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New military spending deal includes help for small business contractors

Two small-business contracting bills crafted by the House Small Business Committee found their way into the final military spending agreement for 2014. (STAFF/AFP/Getty Images)

In unusually speedy fashion, Congress this week approved both a new federal budget and a military spending bill, both of which provide a sense of clarity to small business owners, particularly those who sell goods and services to the federal government.

But there’s also a little something extra for small business contractors in the latter deal, called the National Defense Authorization Act, which authorizes military spending for the coming year and was approved by the Senate late Thursday. In fact, there are two little somethings.

The 2014 version of the legislation, which President Obama is expected to sign in the coming days, included two amendments born earlier this year in the House Small Business Committee, both of which are meant to help small firms in the procurement arena.

The first changes the way prime contractors are allowed to tally up the amount of subcontracting dollars they pass along to small businesses. Currently, the federal government can take into account every small business that works on a given project, even if they are a subcontractor to another subcontractor, when calculating the amount of federal awards that went to small companies in a given year.

However, prime contractors, who like the federal government have certain small-business contracting goals to meet, may only count the immediate small subcontractors one tier down, not the small firms that those subcontractors themselves contract out. Starting next year, under the new rules, those secondary tier subcontractors will also count toward the total, which is meant to give large prime contractors added incentive to make sure work is passed down to small companies.

“Small businesses should get a real chance to compete throughout the federal contracting process,” Sam Graves (R-Mo.), the commitee’s chairman, said when he introduced the bill in June. “The purpose of the federal contracting goal is to ensure small businesses get a fair opportunity, and this bill applies the goal down the line to every subcontract.”

On Friday, Rep. Richard Hanna (R-N.Y.), who formally requested that the bill be embedded in the defense authorization legislation, added in a statement: “Small firms want to compete, taxpayers want efficiency and the federal government needs the work done well. This legislation is a win for all three.”

Second, the bill includes a rule meant to clarify some confusion over rules concerning the amount of work small prime contractors are allowed to subcontract to large firms.

Right now, there are two competing and often contradictory set of rules; one established by the Small Business Act and another outlined by the Department of Defense. In the new bill, lawmakers agreed to direct small contractors to follow the original Small Business Act.

“Clarifying complex subcontracting rules will help small companies navigate the procurement process,” Graves said in a statement. “In turn, helping small businesses compete strengthens the industrial base, keeps costs down and creates jobs.”

This is the second year in a row the House Small Business Committee has managed to attach some of its small-business contracting reform ideas to the defense authorization bill. Last year, the bill included new rules that require the administration to consider each department’s small-business contracting performance when reviewing senior agency officials.

Follow J.D. Harrison and On Small Business on Twitter.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he runs the On Small Business blog.



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