INTRODUCTION

The U.S. government is the world's largest buyer of goods and services. Purchases by military and civilian installations amount to about $180 billion a year, ranging from complex space vehicles to paper clips and janitorial services to cancer research. In short, the government buys just about every category of commodities and services available.

The U.S. Small Business Administration (SBA) has the responsibility of making certain that small business obtains a fair share of government contracts and subcontracts. This mission is spelled out in the Small Business Act of 1953 which established SBA: "The policy of Congress is that ... the government should aid, counsel, assist and protect, insofar as possible, the interests of small business in order to ... insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the government ... be placed with small business." Amendments to this act and other legislation in the intervening years have reinforced and expanded this vital mission.

SBA, working closely with federal agencies and the nation's leading contractors, carries out its procurement assistance responsibilities through a number of programs including:

* Prime Contracting

* Subcontracting

* Procurement Automated Source System (PASS)

* Certificates of Competency

Many laws applying to federal procurement have some special provisions about small business and disadvantaged or minority small business contracting. However, no law has had a more

profound effect than Public Law 95-507. This law (enacted in October 1978) made major revisions to the Small Business Act. In summary, the law requires:

• A strong and specific commitment to subcontracting with small and small disadvantaged businesses by large business prime contractors.
• Detailed subcontracting plans for larger contracts (to be explained further under the heading of "Subcontracting Assistance"). These plans may be accepted or rejected by the government contracting officer in a negotiated procurement and must be carried out forcefully in either a negotiated or sealed bid procurement by the successful large business.
• Monitoring of performance against the plan by SBA and by the procuring activity's contracting officer.
• Federal buying agencies to establish an Office of Small and Disadvantaged Business Utilization to assist small businesses by expanding their contracting opportunities and by helping solve problems.
• Annual goals for contracting with small and small disadvantaged businesses to be set by federal agencies.

How the Government buys military and civilian purchasing activities, installations or

offices scattered throughout the country buy through two methods: sealed bidding and negotiation.

When soliciting for bids, a purchasing office normally sends bid invitations to firms listed on their solicitation mailing lists -or, if a given list is unduly long, the purchasing office may solicit segments of the total list.

The solicitation mailing list is made up of business firms that have advised the buying office that they want to offer on particular solicitations and have supplied data showing their ability to fulfill contracts for the item, service or project.

In some cases, the purchasing installation or office will want offers from additional firms not listed on its solicitation mailing list. These firms are usually located through public advertisements in the Commerce Business Daily (CBD), trade papers, notices in post offices and by Small Business Administration representatives.

Invitations for Bids (IFBs) usually include a copy of the specifications for the particular proposed purchase, instructions for preparation of offers and the conditions of purchase, delivery and payment schedule.

The IFB also designates the date and time of bid opening. Each seated bid is opened in public at the purchasing office at the time designated in the invitation. Facts about each bid are read aloud and recorded.

A contract is then awarded to the low bidder whose bid conforms with all requirements of the invitation and will be most advantageous to the government in terms of price and price-related factors included in the invitation.

When buying by negotiation, the government uses procedures that differ from sealed bidding.

Buying by negotiation is authorized in certain circumstances by law (Federal Acquisition Regulation or FAR).

Often, negotiated contracts cover advanced technology not widely supplied by small businesses and may include very complex areas of research and development, projects connected with highly sophisticated systems, missile programs, aircraft and weapons systems. However, negotiation procedures also may be applied to more-or-less standard items, when negotiation authority has been properly authorized by the contracting office.

For example, items or services may be purchased by negotiation when it is impossible to draft adequate specifications or to describe fully the specific item, service or project.

When purchasing by negotiation, the purchasing office also makes use of its solicitation mailing list for the particular item or service. It may also ask for detailed statements of estimated costs or other evidence of reasonable price. These Requests for Proposals (RFPs) are sent to a number of offerors so that the purchase may be made on a competitive basis.

After reviewing the various offers received in response to the RFP, the contracting officer may negotiate further with the firms that have submitted acceptable proposals to assure the contract most advantageous to the government.

