NASA sued for failing to disclose contracting information
June 17, 2010 by cs
In a bid to hold NASA accountable to meeting federally mandated goals for small business contracting, advocates demanded for the third time that the agency release contracting information for its space operations.
The American Small Business League filed a lawsuit on June 8 asking the U.S. District Court for the Northern District of California to require NASA to release subcontracting reports involving United Space Alliance LLC, a spaceflight operations company co-owned by defense giants Lockheed Martin Corp. and Boeing Co., and NASA’s primary industry partner in managing the space shuttle and the International Space Station programs.
The advocacy group wants to know if United Space Alliance has complied with small business subcontracting goals under those contracts. The organization alleges that NASA violated the Freedom of Information Act by withholding agency records, while NASA claims the data was exempt from disclosure as “commercial or financial information obtained from a person which is privileged or confidential.”
The suit is the latest in a series of legal actions the small business group has taken since 2004 against various federal agencies — including the Army and the Energy Department — to make them account for any large corporations listed as small businesses in government awards. ASBL has won about half the cases.
ASBL suspects NASA is withholding data that will prove it is allowing major prime contractors to falsify compliance with small business subcontracting goals, as well as inflating fulfillment of small business targets by counting “clearly large” firms as small, according to Lloyd Chapman, the group’s president.
The federal government sets out to award 23 percent of the total value of all prime contracts to small businesses annually. The Small Business Administration negotiates individual objectives for each agency, ensuring that when combined they meet the overall statutory goals.
In 2007, SBA instituted requirements for long-term federal contracts to be recertified every five years and at every option point going forward. This would take into consideration the possibility of growth and ensure agencies receive credit for making contract awards to small businesses only as long as the firms remain small.
But advocates say instances of large corporations being listed as small businesses in federal contracting awards keep cropping up.
ASBL spokesman Christopher Gunn said large companies that showed up in data on small business awards in 2008 included Lockheed Martin, Boeing, Raytheon Co. and Northrop Grumman Corp.
Corporations that raked in billions of dollars in federal contracts and did not meet the criteria for being small were labeled as such in Washington Technology’s top 2010 government contractors, a list compiled from government procurement data, said Guy Timberlake, chief executive officer of The American Small Business Coalition, which helps small businesses win federal contracts and strengthens their partnerships with the government.
Whether these cases resulted from mistakes in data entry or fraud remains a point of contention between the federal government and advocacy groups.
Timberlake said because federal contracting programs are such complicated bureaucratic exercises, some corporations exploit the loopholes and lack of oversight. They go “code shopping,” seeking out industry codes that will identify them as a small business, even if the definitions do not apply to their actual operations, he said.
Whether a corporation meets the criteria of being coded as a small business depends on host of factors, including its subsidiaries, affiliations, primary industry, number of employees and annual revenues.
“Some out there may say, ‘Uncle Sam is really bogged down right down, so they’ll never notice me.’ ” Timberlake said. “In addition to deliberate efforts to scam the system, just as many corporations are simply not getting good information from various expert resources.”
He added, “There is a level of enforcement with teeth that is needed” in a more competitive climate, but “additional scrutiny entails process, which entails costs.” It is difficult to come up with extra money for oversight at a time when the government is tightening its belt, he said.
United Space Alliance, which received $1.5 billion in contracts from NASA in fiscal 2009, according to ASBL, said it has both large and small business as subcontractors. “Small businesses play a vital role in our efforts to support the nation’s space program,” said spokeswoman Tracy Yates, “and USA is absolutely committed to working with as many small companies as possible to meet that goal.”
SBA declined to be quoted for this story. A NASA spokeswoman said the agency is looking into the matter, but has no further information to provide at this point.
– by Dawn Lim - GovExec.comm - June 15, 2010
NASA Sued for Refusing to Release Contracting Data
April 30, 2010 by cs
On Wednesday, April 28, 2010, the American Small Business League (ASBL) filed suit against NASA in Federal District Court, Northern District of California. The case was filed under the Freedom of Information Act (FOIA) after NASA refused to release subcontracting reports for contracts awarded to General Dynamics C4 Systems Incorporated. (http://www.asbl.com/documents/complaint_GD_NASA.pdf)
The ASBL requested information from NASA on a contract awarded to General Dynamics after discovering that a contracting officer reported the award as a small business contract.
