Leveling the Playing Field for Minorities in Government Contracting

September 30, 2011 No Comments by Raul Espinosa

Article by Raul Espinosa -  At the request of the Senate Small Business Committee, the Umbrella Initiative and its Think Tank offered Congress five recommendations with which to bring accuracy and integrity to the tracking of contracts awarded to small and minority businesses. The letter said, ” the combination of misinformation, barriers plus a lack of academic procurement trainings has created mistrust in the government and has discouraged the participation of small and disadvantaged businesses in government contracting”.

The Umbrella Initiative is an out-of-the-box entrepreneurial initiative that involves private sector entrepreneurs, University professors and students in sustainable government contracting  projects that bring transparency to government contracting and create jobs. Its mission is “to double the number of small businesses contracting with the government by the year 2010″. Below are the Umbrella Initiative recommendations to Congress:

OMB – through the Data Quality Act (DQA) – must become responsible for bringing accuracy to the reporting of the contracting results with small and minority businesses. The ‘certification ‘ of the Agency procurement data, which OMB has put in place, by itself, will not prevent future blunders involving the Agencies data.

Private industry must be used to effectively interpret the government ‘s results in contracting with small and minority businesses. This belief, is shared by the Government Community of Technology Officers.

The SBA Size Standards must be simplified – as small businesses contractors have demanded through NaFCA – and all of its elements (i.e., size determination, size protests, penalties and enforcement) overhauled. Fixing one element without the other three is equivalent to fixing a flat tire on a car without an engine.

Academic procurement training – as opposed to government procurement training – is essential in the elimination of abusive procurement practices. Let’s face it, Procurement Officials will never admit their own barriers are a large part of the problem.

The participation level of small and minority businesses in government contracting is the only measurable tool that can validate the success or failure of the outreach efforts that are being undertaking. Funding and supporting such validation efforts, along with those which bring transparency, are badly needed.

The comments emphasized the fact that the procurement data Federal Agencies have been turning over to SBA to be made public through the SBA Report Card have been wrong ever since the SBA report Card was conceived. The Umbrella Initiative was conceived to bring transparency to public contracting, increase the participation of minority businesses and to create jobs that benefit underserved communities.

The SBA Report Card Inaccurate Data

The Umbrella Initiative provided the Senate Committee with an evaluation by the Florida Atlantic University Public Procurement Center confirming the methodologies used by the private sector to verify anomalies on the list of the Top 100 Contractors Receiving Small Business Contracts . Watchdog groups such as American Small Business League (ASBL) had claimed that 61 businesses which made the FY 2010 list were not small businesses, yet they were listed as having been awarded $8.8 B in small businesses contacts.

Daniel Gordon, the Administrator of the Office of Federal Procurement Policy (OFPP) at OMB on a May 31st, 2011 Directive to Agency Procurement Officials, admitted that, “Federal procurement data that is gathered by, reported, and entered by procurement agencies into information systems . . . is often incomplete, inaccurate, and untimely”.

The SBA Inspector General has also acknowledged the fact that the Federal Agencies known practice to take credit for small business contracts awarded to ineligible large firms is one of the SBA two biggest challenges. The second one is stopping large businesses from misrepresenting their size of status.

The Umbrella Initiative staff interviewed data intelligence service providers which admitted that only a few of the Agencies subscribe to private data providers and many in the contracting workforce have cautiously admitted to them their fear that the loss of  their jobs outweigh the advantages provided by those intelligence providers.

Roger Campos, President of the Minority Business Round Table (MBRT) on the recent OP-ED on the Federal Times, suggested for OMB to switch its attention from outreach to pressuring Federal Agencies to accelerate contracting with minority business so they can create jobs.

Given the public’s skeptical eye towards most claims the government makes on having achieved its annual small business contracting goals, it would be very wise for Agencies to embrace private sector providers to corroborate their achievements before they submit their data to SBA for Report Card.

A new OMB directive, put the place on March 31st, 2011, but not implemented on the data reported on the 2010 SBA Report Card, now requires that Agencies certify the accuracy of the procurement information they release, including the data for the SBA Report Card – on a POGO Guest Editorial in 2010 – to eliminate the misrepresentation of contracting results by Federal Agencies.

Contracting with Small Businesses at the Federal Level

Although the statutory share of Federal contracts to small businesses is 23% and SBA has admitted that Federal Agencies have failed at reaching that goal by averaging 21.5 – 22.6% over the past four years. The Umbrella Initiative Think Tank had estimated that the truth is more like 18.1 – 20.4% and those are huge differences when the totals involved have averaged $83.2B – $96.8B. Each percentage point represents $4 Billion dollars!

SBA Report Card  Data FY 2007 FY 2008 FY 2009 FY 2010
Federal Agencies Share Claimed $83.2B $ 93.3 B $96.8 B $97.9 B
Official Percentage of Total Claimed 21.5% $21.3% 21.8%

 

22.6%
Umbrella Initiative Unofficial Totals 18.3   -

19.4

18.1-

19.2%

 

18.5-

19.6%

19.3%-

20.4%

Transparency has demonstrated a 10-15% inaccuracy in the reporting of the data

Discouraging the Participation of Small and Minority Business

Dr. Carlton Lamar Robinson, Director of Research for the Umbrella Initiative and past President of the First Coast Black Chamber of Commerce said, “To further demonstrate the Federal Agencies, through their own barriers and misrepresentation of results, have been discouraging the participation of small and minority businesses in government contracting, the Umbrella Initiative released a chart of eligible small businesses are actually registered to do business with the Federal government’.

Small and Minority Business Participate in Government Contracting at the Federal Level

Latest U.S. Census Data Business Registered as of 03-2011 to contract with the Federal Government Umbrella Initiative Mission by 2010
Total Small Businesses 27.2M 482,262 (1.7%) 964, 524
Minority Businesses 5.8M 117,636 (2%) 235,272
Disadvantaged Businesses 21.1 M 260,860 (1.2%) 521,720

 

The State of Florida Example

The Umbrella Initiative intends to demonstrate how its solutions – developed through a procurement Think Tank – can effectively level the playing field and solve the disparities that currently exist, at the State and local levels, including increasing the level of participation.

Small Business Participation in Government Contracting in Florida

Latest Census and State Data Umbrella Initiative Mission by 2020
Total Florida Small Businesses 2.4M
Registered to Contract with the State 95,004 190,008
Registered as ‘Disadvantaged’ Business 7,280 14,560
Certified as ‘Minority’ Businesses 3,583 (<1%) 7,166

The State of Florida, according to our research, has 1,586 public entities issuing contracts, but only 32 of those entities publish their opportunities in one place and track the results. The tracking of the results, however, is such that it does not allow transparency to detect if disparities are involved. Many countries and municipalities, as a result, must spend millions on disparity studies to ascertain fair participation.

Ryan Reid, Director of Technology Services for the Umbrella Initiative and developer of Bidspeed an existing procurement portal built with the suppliers needs in mind. “The Umbrella Initiative selected our model to incorporate spokes that will bring transparency, accountability, and essential procurement services to small and minority businesses at the state and national level”.

In summary, the Umbrella Initiative is focused on bringing transparency and encouraging participation to prevent disparities and abusive procurement practices.

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