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SBA Delays Implementing Changes To NDAA

Written by Tim Morral
Published: 7/22/2014

It's been more than 18 months since Congress passed a number of reforms to the National Defense Authorization Act, yet a majority of the changes haven't been made. Who's to blame?

Over a year and a half ago, Congress added small business procurement reforms to the National Defense Authorization Act (NDAA) for fiscal year 2013. The law is meant to assist small businesses in getting federal contracts and more government work.

SBA Slow to Implement NDAA Changes

Small businesses are pushing to quicken the reform process on SBA's part. Since the government aims to award 23 percent of federal spending to small firms, which is over $100 billion annually, the longer SBA waits, the less money small businesses make. SBA still has 40 of the 56 changes left to implement from the reform.

"It's unfathomable for me to understand why it's taking so long when many of these are minor regulatory changes," Angela Styles, a former White House administrator and current partner at Crowell & Moring in Washington, said this week during a congressional hearing.

Styles says that one of the most important revisions are the rules outlining the share of work a company awarded a government contract could subcontract out to another company, the same work reserved for small businesses.

Rules such as these are meant to prevent large firms from using small ones to win set-aside contract and then performing most of the work itself. Small businesses that win this type of contract are required to use a complex formula based on labor hours and wages to determine exactly how much work can be passed along to subcontractors. But these types of rules have been difficult to understand and implement.

"Nobody knows how to administer this correctly, and the uncertainty has led to many disputes with the government and between prime and subcontractors," Styles said.

The House Small Business Committee's panel on contracting and workforce held a meeting this week to hear from small business representatives about how the delays have impacted them. The Committee also hoped that the SBA could give a reason about why it's taking so long to implement the NDAA reforms. The Chairman of the House subcommittee on contracting and workforce Rep. Richard Hanna (R-N.Y.) said he feels like the agency is addressing reforms they like and ignoring the ones they don't.

"Unfortunately, what should have been a bipartisan success story has soured due to inaction and inattention," Hanna said. "Nineteen months is a long time."

John Shoraka, SBA's associate administrator for government contracting and business development, told the subcommittee that the agency has taken action where it could.

"With respect to the NDAA '13, where we found opportunity to move quickly, especially under the women-owned small business cap removal, where we think that will gain significant traction and help us to achieve our goals, we moved rather quickly and did an interim final rule," he said, "and actually worked with the administration to adjust the federal acquisition regulations to take effect immediately or by June of last year."

Shoraka said SBA has tried to enforce some of the rules that were the easiest to adopt before they moved on to more complicated reforms. He said the agency wants to make sure it gets it right the first time.

However, the wait is becoming unbearable for some small businesses, especially for small businesses coping with the set-aside contracting limits, according to Styles. Business owners are required to follow both the laws enacted by Congress and the regulations issued by the SBA.

Styles said this period of limbo has left business owners in an even more difficult position than before as they try to "comply with two inconsistent provisions -- one in the regulation and one in the statute."

"SBA's failure to act is crippling the very small businesses it is supposed to protect and to assist...and resulting in lost opportunity for economic growth," Styles said.

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