Abusive Procurement Practice Perpetuates Crisis in Small Business Contracting

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Cases Describing Abuse to be Investigated by IG and POGO. Four OFPP Directives Have Failed to Stop an Endemic Practice. Small Busiinesses Denied Opportunities to Level the Playing Field

Ten separate cases involving solicitations restricted for small businesses detail how procurement opportunities were unlawfully wired to preferred suppliers and/or to large manufacturers. The cases will be turned over to the SBA Office of the Inspector General (OIG) and to the Project on Government Oversight (POGO) for their investigation. The Fairness in Procurement Alliance (FPA) which represents the procurement interests of 10 million small and disadvantaged businesses, had spent over a year researching and gathering proof on the abusive practice referred to as 'unfair end-user justifications.'

FPA also submitted recommendations from experts in public procurement to the Office of Federal Procurement Policy (OFPP), which had issued four (4) separate directives (1) to the procurement community - over the last three years - in an attempt at stopping the endemic abusive practice and encourage more competition in commodity procurements.

The culprits, in this case, are the public servants originating the procurement requests and the fact that this constituency has been unethically clever by disguising their requests for purchases through the use of 'unique' or 'patented' features of their preferred brand and the procurement community has been either clueless or they have not questioned the justifications behind the requests.

These public servants, in their effort to get what they want, have disregarded the typical higher costs often associated with their 'personal choises' and restricted the competion. They have allowed themselved to be influenced by their alleged 'preferred suppliers' and/or by the marketing hype of the manufacturers's literature. Regardless, their actions have perpetuated the established monopoly that large businesses have enjoyed - for decades - over public procurement, which included commiting fraud by bidding and accepting awards restricted for small businesses without fear of punishment.

The 110th Congress has issued 12 separate pieces of legislation to bring transparency and oversight to government procurement and public reports, including several from the Government Accountability Office (GAO) have verified this trend.

Although GAO has already confirmed that the statutory rights of small and disadvantaged group have been abused, GAO has not yet addressed 'abusive procurement practices' or alleged 'illegal exemptions.' The 'exemptions,' FPA had claimed, has illegally diverted $640 Billion in contracts away from small businesses over the last decade (2). The GAO-07-1255T Report on Small Business Contracting (3) recommended that "DHS, GSA and DoD take steps to ensure compliance with federal contracting regulations and more transparently disclose the extend to which contracting opportunities are available to small businesses."

"We devoted one of our Procurement Advisories for the procurement community to the subject, talked to hundreds of procurement officials and even challenged some of their postings to discover how and why the abuse had continued even after OFPP had intervened four separate times," said Raul Espinosa, founder and spokesperson for the organization.

Espinosa added, "FPA is convinced that the contracting community is clueless of the end-user attempts to wire their own requests for purchases to preferred suppliers or manufacturers, but they have become part of the problem when they choose to defend the alleged unfair justifications."

"One simplest solution to end 'unfair end-user justifications' is to have Agency heads put their own workforce on notice that individuals will be held accountable for disciplinary action if their requests for purchases of commodities are found to contain improprieties." Espinosa concluded. Another solution is to enforce the OFPP directive, which states, "on commodities which are non-essential to the business of the government, justifications are not even allowed."

Roger Campos, President of the Minority Business Round Table (MBRT) and a member of the SBA National Advisory Board said, "Procurement set-asides are in the midst of a procurement crisis. What we are asking the government to do is to level the playing field." He added, "We will work with any group, which will hear our voice."

Small business columnist, Keith Girard, put it best when on his July 10th column, he said, "Of all the problems facing the SBA, one of its largest responsibilities -- overseeing the award of billions in government contracts every year -- has been its most persistent and controversial." SBA had concluded, in the only two 'Scorecards' that it has released thus far, that most federal agencies had failed to meet their own small business goals for both FY05 and FY06 (4) even though most of them were counting their awards in more than one set-aside category to appear as if they were meeting their goals.

"The transparency efforts of the 110th Congress has exposed the myriad of abuses small and disadvantaged businesses have suffered for decades," said Anthony Robinson, President of MBELDEF. He added, "the government lacks viable vehicles to prevent procurement abuses, enforce the penalties on the book and reward small and disadvantaged businesses when they win their protests. We need to involve entrepreneurs in the solution to the procurement crisis."

In 2005, Espinosa founded the Fairness in Procurement Alliance (FPA) as a national coalition of advocacy groups to bring solutions to procurement issues affecting small and disadvantaged businesses. FPA has teamed up with The University of North Florida (UNF) Center for International Policy in proposing a partnership concept between the government and entrepreneurs in the private sector to address the procurement crisis. This procurement initiative, referred to as 'The umbrella Initiative,' would establish the infrastructure for a private organization - with government oversight and with the transparency Congress now demands - to coordinate and strengthen the delivery of 'essential procurement services 'at the local level to small and disadvantaged businesses (5) qualified to receive, by statute, 23 percent of all Federal contracts or $277 Billion.

(1) http://www.whitehouse.gov/omb/procurement/memo/2008_brand_name.pdf
(2) http://www.prweb.com/releases/2007/9/prweb553578.htm
(3) http://www.gao.gov/new.items/d071255t.pdf
(4) http://www.sba.gov/aboutsba/sbaprograms/goals/index.html
(5) As defined by the Small Business Act of 1953 and its interpretation in FAR 19.001 (48 CFR 19.001), 'small' shall also include small businesses owned and controlled by Hispanics; Blacks; Women; Veterans; Asian Americans; Native Americans; Disabled Veterans' and/or businesses certified as 8(a) or located in Hub Zones. P.L 95-507 implemented the 'disadvantaged group statutes.


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Henry Robertelli
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