I strongly believe that contracting with small businesses is an important part of how we tackle America’s federal spending problems. When small businesses compete for contracts, the government spends less money and gains access to innovative products and services from companies that create jobs. That’s why I oppose the General Services Administration’s proposal to restructure its Multiple Award Schedules program in a way that deprives small business of the opportunity to compete.
Until now, while not perfect, schedules have been good for small business and taxpayers. The schedules streamline the procurement process while remaining open to new, better offers, which translates into faster contracting at lower prices. As a result, about one of every 10 federal dollars spent with contractors goes through the schedules.
More than 70 percent of schedule vendors are small businesses, and they receive about 34 percent of the sales. This is significant, given that small businesses struggle to win about 20 percent of all federal contracts. The 4 percent of small businesses that have a schedule contract do much better than small business overall. It’s clear that schedules are an important tool for small businesses trying to compete for federal contracts.
If schedules work well for small firms and taxpayers, why is GSA proposing to deny new businesses the opportunity to compete for $8.4 billion in contracts? GSA says that the business lines it is closing to new offers — areas ranging from temporary personnel and security services to hardware and building materials — are saturated and that it costs money to support and manage contracts with low or no sales. GSA says it wants to use these resources to make the program run better instead. Consequently, GSA suggests simply not letting new companies compete.
Saving money and improving efficiency are laudable goals, but let’s do some cost-benefit analysis. To understand whether this proposal makes sense, I asked how much this will save and what will it mean in terms of small-business competition. On cost, we received three answers from GSA, ranging from $6 million to $24 million. Our committee’s calculations add up to a little more than $4 million; and even though it is lower than GSA’s projections, we still believe that $4 million is a lot of money.
However, we also learned three things. First, GSA collects more than $62 million in fees on these “saturated” schedules each year, which pay for it to maintain the schedules. Second, GSA has amassed $687 million in reserves from fees on its contracts. Third, GSA is talking about cutting its fees to 0.5 percent, which means forgoing nearly $100 million in revenue. With resources of this level and the ability to walk away from $100 million, GSA does not need to irrevocably harm small businesses to save $4 million.
Make no mistake — this proposal will harm small businesses. Most large companies that want to do business with GSA over the next five years already have a schedule contract. Many small businesses that will want to do business with GSA in the next five years have never heard of GSA, so they don’t know that they need to apply now to have a chance to compete in the near future. For example, GSA has taken the lead on federal strategic sourcing, which attempts to leverage the government’s buying power, but to compete, a company must have a schedule contract. When strategically sourcing office supplies, GSA increased awards to small businesses while cutting government costs. However, if GSA closes the schedule for office supplies, any small business without a current contract won’t be able to submit an offer on the next strategic sourcing contract.
Instead of reducing competition and limiting small businesses’ opportunities, GSA should work with its oversight committees to use its reserves to modernize its systems. The schedules are still operating on an information technology system that became operational in 1980. A better approach to reform would reduce the costs necessary to maintain the schedules, make it easier for small businesses to compete, let agencies get better price information and allow GSA to undertake smart strategic sourcing. I bet there are some great small businesses that would be happy to compete for that contract.
Rep. Sam Graves, a Republican, is chairman of the House Small Business Committee and represents Missouri’s 6th District.