Wednesday’s suit is the second lawsuit filed by the ASBL against NASA. In February of 2007, the ASBL prevailed in its first suit against NASA, forcing the agency to provide detailed information proving the agency falsified its small business contracting statistics by including contracts to a variety of Fortune 500 firms and other large businesses.
Since 2003, over a dozen federal investigations have found billions of dollars a month in federal contracts earmarked for small businesses have been diverted to Fortune 500 firms and some of the largest companies in the world. The large recipients of federal small business contracts include: Lockheed Martin, Boeing, Raytheon, Northrop Grumman, Dell Computer, British Aerospace (BAE), Rolls-Royce, French giant Thales Communications, Ssangyong Corporation headquartered in South Korea, and the Italian firm Finmeccanica SpA. (http://www.asbl.com/documents/20090825TopSmallBusinessContractors2008.pdf)
The ASBL plans to file a series of FOIA requests to NASA as a means of uncovering more federal small business contracts that were diverted to Fortune 500 firms. Specifically, the ASBL intends to uncover contracts awarded to large corporations that were coded as small business contracts by contracting officers.
Section 16(d) of the Small Business Act states, “whoever misrepresents the status of any concern or person as a ‘small business concern’…to obtain for oneself or another,” any prime contract or subcontract with the government shall be subject to penalties of $500,000, 10 years in prison and/or debarment from federal contracting programs. (http://www.sba.gov/regulations/sbaact/sbaact.html)
Attorneys for the ASBL believe federal contracting officials, and possibly even employees of prime contractors, could be held liable for penalties prescribed under section 16(d) of the Small Business Act for fraudulently misrepresenting large firms as small businesses.
“This issue has gone on unabated for over decade. I don’t think these abuses are going to stop until people start going to prison,” ASBL President Lloyd Chapman said.
To watch a clip about the ASBL’s suit click here: http://www.youtube.com/watch?v=Yx-SyChw06I
Why Do Corporate Giants Land Federal Contracts Meant for Small Businesses?
April 13, 2010 by cs
Few would disagree that federal contracts set aside for small businesses should go to small businesses — not corporate behemoths.
And yet it seems to happen again and again. Take one recent example: in late December, an IT company named QSS, a subsidiary of Dell Inc., landed a small-business contract for nearly $21 million from the U.S. Coast Guard.
What’s more, QSS — which in 2006 was purchased by Ross Perot’s “Perot Systems” before Perot was gobbled up by Dell last year — is listed in a federal database as a “self-certified small disadvantaged business.”
How can this be? After all, Dell employs some 76,000 people, and the government’s definition of a small business is one that, in this particular industry, employs no more than 1,000.
The answer depends on whom you ask. The most vocal small business activists insist that the government is acting negligently, even nefariously. Regulators in the federal Small Business Administration counter that the issue is mostly the byproduct of coding mistakes and mergers — human errors that the agency purports to be addressing aggressively under the Obama administration.
Whatever the case, the example with QSS — which Hispanic Business Magazine found through a simple search in the federal contracting database FedMine.Us — isn’t an isolated event. [GTPAC note: fedmine.us is a privately-operated, not government-operated web site.]
Other companies that have landed small-business contracts include General Dynamics — the fifth largest defense contractor in the world — Xerox, Office Depot, John Deere and McGraw Hill, according to a 2008 report from the Department of Interior’s Office of Inspector General. As for QSS, in 2008 it was the nation’s 28th largest recipient of small business federal contracts, according to FedMine.Us.
The 2008 report found that large corporations received $5.7 million in awards that should have gone to small businesses. But that was just within the Department of Interior. The total amount of small business contracts getting diverted to large corporations every year is difficult to ascertain, given the inherent murkiness of the issue. Some activists say it is well into the billions.
In October, the government organization in charge of watching over the SBA — that is, the SBA’s Office of Inspector General — said this issue is among the SBA’s most serious problems.