Requests for Quotations (RFQs) may be used in negotiated procurements to communicate government requirements to prospective contractors. A quotation received in response to an RFQ is not an offer and cannot be accepted by the government to create a binding contract. An RFQ may be used when the government does not intend to award a contract on the basis of the solicitation but wishes to obtain price, delivery or other information for planning purposes.

Generally, solicitation mailing lists of suppliers of items or services are the basis for government purchases. The small business that wants to sell to the government should make sure its name is on all appropriate lists. Before this can be done, however, the firm must know which agencies normally buy the products manufactured or the services offered. Here is where SBA can help.

If a firm supplies one item or just a few products or services, the SBA field office representative can tell the firm which agencies purchase those particular products or services.

Government purchasing installations buying items or services offered by small firms work closely with SBA when seeking small business suppliers.

Names and addresses of prospective military and civilian customers are available through SBA's field offices. When requesting information on the location and names of possible customers, a firm must give SBA complete information on the line of products or services it can supply.

If a business can supply a variety of products or services, it should check a number of sources of information on government purchasing. This way, there will be less chance of overlooking possible outlets. Helpful sources are:

U.S. Government Purchasing and Sales Directory - This SBA publication is a comprehensive guide to the government's (both civilian and military) purchasing and sales activities. The directory lists products and services bought by the federal government and indicates which agencies buy them and the proper purchasing offices to be contacted by potential suppliers. The directory also lists the types of surplus property sold by the government, locations of state offices and indicates SBA assistance available in obtaining surplus property. Copies may be purchased from the Superintendent of Documents, Government Printing Office, Washington D.C. 20402. Stock No. 378-8310-8213.

Business Service Centers of the General Services Administration -GSA acts as the purchasing agency for numerous items of equipment and supplies, as well as services used by federal agencies. A small business owner can learn of items bought by GSA by writing to or visiting the nearest GSA Business Service Center. These offices are located in Atlanta, Ga.; Boston, Mass.; Chicago, Ill.; Fort Worth, Texas; Denver, Colo., Kansas City, Mo.; Los Angeles and San Francisco, Calif.; Philadelphia, Pa.; New York, N.Y.; Auburn, Wash.; and Washington, D.C.

Commerce Business Daily - This publication is issued by the U.S. Department of Commerce, Mondays through Fridays, except on federal legal holidays. It lists proposed government purchases over $25,000, subcontracting leads, contract awards, sales of surplus property and foreign business opportunities. Proposed purchases to be solicited exclusively from small business firms are also identified.

Copies of the Commerce Business Daily are available for reference purposes at SBA and Department of Commerce field offices. It may be obtained by annual subscription of $260, first class, or $208, second class service, from the Superintendent of Documents, U.S.

Government Printing Office, Washington, D.C. 20402.

After determining which agencies procure the items or services a small firm can supply, the small business owner or manager should ask the appropriate agencies for the necessary forms to place the company's name on their solicitation mailing lists for specific items or services.

All published government specifications and standards for items or services purchased by military and civilian departments and agencies may be obtained from the following locations:

Military specifications - Commanding Officer, Naval Publications and Forms Center, 5801 Tabor Ave., Philadelphia, Pa.19120

Federal specifications and standards and commercial item descriptions - Nearest business service center of the General Services Administration or the Federal Specifications Distribution Center Federal Supply Service, GSA, 7th & D Streets S.W., Washington, D.C. 20407

Copies of specifications and standards needed by business concerns for government bidding and contracting purposes are available without charge. However, there will be a charge for large quantities, complete libraries and copies wanted by individuals or organizations not directly involved in government bidding or contracting.

Business concerns that are not certain what specification or standard is needed should contact the specific government agency contracting office which is requesting offers or which awarded the contract referencing the documents.

After the specifications have been studied and the firm believes it is capable of producing the item(s), it should request the buying agency to place its name on the appropriate list.

In answer to the firm's request, the purchasing office should send a "Solicitation Mailing List Application, Form 129" to the requesting firm.

If the purchasing activity does not include a buying list, or if the buying list does not include the exact products or services the firm can supply, a separate sheet should be attached to the completed form showing:

• The specific name of each product or service the firm offers.
• Additional items or services the firm could provide the purchasing agency other than those already listed.
• Any item or service the firm has supplied in the past under government contracts.

