About this Publication

This guide was first published in 1996 to inform, explain and provoke. It is, in many respects, an unconventional government publication shaped by unprecedented acquisition reform and framed by a candid appeal for small firms to play a broader role in molding their own destiny.

The Office of Advocacy collaborated with the U.S. Small Business Administration's (SBA) Office of Government Contracting and Minority Enterprise Development in preparing the first guide. Advocacy also sought and accepted input and comments from other agencies and small business groups. The second edition, an update of the first, was prepared under the direction of Chief Counsel for Advocacy Jere Glover by Assistant Advocate for Procurement Policy Major L. Clark, III; Rosa Sobhraj, summer law intern from the George Washington University School of Law; Advocacy editors Phaedra Brotherton, Sherri Alms, and Kathryn Tobias.

The Office of Advocacy invokes its independent authority within the government and makes a number of frank statements in the publication about change, competition and influence—statements and recommendations that may not be shared by the administration or the SBA.

Foreword

The federal government spends about $200 billion a year on the procurement of goods and services; state and local governments spend an additional $200 billion in acquisitions. Taken together, state and federal government purchases amount to about $1,600 per American. Public sector procurement is big business that significantly affects many small firms.

Shrinking public budgets, efforts to streamline the procurement process, and electronic commerce are changing how and to what extent firms, especially small firms, will be able to participate in government acquisitions.

Government procurement was a major issue at the last White House Conference on Small Business, held in 1995. Seven of the top 60 recommendations formulated by more than 1,700 small business delegates from around the country focused on increasing procurement opportunities for small firms.

Major procurement reforms, as evidenced in recent legislation and regulatory amendments, are happening quickly and definitively. Some of these changes reflect the tenets of the White House Conference and offer new opportunities for competitive small firms; others pose new and difficult challenges. New electronic vehicles like the U.S. Business Advisor at http://www.business.gov and other electronic formats, including the Office of Advocacy’s Web site at http://www.sba.gov/advo make it easy and practical for small firms to stay current on pending policy changes and provide input.

However, without managerial systems in place, or accountability measures that provide incentives for agencies to do business with small firms, or services that make it easy for contracting officers to find small businesses, the benefits of new Internet technologies will not redound to small business. Thus, your ability to benefit from these and other reforms will ultimately depend on how well you respond to and influence change. It is important that you get involved.

I hope you find this guide helpful in understanding and responding to the ever-evolving federal acquisition process.

Jere W. Glover
Chief Counsel for Advocacy
U.S. Small Business Administration

Contents

Introduction

Marketing to the Government in a Changing Environment

Significant Market Elements and Influencing Factors
Effective Marketing Applications

Understand the Customer
Find the Right Opportunities
Know Your Competition
Provide Quality Products and Outstanding Service

Balanced Change: A Platform for Small Business Integration

A Need for Competition
Influencing Change
Advocacy Recommendations

New Approaches to Affirmative Action in the Procurement Process

Background
The Adarand Cas

Supreme Court Decision
Likely Impact of the Adarand Decision on Procurement

Legislative Procurement Reforms

The Federal Acquisition Streamlining Act of 1994

Emphasizing the Acquisition of Commercial Items
Streamlining Acquisition Procedures under an Elevated Threshold
A Government-Wide Electronic Commerce System
Establishing Uniformity in the Procurement System
New Opportunities for Women-Owned Businesses

The Federal Acquisition Reform Act of 1996

Modifying Competition Requirements
Expanding the Use of Simplified Procedures for Commercial Items
Revising Procurement Integrity
Promoting International Procurement
Revamping Federal Information Technology Acquisitions
The HUBZone Act of 1997
The Veterans Entrepreneurshipand Small Business Development Act of 1999

Significant Small Business Procurement Resources

Appendices

I. Standard Form 129

II. The Office of Advocacy

III. The Office of Government Contracting and Minority Enterprise

IV. 1995 White House Conference on Small Business Procurement Recommendations

V. To Our Customers: A Final Note and Invitation for Comments

Introduction

Will Rogers said, "You can be on the right track, but still get run over, if you just stand there..."

Small firms content to travel the same path they have traveled in the past, however productive, will be overtaken by businesses that respond progressively to change and look for opportunities in new ways.

This publication is about change. It is a guide to recent procurement reforms and is intended to help interpret changes represented in two procurement laws, the Federal Acquisition Reform Act, as included in the National Defense Authorization Act of 1996 and the Federal Acquisition Streamlining Act.

Because change in procurement policy has been so significant in recent years, this guide begins with a discussion on marketing to the government in a changing environment. The federal government is fundamentally altering how it does business; small firms must also alter their marketing approach to the public sector.

In response to the multitude of recent changes in procurement policy, this guide includes a number of recommendations with respect to small firms. These Advocacy suggestions are intended to spark dialog and consideration of additional reforms so that balanced change can more readily be achieved. The guide also includes a summary of significant small business procurement resources.

Consider this guide a primer on procurement reform that is still evolving. It is also an appeal for the small business community to get involved in the regulatory process by working closely with the U.S. Small Business Administration (SBA), the Office of Advocacy, professional organizations, and other associations in reviewing and influencing rules proposed as a result of procurement reform legislation.

Will Rogers was more than an admired statesman with an uncanny sense for practical wisdom—he was right!

Marketing to the Government in a Changing Environment

Two recent laws, the Federal Acquisition Reform Act (FARA), as included in the National Defense Authorization Act of 1996, and the Federal Acquisition Streamlining Act (FASA), have had, and will continue to have, a compelling and unprecedented impact on the federal procurement process. Some of these procurement changes will help small firms; others will not. One thing is certain: it will not be business as usual for the government or the firms wanting to do business with the government.

Many claim that selling to the government can be difficult, but many also attest to its being very profitable. The reality is that even in a changing environment, winning the government as your customer can be challenging, but worth it if you succeed.