“Audits and other governmental studies have shown widespread misreporting by procuring agencies,” the report said. “Many contract awards recorded as going to small firms have actually been performed by larger companies.”
The issue is drawing more and more attention as politicians, economists and pundits talk about boosting small businesses in an effort to create jobs, reduce the unemployment rate and stimulate the lagging economy.
At least two bills are working their way through Congress to address this issue. One is co-authored by a duo of Senate moderates, Democrat Mary Landrieu of Louisiana and Republican Olympia Snowe of Maine; the other, by the lesser-known Congressman Henry Johnson, a Georgia Democrat.
By law, the federal government must strive to spend 23 percent of its entire purchasing budget for goods and services on small businesses. That’s a lot of money, seeing how the federal government spends more than half a trillion dollars every year. But by the government’s own admission, it hasn’t been meeting that mark.
It claims to come close. The federal government says it hit 21.5 percent in 2008. (The official report for 2009 hasn’t come out.)
But the American Small Business League, perhaps the nation’s most vocal critic on this issue, scoffs at this contention. Chris Gunn, ASBL’s communications director, insists the true amount is somewhere between 5 and 10 percent.
“The numbers speak to a very different reality,” he told Hispanic Business Magazine.
For starters, he said, the government exempts about a fifth of its purchasing budget from the goal, with the explanation that some contracts are too large for small businesses to handle. This alone, Mr. Gunn said, brings the true percentage down to 17.5 percent.
But Mr. Gunn says the bigger problem is that examples like the case of QSS are happening all the time. And those contracts, like QSS’s $20 million job with the U.S. Coast Guard for homeland security, count towards that 23 percent goal, he said.
In October, the ASBL ran a report, and found that eight of the top 10 small business contract awardees in 2008 were large businesses coded “small.” The ASBL further estimates that at least half of the $93 billion the government says is going to small businesses is actually being diverted to large businesses.
Officials with the federal Small Business Administration, which helps regulate federal contracting to small businesses, say the ASBL’s claims are exaggerated.
“We’re not going to stand for any large business that masquerades as a small business and tries to engage in any malfeasance,” Joe Jordan, the SBA’s associate administrator for government contracting, told Hispanic Business Magazine.
The problem, he said, has more to do with human error. For instance, he said, oftentimes a small business working on a small business contract gets consumed by a corporate giant, and the contracting officer forgets to go back into the database and re-code the business as “other than small.”
Also, after 2012, the problem should abate at least somewhat. That’s because, in July of 2007, a law passed forbidding large corporations from keeping the small business contracts of the small companies swallowed up in acquisitions. But the law grandfathered in, for five years, merger deals made prior to that date. This is what happened with QSS group, which, despite what the federal database says, no longer even exists as a company. (It is really just “Dell.”) That company’s five-year contract with the Coast Guard — which has been renewed every year — expires in late May, said Frank Islam, QSS’s founder and former owner, speaking to Hispanic Business Magazine.
Nonetheless, the phenomenon is a widely recognized problem, and reform efforts have thus far failed to catch hold. This owes in no small part to how the reform advocates themselves are divided. In short, the most vocal and visible activists — such as the ASBL — are out of synch with the most powerful and influential lawmakers putting forth their proposed solutions, such as Senators Landrieu and Snowe.
Ms. Landrieu and Ms. Snowe are the chair and ranking member of the Senate Committee on Small Business and Entrepreneurship.
When introducing their Small Business Contracting Improvements Act in February, Ms. Landrieu said it would create at least 163,000 jobs.
“In this past year, small businesses accounted for more than 85 percent of job losses,” she said on the floor. “When large businesses get new work they typically spread the work among existing employees. When small businesses get these contracts they must staff up to meet the increased demand.”
But where ASBL is often knocked for being too extreme, Sen. Landrieu’s effort is being criticized by some for being too mild.
Most notably, although the bill includes strong language about the illegality of large companies landing small-business contracts through misrepresentation, it exempts the Department of Defense, which by many accounts has the worst record on this matter.
