Let's Get Small

The hilarious final days of the Bush presidency continue with a Washington Post report on how huge corporations scored "small business" contracts.

In the data The Post analyzed, federal agencies counted Lockheed Martin and its subsidiaries as "small" on 207 contracts worth $143 million. Dell Computer, a Fortune 500 company, was listed as a small business on $89 million in contracts.

The Navy claimed that $60 million in work it gave to Digital System Resources, a division of General Dynamics, went to a small firm—a year after agencies were warned that DSR did not qualify. The Defense Department, which for a century has used Electric Boat to build submarines, labeled the firm as a small business for $1 million in supplies and services. The Department of Veterans Affairs said a computer glitch caused it to claim a $29 million payment to defense security giant CACI as a small-business award.

And 36 of 200—eighteen percent—of the companies at the top of the contract list did not fit the definition of "small" businesses.

Comments

[Legate Damar]

36 of 200 is 18%.
26 of 200 is 13%.

[Warren]

Let's get small!

Nice vintage allusion! All you young puppies out there who think Steve Martin is a hack actor and not so funny comedian, go check out "Let's Get Small" from whatever you punks use as a library these days.

Ah the 70's Carlin, Cosby, and Martin *sigh* Will we ever know such a golden age of comedy again?

[John]

The small business set aside is one of the biggest pain in the ass boondogles ever. It really hits hard in the IT world. When a normal company needs IT equipment, it calls down to a big vender and the vender comes in and does everything they need. They don't worry about competing it out or giving everyone a fair chance, they make a few calls and do it. If they are not satisified they never use the vender again.

In the government, if it is a big purchase, they have to go through the contracting process. Rather than making a call, they have to go to the contracting office. The contracting office, taking their own sweet time, puts the project out for a bid and then a few months later evaluates the bids. They have to give so many bids to small businesses. So instead of the big, established company like Dell or Sun, you may get Bob's computer supply and IT. Not only that, you will get Bob six months after you needed the stuff and Bob may or may not be able to handle the job. Nine months later you maybe get a job done half right that anyone else would have had done in a week after a single phone call.

[The Wine Commonsewer]

It's all about relative size and tweaking the rules. Back in the BAD OLD DAYS, American Motors Corporation was a qualified small business and got all sorts of goodies and graft because it was the smallest in it's industry.

How that squares with Dell Computers size I can't say, but there are some very bizarre rules connected with getting small business and minority business contracts from the government.

And, apparently, a lot of outright bullshit!

Hey, here's a plan: Let's abolish the SBA and all the other agency rules pertaining to the hoops companies jump through to be allowed to bid on contracts for the federales.

[The Wine Commonsewer]

Nine months later you maybe get a job done half right that anyone else would have had done in a week after a single phone call.

And each computer cost $3,700.00.

[J sub D]

As a taxpayer, I want my employees (the goddam government) to get the most bang for the buck. I am unconvinced that small business, minority, and prevailing wage contracting mandates do that.

Still, the law is the law. You would expect the governmental high mucky mucks and bureaucrats to follow the law more than 82% of the time when awarding contracts.

[P Brooks]

I want to help. Where do I sign up to be a "small business" front partner for General Dynamics?

[The Extispicator]

I have seen several times businesses set up minority owned and woman owned fronts to get contracts. Obama must love it because it creates so many jobs - lawyers to set up the shell entities in a manner that complies with the law, patsy minorities or women to hold the 51% interest, and bureaucrats to award the contracts.

[Tonio]

Former "beltway bandit" (DC-area defense contractor), here. Haven't yet read the WaPo article, but to expand on what John, P. Brooks and The Extispicator (love that name, btw) said:

Pretty much all you need to become a small, minority or woman-owned business for purposes of "partnering" with, say, General Dynamics, is a company that fits the definition of "small," or to have a woman or minority CEO. Once you've done that, the big contractors will come a courtin' you.

Although I was never involved in the contracting/business end of the biz, the word on the streets was that the "partners" did little, if any, useful work, which was fine with the big guys. Everyone knows how the game is played and the big guys are happy to give the "partners" their cut if they stay out of the way and don't cause problems. Basically, it's legal money laundering.

Law of unintended consequences, and all.

[Windypundit]

"I have seen several times businesses set up minority owned and woman owned fronts to get contracts."

Meanwhile, a friend of mine who quit her Senior VP job at a Fortune 500 company to start her own business had to spend 5 years jumping through hoops to get certified as women-owned.

[matt2]

P Brooks, you'd better find a way to become a disabled minority veteran first; that's where the real money is.

Then all you have to do is set up a storefront, and contractors will be knocking down your door to PAY YOU so that they can do all of the work.