Each product or service listed in the attached sheet should be fully described and, if possible, should indicate the government specification number for each item.

When returning the completed form to the purchasing activity, the small firm should include a covering letter referring to the attached data and asking to be kept informed about the lists on which its name has been placed. This is particularly important to ensure proper listing.

Even though it may have its name on several solicitation mailing lists, a small firm should continue to seek other opportunities. The U.S. Government Purchasing and Sales Directory and the Commerce Business Daily are both useful in this regard.

Firms that receive invitations to bid or requests for proposals from a purchasing activity should submit offers or notify the purchasing office that they are unable to offer on the particular item or service, but wish to remain on the active list for future purchases of the specific product. Otherwise, they may be dropped from the list.

There are two types of offers - bids and proposals. Bids are used in sealed bidding purchases, while proposals involve awards to be made following negotiation. Bids and proposals always should be prepared with utmost care. Contracts awarded on erroneous offers may result in serious financial loss or other difficulty for the bidder.

Before preparing an offer, close study should be made of the specifications to be sure that all requirements can be met. Particular attention should be given to the instructions to offerors and to conditions of purchase, delivery and payment.

When determining the amount of the offer, the small firm should be especially careful to include all costs of material, labor, overhead, packaging and transportation. Also, it should be sure to comply with such important provisions of the solicitation as submitting the required number of copies, mailing the offer insufficient time to reach the purchasing office before the closing date, and properly tagging, marking and mailing any required samples well in advance of the opening date.

If a firm wants to change or withdraw a bid, it may send a letter or telegram to this effect to the purchasing office. However, the notification must reach the office prior to the time set for the bid opening.

When preparing a proposal on a negotiated procurement, the same care should be taken as with a sealed bid. However, because the negotiated purchase procedure is more flexible than the sealed bid procedure, there is greater opportunity to seek modification of specifications, conditions of purchase, or delivery and payment.

If the contracting officer decides to negotiate on a firm's proposal, a complete cost analysis may be required. Therefore, the firm should be prepared to support the offer with facts and

figures.

Prime contracting concerns itself with the relationship between federal buying agencies and companies directly responsible for providing the supplies or services needed by the government.

In fiscal year 1990, federal agencies collectively purchased a total of $178 billion worth of supplies and services, of which $36 billion was awarded to small businesses as prime contracts. Much of this small business prime contracting occurs without intervention by SBA because of the reasons listed on the following page:

• A small business wins the award in head-to-head competition resulting from responses to an Invitation For Bid (IFB) with other businesses both large and small; or
• A small business is judged to have the best proposal in response to a Request for Proposal (RFP) and successfully negotiates a contract with the activity.

SBA, however, continually tries to increase both the dollar value and percentage of total awards to small business, principally through the work of its procurement center representatives (PCRs) stationed at selected military and civilian locations where there are major buying programs. There are two types of PCRs, traditional (TPCR) and breakout (BPCR), whose duties are different but complementary.

TPCRs have many challenging tasks in support of SBA's procurement assistance mission, but most of their time is spent on the prime contracting program. TPCRs operate under provisions of the Federal Acquisition Regulation (FAR) and other directives and are in the review cycle of requirement packages (describing what the agency wants) as they are being processed by the contracting officer. The agencies are required to submit to the TPCR, for independent review, all requirements which are valued at more than $25,000 and are not to be processed as small business set-asides restricted to competition among small businesses only.

In reviewing a requirement, the TPCR attempts to obtain a small business set-aside, i.e., restricts the acquisition to small business firms. The FAR states that small business set-asides are mandatory when a determination is reached that there is reasonable expectation that offers will be obtained from at least two responsible small business concerns so that awards will be made at fair market prices. When the TPCR recommends a small business set-aside which then is rejected by the contracting officer, the TPCR may appeal the decision. This appeal may go all the way to the head of the department involved. Many times, the TPCR is sustained on an appeal and the acquisition is set aside.

