House Passes Bill to Help Small Contractors Win More Sole Source Contracts

The Small Business Administration (SBA) has for many years created various categories of 8(a) or otherwise disadvantaged small business categories to try and create opportunities for small and emerging federal contractors. The SBA’s goal has been to serve as a “conduit” between those government agencies who have contracts containing small business set asides, and those small businesses that can fill those needs. While the SBA’s efforts have gone a long way, many pundits have long wanted Congress to step in to up update the regulations to better utilize small, disadvantaged federal contractors and to better reflect the current federal contracting landscape.

Earlier this year, the U.S. House of Representatives passed House Resolution 190 (H.R. 190)1 , titled the Expanding Contracting Opportunities for Small Businesses Act of 2019, which proposes some dramatic changes to sole-source contracting for small businesses. Most significantly, the bill seeks to increase the size of sole source contracts for SDVOSBs, WOSBs, and HUBZone contractors.

A. Background

FAR Part 19 currently allows contracting officers (CO) to award sole source contracts, albeit under tight restrictions, to 8(a) small businesses, Service-Disabled Veteran-Owned Small Businesses (SDVOSB), Historically Under-utilized Business Zones (HUBZones) and Women Owned Small Businesses (WOSB). Except in the 8(a) Program and VA SDVOSB/VOSB program, a CO may not award a sole source contract under FAR Part 19 if there are likely two or more qualified concerns likely to submit competitive offers. If there are qualified concerns able to perform the contract at fair and reasonable pricing, then sole sourcing is available. In addition, sole source contracts may not exceed certain dollar thresholds under FAR Part 19. Current regulations provide that the CO cannot issue a sole source award if “the anticipated award price of the contract, including options” exceeds $7 million maximum for manufacturing NAICS code contracts or the $4 million maximum in the case of all other contract opportunities. When calculating the award price of a sole source contract under FAR Part 19, the CO must include the anticipated price of all option contracts that might be added to the base year contract.

Speaking on the floor of the House in support of HR 190, Representative Steve Chabot (R-OH) explained the problem with the current regulations this way: “The Small Business Act currently allows Federal agencies to award sole-source contracts to [WOSBs; SDVOBs,] HUBZones; and socially and economically disadvantaged small businesses. However, these awards can only be made in the narrowest of circumstances, rightly protecting the ability of small businesses to compete against each other. Even though Federal contracting officers have this procurement tool in their toolbox, the reality is that small business sole-source contracting is rare and may be underutilized. This can, in part, be attributed to the fact that the maximum dollar threshold for Federal sole-source contracts designated in statute has fallen far behind the typical size of contract awards made today. As contracts increase in size and scope, the usefulness of small business sole-source contracts diminishes, to the detriment of small contractors eligible to receive such awards….”

B. The Potential Impact of HR 190

If eventually signed into law, H.R. 190 would eliminate the words “including options” from the spending limit portions for HUBZone, SDVOBs, and WOSBs. This would allow CO’s to consider the cost of only the base contract when awarding sole source contracts, and would eliminate the need to consider the price of possible option years. HR 190 would also raise the threshold amount that federal contracting officers may award in sole-source contracts to certain types of small business from $4 million for the life of the contract to up to $7 million per year, bringing sole source contracts more in line with the average size of government contracts awarded in today’s market.

Notably, 8(a) small businesses are not included in the companies listed whose sole source limits would be increased under H.R. 190. However, as this bill advances through the Senate, this could change as lobbying efforts for the Bill begin to take shape.

In addition to increasing the contract dollar threshold, HR 190 requires the SBA to individually certify small business’ eligibility to receive such contracts upon request from a federal CO. Eventually, the SBA would be responsible for developing a program to determine small business’ eligibility to receive sole-source contracts. Additionally, this bill would require the Government Accountability Office (GAO) to evaluate federal policies and practices regarding classifying and awarding sole source contracts and to report to Congress on its findings.

Speaking on the House floor shortly before the vote on HR 190, Representative Nydia Velazquez (D-NY District 7) stated “[HR 190] promotes and preserves a strong, competitive marketplace for our Federal agencies while also strengthening the ability of women, service-disabled veterans, and socioeconomic businesses to participate with the single largest purchaser of goods and services in the world.”

C. What’s Next for HR 190?

HR 190 passed the House on January 16, 2019, and on January 19th was sent to the Senate for consideration. The Bill is now in the hands of the Senate Committee on Small Business and Entrepreneurship.

On March 6, 2019, Senator Joni Ernst (R-IA) introduced a companion Bill in the Senate (S. 673 – Expanding Contracting Opportunities for Small Businesses Act of 2019) addressing the same issues. That Senate Bill has also been referred to the Senate Committee on Small Business and Entrepreneurship.

The Senate committee will likely marry the two pieces of proposed legislation into a single Bill and send it out to the full Senate and then to the House to vote on. If it passes both houses of Congress, the Bill would then go to the President to sign into law. Although the process sounds simple, neither the House nor the Senate is obligated to take any further action, and the legislation could very well “die in committee”. Less than 3% of all Bills introduced by the House and Senate actually get passed into law. Nevertheless, this Bill merits following closely, as it could dramatically expand the sole source contracting opportunities for many SDVOSBs, WOSBs, and HUBZone contractors who struggle in today’s landscape to compete and win contracts.

C2 provides strategic HR outsourcing to clients who want to develop optimal workforce strategies and solutions to allow them to be more competitive and profitable. C2 blog posts are intended for educational and informational purposes only.

1 The bipartisan legislation was introduced January 3, 2019 by U.S. Representative Roger Marshall (R-Kan.) and co-sponsored by Representatives Josh Harder (D-CA) and Brad Schneider (D-IL). It passed the House of Representatives on January 16, 2019 by a vote of 415-6.