A number of recent investigations into the ways in which the federal government is meeting the standards it sets for itself in terms of contracting with small businesses has shown that things are falling well short of those goals. Now, it seems lawmakers are setting their sites on making sure that doesn’t continue to happen.
One of the biggest reasons for these shortfalls is that small businesses will often contract with government agencies, but then subcontract out the work they agreed to complete to larger companies, according to a report from the Washington Post. That, in turn, means that the bigger competitors are essentially getting much of the money the federal government sets aside for small businesses, effectively defeating the purpose of the contracting goals in the first place.
However, the U.S. Small Business Administration is now making an effort to crack down on this kind of abuse of the system through which small businesses are supposed to be able to contract with the federal government for up to $6.5 million per deal, the report said. Last year, Congress passed legislation that would create limits on how much of the contracted work could be farmed out to other companies, and firms found to be in violation of those rules would be fined at least $500,000.
So what’s the issue?
The problem is that, much like the original program before the subcontracting limits, it seems the SBA isn’t keeping particularly close tabs on whether those levels are actually being observed by small businesses that get the contracts in the first place, the report said. In a recent examination of 10 such deals, the nonpartisan Government Accountability Office found that only two met the newly written law’s rules for being properly monitored by contracting officers. Most businesses involved reported that they had limited contact with these officials who were supposed to be overseeing their contracts. Interestingly, it seems that these officers weren’t aware that keeping tabs on such compliance was part of their duties.
Government contracts can go a long way toward helping independent companies succeed if they’re handled properly, and for this reason, owners might want to do more to make sure they can appear attractive in the application process. That might include finding ways to cut expenses, such as by finding more affordable small business insurance coverage, including policies for liability insurance. Doing so could end up saving companies thousands annually.