“DOD is seriously challenged in its contracting to minority and small enterprises,” David Ferreira, vice president of government affairs for the U.S. Hispanic Chamber of Commerce, told HispanicBusiness Magazine. “They often rely on very large businesses and award them small-business contracts because of loopholes in the law.”
However, Mr. Ferreira said the U.S. Hispanic Chamber is pleased with some aspects of the bill, such as its focus on reducing a phenomenon known as contract bundling. This is when the federal government, for the sake of efficiency, will consolidate several contracts into one super-contract. This often precludes small businesses from competing because they lack the resources for such large jobs.
One particularly unsavory practice related to this is known as “bait and switch” sub-contracting. The term refers to when large corporations, under mandate from the feds, promise to hire, on bundled contracts, sub-contractors that are small businesses or minority-owned, and then renege after winning the job.
It’s a tactic with which Bill Miera, owner of a Hispanic-owned engineering and IT firm in New Mexico with 50 employees, is all too familiar.
For years, Mr. Miera’s Fiore Industries had been winning bids and working on two separate contracts with the U.S. Air Force, worth between $5 million and $10 million a year each.
About 10 years ago, the Air Force bundled one of the contracts into a mega-contract worth around $50 million — far too big for Miera’s firm to handle.
A Fortune 500 company put in for the bid, and in its proposal told the federal government it would be hiring a minority-owned small business — Fiore Industries — as a sub-contractor. (Mr. Miera declined to name the company, citing a reluctance to burn bridges in what is a relatively small industry.)
When the large company got the job, it dropped Fiore Industries and went with another firm, which was Caucasian-owned.
Mr. Miera, a former board member on the U.S. Hispanic Chamber, was forced to lay off five employees. A few years later, it happened again, with another Fortune 500 company, which went even further.
“They started hiring our people to work for them,” he told Hispanic Business Magazine. “They said, ‘If you want to keep your job, you’ve got to work for us.’”
As a result of these two bait-and-switch examples, Fiore Industries’s annual revenues dropped to about $5 million from $8.4 million. It lost about 10 of 50 employees.
Thanks in part to a contract with NASA, Fiore’s revenues have since climbed back to $6.5 million. But the company’s original plan was to be earning $50 million annually by now.
“That hurts, especially when you’ve done good work, and then lose your contract, but not because you’ve done a bad job or your prices are too high,” he told Hispanic Business Magazine.
Mr. Miera said the problem is that the law, as written, has no teeth to punish those who engage in such tactics.
“The large businesses know that,” he said.
For the entirety of the Bush administration, the ASBL, headed up by its colorful leader, Lloyd Chapman — a frequent pundit on cable news networks such as Fox, MSNBC and CNN — carped on the federal government on these issues. It also filed — and won — several lawsuits.
Mr. Chapman claims the Obama administration has been no better.
“I say it’s getting worse, because Obama has refused to close the existing loopholes that all Fortune 500 firms use to get small business contracts,” he told Hispanic Business Magazine.
Mr. Chapman is advocating the federal contracting bill sponsored by Rep. Johnson of Georgia. Mr. Chapman says he helped write the bill, and typically refers to it as his own.
“My bill has 20 co-sponsors,” he told HispanicBusiness Magazine. (They are mostly House Democrats, but the list does include two Republicans: Ralph Hall of Texas and Ileana Ros-Lehtinen of Florida.) “It will solve a 10-year-old contracting scandal, won’t increase the deficit and it’s permanent.”
Mr. Chapman and the ASBL are also highly critical of almost every other advocate on this issue. Senator Landrieu’s bill, they say, while well intentioned, gives recalcitrant corporate giants “a pass.” The U.S. Hispanic Chamber of Commerce is “backed by Fortune 500 companies.” But Mr. Chapman is particularly critical of U.S. Rep. Nydia Velazquez, (D-NY) — chair of the House Small Business Committee, whom he believes has done nothing to address the issue.
“She has chaired the small business committee for three or four years,” he said. “How come she hasn’t proposed legislation to address it?”
He added that Boeing, the world’s largest global aircraft manufacturer, is a major campaign donor to Velazquez and other small business committee members.
