Procurement Codes Need Small-Business Bulldogs

State Senator Jake Knotts of Lexington County, South Carolina, is angry. 

Recently a school district in his county gave the contract to build a new school to a big Chinese general contractor that had the low bid.  Senator Knotts shares the outrage of many of his constituents.  While a local architectural firm is being hired to draw the plans and supervise construction, only one other in-county business is being brought on board the project.  The rest of the construction services appear to be going to U.S. businesses outside the county and state.

But the main concern for the Senator is the Chinese general contractor, and rightfully so.  We can expect to see the steel, concrete, furniture and other goods needed for the contract being imported from Chinese manufacturers.  Millions of local tax dollars will flow back to China draining much needed cash from our local, state and national economies. 

Senator Knotts, who has a reputation as a legislative bulldog, wants to change the procurement code to give locally-owned businesses an advantage in the bidding process for government construction contracts.

For many years, the South Carolina Small Business Chamber of Commerce was concerned about the State procurement code, not because of China, but because we did not feel that in-state small businesses were getting their fair share of contract work.  After many years of lobbying, in 2009 the Small Business Chamber of Commerce (co-founded by Senator Knotts), the state’s General Assembly passed legislation that increases the chances that South Carolina small businesses will receive more state government contracts for their goods and services.  However, this procurement change did not apply to construction contracts, which have traditionally been solely based on low bid.

But the problem for small-locally owned businesses in government contracts isn’t just a local and state issue.  The largest government purchaser of goods and services, the United States federal government, is also a concern.

According to the American Small Business League (ASBL) Congress passed the Small Business Act in 1953 that set a goal of awarding 23% of all federal contracts to small businesses each year.  Sounds good doesn’t it.

So what small businesses have been the beneficiaries of this Congressional effort?  ASBL looked at the data from the Federal Procurement Data System and found these “small business” federal contractors in FY 2011:

Apple-IBM-Microsoft-Chevron-Shell-Sony-Siemens-Toyota-Coca Cola-Wells Fargo-Bank of America-Citigroup-General Electric-PepsiCo-Ford Motors-Home Depot-Xerox-JP Morgan Chase-Ernst & Young-PriceWaterhouse Cooper-Raytheon-Hewlett Packard-Panasonic-CVS-Verizon-Time Warner-Boeing-Disney-Comcast-Lockheed Martin-AT&T-Rolls Royce-British Aerospace-General Dynamics

ASBL says that these big businesses get away with being counted as small business contractors by the federal government and every year they siphon off billions of tax dollars intended for real small businesses “due to fraud, abuse and loopholes”.  ASBL lays the blame for this outrage primarily on the U.S. Small Business Administration and Department of Justice, for failing to enforce procurement laws; and on outdated carve-outs for special interests.

This problem has apparently existed for years with calls for Congress to act not having much success.  Sounds like small businesses need a bulldog in Congress on this procurement issue.  How about it, Senator Knotts???