President Joseph R. Biden
The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500
Dear President Biden:
On behalf of the U.S. Women’s Chamber of Commerce and the 5,000+ small businesses we represent in the federal marketplace, their employees, their families, and their communities, we ask that you sign a single Executive Order to ensure small business inclusion in “Category Management Best-In-Class” (BIC) contracts.
Background: Since 2015, the federal government has pushed forward to implement several OMB memoranda aimed at transforming the federal acquisition process (known as “Category Management” through “Best-In-Class” solutions)1. This transformation accelerated rapidly with the 2019 OMB M-19-13 memo, which introduced the concept of “Tiered” procurements. This memo encouraged the use of “Tier 3” BIC purchasing vehicles that limit competition to a list of preferred vendors comprising only a small percentage of the total contractor market.
Consequences in Action: We agree with the original intent of Category Management, which was to reduce contract redundancy and strengthen stewardship of federal tax dollars. Our goal is simply to help the government align the realities of the policy with its intentions. Small businesses are blocked from competing for government contracts with increasing frequency, while agency small business and acquisition professionals are pressured to disregard the law – specifically the Small Business Act – by adhering to Tier 3 purchasing goals. OMB M-19-13 ignores the Small Business Act’s guarantee that small business suppliers are provided with the “maximum practicable opportunity” before any and all contracts are awarded. Tier 3 contracts are generally awarded to a relative handful of small businesses, many of which must team with large integrators to meet the required qualifications.
GAO studied this phenomenon and reported bleak results in a November 2020 Report on Category Management (GAO-21-402). Of their findings, they stated, “Of the tens of thousands of contracts eliminated by category management, 53% of them were small business contracts.” The Small Business Administration (SBA) echoed GAO’s concerns, adding in response3 to the GAO report that, “SBA is aware that the number of small business new entrants has dropped nearly 60% from 23,000 in FY12 to just 9,400 in FY19. Firms have withdrawn from SBA’s 8(a) program citing decreasing opportunities and increased consolidation of contracts.”
When small businesses depart from government contracting (either by choice or due to lack of opportunity), America suffers. Small businesses are the heartbeat of economic recovery. They are widely known to employ local talent, reinvest profits near to home to spur economic development, and bring growth and innovation to their communities.
Why Act Now: After 5 years of erosion to the small business government contracting community due to Category Management, 2021 is the ideal time to act:
The COVID-19 pandemic illuminates the economic necessity of small business growth. We are closely connected to our communities and willing to take out PPP loans to keep staff on the payroll. While large businesses worry about stock prices and bottom lines, small businesses are closely connected to our communities and willingly sacrifice to defend the greater good of our country and our communities. Now more than ever we should tread lightly on our small businesses, proactively increase access to procurement opportunities, and engage small businesses in the most patriotic effort there is – the rebuilding of our economy. Rather than simply issuing forgivable loans, the government can enable small business government contractors to compete fairly to remain in business and protect their workforces. Small businesses and the communities they support make up an important part of your voting base and are critical to reinvigorating this economy.
Many small businesses are owned by women, people of color, economically disadvantaged citizens, veterans, and individuals living in Historically Underutilized Business zones (HUBZones). You emphasized breaking the glass ceiling at your inauguration and spoke proudly about the Black Lives Matter movement. You have spoken often about creating equity for our middle-class and rural populations. That is precisely what the small business government contracting program was designed to do — empowering these historically marginalized business leaders to create jobs for others in their communities. Category Management has evolved into a direct assault on that foundational goal.
Specific Recommendations: We ask you to step up to protect and uphold the Small Business Act’s guarantee for small businesses to have the “maximum practicable opportunity” in contracting. Your action can ensure small businesses are rightly and proportionally included in Category Management’s Tier 3 spending. Just as this original action was set forth by an Executive Order, we ask that you clarify and expand on this action by signing a single Executive Order that sends a loud, clear message that the United States will not tolerate policies that create further barriers to entry for American small businesses and marginalized communities.
Specifically, this Presidential Executive Order should:
Recognize ALL Small Business spending as BIC Tier 3, regardless of the contract vehicle.
Add a training requirement that all agency leadership and acquisition staff must receive training on the Category Management / BIC initiative that ensures small business inclusion.
Require that new BIC vehicle awards be made in proportion to the population (i.e., proportion of large business vs. small business awards match the business population).
Thank you for your consideration of this important issue.
1 - “Category Management” has been a bi-partisan issue, first introduced in October 2015 and further enumerated with OMB Memos M-16-02, M-16-12, M-16-14, M-16-20, and M-19-13.
2 - GAO Full Report: https://www.gao.gov/assets/720/710938.pdf
3 - SBA’s Response: https://public.3.basecamp.com/p/y2qur6ltubshtlgdycmxhmq9