House Committee Chair Proposes Overhaul of Procurement Programs House Small Business Committee Chairwoman Nydia Velazquez, D-NY, plans to introduce legislation overhauling small business contracting programs. Among the provisions, as described by Velazquez and her staff at a hearing Oct. 4: Sole-Source Contracts Velazquez proposes increasing the size of sole-source contracts for small businesses to $10 million. It is currently $3 million, or $5 million for manufacturing. While several small business groups endorsed the increase, Angela Styles, former head of the Bush administration’s Office of Federal Procurement Policy, said it would favor 8(a) contractors at the expense of other small businesses. A sole-source contract can be awarded to an 8(a) company without regard for the “rule of two.” For all other categories of small business, no sole-source contract can be awarded if at least two companies are qualified to do the work. 8(a) Program Velazquez proposes increasing the net-worth ceiling for owners of new 8(a) businesses to $750,000, from the present $250,000. SBA officials have agreed that the limit needs to be raised, but Administrator Steven Preston said $750,000 is too high. Under the proposal, the current $750,000 net-worth ceiling for remaining in the program would be abolished. Velazquez proposes eliminating the “delegation of authority” that allows other agencies to decide which contracts will be set aside for 8(a) firms. SBA once made those decisions, but turned the responsibility over to procuring agencies as part of the procurement reforms of the 1990s. Some small business advocates say one result of delegation has been that agencies steer contracts to a few favored 8(a) companies. Velazquez said only 7% of 8(a) firms received any contract in 2006, but Preston said she was misinterpreting the figures. An SBA press release said about 45% of companies received contracts. Steven Denlinger, president of the Latin American Management Association, agreed that action is needed to prevent “a concentration of 8(a) awards in the hands of far too few 8(a) firms,” but he warned that going back to the old ways would slow the contracting process and put 8(a) firms “at a great disadvantage.” Denlinger said other ways could be found to increase SBA’s oversight of 8(a) contracting. The Bush administration also opposes the provision. Preston said, “Agencies need this [delegated] authority to streamline the process for making 8(a) awards.” Finally, Velazquez proposes extending the length of a company’s participation in the 8(a) program to 10 years, from the present nine. HUBZone Program Velazquez is proposing several measures to guard against fraud in HUBZone contracting, after a pair of reports by SBA’s inspector general found that many certified companies are ineligible for the program. She wants to require on-site inspections of all companies that apply for HUBZone certification. Preston said SBA does not have the people or money to do that. To combat fraud, he said SBA will propose a rule requiring a HUBZone company to certify that it is eligible for the program at the time a contract is awarded, as well as when it submits a bid. Velazquez proposes limiting HUBZone construction companies to work within 150 miles of their home offices, a move endorsed by the Associated General Contractors and other construction-industry groups. Velazquez said the purpose of the program is to create jobs in low-income communities, so the companies should be working in or near their home communities. But Styles, the former OFPP head, said contracting officers already have authority to limit competition to local contractors. She said the restriction would cripple HUBZone construction companies. Overall, Styles said Velazquez’s proposals “appear to favor the 8(a) program and place harsher requirements on HUBZone and service-disabled veteran-owned companies.”