With just weeks to go to meet its small business goals for the year, the Veterans Affairs Department recently took the unusual step of directing VA contracting officers to award contracts only to small firms until Sept. 30.

Contracts intended for mid-sized and large businesses were ordered to go through a review by the VA central office, a process that specialists say could slow awards to those firms.

On Aug. 1, VA Deputy Secretary W. Scott Gould issued a department-wide memo stating that the department, to date, had not met its 34 percent goal for small business utilization for fiscal 2012.

Gould’s memo directed VA contracting officers to limit awards to small firms only until the fiscal year’s end on Sept. 30.

“Unfortunately, our performance in meeting our small business targets is well short of our goal of 34 percent,” Gould wrote in the memo. “With only two months left in the fiscal year to achieve our goal, we must take extraordinary measures to ensure success.”

“Effective immediately, VA contracting officials’ authority is limited to awarding contracts to small businesses,” Gould’s memo stated. “No contracts to large businesses, other than our prime vendors, will be awarded unless approved by VA Central Office.”

A central office team led by the chief of staff will meet weekly to undergo a “rigorous analysis” of proposed procurement actions requesting awards to large businesses, Gould added.

Gould made exceptions for federal supply schedules master contracts awarded by the VA National Acquisition Center, for enterprise-wide purchases such as medical supplies and for government micro-purchases of $3,000 or less.

Even so, the temporary policy sent a small shock wave through the contracting community. While small businesses would benefit, several specialists said mid-tier and large firms could take a hit.

Mid-tier firms that do not qualify for small business set-asides are probably the most vulnerable to losing awards under the new policy, said Stan Soloway, president of the Professional Services Council.

“We have heard a great deal of concern,” Soloway said. “It is having a very real impact.”

“As an unintended consequence, other than the large firms, it is the mid-tier firms that are getting squeezed terribly,” he said.

While the VA should be lauded for its small business utilization, Soloway said that applying a sweeping and sudden policy change is a drastic measure.

He said the council has shared its concerns with the VA and is hopeful of a follow-up memo that would soften the initial order.

VA officials did not respond to a request for comment.

Meanwhile, large businesses may need to dramatically rework their capture plans for the remainder of the fiscal year, Jennifer Aubel, management consultant to Aronson LLC, wrote on the Aronson FedPoint blog.

“Due to the extremely high level of visibility that any large business procurement will attract in the review process, it is likely that many contracting professionals will be reticent to pursue many large business awards until (fiscal) 2013,” Aubel wrote.

“Large businesses would be well apprised to cultivate their relationships with small business partners in order to be able to offer solutions to their VA customers for the remainder of the fiscal year,” Aubel added.

Overall, the VA awarded 33.66% of its contracts to small businesses in fiscal 2011, according to the Small Business Administration Procurement Scorecard. The federal goal is 23%.

Under law, the VA prioritizes service-disabled veteran-owned small businesses, for which it has a 10% goal vs. the government-wide goal of 3%. The VA achieved 18.2% in that category in fiscal 2011

The VA also prioritizes veteran-owned small businesses, for which it has a 12% goal. There is no government-wide goal for veteran-owned set-asides.