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Thursday, February 28, 2013

Federal Contracting and Subcontracting with Small Businesses: Issues in the 112th Congress

Kate M. Manuel
Legislative Attorney

Erika K. Lunder
Legislative Attorney

Congress has generally broad authority to impose requirements upon the federal procurement process, or the process whereby agencies obtain goods and services from the private sector. One of the many ways in which Congress has exercised this authority is by enacting measures intended to promote contracting and subcontracting with “small businesses” by federal agencies. Among other things, these measures (1) declare a congressional policy of ensuring that a “fair proportion” of federal contract and subcontract dollars are awarded to small businesses; (2) establish government-wide and agency-specific goals for the percentage of contract and/or subcontract dollars awarded to small businesses; (3) require or authorize agencies to conduct competitions in which only small businesses may compete (i.e., set-asides), or make noncompetitive awards to them in circumstances when such awards could not be made to other businesses; and (4) task the Small Business Administration (SBA) and officers of the procuring agencies with reviewing and helping to restructure proposed procurements so as to maximize opportunities for small business participation. A companion report, CRS Report R42391, Legal Authorities Governing Federal Contracting and Subcontracting with Small Businesses, by Kate M. Manuel and Erika K. Lunder, provides an overview of these statutes, the regulations implementing them, and the various judicial and other tribunals that construe them.

This report describes and analyzes measures that Members of the 112
th Congress enacted or proposed in response to particular issues pertaining to small business contracting and subcontracting. The majority of such measures addressed (1) the standards under which firms’ size is measured, including the establishment of size standards for “early stage” small businesses and “mid-sized” firms; (2) government-wide or agency-specific goals for contracting and subcontracting with small businesses; and (3) eligibility for the set-aside programs for particular types of small businesses (e.g., HUBZone small businesses). Other measures addressed federal contractors’ obligations vis-à-vis small business subcontractors; limitations on the amount of work that may be subcontracted by small businesses to other firms; expedited payment of small business contractors; increases to the maximum surety bond amount that SBA may guarantee; bundling and consolidation of requirements into contracts unsuitable for award to small businesses; and agency “insourcing” of functions performed by small businesses. Yet other measures addressed the responsibilities of SBA Procurement Center Representatives and agency Offices of Small and Disadvantaged Business Utilization; the circumstances in which agencies may set aside contracts for small businesses or make non-competitive awards to them; the use of small businesses when making “small purchases;” mentor-protégé programs wherein large businesses provide financial and other assistance to small businesses; the deterrence and punishment of fraud in small business contracting programs; and contracting or subcontracting with small businesses by particular agencies.

Date of Report: January 24, 2013
Number of Pages: 44
Order Number: R42390
Price: $29.95

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