Significant Market Elements and Influencing Factors

A multitude of new, challenging and sometimes conflicting factors must be considered when developing a marketing strategy for public markets. As agencies implement reforms and adjust to streamlined processing, prospective and seasoned vendors must also embrace change and make adjustments in how they sell to the government.

Factors likely to have the greatest influence on federal government procurement in the foreseeable future include the following:

Electronic commerce. The shift from paper-based to computer-based communications between the government and its suppliers will significantly expedite processing, redefine minimum notice and response times, provide quicker and broader information, including historical perspectives, and increase competition. Electronic markets, because they are more competitive and efficient, will make it easier for government agencies to comparison shop and arrange just-in-time deliveries among a large number of vendors. As agencies exploit this change, they will also struggle with finding ways to fairly evaluate a large number of bids. This could be challenging for many small firms, especially if the competitive range is continuously downsized.

Empowered contracting officers. Front-line contracting officers will have greater authority and will be more responsible for producing results than following rules. This is not to suggest that the Federal Acquisition Regulation (FAR) will not be adhered to. However, contracting officers will have more flexibility in interpreting regulations to achieve results that efficiently satisfy the government's needs.

Best value practices. The government's buying decisions will focus more on overall best value, performance, and quality, and less on price.

Budget constraints. The government has an overwhelming mandate to spend less and improve services. As a result, agencies are adopting emerging commercial practices to achieve the most efficient and cost-effective results. Such practices are demanding greater centralization of contract administration, more commercial (off-the-shelf) buys, best overall value to the government and, in many cases, the consolidation (bundling) of contract requirements.

Small business goals. Contracting officers will have more flexibility in satisfying the government's buying needs, but will continue to be required to meet statutory small business utilization goals. Federal contracting employees, consequently, will be looking for creative ways to meet small business goals.

Effective Marketing Applications

Although unique in many respects, selling to the government is similar to marketing to the commercial sector. The rules are different and perhaps more complex, but the basic marketing tenets are the same. Effective marketing demands the application of several fundamental principles:

• Understand the customer.
• Find the right opportunities.
• Know the competition.
• Provide quality products and outstanding customer service.

Understand the Customer

Understanding the requirements, needs, and idiosyncrasies of the government is critical and paramount in developing a successful marketing strategy, especially in today's environment of unprecedented change. Some companies market to customers they don't know or understand. These firms are often so preoccupied with whatever they are doing—introducing new technologies, redesigning products, automating their plants—that they ignore the needs of their end users.

Do your homework. Learn about resources that are available to help understand government buying trends, needs, subcontracting opportunities and even federal agency phone numbers. An excellent resource is a directory published by the U.S. Government Printing Office (GPO) that lists numerous helpful publications designed specifically for government contractors. Resources for U.S. Government Contractors can be obtained at no cost by writing to: U.S. Government Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-7954.

Identify agency needs. Contact individual agencies to learn of needs and unique agency requirements. Keep in mind that most agencies operate autonomously with respect to procurements and there is no central point to learn of all agency needs and requirements.

Know your customer. Most agencies produce a guide about how to do business with them. A starting point might be to contact respective offices of small and disadvantaged business utilization (OSDBUs) to inquire about available information. Each federal department and agency has an OSDBU responsible for ensuring that the agency awards an equitable share of prime contracts and subcontracts to small firms. See http://www.sba.gov/GC/osdbu for a list of OSDBUs.

Learn the rules. Become familiar with, but not intimidated by, the government's procurement rules. The Federal Acquisition Regulation is the primary set of rules followed by government agencies when purchasing goods and services. The FAR is published as Chapter 1 of Title 48 of the Code of Federal Regulations (CFR) and can be consulted at many public libraries and most federal agency resource centers. Also, it is important to note that many agencies produce supplements to the FAR that address specific agency requirements. The rules differ by industry. For instance, certain procurement requirements for technology-based industries are different from those in the construction industry. Trade associations are often experts in their respective industry-specific regulations and can be excellent resources.

Find the Right Opportunities

Some say the best commercial marketing strategy is to "find a need and fill it." This strategy also applies in the government. Finding opportunities requires a dedicated level of diligence in exploring public needs. It also demands a company's deliberate, systematic and persistent outreach. True, long-lasting success is earned by seeking market-based opportunities, not government guarantees or artificially induced markets.

Review the CBD. The Commerce Business Daily (CBD) is published every Monday through Saturday by the U.S. Department of Commerce. This publication lists proposed government procurement actions that are typically greater than $100,000 (or $25,000 if not yet published on the Federal Acquisition Computer Network or FACNET), subcontracting leads and other information. An electronic edition of the CBD is available from several sources (including www.business.gov) listed on the first page of the CBD. Paper copies of the government publication can be found at most public libraries and are typically available at government resource centers.

Use electronic commerce. Consider using the services of a certified value added network (VAN). VANs are private companies, some of which are certified by the government to receive, share, sort and electronically list all procurement opportunities processed through FACNET. It is envisioned that most government procurements will be processed electronically through FACNET. For this reason, it is imperative to become knowledgeable about electronic commerce and to consider the costs and benefits of engaging a VAN. Stay current, flexible and willing to engage emerging and advanced technologies. A current listing of all government-certified VANs and other technical information can be obtained from one of several electronic commerce resource centers (ECRCs) at 1-800-318-9223 or the Defense Electronic Information Center at 1-800-334-3414.

Exploit outsourcing. Take advantage of outsourcing opportunities. Some successful companies will derive their competitive edge by developing several core competencies and outsourcing all other functions. Such firms perform only functions they do exceptionally well and contract everything else to superior outside vendors. By doing this, firms can be more responsive, decentralized, lean, flexible and perhaps more likely to succeed as government prime or subcontractors. Look for opportunities with other firms where you can provide a superior product and/or service and fill a particular need.

Apply diversity marketing. The government is committed to encouraging diversity in the workplace and in the business environment. Agencies and prime contractors have an obligation, as well as incentives, to meet specific diversity goals. If you are a minority or woman business owner, take advantage of this opportunity. Don't be shy about telling agencies or prime contractors of your availability.

