A small business advocate is warning of possible negative repercussions for small defense contractors as a result of a provision in the National Defense Authorization Act (NDAA) for fiscal 2013 that became law in January.

The provision is described in Section 331 of the law. It allows Defense Department agencies to enter into intergovernmental support agreements with state and local governments for the purpose of providing, receiving or sharing “installation support.”

The agreements may be sole-sourced and are limited to five years. The agreements are only applicable if the government provider already provides such services for its own use.

The agreements are intended for “enhancing mission effectiveness or creating efficiencies or economies of scale, including by reducing costs,” according to the law.

However, Kay Bills, president of the Mid-America Government Industry Coalition (MAGIC), is raising an alarm about the intergovernmental agreements, claiming they are likely to have a negative effect on small vendors.

She cited the example of a military base in the Midwest region that she says may be entering into a waste management agreement with a local government agency as a result of Section 331. Previously, the waste management service was handled by a vendor.

“This is not good,” Bills told Set-Aside Alert. “This is taking work away from the private sector and giving it to the city.”

Details of the case were not immediately available, and it was not known whether similar transactions were happening at other military bases.

However, if the agreements become popular, it seems the impact could be significant.

Attorneys of the McKenna Long & Aldridge LLP law firm said the provision could help state and local governments raise revenues.

“These agreements could be a game-changer for cash-strapped localities because cities would be paid for services provided to local installations,” Jim Schweiter, Elizabeth Ferrell and Katherine John, all of McKenna Long, wrote in a recent blog entry.

Because installation support covers such a broad range of activities, Sect. 331 could be significant. It could include utility system operations and maintenance, water and wastewater plant operations and maintenance, sewage and garbage disposal, grounds keeping work, snow and ice removal and building maintenance, the attorneys wrote.

But the potential losers are the small firms that may be currently providing those services, Bills said.

Presumably addressing similar concerns, the law states that Section 331 is not to be used to circumvent Office of Management and Budget guidance on public-private competitions.

More information: NDAA Section 331: http://goo.gl/615QK
McKenna Long blog: http://goo.gl/NOJqd