News From Congresswoman
Nydia M. Velázquez
Representing New York's 12th Congressional District - Brooklyn, Manhattan, Queens
Ranking Democratic Member, House Small Business Committee

For Immediate Release
October 20, 2003

CONTACT: Wendy Belzer, Kate Davis, 202-225-4038

Velázquez Criticizes Bush's Strategy to Open the Federal Marketplace for Small Businesses
Plan would harm small firms by decreasing their access to government contracts

WASHINGTON - Congresswoman Nydia M. Velázquez (D-N.Y.), Ranking Member of the House Small Business Committee, stated that the administration's plan to open the federal marketplace to small businesses "falls vastly short of accomplishing this goal." Labeling it as "totally inadequate," Congresswoman Velázquez called on the Bush administration to go back to the drawing board and produce a plan that will truly open new federal contracting opportunities to small businesses.

The plan, which was a result of the president's 5-point small business agenda introduced in March 2002, promised to assist small businesses through tax relief, access to health care, regulatory reduction, and opening up the federal marketplace.

As a result of this agenda, the Office of Management and Budget (OMB) was tasked with studying the barriers preventing small business access to the $235 billion federal marketplace and developing a plan to increase small business opportunities. The regulations recently published in the federal register are a result of OMB's work.

"Once again, there is a growing gap between the administration's rhetoric and reality," Congresswoman Velázquez said. "The president promised a lot, but the final plan delivers little. In announcing his agenda over a year and a half ago, the president said 'government contracting must be more open and fair to small businesses.' These measures will do nothing to remove the current obstacles standing in the way of small businesses that want to perform federal contracts."

Congresswoman Velázquez cited several deficiencies in the administration's plan, including giving additional duties and responsibilities to Procurement Center Representatives (PCRs) who, as the frontline of defense for small businesses, ensure they are treated equitably and fairly in the federal marketplace. There are currently less than 50 PCRs nationwide to cover the millions of contracting actions that occur on an annual basis. These already overburdened individuals will see their duties double without any additional resources to carry out the new directives.

"By doling out more duties without providing more resources, the Bush administration is setting these individuals up for failure," Congresswoman Velázquez said. "This administration talks tough on enforcement, but when it comes time to make things happen, it fails to provide any funding. Even members of the Bush administration have acknowledged the lack of resources is a major obstacle to accomplishing the president's contracting plan."

The plan also fails to address the number one challenge facing small firms in the federal marketplace - the practice of grouping together contracts previously performed by small businesses into one large contract. This practice - known as contract bundling - is a major factor in the federal government's failure to meet its small business goals, costing these firms $13.8 billion in lost contracting opportunities in 2002 alone.

The president said "whenever possible, we're going to insist we break down large federal contracts so that small business owners have got a fair shot at federal contracting." Unfortunately, the final plan does very little to stop contract bundling. The major issue surrounding contract bundling protections is the existence of loopholes that allow agencies to skirt their small business responsibilities. These loopholes have caused a situation in which a mere 2 percent of all federal contracts are actually considered "bundled."

Congresswoman Velázquez pointed out the new regulations do nothing to close one of the most obvious loopholes, which allows federal agencies to circumvent the bundling requirements simply by adding one new contracting item to those formerly performed by small businesses. Closing this loophole would ensure that 50 percent of all bundled contracts would be subject to small business reviews.

Not only will the president's plan do little to change the landscape of the federal marketplace for small businesses, but several provisions will also result in diminished small business opportunities. Specifically, the regulations will waive current provisions aimed at protecting contracts that small companies can perform, which will cause a marked increase in the number of bundled contracts.

"By eliminating these critical protections, we remove those contracts that serve as a gateway for small businesses into the federal marketplace," Congresswoman Velázquez said. "This move will result in the elimination of the next generation of small business contracts, robbing the federal government and the U.S. taxpayer of innovations and cost savings."

Congresswoman Velázquez called for passage of the 2003 House version of the SBA reauthorization, which will make real strides in opening up the federal marketplace to small firms. This bipartisan legislation (H.R. 2802) quadruples the number of PCRs, gives small businesses more time and flexibility to team together and compete for bundled contracts, limits the ability of agencies to create bundled contracts by building in safeguards, and creates an objective and balanced process for small businesses to challenge unfair contracting decisions.

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