Explore agency bidder lists. Arrange to get on agency mailing lists to automatically receive solicitations for specific types of procurements. This can be achieved by completing Standard Form (SF) 129, Solicitation Mailing List Application, and sending a copy of it to each agency you are interested in. Such arrangements can be a very important and effective marketing tool for small firms. A reproducible copy of SF 129 is included in Appendix I and may be found in pdf format on the Web at http://www.gsa.gov/forms/zero.htm. Note that in some instances, agencies require more information than is required on SF 129. You may want to contact specific agencies to ensure that you meet all of their internal bidder list requirements. Also, be sure to follow up with agencies to make sure your company name does, in fact, appear on bidder mailing lists.

Check the Web. Learn about individual agency Internet Web sites and bulletin boards. The big procuring agencies—Department of Defense (DoD), General Services Administration (GSA), Department of Veterans Affairs (VA), National Aeronautics and Space Administration (NASA)—and most smaller procuring agencies have electronic sources and bulletin boards that they frequently use to profile upcoming acquisitions. These multi-purpose, often interactive electronic vehicles are increasingly being used by agencies to inform their customers and solicit input. Contact individual agencies via their OSDBU offices for information about specific electronic addresses and bulletin boards, or visit http://www.sba.gov/GC/osdbu.html for a list of agency OSDBUs.

Exploit government resources. Many excellent government resources are available to help small businesses find procurement opportunities. Use them. The SBA, DoD, VA, NASA, and GSA, to name only a few, are agencies that offer outstanding resources and programs for small firms. Also, small firm owners should not overlook the value of using the many procurement technical assistance centers (PTACs) located around the country.

Attend procurement seminars. Take advantage of procurement seminars, conferences and briefings offered by federal agencies and other organizations. The networking and contacts developed at the events are often as valuable as the topical discussions featured.

Advance one-on-one relationships. Send, fax, or e-mail unsolicited company brochures to targeted contracting officers and then follow up with a phone call or personal contact. One-on-one relationships with contracting officers are more important in the new environment. Proper targeting, persistence and a quality presentation can pay big dividends. Note: contracting officers more often prefer line-cards, or one-page descriptions that highlight a firm's capabilities. If necessary, a firm can follow up with a detailed presentation.

Explore subcontracting opportunities. Target successful prime contractors and send them information about your company, emphasizing your competitiveness, willingness to form a partnership, mutual interest in growth and profitability, and the benefits of your products and services. Examples of important information to send include company brochures, quality control standards, commercial and/or government references, and, if appropriate, a detailed list of equipment and service resources. Subcontracting opportunities for small businesses are expected to expand, as prime contractors are under greater pressure to offer more services to the federal government and utilize more small firms as subcontractors. Ask specific agencies for lists of their prime contractors. For example, GSA publishes the GSA Subcontracting Directory twice a year; the DoD publishes Subcontracting Opportunities with DoD annually; and the SBA publishes the Subcontracting Directory, which lists numerous prime contractors for multiple agencies. Also, agencies prepare procurement forecasts that may be helpful in identifying future subcontracting opportunities.

Register with the CCR and Pro-Net. List your company in the Central Contractor Registry (CCR). This is an electronic data base of government vendor firms maintained by the Department of Defense. Federal agencies and prime contractors use the data base to locate suppliers. Also list your company on SBA's Pro-Net, a data base specifically for small firms. For information about the CCR, contact the DoD Electronic Information Center at 1-800-334-3414 or visit the Web site at http://www.ccr2000.com/. For Pro-Net contact the SBA at 1-800-827-5722 or visit the Web site at http://www.pro-net.sba.gov.

Develop entrepreneurial networking. Consider networking, partnering and/or forming consortia with other firms (large or small) to meet specific, expanded or consolidated government requirements. Such business linkages can offer benefits to both the government and the partnering firms and are becoming more commonplace in government procurements. They are also an excellent way for small firms to compete with big businesses.

Tap into your industry trade association. Associations generally follow industry trends, proposed regulations, changes and related congressional initiatives and funding. They can be an excellent resource for the latest information.

Know Your Competition

Understanding your competition is a fundamental and critical aspect of becoming and remaining competitive.

Apply competitive advantages. Learn who your competition is and become an expert in recognizing why they are or are not successful. Apply what you have learned in your own company.

Provide Quality Products and Outstanding Customer Service

There is no substitute for providing quality products and superior customer service in winning and keeping customers.

Be a champion of excellence. Products and services should be outstanding in their class. The Department of Commerce, National Institute of Standards and Technology (NIST), administers the Malcolm Baldrige National Quality Award Program, which provides information to help companies improve the quality of their products and processes.

Develop memorable proposals. Proposals or bid offerings in response to solicitations or letters of interest should be well-written, responsive, easy to understand, informative, timely, and complete. Information and tools to assist in the preparation of proposals can be obtained from your local SBA office.

Provide incredible customer service. Small firms should be ready and willing to compete on service. Small businesses rarely have the buying leverage or the advantage of economies of scale to be able to compete on price. However, they are typically more agile, less bureaucratic and more creative, and they are often in a better position to mold their product and service mix to exceed the expectations of the customer. Providing outstanding customer service can be the most important tool a small business has in winning and keeping both government and commercial customers.

Small firms that do not keep pace with the many changes transforming the government and expect business as usual are destined to be left behind. Only firms that aggressively respond to change, and are competitive and resourceful in reaching out to the government will succeed in tomorrow's public markets.

Balanced Change: A Platform for Small Business Integration

Although small firms offer unequaled advantages to the U.S. economy, generating competition, lowering overall costs, creating innovations, and providing more jobs than any other sector, these benefits are often overshadowed. Most procurements still go to large businesses.

Large firms consistently receive the predominant share of the approximately $200 billion in annual government contracts. Fiscal year 1999 was no exception, with seven of the government's largest contractors receiving more federal prime contract dollars than the entire small business universe received over the same period.

