STATEMENT
OF
JIM O'CONNOR
PROCUREMENT POLICY ADVOCATE
U.S. SMALL BUSINESS ADMINISTRATION
OFFICE OF ADVOCACY
BEFORE THE
FAR COUNCIL AT A PUBLIC MEETING
TO DISCUSS
FAR CASE 96-303, COMPETITIVE RANGE DETERMINATIONS
AND
FAR CASE 96-029, PART 15 REWRITE - PHASE I
NOVEMBER 8, 1996
PUBLIC MEETING
November 8, 1996
FAR Case 96-303, Competitive Range Determinations
and
FAR Case 96-029, Part 15 Rewrite - Phase I
Good morning. I am Jim O'Connor the Policy Advocate for
Procurement within the Small Business Administration's Office of
Advocacy.
I thank the FAR Council for the opportunity to share the
views of the Office of Advocacy regarding the proposed rules,
Competitive Range Determinations and FAR Part 15 Rewite -
Phase I. These rules, in Advocacy's opinion and in the opinion
of many small business groups, will have an adverse impact on a
substantial number of small firms.
The Office of Advocacy was established by Congress to ensure
that Federal agencies consider the impact of their rules and
policies on small business. In this capacity Congress also gave
us the responsibility to monitor agency compliance with the
Regulatory Flexibility Act (RFA) and to report deficiencies to
the Congress.
The Regulatory Flexibility Act and the analytical
requirements it mandates are designed to require federal agencies
to articulate the effects of their proposed and final rules on
small entities. In addition, the recent passage of the Small
Business Regulatory Enforcement Fairness Act provides additional
regulatory relief for small businesses, including judicial review
of an agency's compliance with the Regulatory Flexibility Act.
We believe that full compliance with the "reg flex" law
helps agencies understand the needs of small businesses, leads to
greater competition and government cost savings and, most
importantly, protects that sector of the economy that is the
engine of prosperity and growth.
In accordance with our regulatory responsibilities, the
Office of Advocacy voiced its concerns regarding the competitive
range rule in recent letters to the FAR Council; Sally Katzen,
Administrator of the Office of Information and Regulatory
Affairs; and, Dr. Kelman, Administrator of the Office of Federal
Procurement Policy. Advocacy will file additional comments on
the competitive range rule as well as comments on FAR Part 15,
prior to the expiration of the November 26 comment period.
Before I articulate some of Advocacy's concerns on the
proposed rules, I want to thank the FAR Council, especially Dr.
Kelman, for agreeing to extend the comment period on the
proposals and for conducting two separate public meetings -- one
this morning and another in Kansas City on November 18.
I also want to acknowledge recent changes my office has
noticed regarding compliance with the Regulatory Flexibility Act.
We are pleased to see that some of the newer FAR cases include
improved regulatory analyses, better disclosure regarding small
business impact and more regulatory alternatives being
considered. This is not to suggest that all FAR cases are now in
full compliance with "reg flex" -- they're not, but they are
getting better.
In fact, as you know, Advocacy, in its August 27 comments to
the FAR Council, described the competitive range rule as
deficient in meeting the requirements of the Regulatory
Flexibility Act.
The competitive range rule implements a provision in the
Federal Acquisition Reform Act that gives a contracting officer
the authority to limit the competitive range to the greatest
number that will permit an efficient competition.
Only offerors that are initially "highly likely" to receive
an award would be included in the competitive range. The current
standard, under which those with a "reasonable chance" of
receiving an award are included in the competitive range, would
be eliminated. The proposed competitive range provisions are
incorporated in the rewrite of FAR Part 15.
Advocacy supports the streamlining both rules suggest, but
is very concerned that the proposals will limit competition by
giving the contracting officer significant authority to
eliminate offerors prematurely -- for reasons of convenience. In
theory, limiting the competitive range to promote government and
offeror efficiency sounds great. But, in the real world -- where
contracting officers have concurrent buying actions on-going and
are under significant pressure to do more with less -- we believe
the rules will give government contracting officials license and
incentive to focus on the fewest number of offerors that are the
best known or who represent the most recognized brand name.
We are concerned that new government vendors, emerging firms
and other small businesses, less polished in marketing or
proposal writing skills, will be quickly eliminated from a
competition.
Advocacy believes competition will be limited because
provisions in the proposed rules:
- Do not define what is meant by an "efficient
competition," giving the contracting officer
significant latitude to interpret "efficiency" as
"convenience."
- Allow a contracting officer to determine the number of
offerors to be considered in a competitive range before
the submission of offers;
- Do not require a minimum number of offerors to be
considered in the competitive range;
- Leave open to the judgement of the contracting officer
the method or reasons for eliminating a potential
offeror from the competitive range; and,
- Provide no protections for small firms in mandatory or
advisory "down-selects."
The most important issue here today is that the proposals
represent a dilution of the practice of "full and open
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 need for open competition in federal procurement markets
is significant. Advocacy contends that some recent acquisition
reforms, including those articulated in the proposed rules, will
have the immediate effect of reducing procurement opportunities
for 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, in our
opinion, 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. As such, certain allowances for small firms should
exist to level the playing field so that open competition is
preserved and that all sectors of the economy, including women
and minority business owners, 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 an absolute requirement of a dynamic and
competitive federal marketplace. It would be myopic to sacrifice
competition at the expense of creating 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.
Advocacy asks that the following amendments and/or
alternatives to the proposals be considered by the FAR Council:
1. Define what is meant by an "efficient competition" in the
rules.
2. Factors for limiting competitive range "market research,
historical data for previous/similar procurements" (as
referenced in the rules) should be disclosed and readily
available and the factor, "resources available," should be
eliminated from the proposals.
3. Establish FAR guidelines for determining the minimum number
of offerors in a competitive range.
4. If any small firms have a "reasonable chance" of winning a
particular contract, at least one small firm (highest
ranked) should be included in the competitive range.
5. Re-affirm in Part 15 of the FAR the government's commitment
to utilizing small firms in federal procurement.
6. Require written tracking of all contracting officer/offeror
"discussions."
In closing, Advocacy believes the competitive range rule and
the rewrite of FAR Part 15 should be considered as major rules,
subject to Office of Management and Budget (OMB) review under
Executive Order 12866. A major rule is defined as one with an
annual economic impact of greater than $100 million or having
significant adverse effects on competition. In FY '95, competed
contracts represented about $130 billion or 64 percent of all
federal contract dollars. Further, these regulatory proposals
will significantly alter what is meant by "full and open
competition" in government contracting and, in our opinion,
adversely affect many small firms.
The Office of Advocacy is committed to making procurement
reform a reality and stands ready work with the FAR Council, the
Office of Federal Procurement Policy, and the promulgating
agencies in that endeavor.
Thank you for the opportunity to express our views at this
forum.