Casey: Protect Small Businesses in Competition for Federal Contracts

WASHINGTON, DC— U.S. Senators Bob Casey (D-PA) and Claire McCaskill (D-MO) today called on the Senate Armed Services Committee to protect small businesses.  In a letter to Armed Services Committee Chairman Carl Levin (D-MI) and Ranking Member John McCain (R-AZ), Senators Casey and McCaskill pushed for the inclusion of language in the National Defense Authorization Act that would ensure fair practices in the competition for federal contracts.

“We respectfully request that you consider including language in this year’s National Defense Authorization Act that would ensure equal participation by all businesses in the competition for federal contracts,” the Senators wrote.

Prime contractors frequently list small businesses, particularly minority business enterprises (MBEs) or women business enterprises (WBEs), as sub-contractors on their bids in order to strengthen their applications, at times without the knowledge of the MBE or WBE.  When this occurs, the subcontractor often does not receive the business because it was unaware of its inclusion on a federal bid.  

In February, Senator Casey introduced the Subcontractor Notification Act (S. 370), which would require contractors to notify small businesses of their inclusion in bids for work from federal agencies.  In March, Senator Casey secured the passage of an amendment similar to the Subcontractor Notification Act to the Small Business Innovation Research bill. The amendment passed by a 99-0 vote, but the bill failed to pass the Senate.

The language Senators Casey and McCaskill are pushing the Armed Services Committee to include in the National Defense Authorization Act would:

  • Require subcontractors identified on a solicitation for a competitive proposal made by an executive agency be notified by the prime contractor before the application is submitted.
  • Establish a reporting mechanism that allows a subcontractor to report fraudulent activity by a contractor.

A copy of the letter Senators Casey and McCaskill sent to the Armed Services Committee is below:

Dear Chairman Levin and Ranking Member McCain:

We write to call your attention to an important issue that is detrimentally affecting subcontractors in the federal procurement process.  We respectfully request that you consider including language in this year’s National Defense Authorization Act that would ensure equal participation by all businesses in the competition for federal contracts.

As supporters of S. 370, the Subcontractor Notification Act, we are concerned about the number of subcontractors who are unaware of their inclusion by prime contractors on federal bids.  As it stands, some prime contractors are listing subcontractors on procurement bids without informing them.  This happens frequently with minority and women owned businesses that are listed as subcontractors in order to make an application more competitive.  Once the prime contractor receives the federal contract, business is not given to the subcontractor.  

There is currently no legal requirement to notify subcontractors of their inclusion on federal bids and no way to report this.  To address this problem, language in the National Defense Authorization Act should include the following:

Notification Requirement

An offeror with respect to a contract led by a Federal agency that is to be awarded pursuant to the negotiated method of procurement that intends to identify a small business concern as a potential subcontractor in offer relating to the contract shall notify the small business concern that the offeror intends to identify the small business concern as a potential subcontractor.

Reporting by Subcontractors

The Administrator shall establish a reporting mechanism that allows a subcontractor to report fraudulent activity by a contractor with respect to a subcontracting plan submitted to a procurement authority.

This language passed through the Senate by a roll call vote of 99-0 on March 16, 2011 as an amendment to the SBIR/STTR Reauthorization bill which shows its strong bi-partisan support. The CBO determined that this would have an insignificant effect on revenue and direct spending.

Thank you for consideration of our views.

Sincerely,

Robert P. Casey, Jr.
United States Senator

Claire McCaskill
United States Senator

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