Small firms annually receive about 20 percent of all federal prime contract dollars and another 14-19 percent of the federal procurement pie in subcontracts. Large firms, representing less than 5 percent of businesses, receive more than 60 percent of all federal procurement dollars.

A Need for Competition

Competition strengthens the economy by providing profit and other incentives for firms that are responsive to the needs of a dynamic and ever-changing customer base. The clear end result is lower prices and better products and services—all factors contributing to the strength of the U.S. economy. The evolution of firms, especially small businesses, entering and leaving open markets is the essence of competition and a fundamental element of America's prowess in the world economy.

The need for open competition in federal procurement markets remains strong. The Office of Advocacy contends that some recent acquisition reforms will have the immediate effect of reducing procurement opportunities for many small firms. In the long term, these changes may alter the number of firms available, willing, and able to participate in federal procurement markets. These changes are being made in the name of government efficiency and cost savings without enough emphasis on maintaining a strong competitive marketplace.

Small business inclusion requirements and certain allowances in the procurement process are often viewed as obstacles to government efficiency. Certainly, some government-unique standards have grown obsolete and should be purged. Advocacy, however, believes the federal government has an obligation stemming from the tenets of good public policy to direct public monies in such a way that competition is vigorously encouraged. Open competition must be preserved and all sectors of the economy, including women and minority business owners, must have an equal opportunity to participate in federal markets.

Free markets thrive on competition. Ensuring the free and continuous access of small and new firms to federal procurement opportunities is a sine qua non of a dynamic and competitive federal marketplace. It would be myopic for the government to sacrifice competition to create false efficiencies and short-term savings. Only market-based competition can prevent monopoly practices and the concentration of federal dollars in the hands of a few large industry giants. It is easy and arguably more efficient in the short term for the government to contract with a cadre of mostly large firms. In the process, however, the fate of many small firms, the entrepreneurial base of the economy and the future of competition are jeopardized. The real policy question is: should federal tax dollars (procurement dollars) be used to promote competition or to advance industrial concentration?

Influencing Change

Within free market boundaries, large businesses attentively seek ways to maintain market share and influence change. Big business is organized, industry represented, flush with resources, active and very close to the procurement process.

Small firms, on the other hand, are less organized, more fragmented, have fewer resources and are further removed from the procurement process. They have no in-house government relations staff, no government lobbyist on retainer, and their nameplate is typically not stamped on the end product the government buys. Yet they are the essential competitive force in the procurement process.

With the stakes high and growing higher, and the procurement arena rapidly changing, it is more and more difficult for the voices of small business to be heard. It is imperative that small firms invest in understanding policymaking and become part of the process.

While the task of writing new procurement laws falls to Congress, it is the responsibility of the Office of Federal Procurement Policy, the Department of Defense, the General Services Administration, and other agency representatives, through the FAR Council, to write the implementing rules that are articulated in the Federal Acquisition Regulation.

Big business is frequently at the table when regulatory and other changes are being formulated. The concerns of small firms, on the other hand, have historically been overlooked or viewed as an inconvenience in the process. Small businesses must also be at the table when regulatory and other changes are being formulated.

Advocacy Recommendations

The concerns of small firms demand a broader, more serious focus, and must continue to be better integrated into the change process, so that balanced change can be achieved. The Office of Advocacy and the small business community believe that balanced change is good public policy. It is important that the small business community get involved in regulation and other change processes by working closely with the SBA, the Office of Advocacy, professional organizations, and other associations. The Office of Advocacy recommends that the following additional modifications to the procurement process be considered:

• Require agencies to include in prime contract solicitations of more than $500,000 an evaluation factor that would measure a prospective bidder's past and planned utilization of small, minority, and women-owned firms as subcontractors.
• Strictly monitor compliance with subcontracting plans and restrict firms that are not in compliance from future government contracts.
• Expand the FAR Council to include the U.S. Small Business Administration. This is an important change because small business concerns have historically not been sufficiently considered in the development of procurement regulations.
• Increase the utilization of Pro-Net and other Internet sources as easy and inexpensive electronic tools for small business and the contracting community.
• Increase overall small business utilization goals. Agencies should be encouraged to work with small firms and be creative in how they meet small business goals. Let the goal, not the process, be the driving force. Incentives (recognition, flexibility, policy relief, etc.) should be provided for federal agencies to exceed their small business procurement goals.
• Develop progressive small business training models. Such additional training/materials would focus on:
• How to take advantage of electronic markets.
• How to link, partner or form a consortium with other firms to meet expanded or consolidated procurement requirements.
• How to find and use federal procurement resources.
• How to find subcontracting opportunities.
• How to market to the government in a changing environment.
• How to write winning procurement proposals.
• How to use service excellence in leveraging procurement opportunities.
• Restrict government competition with the private sector.

All of these recommendations are fair, doable and market-based to stimulate real competition. They represent a balanced approach and do not artificially influence government markets with new or augmented small business preferences. Rather, they are designed to complement progressive change and enhance access to procurement opportunities so that small businesses can compete.

New Approaches to Affirmative Action in the Procurement Process

In searching for ways to achieve equal opportunity for all, the federal government—over a period of years—developed a number of specific affirmative action initiatives. All of these initiatives are currently under review by the Justice Department.

Background

Traditionally, the purpose of affirmative action has been to address the exclusion of individuals on the basis of their gender or race. Affirmative action has been an effort to open the doors of education, employment, and business development opportunities to qualified individuals who happen to be members of groups that have experienced longstanding and persistent discrimination—for the most part, women and minorities.

Methods for achieving better representation of women and minorities have included the institution of goals and timetables, targeted outreach, training and recruiting, the use of special selection procedures emphasizing racial and gender diversity, and the use of management tools including preference standards and reporting requirements.

Some who have studied affirmative action agree that it has helped close gaps in economic opportunity in American society, thereby strengthening the entire economy.