“My bill will take $100 million a year in federal small business contracts away from Boeing,” he said.
(Ms. Velazquez’s office did not provide a comment for this story, despite repeated requests from Hispanic Business Magazine.)
For its part, the federal SBA insists that it is working aggressively to fix the problems. By March, of the eight top awardees of small-business contracts that ASBL had highlighted in October, most had been re-coded as “small.”
Also, President Obama has proposed doubling the budget of the SBA, bringing it back to about $1 billion — which is where it was at the start of the Bush administration.
But despite their contention that the problem is most attributable to human error, SBA officials don’t deny that fraud is a factor.
“The U.S. Small Business Administration is making a tremendous effort to combat abuses in the federal contracting program,” SBA spokeswoman Hayley Matz told Hispanic Business Magazine in an email. “SBA recognizes the significant benefits of the program, but also acknowledges that instances of errors and potential abuse have occurred and resulted in negative consequences.”
Source: HispanicBusiness.com. All Rights Reserved – April 8, 2010 – by Rob Kuznia, Staff Writer
NIH prepares to fight for contract authority
April 9, 2010 by cs
The National Institutes of Health is confident it can survive the scrutiny of the Office of Federal Procurement Policy as OFPP reviews the agency’s governmentwide contracting authority.
“We feel very confident that we have a successful program,” said Diane Frasier, director of the NIH Office of Acquisition Management and Policy, said April 7. “We are tried and true.”
NIH has come under some increased scrutiny as reports have surfaced that the General Services Administration has asked OFPP to not extend NIH’s GWAC authority.
Fraiser would not explicitly say whether NIH’s governmentwide acquisition contract would receive the blessing from Office of Management and Budget procurement officials, but she said her program has been around for 14 years and has received OMB’s designation as a GWAC host since 2000.
To be a GWAC, OFPP must grant an agency the designation. And few are given. Agencies with designations must get OFPP’s approval whenever one of their GWACs comes up for renewal. Compared to the number of multiple-award contracts surfacing throughout the federal government, government-wide contracts are a rarity. Only NIH, the General Services Administration, NASA and the Environmental Protection Agency now have the designation.
NIH’s Information Technology Acquisition and Assessment Center (NITAAC) has submitted its materials to OFPP. Frasier expects to sit down this month with Daniel Gordon, OFPP administrator, and his staff, to discuss NITAAC’s status as an executive agent of GWACs.
“We have to assure them that we have a well-run program,” Frasier said. One proof of its success is its sales. Since January NITAAC has had more than $100 million in orders on its Chief Information Officer-Solutions and Partner2i (CIO-SP2i) GWAC.
She also said agencies trust NITAAC enough to send their big orders to the center. Agencies, such as the Defense Department, have looked to CIO-SP2i for demands with engineering and program support, security information management systems and Internet-accessible database services. The Obama administration’s drive for a more open government may even bring more customers to NITAAC, Frasier said.
If NITAAC gets the designation from OFPP, Fraiser can take the next step in getting bids for its CIO-SP3 and CIO-SP3 Small Business contracts. NITAAC has already released a draft request for proposals and in March formally responded to questions about the contract. Fraiser said she expects business to continue growing, and to that end, NITAAC has put the ceilings for each CIO-SP3 contract at $20 billion.
Still, NITAAC has lost business as agencies, such as the Homeland Security Department, launched their own department-wide IDIQs or as other agencies set up multiple-agency contracts, Frasier said.
Despite agencies’ efforts to launch their own vehicles, Frasier said they should realize the GWACs have strict standards and reporting requirements for OMB. They are held to a higher standard, unlike the other contracts popping up.
Multiple-agency contracts are similar to GWACs in that both are interagency contracts. However, GWACs are specifically for information technology products and services, and agencies interested in awarding a GWAC must first get OFPP’s permission. They don’t need that approval to award MACs.
Facing OMB’s review of her program, Fraiser said she’s not running a “fly-by-night operation.”
“NIH has 14 years of experience in running a major IT program, and was one of the first programs to earn OMB’s designation as a GWAC,” Frasier said.
