Stop-gap legislation has been introduced into the U.S. House of Representatives to fund the federal government though March 6, 2009 under Continuing Resolution (CR) unless regular appropriations bills are enacted before then. The Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 (H.R. 2638) would fund federal agencies at 2008 levels, with the exception of the Department of Defense, Department of Homeland Security, and Military Construction and Veterans Affairs, which would receive full year appropriations. If passed by the end of September, the bill would also avoid any government shutdowns that would occur if Congress fails to enact any funding bills by the end of the fiscal year.

Continuing Resolutions at the fiscal year's end have become an established norm in the federal appropriations landscape for a decade as Congress appears either unwilling or unable to tackle the task of providing regular year-long operating funds for federal agencies before the fiscal year begins.

Funding Highlights of the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009:

• $487.7 billion in FY09 funding for the Department of Defense
• $40 billion in FY09 funding for the Department of Homeland Security
• $72.9 billion in FY09 funding for Military Construction and Veterans Affairs.
• Continuing Appropriations for all remaining agencies and activities that would be covered by the regular fiscal year 2009 appropriations bills until a full appropriation is enacted or March 6, 2009 (whichever occurs first)
• $22.9 billion in emergency supplemental appropriations for relief and recovery from hurricanes, floods, and other natural disasters

INPUT's Take

This new CR goes beyond the most commonly chosen time span of December or January to stretch out to March of 2009.

• The entire House of Representatives is up for reelection this cycle and is in the heat of campaigning for their jobs. Rushing to complete regular appropriations bills by the end of September has been off the radar for weeks, if not months. But in passing a CR the Congress walks the tight rope between getting something passed so they can run home to campaign and facing voters who wonder why they have been ineffective in getting the basics of their job done.
• A government shut-down is something legislators strongly wish to avoid, unless it serves to bolster their reelection chances. So it is highly likely that some form of CR will be passed.
• The President has threatened to veto any appropriations bills that spend more than he has recommended, so while the CR would keep budgets at 2008 levels analysts in the Administration will be combing through the bill to find any hidden pork. The question remains whether or not the President wishes to close-out his time in office with a veto.
• With March 2009 expiration, the Democrat-led Congress keeps its options open for dealing with a new administration that will kick off in January. If Obama wins the March deadline buys time to allow the new administration to shape the budget for the rest of the 2009 fiscal year. If McCain wins it will allow a (presumably) opposition Congress to wield some weight with the new White House.
• With the current financial market bailout nearly monopolizing Congress' attention this CR will likely sail through.

Bottom Line for Information Technology Vendors

• Vendors may need to revise their business development account plans (if they had not forecasted the impact of a likely CR from the onset.) New IT projects in the FY 2009 budget may be put on hold for half the year, or more and existing programs waiting for increased funding will likely have to wait longer. It is possible that IT projects agencies have planned for in the first half of the year won't happen at all.
• Large company federal units should begin to communicate to their corporate entities to not expect that they will make their numbers and corporate needs to look to other commercial sales organizations to bridge the gap.
• Vendors may consider reassessing of their hiring plans and compensation plans for 2009 to determine how this "treading water" period impacts these plans and make adjustments as necessary.
• This is a 1-2-3- punch for federal technology vendors: 1) Market growth was projected to slow in FY09; 2) The bailout of the financial markets currently in development will curtail growth even further; and 3) Now this CR, although not completely unexpected, is longer than what many in the industry would hope for to make 2009 a more positive year.

It's been a very interesting past few months for the Small Business Administration. After a high-profile article was released by the New York Times on June 12th highlighting the state of the Agency's lending and small-business-support goals in the wake of Steven C. Preston's departure, the SBA has experienced heightened scrutiny of its practices. The most notable talking points, as outlined in the article, are the waning flow of SBA loans, the shortfall in meeting woman-owned business goals, and the much-criticized reality of large businesses receiving contracts that are earmarked for small businesses.

The SBA maintains that it is an Agency in transformation. Jovita Carranza, the Acting Administrator of the SBA, stated in his subsequent Letter to the Editor that the Times' article was "stunning in its omission of letters and proclamations of support for the agency's turnaround from industry groups and legislators."

Indeed, it does seem that a turnaround is taking place, and that major changes are not far afield at the SBA. This seachange is reflected in the increased, self-administered scrutiny in reporting that the contracting community is witnessing at the SBA.

In a preliminary assessment of SBA's 2007 numbers, which will be released in August, Kent Hoover, the Washington Bureau Chief at Bizjournals.com, says that the Agency will not be meeting its goal of 23% allocation of government procurement dollars to small businesses (SB). However, at the same time, some interesting figures jump out:

• $436 billion in total prime contracts (more money than 2006)
• SB prime contract dollars decreased to 22.1% from 22.8% in 2006
• $1 out of every $3 went to DC metro area firms

This downtick was likely attributable to the fact that small business acquired by large businesses no longer counted toward Agencies' small business goals. Additionally, for the first time ever this year, Agencies were required to certify the accuracy of their contracting data: in theory, this means fewer size standard and codification errors, and more transparency surrounding small business contracting processes, which will hopefully allow small businesses targeting government business to breathe a sigh of relief and rest assured that their concerns are being addressed.