The tenets of the government's affirmative action efforts have been tested on numerous occasions. The 1995 Supreme Court case, Adarand Construction, Inc. v. Pena, in particular has had an impact on targeted preferential programs. The Adarand decision came six years after the 1989 ruling in Croson v. the City of Richmond, which imposed strict scrutiny standards on state and local procurement set-aside programs.

The Adarand Case

The central focus of the Adarand debate was the provision in the Small Business Act requiring federal agencies to set contracting goals for small disadvantaged businesses (SDBs). The law requires that the Department of Defense establish SDB goals that represent at least 5 percent of the total value of its prime contract awards.

The Federal Highway Administration, within the Department of Transportation, sought to achieve its SDB goals in part by providing financial incentives to prime contractors who utilized small disadvantaged firms as subcontractors. On September 15, 1989, the Federal Highway Administration awarded a $1 million prime contract to the Mountain Gravel Construction Co. for a highway project in Colorado. The prime contractor awarded a subcontract for a guardrail system to the Gonzales Construction Co., a qualified SDB. In so doing, the prime contractor rejected a lower bid from the Adarand Construction firm. The Mountain Gravel Construction Co., by awarding the subcontract to an SDB, earned a bonus of approximately $10,000.

Because the Adarand bid was rejected by the prime contractor in favor of the higher SDB bid, the Adarand Construction Co. filed suit. Both the District Court in Colorado and the Tenth Circuit Court ruled against Adarand. However, the case was elevated to the Supreme Court, which ruled in Adarand's favor.

Supreme Court Decision

The Adarand decision did not dismantle affirmative action or set-asides. In fact, while setting stricter standards mandating reform, it actually reaffirmed the continued existence of systematic discrimination in the United States and the need for affirmative action.

What the Supreme Court did was to order the federal government to meet the same, more rigorous standard for affirmative action programs that state and local governments were ordered to meet under the earlier Croson decision. Many of the best-tailored state and local government programs are still in place after having been challenged under that standard.

More specifically, the Supreme Court held that many affirmative action programs, under the equal protection clause of the Fifth Amendment's due process clause, must be reviewed by the courts using strict scrutiny. To meet this standard, a program must be shown to meet a compelling governmental interest and must be narrowly tailored to meet that interest. That is a more demanding test than had been previously applied to federal affirmative action programs.

Likely Impact of the Adarand Decision on Procurement

No one knows for certain how the Supreme Court decision will affect procurement opportunities for small disadvantaged, women-owned, and other firms over the long term. However, based on interpretations of the Adarand decision, it is likely that procurement will be affected in the following ways:

• Procurement set-aside and other preferential programs for minority-owned firms are more likely to be focused on particular regions and business sectors where the problems of discrimination or exclusion are provable and can be quantified.
• The requirements for procurement preference programs will be tightened such that once a firm has had a fair opportunity to compete, the preference will be terminated. Long-standing, permanent set-asides will likely not be supported.
• Procurement preference programs sponsored by the federal government will echo the more rigorous affirmative action standards state and local governments were ordered to meet several years ago.
• Preference programs will focus on assisting disadvantaged people and distressed communities, whatever their race or gender.

The Justice Department continues to review all federal affirmative action initiatives to make certain they are in compliance with the Adarand decision.

Legislative Procurement Reforms

The Federal Acquisition Streamlining Act of 1994 (FASA) and the Federal Acquisition Reform Act (FARA), as included in the National Defense Authorization Act of 1996, have had, and will continue to have, a compelling and unprecedented impact on the federal procurement process.

The Federal Acquisition Streamlining Act of 1994

The Federal Acquisition Streamlining Act of 1994 repealed or substantially modified more than 225 provisions of law to reduce paperwork burdens, facilitate the acquisition of commercial products, enhance the use of simplified procedures for small purchases, transform the acquisition process to electronic commerce, and improve the efficiency of the laws governing the procurement of goods and services. FASA was signed into law by the White House on October 13, 1994.

The most significant provisions of FASA included:

• Emphasizing the acquisition of commercial items
• Streamlining acquisition procedures under an elevated small purchase threshold
• Implementing a government-wide electronic commerce system
• Establishing uniformity in the procurement system

Emphasizing the Acquisition of Commercial Items

The law strongly encouraged the acquisition by federal agencies of commercial end-items and components, including the acquisition of commercial products modified to meet government needs.

Definition of commercial items. The law enhanced the government's access to items from the commercial sector by expanding the scope of products and services that qualify for treatment as commercial items.

Preference for commercial items. The law established a statutory preference for commercial items and required that, to the maximum extent practicable, contract requirements and market research facilitate the use of commercial items.

Streamlining Acquisition Procedures under an Elevated Threshold

The law increased the small purchase threshold from $25,000 to a new simplified acquisition threshold of $100,000. This higher threshold expanded streamlined processes, making it easier for contractors to do business with the government, while making it simpler and more efficient for agencies to solicit and process procurements.

Special rules for using simplified acquisition procedures. To take full advantage of the simplified acquisition procedures, an agency must become certified by the Office of Federal Procurement Policy (OFPP) that it has implemented an interim FACNET capability. This means that an agency can perform certain functions electronically, using FACNET.

General provisions of the simplified procedures. The simplified procedures exempt purchases at or below the $100,000 simplified acquisition threshold from paperwork and recordkeeping requirements included in more than 15 statutes. Note that FARA subsequently expanded the simplified procedure provision to allow its use with purchases of commercial items, property, and services valued at up to $5 million. Some of the key provisions exempted in the simplified procedures include:

• Contingent fee certification
• Contract audit requirements
• Procedural requirements of the Anti-Kickback Act
• The Miller Act
• Contract Work Hours and Safety Standards Act
• Drug-Free Workplace Act of 1988
• Prohibition limiting subcontractor direct sales to the U.S. government
• Inventory accounting requirements
• Identification of suppliers and sources

The law permits agencies to adopt streamlined procedures for providing notice of contracting opportunities.

