Over the past quarter century, the Defense Department has been testing a contracting program that was intended to help small businesses obtain a larger share of federal work. However, Pentagon officials and small business leaders say the initiative has not only failed to help small contractors, it’s actually hurt them.
In other words, neither those running the program nor those it was supposedly intended to help believe the program works. Thus, many expected the experiment to come to an end when its most recent congressional approval expires on Wednesday.
But that’s not happening.
In what critics are calling another victory for Washington’s massive contracting darlings at the expense of small businesses, Congress has approved legislation extending the contracting initiative, called the Comprehensive Subcontracting Plan Test Program (CSPTP), for another three years. It’s the eighth time the program has been revived.
Under the rules of the test program, large contractors are permitted to submit company-wide or division-wide small-business subcontracting doctrines that apply to any of the firm’s federal contract proposals. Outside the program, prime contractors must submit a unique subcontracting plan for each bid, including which small firms they intended to partner with and how much money will flow through to the partners.
In the legislation authorizing a two-year test back in 1989, lawmakers said CSPTP was meant to “determine if comprehensive subcontracting plans on a corporate, division or plant-wide basis would lead to increased opportunities for small businesses.”
By all accounts, they have done precisely the opposite.
Maureen Schumann, a Defense Department spokeswoman, said recently that the program “has led to an erosion of [the agency’s] small business industrial base.” And while the department has yet to publish any formal reports on the program’s results, she said the Pentagon’s internal analysis suggests that, while it has resulted in savings for the participating large contractors — including local behemoths such as Lockheed Martin, Northrop Grumman and General Dynamics — there is no evidence that the CSPTP has benefited small companies.
During negotiations over the program earlier this year, Schumann said the Defense Department was in favor of letting the initiative expire. It’s the first time the agency has openly expressed its opposition to the program.
Many small business groups have criticized the initiative, as well, and this month, the Government Accountability Office published a report stating that the comprehensive plans make it difficult and sometimes impossible to track subcontracting dollars.
“From what we heard, the small business community was not in favor of extending the program,” Jared Leopold, a spokesman for the Senate Small Business and Entrepreneurship Committee, wrote in a recent e-mail.
So then why did lawmakers extend it again?
The bill authorizing a three-year extension of the program originated in the House Armed Services Committee, which added some new reporting requirements intended to shed additional light on the test program moving forward. In a report filed by the committee about the proposed extension, lawmakers acknowledged “after nearly 24 years since the original authorization of the program, the test program has yet to provide evidence that it meets the original stated goal of the program.”
A spokesperson for the committee declined to speak on the record about why the program was tweaked and extended rather than simply allowed to expire. However, a staff member of the House Armed Services Committee familiar with the negotiations, who spoke on the condition of anonymity because the member was not authorized to speak publicly, explained that the three-year revival was meant to serve as an off ramp, so to speak, allowing large contractors participating in the CSPTP to update their reporting procedures to meet the subcontracting requirements that apply to contractors outside the program.
The idea, the staff member said, was to wind down the program gradually, rather than bringing it to an abrupt halt at the end of this year.
One small business lobbying group says the reauthorization was pushed through under a veil of secrecy that should have already been removed.
Steven Godfrey, a spokesman for the California-based American Small Business League, echoed the Defense Department by saying that the lone benefactors of the program appear to be large contractors; however, a simpler bidding process isn’t the only perk, he said. Under the law, CSPTP participants are exempt from paying damages if they fall short of statutory small-business subcontracting requirements.
In other words, they are shielded from back payments if they fail to pass enough of work along to small companies. Thus, Godfrey argued, the program “is nothing but a loophole for prime contractors and a way to get rid of transparency and any penalties for non-compliance.” Now they have that loophole for another three years.
Problem is, there has been no information released about the program’s participants to show conclusively whether they are truly shorting small businesses. That nearly changed recently.
The American Small Business League in November won a key legal dispute when a federal judge in California’s Northern District ordered the Defense Department to release subcontracting data requested by the group for one of the large contractors using the program (Connecticut-based aircraft manufacturer Sikorsky). The judge ordered the Pentagon to release the figures — offering the first real glimpse into the effectiveness of the program — no later than Dec. 3.
However, the judge later granted a last-minute request by the U.S. Solicitor General to delay the release of the data for 60 days while officials decided whether to appeal the ruling, pushing the deadline back until late January.
Lloyd Chapman, president of the ASBL, said at the time that he expected the information, if released, to be “so explosive it [would] block the renewal of the CSPTP in the 2015 National Defense Authorization Bill. However, he predicted that officials would likely attempt to “withhold the release of this information until after Congress has renewed the program.”
The Pentagon has yet to release the requested documents. Congress approved the provision renewing the contracting program two weeks later. President Obama signed the bill into law on Dec. 19.