If set-aside criteria cannot be met, then the TPCR attempts to provide competent small business sources to ensure the widest possible small business participation in the acquisition. These sources can come from activity files, from other PCRs or small business, or from SBA's Procurement Automated Source System (PASS). Purchasing agencies will send copies of the solicitation to these additional sources upon request of the TPCR.

While reviewing requirement packages, the TPCR is constantly on the lookout for provisions or procedures which may inhibit, restrict or discourage small business firms from submitting offers. These barriers could include restrictive specifications, unreasonably large bonding requirements or unrealistic delivery schedules.

In addition to these duties involving specific procurements, TPCRs are active ombudsmen for small businesses having problems with an agency. They participate in procurement conferences, seminars and business fairs, explain SBA's procurement assistance programs and introduce small businesses to buying activities. Should you have a specific problem or general questions about contracting at an activity, the nearest SBA field office or regional office can put you in touch with the TPCR.

Breakout procurement center representatives (BPCRs) are located at major procurement centers of the federal government. The BPCRs and their technical advisors are advocates for the breakout of items for procurement through full and open competition. All BPCRs are technically trained accredited engineers familiar with the supplies and services procured at their center. The BPCRs review the method by which the activity intends to procure goods and services to ensure that competition is not unnecessarily restricted.

BPCRs recommend appropriate acquisition methods when competition can be expanded. Our experience is that the breakout program creates many opportunities to offer on new items and services and small businesses generally win a majority of the items and services procured through full and open competition.

Prime contracting also conducts surveillance reviews of federal contracting offices. These reviews assess the effectiveness of an activity's small business utilization program in providing the small business community the maximum opportunity to participate either as a prime contractor or subcontractor in performance of contracts awarded by that office. Recommendations for any noted program weaknesses or omissions are submitted to the department level authority.

The federal government's role in subcontracting assistance to small business was changed significantly by P.L. 95-507, which amended Section 8(d) of the Small Business Act. Prior to the enactment of the law, the emphasis was on voluntary best efforts by cooperating prime contractors. Once contractors had made their make-or-buy decisions, they attempted to subcontract many of the buy items to small business. Over the years the percentage of small business subcontracts grew, but as federal prime contracting became more complex and specialized, it was realized that more could and should be done for small business in

subcontracting in the high-dollar, complex procurements.

P.L. 95-507 changed the emphasis from voluntary to mandatory and from best efforts to maximum practicable opportunity. The Act directs that federal government contracts over $ 10,000 shall contain a clause entitled Utilization of Small Business Concerns and Small Business Concerns Owned and Controlled by Socially and Economically Disadvantaged Individuals.

For larger contracts, I. e., those over $500,000 ($1 million for construction), the law also requires a subcontracting plan setting forth percentage goals for utilizing small business concerns, including separately identified goals for disadvantaged small business. In addition, the prime contractor must describe the efforts it will take to assure that such firms have an equitable opportunity to compete for subcontracts.

For large negotiated contracts, the contracting officer may approve, cause to be modified or reject the submitted subcontracting plan. Although the agency's contracting officer has the final decision, SBA may perform a preaward review and evaluation of the subcontracting plan. In most cases, if SBA has serious objections to a proposed plan, the contracting officer will require the large business submitting the plan to make changes to overcome SBA's objections. If the contracting officer determines that the plan provides "the maximum practicable opportunity" for small and small disadvantaged concerns to participate as subcontractors in the performance of the contract, the approved plan is incorporated as part of the contract. Failure by the large prime contractor to carry it out can constitute a material breach of the contract and, unless remedied, could result in termination.

For large, sealed-bid (as opposed to negotiated) contracts, the plan submitted by the successful bidder is incorporated into the contract and, if not carried out, can constitute a material breach. The plan is not negotiated ahead of time between the large business and the buying agency. If the agency's contracting officer believes that the subcontracting plan submitted does not reflect the best effort by the bidder to award subcontracts to small and small disadvantaged concerns to the fullest extent, the agency shall request a review by SBA. Although this request does not delay award of the contract, prior compliance of the bidder with such subcontracting plans shall be considered by the federal agency in determining the responsibility of the bidder for the award of the contract.