Micro-purchases. Government purchases up to $2,500 are now classified as micro-purchases, allowing for significantly simplified procedures. Purchases of $2,500 or less:

• Are no longer reserved for small firms;
• Can be made without obtaining competitive quotations; and
• Are not subject to the requirements of the Buy American Act.

A Government-Wide Electronic Commerce System

The fully implemented electronic commerce system will significantly simplify and streamline the purchasing process, promote greater customer service, and increase cost effectiveness. The electronic exchange of acquisition information between the private sector and the federal government is also increasing competition by providing improved access to procurement opportunities for thousands of vendors currently doing business with the government. While this system may be of particular benefit to small businesses, it can also help many other vendors who found access to bidding opportunities difficult under the pre-electronic system.

Federal Acquisition Computer Network. The law established the Federal Acquisition Computer Network. FACNET is helping ensure that the government's paperwork-driven acquisition process evolves to an expedited system based on electronic data interchange. The electronic system is intended to provide a single face to industry and interoperability within the federal sector. The law established parameters for a FACNET system built along functional lines, with parameters set forth for government and private users. These functions were to be implemented by agencies within five years of FASA's enactment. The government-wide FACNET system is designed to:

• Inform the public about federal contracting opportunities;
• Outline the details of government solicitations;
• Permit electronic submission of bids and proposals; and
• Facilitate responses to questions about solicitations.

It was envisioned that many firms would use the services of a value-added network (VAN) to access the FACNET system. VANs are private companies certified by the government to receive, share, sort, and electronically list all procurement opportunities routed through FACNET. Vendors can select from a variety of certified VANs to access procurement opportunities and exchange information.

Establishing Uniformity in the Procurement System

FASA amended several procurement laws to promote the uniform treatment of Department of Defense and civilian agency procurements. To accomplish this, the law did the following:

• Amended the Federal Property Act to establish contract cost principles for civilian agencies. Contract cost principles provide that certain types of costs, such as entertainment costs, lobbying expenses, advertising, and so-called golden parachute payments, are not allowable in federal contracts.
• Established cost certification procedures and penalties identical to those that have long been applicable in DoD procurements.

New Opportunities for Women-Owned Businesses

In addition to these key provisions, FASA established a 5-percent government-wide procurement goal for women-owned businesses. Under this provision, women-owned firms were specifically incorporated into the procurement goaling process established by statute for all government agencies.

Each federal agency is required to establish a goal for participation of small business concerns owned and controlled by women at not less than 5 percent of the total value of all prime contracts and subcontract awards for each fiscal year. On May 23, 2000, the President signed Executive Order 13157, which requires all federal agencies to take immediate steps to meet or exceed the 5 percent government contracting goal.

The Federal Acquisition Reform Act of 1996

The Federal Acquisition Reform Act was signed into law by the White House on February 10, 1996, less than 16 months after the President signed the Federal Acquisition Streamlining Act on October 13, 1994. FARA is a major reform law, but was not expected to bring the same level or magnitude of sweeping change to the procurement process as FASA did. The small business community can and should continue to participate in the implementation of the law through the regulatory process. Key provisions in FARA include:

• Modifying competition requirements
• Expanding the use of simplified procedures for commercial items, services and property
• Revising procurement integrity
• Promoting international procurement
• Revamping federal information technology acquisitions

Modifying Competition Requirements

The law retained the Competition in Contracting Act (CICA) requirement for full and open competition. However, the legislation directed that the Federal Acquisition Regulation be revised to ensure that the CICA requirement was implemented in a manner consistent with the need to efficiently fulfill the government's procurement requirements.

The statute carried minor revisions to the previous competition standard. However, the new focus on government efficiency gave greater latitude to contracting officers to limit competition and, in some circumstances, to use simplified procedures not requiring full and open competition.

Greater efficiency, tighter competition. Contracting officers were given greater authority to control the number of proposals considered. The revised statute provided that, if a contracting officer determines that the number of offerors exceeds the number at which an efficient competition can be conducted, the contracting officer may limit the number of proposals in the competitive range, in accordance with the criteria specified in the solicitation, to the greatest number that will permit an efficient competition among the offerors rated most highly. The competitive range determination is made after the initial evaluation of proposals. Offerors excluded from the competitive range are entitled to a pre-award briefing.

Design-build selection procedures. The law provided an alternative two-phase selection process for the award of a single design and construction contract for public buildings. The two-phase process differs from the traditional design-build approach, established under the Brooks Architect-Engineers Act, by using two distinct procurement review phases to screen and limit the number of proposals for final review. This change was intended to minimize the costs that firms incur in developing proposals.

Expanding the Use of Simplified Procedures for Commercial Items, Property, and Services

FASA significantly changed the way the government buys commercial items. The 1994 law provided the foundation for establishing commercial-like procedures within the federal procurement system, called simplified procedures. FARA expanded what FASA began by further establishing simplified procedures for the purchase of commercial items, property, and services, and exempting commercial item purchases from certain government-unique requirements. These reforms were intended to bring public procurement into alignment with private sector procurement practices and reduce the cost of doing business with the government.

Simplified notice procedures. These provisions allow the use of simplified procedures for purchases of commercial items, property and services up to $5 million.

Exemptions from certain laws. This provision requires that the FAR be revised to include a list of provisions that are inapplicable to contracts for commercially available off-the-shelf items. The list would include provisions of law that, in the opinion of the head of the Office of Federal Procurement Policy (OFPP), impose government-unique policies, procedures or restrictions on contracting officers. Commercial item contracts and subcontracts are exempted from Truth in Negotiations Act (TINA) requirements of submitting certified cost or pricing data to the government. Cost Accounting Standards (CAS) would also no longer apply.

Revised definition of commercial services. This section broadens the definition of commercial services with respect to prices, such that market prices would mean current prices established in the course of ordinary trade between buyers and sellers and that could be substantiated from sources independent of the offeror.

