House Approves Changes in Set-Aside Programs The House has passed legislation giving new preferences to service-disabled veterans, increasing the limit on sole source contracts, and overhauling the 8(a) program. The Small Business Contracting Program Improvements Act, H.R. 3867, would also allow immediate implementation of the set-aside program for woman-owned businesses, but the Bush administration says that provision may be unconstitutional. The House approved the bill Oct. 30 on a 334-80 vote. It was sponsored by Small Business Committee Chairwoman Nydia Velazquez, D-NY, and Rep. Mary Fallin, R-OK. It now goes to the Senate. The Senate Small Business Committee approved a separate contracting bill. (See separate story.) Sole Source Contracts The House bill would increase the limits on sole source awards to $5.1 million, up from $3 million, and $5.5 million for manufacturing, up from $5 million. The new limits would apply to 8(a), HUBZone and service-disabled veteran-owned businesses. Service-Disabled Veterans The bill provides equal treatment for SDV companies and 8(a) firms, moving SDVs to the head of the line for set-asides. It would eliminate the “rule of two” for SDV companies; they could receive sole source awards without regard to whether a second SDV business is capable of doing the work, the same preference that applies to 8(a) firms. In addition, the bill directs that priority be given to businesses owned by the most severely disabled veterans. Women’s Set-Aside The bill would immediately implement the long-delayed set-aside for woman-owned businesses. Agencies would be allowed (but not required) to set aside contracts in certain industries without waiting for SBA to adopt a rule implementing the program. (See below for a list of eligible industries.) In a policy statement, the White House Office of Management and Budget said the Bush administration “opposes the bill’s constitutionally suspect creation of gender-based set-asides.” OMB argued that the set-aside might not stand up to a court challenge under Supreme Court decisions limiting affirmative action. The bill passed by a margin far greater than the two-thirds needed to override a presidential veto. But the administration could refuse to implement the set-aside on constitutional grounds, setting up another round of litigation. (See related story, p. x) 8(a) Program The bill raises the net-worth limit for new 8(a) business owners to $550,000, from the current $250,000. It abolishes the current $750,000 net-worth limit for business owners to remain in the 8(a) program. The Bush administration and several Republican congressmen argued that the new ceiling is too high. The Small Business Committee’s ranking Republican, Steve Chabot of Ohio, said “roughly half” of all House members would qualify as disadvantaged because their net worth is less than $550,000, not counting the value of their home or business. But Velazquez said the net-worth limit has not been raised since 1988, “when a gallon of gas was 90 cents and the average cost of a home was less than $90,000. For too long, we have forced minority businesses to operate under antiquated financial standards that, in many cases, were simply setting them up to fail.” The bill extends the time for participation in the 8(a) program to 10 years, from the current nine. HUBZone Program The bill’s tough new restrictions on HUBZone businesses would cripple the program, according to Ron Newlan, chairman of the HUBZone Contractors National Council. HUBZone set-asides would be discretionary rather than mandatory, as under current law. That would move those companies to the back of the line for set-asides. The bill requires SBA to conduct a site visit to a HUBZone firm before it receives its second set-aside contract. It restricts HUBZone construction companies to work no more than 150 miles away their home office. Velazquez argued that new controls are needed because two investigations by SBA’s inspector general found evidence that ineligible companies were getting HUBZone contracts. Rep. Chabot said the bill would punish all HUBZone firm “as a result of a few bad actors.” GSA Schedules The bill expresses “the sense of the House of Representatives” that GSA schedule orders between $3,000 and $100,000 should be set-aside for small businesses. Currently all other contracts in that range are mandatory set-asides, but GSA contends that its schedules are exempt from the requirement. SBA disagrees, and the issue has been appealed to the Government Accountability Office for a decision. (SAA, 9/28) Rep. John Mica, R-FL, offered an amendment to require set-asides on GSA schedules, but withdrew it before a vote. Instead the House accepted his non-binding amendment favoring the set-asides. Protests The bill would give any small business the right to protest an award in any category. For example, an 8(a) company could protest a HUBZone award, and vice versa. Eligible Industries The Small Business Contracting Program Improvements Act passed by the House provides that woman-owned businesses in these industries will be eligible for set-asides. A Rand Corp. study, sponsored by SBA, found that woman-owned firms in these categories are underrepresented in federal contracting. (The numbers are the first two digits of the NAICS code.) 11 Forestry 21 Mining 22 Utilities 23 Construction 31 Manufacturing 32 Manufacturing 33 Manufacturing 42 Wholesale Trade 44 Retail Trade 45 Retail Trade 48 Transportation 49 Transportation 51 Information 52 Finance and Insurance 53 Real Estate and Rental and Leasing 54 Professional, Scientific, and Technical Services 56 Administrative and Support, Waste Management, and Remediation Services 61 Education Services 62 Health Care and Social Assistance 71 Arts, Entertainment, and Recreation 72 Accommodation and Food Services 81 Other Services