by small businesses owned and controlled by service-disabled
veterans in federal contracting and subcontracting. OFPP’s role in
the goaling process is limited to gathering statistics and, if necessary,
negotiating disagreements on goaling between SBA and the procuring agency.
OFPP worked with the Department of Defense, the National Aeronautics and
Space Administration, and the General Services Administration to draft the
federal regulations implementing section 502. Specifically, the FAR has
been amended to (1) define the term “small business concern owned
and controlled by service-disabled veterans”; (2) establish that service-disabled
veteran-owned small businesses are afforded maximum practical opportunity
to participate in the performance of contracts and subcontracts awarded
by any federal agency; (3) establish a 3 percent government-wide goal (based
on the total value of all prime contract and subcontract awards) for participation
by service-disabled veteran-owned small businesses; and (4) add data collection
requirements for prime and subcontract awards to service-disabled veteran-owned
small business concerns.
The agency-specific goaling requirements are implemented through goaling
letters and guidance issued to the agencies by SBA. Goals are calculated
as the result of a negotiation between SBA and a procuring agency based
on what is intended to realistically reflect the potential of small businesses
to perform contracts and subcontracts of the agency. SBA also reports to
Congress and the President on each agency's progress toward achieving the
goal in the previous year.
I have attached to my testimony detailed statistics from the Federal Procurement
Data System (FPDS) covering the years since the start of the government-wide
goaling requirement. These statistics, provided on a quarterly basis, cover
participation in federal contracting by both veteran-owned small businesses
and service-disabled veteran-owned small businesses for fiscal year 2001
and the first three quarters of fiscal year 2002.
In summary, the statistics reveal that during fiscal year 2001 service-disabled
veteran- owned small businesses were awarded 9053 contract actions for a
total of $554,554,000; this represents approximately .24% of the total dollars
awarded by federal agencies during that period. During fiscal year 2001,
service-disabled veteran-owned small businesses received $74,652,719 in
subcontracts. For the first three quarters of fiscal year 2002, up to and
including the third quarter, FPDS reports that service-disabled veteran-owned
small businesses were awarded 2735 contract actions for a total of $143,611,000;
this represents approximately .10% of the total dollars awarded by federal
agencies during that period. Subcontracting numbers are not available yet
for fiscal year 2002 because the numbers will not be submitted by the agencies
until March 2003.
With regard to other veteran-owned small businesses, FPDS reports that in
fiscal year 2001 these small businesses were awarded 79,419 contract actions
for a total of $564,463,000; this represents approximately .244% of the
total dollars awarded by federal agencies during that period. During the
same period, veteran-owned small businesses received $533,029,664 in subcontracts.
For the first three quarters of fiscal year 2002, veteran-owned small businesses
were awarded 27,562 contract actions for a total of $526,055,000; this represents
approximately .366% of the total dollars awarded during that period. I am
encouraged by what appears to be a significant increase from 2001 to 2002
for veteran-owned small businesses. Again, subcontract numbers for fiscal
year 2002 will not be available until March 2003.
Based on historical trends, we can anticipate a significant increase in
spending during the fourth quarter and a commensurate increase in contract
awards for service-disabled veterans. However, the statistics for the first
three quarters of fiscal year 2002 as compared to fiscal year 2001 are troubling.
For the first three quarters of 2001, firms owned by service-disabled veteran-owned
small businesses received $297,643,000 in contracts. In comparison, for
the first three quarters of fiscal year 2002, small businesses owned by
service-disabled veterans received $143,611,000 in contracts.
Frankly, I find these numbers troubling. While numbers below 3 percent are
not surprising for the first years after the statutory goal was established,
we clearly have issues that we must resolve if the fourth quarter statistics
for 2002 reveal a percentage decline from 2001 to 2002.
Conclusion
This Administration is committed to providing small business opportunities
in our federal procurement system, particularly opportunities for the very
people that have fought and suffered for the principles behind our competitive
enterprise system. Although these goals may not be easy to accomplish, we
must take greater advantage of the skills and ingenuity of our small business
community. Whether unbundling contracts, opening the government’s
commercial activities to the synergies of the marketplace, or simply making
sure competition is used more, we are determined to provide opportunities
for the nation’s small business contractors who are able and willing
to supply quality goods and services at competitive prices.
I
look forward to working with this Committee to ensure the availability
of adequate opportunities for small businesses owned by service-disabled
veterans. This concludes my prepared remarks. I am happy to answer any
questions you might have.
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