GSA could be trying to kill rival agency contract – Are other GWACS next on the hit list?
April 8, 2010 by cs
The General Services Administration seems to again be pushing to be the only provider of governmentwide acquisition contracts. The agency’s GWAC director is trying to get the Office of Federal Procurement policy to strip GWAC authority from the National Institues of Health, according to Joanne Woytek, program manager at NASA’s own Solutions for Enterprisewide Procurements GWAC, wrote today on FCW.com.
Woytek reported this in a posting to Harvard professor and FCW blogger Steve Kelman’s Facebook wall, and Kelman in turn based a blog entry on it.
Woytek said Friday morning that she has not been contaced by GSA or OFPP about rescinding NASA GWAC authority.
Officials from NIH’s Information Technology Assessment and Acquisition Center are slated to meet soon with Dan Gordon, OFPP administrator, to discuss a request he recevied to remove NIH’s Chief Information Officer-Solutions and Partners contract from the list of GWACs, according to Kelman.
Woytek said in her Facebook posting that she thinks GSA will try the same maneuver with SEWP when it comes up for renewal in 2012. Her Facebook posting and comment on Kelman’s blog were just “heads up” that she wanted to pass on to him, she said Friday.
None of the agencies involved responded to requests for comments.
Overall GSA’s move, which is not the first attempt by the agency, raises the question of whether the government has too many GWACs, multiple-award contacts and indefinite-delivery/indefinite/quantity contracts, and if they have started overlap.
Experts are split on the decision.
Competition among contract vehicles, including the alternative default contracts inside each agency, promotes customer service and innovation, like competition in other markets, Kelman wrote. When GSA had a monopoly on the government contracting business, it also had poor customer service and little innovation when it had a monopoly on the government buying market, Kelman — himself a former OFPP administrator — wrote.
Martha Johnson, GSA’s administrator, agreed in a recent speech at FOSE 2010, saying GSA didn’t know how to spell “marketing” when agencies were required to buy from GSA. Competition has forced GSA to improve on its innovation and customer service.
However, other experts say there are too many GWACs that are selling much of the same items, especially commodity IT products. As a result, it creates inefficiencies in government operation.
Woytek disagreed with this characterization, saying there are only two commodity GWACs – SEWP and NIH’s Electronic Computer Store.
Bob Woods, president of Topside Consulting and a former GSA commissioner, said agencies should let the larger organizations, such as GSA, handle the commodities. Then the agency can allow employees in their contracting shops to attend to the agency’s unique purchases.
“Competition isn’t as important if you’re not taking care of the basics of business,” he said.
Furthermore, agencies can save money by paying the GSA’s 0.75 percent fee upfront to get general products, instead of launching their own contracts to get the same things, he said.
SEWP’s fee is 0.5, which would be even greater savings for agencies than using GSA’s vehicle, Woytek said.
At the same time, the government may be paying higher prices because of too many contracts
Ray Bjorklund, senior vice president and chief knowledge officer at FedSources, said companies believe they should be on each of the contracts to have access to a lot of business. But it creates more work and more divisions inside a company to deal with each contract’s specific requirements, such as reporting information.
As companies submit more bids and pour more resources into getting a chance to even compete for the work, costs can increase for the govenrment, he said.
Today, the marketplace has changed dramatically since the 1990s when agencies were first given the chance to start up their own contracts, he said. Now, most agencies have settled on their client, and industry is advanced enough to handle more complex work. The government now should consider GSA’s move several years ago to merge two different GWACs and created the Alliant GWAC for IT products and services. While there were some bumps along the GWAC’s way with bid protests and court cases, the principle is fine, he said.
Now, the acquisition community is waiting for officials in OFPP, who have the authority to deny an agency its GWAC status, to decision how it plans to address the issue of too many contractors or more competition.
“I wish OFPP would take a leadership position and reconcile this issue of GWACs and multiple-agency contracts,” Bjorklund said.
by Matthew Weigelt–Federal Computer Week-Apr, 01, 2010 - About the Author: Matthew Weigelt is acquisition editor for Federal Computer Week. © 1996-2009 1105 Media, Inc. All Rights Reserved.