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Obama signs legislation to deliver more government contracts to small businesses

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Washington’s elected officials are taking new steps to direct more government work to small businesses, just as contractors are bracing for the threat of sequestration.

President Obama on Tuesday signed as part of the military spending budget a series of provisions to help small firms compete for more federal contracts and ensure that agencies take their annual small business contracting goals more seriously. Most notably, the law requires that small business contracting performance be part of employee reviews for senior agency officials, which factor into their consideration for bonuses and promotions.

The change comes after the federal government missed its stated small business contracting goal (23 percent of total procurement across all agencies) for the eleventh straight year in 2012. Though lawmakers stopped short of imposing penalties like reducing budgets or senior level compensation for agencies that fall short of the annual goals, as had been previously proposed in both chambers, this is the first time they have provided formal incentives to encourage agencies to deliver on their annual pledge to small businesses.

“The small business provisions in the NDAA will help make sure existing small business goals are actually met, empower small business advocates, and crack down on fraud,” Rep. Sam Graves (R-Mo.) said in a statement, adding that he expects the changes to “help small businesses compete in the federal marketplace, bring efficiency and cost-savings to the taxpayer, and create jobs while doing it.”

Many of the contracting reform measures stem from a series of bills originally introduced nearly a year ago by members of the House Small Business Committee. The portions that made it into the law include changes to subcontracting rules that allow small firms to team up on large contract bids as well as provisions that discourage the practice of grouping projects together to cater to large corporations, known as contract bundling.

Another provision requires the Small Business Administration to draft size standards for each individual industry rather than lumping sectors together for the purpose of defining “small businesses.”

One small business advocate says that while the legislation won’t break down all the hurdles for small contractors, it’s a sign that policy makers are beginning to live up to some of their campaign promises.

“There has to be a true commitment to doing business with small businesses, whereas during the election, there was just a lot of rhetoric,” Margot Dorfman, vice president of the National Association of Small Business Contractors, said in an interview. “Everyone loved small businesses, but when you looked at what was actually being done to help them get contracts, there was nothing. This is a step in the right direction.”

The General Services Administration has also rolled out a new program to help small technology firms break into the contracting market and streamline the purchasing process for procurement officials across all agencies. Through the National Information Technology Commodity Program, as it’s called, the federal government has recently awarded 43 large contracts to small businesses, including women- and veteran-owned companies.

The help for small firms arrives just as contractors of all sizes are bracing for an enormous round of government spending cuts, known as sequestration, which was merely delayed two months by the recent “fiscal cliff” compromise. Dorfman said her group hopes lawmakers will avoid the automatic cuts by striking a deal that trims small amounts of funding where available instead of eliminating important programs, especially those that have proven to benefit small businesses.

“Right now, we are in wait-and-see mode,” Dorfman said. “We have to be careful about our next step, and go in with tweezers rather than start amputating and cutting entire programs. And we have to continue to invest in small businesses, because it represents a good investment in our economy.”

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