The big contractors will literally do the entire proposal, including your technical & cost solution, slap your name on it and give you 10%.

[Mo]

The small business set aside is one of the biggest pain in the ass boondogles ever. It really hits hard in the IT world. When a normal company needs IT equipment, it calls down to a big vender and the vender comes in and does everything they need. They don't worry about competing it out or giving everyone a fair chance, they make a few calls and do it. If they are not satisified they never use the vender again.

Uh, they don't go out and talk to a bunch of different vendors because the vendors go to them. And there are only a couple of vendors than can provide end to end soltuions. Usually they don't call the vendors directly, they call an Accenture, IBM Consulting or a Capgemini. Those guys call the wide array of vendors to get the best deal. If cost wasn't an issue, then you wouldn't see the shrinking of margins you've seen in IT in recent years.

[Longtime Lurker]

Another interesting thing about small biz designations -- they are self certified. Anyone can submit a proposal claiming they are a small business. However, if someone raises a stink (a losing competitor, for example), you have to be prepared to prove you fit the requirement for the specified NAICS code. Otherwise, it's smooth sailing until you hit the front page of the WaPo.

Also, some designations hardly seem "small". Some industry codes allow businesses with 1,000 employees to qualify. A few lucky groups -- petroleum refineries and ammo makers (not small arms ammo though, for example (Hmmm) -- can have 1,500 employees. I guess it's not unreasonable for specialized industries to have larger allowances, but these are certainly not the Main Street operations people usually think of....

[Kolohe]

They have to give so many bids to small businesses. So instead of the big, established company like Dell or Sun, you may get Bob's computer supply and IT.

For most of the 90's the Dept of the Navy IT was basically ad-hoc and used places like Bob's. Toward the end of the Clinton administration they decided to select a single enterprise-wide IT provider. And so the current system is provided by EDS (Electronic Data Systems, that 'mom & pop' operation where H Ross Perot is (was) 'pop'.)

I will say, the system now is not bad (I'm using it right now). And it's incredible useful to have a single enterprise wide IT system vice a bunch of disparate indivdual legacy system. But there were heck of a lot of growing pains. The biggest problem IMO is that we were paying 1999 prices for IT professionals in 2001. As a data point, iirc in 2001 a single unclassified 'seat' (i.e. a late model (no older than 2 year) dell with the current Office Suite, a broadband internet connection, and tech support) *leased* for around $300. Per month. The Dod would have done wonders for itself if it swept up all that post tech-bust talent for a song, but I feel they squandered an opportunity.

And another anecdote re small business defense contractors. I worked for a real estate agent one summer during college and part of their office space was sublet to a woman who ran a small defense contracting business. It is obvious now as a one person operation that this business was the front to fill the 'woman/minority owned' (she was both) contracting requirement and all the work was actually done by the usual suspects.

[No Name Guy]

I work for a large defense contractor.

First of all, the set asides (in all incarnations) are bull. Let the best bidder get the job, period. If it happens to be small, or woman owned or minority owned - hey great. Otherwise, the tax payer is getting a 2nd (or 3rd or 4th) rate product for too high a price.

That said, no sane small businessman would enter into a contract with the DOD. The requirements are absolute bullshit. They regulate your profit margin, they impose bullshit expensive accounting requirements, you have to use more expensive materials from domestic producers (the Berry ammendment) even when the exact same metals are available from foreign suppliers at a fraction of the cost, and, most disturbingly from at least a business perspective, your livelihood is dependent on the fickle whims of a psycho congress. Is it any wonder hammers cost $500....

[Adam]

Government contracts attorney here- sure there are a lot of nutty rules, but government contracts can't be the same as a large corporation. There are HUGE opportunities for graft, bid rigging, etc. in government contracting- most of the rules are designed to prevent this by creating and open, transparent, and fair process. The rules significantly slow things down and cause costs to be higher than what a large corporation pays, but they provide a big benefit to the taxpayer in the long run. We can scrap plenty of the socioeconomic rules, but the core of the system is pretty good.

[Dave W.]

Companies should be progressively taxed based on size. The we wouldn't need to worry about this stuf.

[MJ]

Gee, any surprise that regulations were gamed to either benefit the well connected or to superficially satisfy the requirements when a real small business would not be able to fulfill the contract?

[Guy Montag]

What No Name Guy said, and . . .

The Department of Veterans Affairs said a computer glitch caused it to claim a $29 million payment to defense security giant CACI as a small-business award.

I worked for that firm for 9.5 years, left them about 4 years ago for a smaller firm, but they were never a "defense security giant" and still are not. Hell, when I started working for them they were barely abouve 8A status. Their purchase of another firm about 5 years ago made them a good bit bigger, but any argument that they are a first tier firm, like Boeing, is just Fairbanksing.