Tools to Expedite the Federal Government’s Equity in SDB Contracting Goals

The Biden administration has leaned into the federal government’s longstanding commitment to supporting small, disadvantaged businesses (SDBs) with new SDB contracting goals, and with good reason. Diverse small businesses are key to delivering agile innovation and localized service to our Defense and Federal agencies, national security efforts and agency missions. However, many small businesses have faced significant challenges in the volatile economic environment of the pandemic. Therefore, as our construction economy rebounds amid supply chain instability, it is critical to nurture the small business pipeline to ensure that agency needs are met. For this reason, in addition to the very worthy goal of promoting racial equity by providing opportunities for socio-economically disadvantaged business, the administration’s focus simply makes good business sense.

A recent Executive Order outlined five key initiatives:

• Agree with SBA on an agency-specific SDB contracting goal for FY 2022 that will allow the federal government to cumulatively award at least 11% of federal contract spend to SDBs in FY 2022.
• Review and adjust category management stewardship practices to boost contracting opportunities for SDBs and other socioeconomic small businesses.
• Increase the number of new entrants to the federal marketplace and reverse the general decline in the small business supplier base.
• Include the achievement of small business contracting goals as a part of the performance plans for key Senior Executive Service officials.
• Ensure agency small business contracting offices have access to senior leadership.

Construction and Real Property: SDB Fit

While many industries will benefit, facilities construction and services has been a natural entry point into the federal market for SDBs. The Federal government has executed $15-17 billion in Real Property Maintenance, Repair and Alteration annually for the last four years. Much of this work is very well-suited to emergent firms and those first entering the federal market. But there are contracting and operational constraints that can be a barrier to getting this work in the hands of those businesses. Fortunately, there are proven data technology tools and contracting methodologies that can be leveraged to accelerate fulfillment of the current aggressive SDB contracting goals.

The Friction Between SDB Support and Category Management

For many years, Federal contracting offices have been tasked with optimizing spend — doing more with less by consolidating spend under Category Management principles – and these initiatives are frequently seen as being at odds with SDB support. They indeed can be. But when work requirements are consolidated in the right way — into long-term multi-project contracts that can be tackled by small business — the result can be a small business growth engine that frees SDBs from a constant bidding cycle and rewards them for high performance work execution. A clear example of how appropriately consolidated construction work requirements can support small business is through Job Order Contracting (JOC, also called SABER in Air Force and some agencies).

Early government-funded studies demonstrated that JOC methodology — a long-term contract based on a unit price guide and a coefficient or adjustment factor — resulted in fewer barriers to entry into the Federal market for SDBs. At the time, most of these programs funneled construction volume to SDBs through larger prime contractors, but contracting officers soon determined that SDBs could themselves be very successful at this type of small project execution program, and now almost all JOC programs are set aside.

Sole Source Awards with Fair and Reasonable Pricing

To meet increased SDB award goals for 2022 and beyond, contracting officers will want to leverage sole source awards, which are enabled for 8(a) firms and in certain circumstances for WOSB, HUBZone and SDVOSB firms. The maximum award value is $4.5M for individually owned firms (tribally-owned entities have a cap of $100M in DOD). These awards can be executed in weeks rather than the year-long timeline of many Federal procurements. But arriving at fair and reasonable pricing in the absence of competition can be a challenge. Fortunately, construction pricing data can serve as a “single source of truth” to facilitate negotiations. While commercial price guides are sometimes used, Gordian’s Construction Task Catalog© (CTC) is the gold standard for governing pricing in a contractually precise way that ensures performance standards and covers DOD- and federal-specific work items.

JOC Meets Sole Source

By intersecting these two useful tools (sole source awards and JOC), it is possible to award quick-execution multiple project vehicles. These are sometimes called “Mini-JOCs” or Rapid-JOCs.” In USACE, they are sometimes called POCAs (Performance-Oriented Construction Agreements). When properly planned and supported, they can serve as a supportive proving ground for small businesses looking to enter the federal market, a key tenet of the recent executive order. By incentivizing SDBs with the potential for multiple small projects within a single contract vehicle, the Government can introduce new companies into their ecosystem, reward performance and gain meaningful efficiencies in their procurement and management of projects. Gordian is finding that many Federal agencies are using sole source awards as a “quick start” to a more strategically planned and larger multi-year JOC program. It provides a way to groom SDBs to competitively bid on the larger contract and serves as a pilot to ensure they fully understand the delivery method as they plan the larger acquisition.

Training and Technology Enablement for SDBs

There are a few challenges to fully realizing the potential of SDB execution of JOCs and sole source Mini-JOCs. The complexity of evaluating a vast set of unit prices and developing a coefficient can be daunting. The government must also fully understand the pricing to effectively negotiate a fair and reasonable coefficient. Larger contract can require a significant investment in data, software and training that can be a cash flow drain to emerging businesses. But turnkey, consumption based JOC support systems like those provide upfront program support in the form of technology enablement and training can help SDBs to “demystify” JOC and engage in these programs with no up-front financial investment. Likewise, it is very low risk for the Government to pilot these programs.

Leadership

The EO’s emphasis on leadership is well-placed. Contracting offices are trained to focus on transparency and open competition, and some are wary of sole source awards. Leadership in the OSDBUs, supported by Contracting leadership, will need to bring into focus the value of sole source awards in developing the DOD and federal supplier base. They will also need to socialize the concept of ensuring fair and reasonable pricing through adept us of unit pricing tools like the CTC, rather than direct competition.

Gordian has recently enabled its award-winning holistic JOC system to support SDBs and the government in sole source awards. We are actively supporting 8(a) and other qualifying contractors in pursuing these awards and helping Government contracting offices in meeting new SDB contracting goals.