Requirements for subcontracting plans do not apply to small business prime contractors, contracts under the prescribed amounts, prime contracts not offering subcontracting

possibilities or contracts which are to be performed entirely outside the United States.

SBA has commercial market representatives (CMRs) located throughout the country. Their basic responsibilities are to:

• Assist small businesses in discovering and expanding subcontracting opportunities.
• Work with large prime contractors to identify competent small business contractors, and assist them in interpreting Section 8(d) and its implementing regulations, including the formulation of subcontracting plans.
• Conduct preaward review and evaluation of subcontracting plans requested.
• Conduct postaward review and evaluation of contractually required subcontracting plans.
• Conduct subcontract program reviews and compliance evaluations to make sure that prime contractors are implementing their subcontracting program requirements under Section 8(d).

An SBA Small Business Subcontracting Directory is published every two years for use by small businesses as an aid in marketing. SBA has selected the major prime contractors to the federal government offering the greatest potential for subcontracting to small businesses. Companies are listed alphabetically by name (corporation, division or company) within each of the ten SBA regions. This publication can be obtained at any SBA regional office listed in the back of this booklet.

Earlier we referred to locating competent small businesses for prime contracting opportunities with government buying agencies and subcontracting opportunities with large business prime contractors. Over the years, many source lists and bidders' lists of small businesses were developed by agencies and companies. Some were manual, others were partially automated.

PASS was designed to establish a centralized, computer-based inventory and referral system of small businesses interested in being prime or subcontractors for federal requirements. Using computers and remote video terminals, PASS furnishes sources by matching key words which small firms have used to describe their capabilities. Firms are also available by Standard Industrial Classification (SIC) Codes, Federal Supply Codes or DUNS numbers. Sources may also be retrieved by geographic region. When procurement agencies or prime contractors request small business sources, SBA can furnish the names and capabilities of those firms meeting the buyers' specifications. Also, a profile of the firm can be made available giving information as to minority status, quality assurance programs and other useful information.

Since 1978, the system has grown to an "Inventory" of more than 230,000 firms and is growing every day. SBA is also expanding the number of terminals through which federal agencies and the private sector can obtain small business sources. If your firm provides goods or services purchased by the federal government and your firm has not registered in PASS, you can obtain the simple one-page registration form from your nearest SBA office. It can be completed in a few minutes and your firm will be profiled in the system within a few weeks from the day the completed form is received. PASS registration is not intended to guarantee contracting opportunities, but small firms registered with the system will have their capabilities available if requests are made by the Federal Procuring Offices or purchasing agents of prime contractors. Small firms should never rely on PASS registration to replace their regular marketing and sales efforts, but merely to augment them.

SBA's procurement assistance effort is greatly strengthened by the Certificate of Competency (COC) Program. SBA is authorized by the Congress to certify as to a small company's "capability, competency, credit, integrity, perseverance and tenacity" to perform a specific government contract. If a contracting officer proposes to reject the offer of a small business firm which is a low offer because he/she questions the firm's ability to perform the contract on any of the above grounds, the case is referred to SBA. SBA personnel then contact the company concerned to inform it of the impending decision, and to offer an opportunity to apply to SBA for a COC. If granted, the COC would require award of the contract to the firm in accordance with the Small Business Act. SBA may also, at its discretion, issue a COC in connection with the sale of federal property if the responsibility (capacity, credit, integrity, tenacity and perseverance) of the purchaser is questioned, and for firms found ineligible by a contracting officer due to a provision of the Walsh-Healey Public Contracts Act which requires that a government contractor be either a manufacturer or a regular dealer.*

The COC program is carried out by a specialized SBA field staff of individuals with technical, engineering and government procurement background in cooperation with financial specialists, also of the field organization. On receipt of a COC application, the contracting officer of the purchasing agency is notified that the prospective contractor has applied, and a team of financial and technical personnel is sent to the firm to survey its potential. Although SBA has access to the purchasing agency's preaward survey, which served as the basis of the contracting officer's decision, SBA conducts a completely new survey, which evaluates the characteristics of the applicant in terms of the needs of the specific acquisition in question. Credit ratings, past performance, management capabilities, management schedules and the prospects for obtaining needed financial help or equipment are considered.