Revising Procurement Integrity

Procurement integrity statutes, under FARA, were revised to specifically prohibit agency employees and others not authorized to do so from obtaining or disclosing contractor bid information or agency source selection information. The law also eliminated all remaining agency-specific post-employment restrictions and provided standard, government-wide one-year post-employment restrictions for designated officials involved in procurements over $10 million. FARA increased the penalties for violating these laws.

Promoting International Procurement

The reform law provided authority to the president to waive a provision of law requiring that a tax or recoupment fee be paid to the U.S. government on foreign sales of products and technologies originally developed under contracts with the federal government. This fee can be waived when the competitiveness of U.S. firms is threatened.

Revamping Federal Information Technology Acquisitions

FARA eliminated the procurement authority of the General Services Administration (GSA) for information technology (IT) investments and vested the authority in each executive agency. It established a chief information officer in each agency, required agencies to change the way they did business before making IT investments, and encouraged agencies to break information technology acquisitions into smaller, more manageable pieces. In addition, FARA repealed the authority for the General Services Board of Contract Appeals to decide bid protests for IT acquisitions. The General Accounting Office (GAO) was assigned to handle all bid protests. 

The HUBZone Act of 1997

The HUBZone Empowerment Contracting Program was created by the HUBZone Act of 1997, which is contained in Title VI of Public Law 105-135, enacted on December 2, 1997 (111 Stat. 2592). This program is different from other procurement programs because it focuses on job creation in high employment and poverty-level communities. The HUBZone Act set the government contracting goal for the HUBZone program initially at 1 percent of all federal prime contracts with a gradual increase to 3 percent by the year 2003. The U.S. Small Business Administration was given authority to manage this program.

The Veterans Entrepreneurship and Small Business Development Act Of 1999

This act expands existing assistance programs and establishes new programs for veterans who own or operate small businesses. The act creates a 3 percent government-wide goal for participation by small business concerns owned and controlled by service-disabled veterans.

Significant Small Business Procurement Resources

Knowledge is power! It is an asset that can help overcome uncertainty and open new avenues for opportunity. It is also a powerful tool that can help small firms create value and make money in government, commercial and other markets. Because information and resulting knowledge are so critical, this guide lists numerous and varied small business resources.

The U.S. Small Business Administration

409 Third Street, S.W., Washington, DC 20416, (800) 827-5722, http://www.sba.gov

Office of Government Contracting (202) 205-6460.

The SBA provides a wide range of services to help small firms obtain and fulfill government contracts. The agency seeks to increase the number of contracts awarded to small businesses through set-asides for small businesses, subcontracting opportunities with larger companies and many other programs.

SBA has procurement center representatives (PCR) stationed at many federal installations, both military and civilian, that have major buying programs. In addition, the agency's commercial marketing representatives (CMR) monitor large business prime contractors to ensure that subcontracting opportunities are available for small and small disadvantaged businesses.

CMRs also can refer small businesses to prime contractors. For the names and locations of PCRs and CMRs in your area, contact SBA's government contracting area office nearest to you.

Area I includes the states of Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont, and the Commonwealth of Puerto Rico. Contact Janette Fasano, Boston, MA, (617) 565-5622; or Tom Dey, New York, NY, (212) 264-1452.

Area II includes the states of Delaware, Maryland, Pennsylvania, Virginia, and West Virginia, and the District of Columbia. Contact Joseph May, King of Prussia, PA (215) 580-2766.

Area III includes the states of Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina and Tennessee. Contact L. A. Symasek, Atlanta, GA (404) 331-7587.

Area IV includes the states of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota and Wisconsin. Contact Robert Murphy, Chicago, IL (312) 353-7381; or Malin Francksen, Kansas City, MO (816) 374-6815, ext.290.

Area V includes the states of Arkansas, Colorado, Louisiana, Oklahoma, New Mexico and Texas. Contact John Bateman, (817) 684-5301; Jose Martinez, Denver, CO (303) 844-0513.

Area VI includes the states of Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Utah, Washington, and Wyoming and Guam. Bob Paccione, San Francisco, CA (415) 744-6828; or call WA, (206) 553-8546.

Office of Minority Enterprise Development, (202) 205-6410

The primary responsibility of this division within the SBA is to promote business ownership by individuals who are socially and economically disadvantaged and to promote the competitive viability of such firms. This office oversees the 8(a) business development program.

Office of Advocacy (Procurement Policy), (202) 205-6532

The Office of Advocacy is an independent office within the SBA. It seeks to ensure that government policy decisions, whether legislative or regulatory, enhance the economic viability of small businesses. See Appendix II for more information.

The U.S. Business Advisor, http://www.business.gov

On June 14, 1995, at the White House Conference on Small Business, the administration announced a new way for businesses to work with government the U.S. Business Advisor, an on-line service on the Internet. The U.S. Business Advisor offers businesses one-stop access to government forms, business development software and business-specific information from the SBA and other agencies. Among the types of information included are the following:

• The Commerce Business Daily and other procurement information;
• SBA's LowDoc, Export Working Capital and pre-qualification loan applications;
• The Service Corps of Retired Executives (SCORE) counseling request forms;
• Business development software to help prepare a business plan, do a marketing strategy, or create a financial statement; and
• Business-specific information on women-owned businesses, minority enterprise development, international trade, government contracting, financial services and disaster support.

The U.S. Business Advisor allows access to a full range of plain-language regulatory guidance and compliance assistance to help businesses understand regulatory requirements, environmental, safety and health statutes, international trade, taxes and customs regulations. The Internet address for the U.S. Business Advisor is: http://www.business.gov

Government Electronic Commerce

Procurement Web Sites

The following web sites are good sources for procurement policy and other procurement information:

Acquisition Reform Network, http://www-far.npr.gov

U.S. Business Advisor, http://www.business.gov

GSA Advantage http://www.gsa.gov

Federal Acquisition Regulation, http://www.farsite.hill.af.mil/

Department of Defense Central Contractor Registry, http://www.ccr2000.com

U.S. Small Business Administration, http://www.sba.gov

Pro-Net, www.sba.gov/pro-net/

Procurement, http://www.fedmarket.com/sales

U.S. Army, http://www.army-acquisition.net

Electronic Commerce Resource Centers

The following centers provide information and assistance to small firms interested in understanding and participating in the government's electronic commerce system. See the Web site at http://www.ecrc.ctc.com/ for more details.