Although all the back and forth between critics and the SBA has done much to increase scrutiny of the numbers, the actual reality of small business concerns in the contracting world remains relatively static. Relationships still matter, quite a bit, and although this has never been a surprise in the contracting arena, it is surprising to just what degree such increased access still informs government procurement. With so many new programs of such a high profile at stake:

• PACTS, the $1.5 billion DHS vehicle which touts support-service set-asides for Service-Disabled, Veteran-Owned businesses
• Army's ITS-SB , which sets aside $400 million of its IT Services contracts for small businesses
• 8 NETCENTS II small business set-aside programs – Air Force will spend a portion of the $10 billion ceiling for contracts involving SOA Enterprise, Software Services, Infrastructure and Support Engineering

It's very important that the SBA and the contracting community work together, reconcile differences and stave off post-award outcry, which only creates further hindrances and expense to the procurement process.

Perhaps the best way to move forward is to assimilate the input of small businesses themselves, to ensure visibility and support for all policies; it seems as though increased oversight in this direction, however slowly, provides targeted growth and greater opportunities. One thing is for sure - there is always progress to be made.

INPUT welcomes the feedback of its members. Are you sensing a change on the horizon for small business concerns, and the government's commitment to meeting its goals? Or are we just conducting business as usual?

SBA Honors Contractors in 2008

The Small Business Administration released their award winners for 2008 Small Business Prime Contractors of the Year. Ten small contractors were honored for providing the Government with outstanding goods and services as prime contractors.

Radiance Technologies, Inc

• President – George Clark Jr. PhD
• Huntsville, Alabama

Environmental Science International

• President – Ernest Shih
• Kailua, Hawaii

Security Construction Services, Inc

• President – Janet Ceddia
• Hudson, Massachusetts

K&K Industries, Inc

• President – Keith Klaty
• Newberry, Michigan

Metro Medical Equipment & Supply, Inc

• VP Sales – Joshua Stevenson
• St. Louis, Missouri

Willow Creek Construction

• Owner – Nikki Whitford
• Browning, Montana

Classic Industries

• President – Richard Lara
• Dona Ana, New Mexico

Coverall Contracting, Inc

• President – Amanda Harrington
• Green Island, New York

GS5, LLC

• President – Bobby Blackwell
• Dumfries, Virginia

J. Hardin, Inc

• President – Joel Hardin
• Everson, Washington

The Small Business Administration released their award winners for 2008 Small Business Subcontractors of the Year. Twelve small contractors were honored for providing the Government with outstanding goods and services as subcontractors.

Trio Manufacturing, Inc

• President – Michael Hunkins
• El Segundo, California

North Wind, Inc

• President – Sylvia Medina
• Idaho Falls, Idaho

Ideal Systems Solutions, Inc

• President – Elise Hernandez
• Maple Grove, Minnesota

PLX, Inc

CEO – Jack Lipkins Deer Park, New York

Banneker Industries, Inc

• President – Cheryl Snead
• North Smithfield, Rhode Island

Empirical Laboratories, LLC

• President – Sheila McLendon
• Nashville, Tennessee

JES Tech

• President – Bobbie Jessie
• Houston, Texas

ML Technologies

• President – Stan Nakamura
• Bountiful, Utah

Advanced Technologies, Inc

• President – R. Roberts
• Newport News, Virginia

A recent INPUT blog discussed the advantage that small businesses within the Washington DC area have for winning federal contracting dollars. It turns out that not all of those small businesses are on the up and up.

Recent GAO testimony identified substantial deficiencies in SBA's application and monitoring process, specifically as it relates the HUBZone program (designed to provide opportunities to small businesses in economically depressed areas). HUBZone small businesses raked in about $8 billion in contracting money in FY2007, but some of them were not actually eligible for HUBZone status. GAO asserts that SBA, at least within their area of investigation, failed to verify even the most basic information of small businesses applying for HUBZone certification.

GAO's report highlighted 10 case studies of HUBZone-certified small businesses in the DC metro area that were not eligible, but had earned $105 million in prime federal contracts since 2006. They either had "virtual" principal offices that held no employees and minimal equipment, provided addresses that were not in HUBZones (e.g., McLean, VA was not in a HUBZone the last time I checked), or failed the employee HUBZone residency requirement. In a scenario rivaling Dateline NBC's "To Catch a Predator," GAO investigators also set up four phony small businesses and submitted applications to SBA for HUBZone status. They created bogus employees, addresses, and documentation, and in all cases their applications were approved within weeks. One of the addresses belonged to a Starbucks located in a HUBZone, and two others were rented P.O. boxes (which as explicitly disallowed according to SBA's own rules).

This is disheartening for the thousands of eligible and legitimate small businesses struggling to find federal opportunities. Organizations like the American Small Business League work to prevent fraud and abuse when it comes to size certifications and improper government awards, but perhaps they should widen the net to include companies among their own ranks that are claiming special status unfairly.

Interestingly, the Small Business Administration is tasked with monitoring and tracking federal agencies' small business contracting, but it seems that some of that monitoring and tracking needs to be directed internally.

DC has a lot of great things – rich history, museums, and the new Nationals ballpark; the other thing DC has, besides traffic, is many government contracting firms. Trust me, we should know. If the federal government is your market, being close to the market makes perfect sense. However, should it be criteria for success? Certainly not. According to a new AP report, "Companies within 50 miles of the White House earn nearly $1 of every $3 in federal contracts given to small firms." Apparently, USAID in a recent RFP went so far as to mandate that the proposing firms be within 50 miles of DC, which seems like an arbitrary limitation of the market. But is it that surprising that being close to the majority of customers results in greater success?

As always, it's who you know

This story underscores the importance of understanding the contracting environment. Like most businesses, government contracting remains a relationship business where knowing the customer and the customer's business remain paramount. What's more, being located in the DC metro area also provides easier access to all-important teaming relationships (there's that word again) and even event attendance. Even as Federal agencies open more regional offices and some, like the Air Force, are moving to a more regional model, the basic principles of understanding the market remain constant. For starters: small businesses can still be successful utilizing the tools and resources provided. These include mentor-protégé programs and set-aside designations; as well as promoting regional notoriety or "connection" to work located in their area of the country. For example, of the 33% of small business work mentioned by the Associated Press, it would not surprise us to learn that much of it was based in the DC metro area anyway. Work in Huntsville, Alabama is probably more likely to end up with a Huntsville firm (at least more than 33% of it). Lastly, niche technologies and capabilities also distinguish small business firms apart from each other and can make winning DC business, outside DC easier. Of course, the contracting officials still need to know you exist before you can win that business, but that's a whole other blog.

Watercooler

One of the interesting points mentioned around our hallways today was that one effect of the location of firms in winning government business is an always growing regional economy. The government contracting market feeds a regional economy that manages to remain strong regardless of the economy nationwide. As more work is farmed out each fiscal year, the government spends more on all government contracting firms and sustains a robust local economy. So, in addition to being close to the customers, DC does have advantages, even more apparent now in the midst of what many consider a major downturn in the US economy. Not to mention the short, daily commutes.

I honestly spent Tuesday trying to process my thoughts past "you've got to be kidding." But, I didn't get very far.

The Small Business Administration (SBA) announced on Monday that an agreement has finally been reached to allow the Department of the Navy (DoN) the authority to set-aside Seaport-e requirements for 8(a) certificate holders. After four years of debating, the last lone set-aside has been thrown into the whirlpool that is the Seaport contract vehicle. What current Seaport primes may or may not know, any requirement that fits within the scope of the 22 functional categories that comprise Seaport, must utilize that vehicle for procurement (according to DoN policy). I have a strange feeling that I'm witnessing the end of most full and open competition.

Tim Foreman, Navy's Director of the Office of Small Business Programs, was quoted as saying "This is good for the Navy, it's good for the SBA, but more importantly, it's good for the small disadvantaged businesses that participate in the 8(a) program." That's when I started wondering - "huh?" I can understand this being good for the Navy; using an existing contract vehicle will obviously save them money throughout the procurement process. In addition, the SBA has the advantage of no longer spending time and manpower operating as a middle-man in many DoN procurements. How this is good for 8(a) participants is not as clear. If a requirement could be reserved as an 8(a) set-aside, it was, regardless of the Command's desire to use Seaport or not. Now, 8(a) participants will have two obstacles: are they Seaport primes already and do they have enough time to respond to the Task Order solicitations?

Currently there are 292 Seaport primes that are participating in the 8(a) program. With the SBA announcement, those 292 vendors are the only competitors for 8(a) set-asides for the next two years. The 2008 Seaport rolling admissions have already closed; awards were announced in late May. NAVSEA previously announced its intent to refrain from re-opening admissions in 2009 and will wait until 2010 to hold another open-admission. How many potential participants have just been weeded out because they no longer have access to the requirements they previously targeted?

I've heard strong criticism from the market regarding Seaport --- mainly due to the fact that Seaport procurements can severely limit competition, even to the point of not allowing sufficient time for competitors to respond to solicitations. In a previous study of Seaport's efficiency and effectiveness, the acquisition timeline was reported to have been shaved from nine or twelve months down to a mere 67 days. Without the advantage of performing the work on a current contract, is it possible to adequately respond and win a Task Order in under 67 days? How about defining, posting, competing, evaluating and awarding? More importantly, do "the small disadvantaged businesses that participate in the 8(a) program" have the resources to respond successfully in that short a time limit?

In the long run, I question the ratio between money saved and Task Orders awarded. In Navy's effort to streamline and cut costs, what kind of expectation are they setting for competitive responses?

John Deere and Waste Management would generally not be thought of as small businesses (# 98 and 181, respectively, on the Fortune 500). However, contracting officers at the Interior Department coded them as such into FPDS-NG and took credit toward their small business goals, according to an IG audit.

"Contracting officers often click through mindlessly when entering contracts," said one Interior CO. Office of Federal Procurement Policy (OFPP) officials promise more training and improved data quality in FPDS. We think this also speaks to a deeper issue: Contracting Officers are stretched too thin and are thus prone to short-cuts and mistakes.