National ECRC - Technical Hub, (800) 318-9223

Fairfax, VA, (703) 691-1507

Palestine, TX, (800) 209-2772

Atlanta, GA, (404) 894-7772

Dayton, OH, (513) 449-6060

Oakland, CA, (800) 231-2772

Orange, TX, (409) 882-3950

Bremerton, WA, (206) 478-0333

Cleveland, OH, (800) 991-3272

San Antonio, TX, (210) 732-1141

Scranton, PA, (800) 867-2772

DoD Electronic Commerce Information Center

(800) 334-3414

Procurement Technical Assistance Centers (PTACs)

There are about 100 Procurement Technical Assistance Centers (PTACs) around the country. The procurement centers are supported by the DoD-Defense Logistics Agency, state and local governments, and private entities. Some PTACs operate within SBA Small Business Development Centers. Their mission is to assist local businesses in marketing and selling products and services to federal, state and local governments. PTACs specialize in providing technical assistance and electronic bid-match services and other electronic services that link firms with procurement opportunities. Center locations and contacts can be obtained by calling (409) 886-0125 or (703) 767-1650.

Offices of Small and Disadvantaged Business Utilization

Each federal department and agency has an Office of Small and Disadvantaged Business Utilization (OSDBU) responsible for ensuring that the agency awards an equitable share of prime contracts and subcontracts to small firms. See also http://www.sba.gov/GC/osdbu.html for an electronic listing.

Department of Agriculture, (202) 720-7117

Department of Commerce, (202) 482-3387

Department of Defense, (703) 614-1151

Department of the Air Force, (703) 697-1950

Department of the Army, (703) 695-9800

Department of the Navy, (703) 602-2700

Army Corps of Engineers, (202) 761-0725

Ballistic Missile Defense Organization, (703) 693-1553

Space and Naval Warfare Systems Command, (703) 602-6091

U.S. Marine Corps, (703) 696-1022

Department of Education, (202) 708-9820

Department of Energy, (202) 586-7377

Department Health and Human Services, (202) 690-7300

Department of Housing and Urban Development, (202) 708-1428

Department of the Interior, (202) 208-3493

Department of Justice, (202) 616-0521

Department of Labor, (202) 219-9148

Department of State, (703) 875-6824

Department of Transportation, (202) 366-1930

Department of the Treasury, (202) 622-0530

Department of Veterans Affairs, (202) 565-8124

Agency for International Development, (703) 875-1551

Environmental Protection Agency, (703) 305-7777

Export-Import Bank of the United States, (202) 566-8111

Federal Trade Commission, (202) 326-2258

National Aeronautics and Space Administration, (202) 358-2088

General Services Administration, (202) 501-1021

Office of Personnel Management, (202) 606-2240

Small Business Administration, (202) 205-6410

Tennessee Valley Authority, (615) 751-6269

U.S. Information Agency, (202) 501-7708

U.S. Postal Service, (202) 268-4633

General Services Administration (GSA)

One of GSA's primary responsibilities is the procurement of many goods and services needed by federal agencies. Many government procurement opportunities are available through GSA.

GSA Business Service Centers (BSC), (202) 708-5804

BSCs promote the participation of businesses, especially small firms, in government contracting. The centers provide information and counseling on how to obtain government contracts.

Atlanta, (404) 331-5103

Boston, (617) 565-8100

Chicago, (312) 353-5383

Denver, (303) 236-7408

Fort Worth, (817) 334-3284

Kansas City, (816) 926-7203

Los Angeles, (213) 894-3210

New York, (212) 264-1234

Philadelphia, (215) 656-5525

San Francisco, (415) 744-5050

Seattle, (206) 931-7956

Washington, DC, (202) 708-5961

GSA Federal Supply Schedules, (202) 708-5804

These schedules list goods and services government agencies purchase on a regular basis as well as possible vendor sources. Small businesses may also apply to be listed on GSA schedules.

U.S. Department of Veterans Affairs

National Acquisition Center (703) 786-5157

U.S. Department of Commerce

Minority Business Development Agency (MBDA)(202) 482-1015

The MBDA seeks to assist minority business owners in obtaining federal contracts. There is a network of MBDA centers around the country.

State Government Procurement Assistance Programs

Most state and many local governments provide procurement assistance programs to help local businesses receive federal, state and/or local government contracts. The programs are generally operated through economic development offices. For information about state procurement assistance programs, contact your local economic development office.

Selected Publications

Commerce Business Daily (CBD). This publication, published by the Department of Commerce, is the most common vehicle used for finding federal procurement opportunities valued at more than $100,000. The publication is available at many libraries and on several on-line services. Contact the U.S. Government Printing Office at (202) 512-1800.

Procurement Assistance. Published by the SBA, this booklet provides guidance to small firms interested in seeking federal contracts. Contact SBA's Government Contracting Office at (202) 205-6460 for more information.

Selling to the Military. This publication is designed to walk you through the procurement requirements of the military branches. Contact the Department of Defense at (703) 614- 1151 for information on how to obtain a copy.

U.S. Government Purchasing and Sales Directory. Prepared by the SBA and available through the U.S. Government Printing Office (GPO), this excellent directory lists nearly 4,000 products and services bought by defense and civilian agencies. It also explains how to do business with the government and profiles SBA's contracting programs. Contact SBA's Government Contracting Office at (202) 205-6460 for more information.

Doing Business with GSA. Available from GSA's Business Service Centers (BSCs)), this publication