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Statement of A. Jo Baylor
Office of Small and Disadvantaged Business Utilization
before the
United States House of Representatives
Subcommittee on Regulatory Reform and Oversight
Committee on Small Business

July 15, 2003

Good afternoon, Chairman Schrock, Ranking Member Gonzalez and distinguished members of the Subcommittee on Regulatory Reform and Oversight of the Committee on Small Business. On behalf of Secretary Mel Martinez and Deputy Secretary Alphonso Jackson, thank you for inviting the Department of Housing and Urban Development to testify about HUD's plans to meet the President's goal of increasing small business opportunities in federal procurements and HUD's policies regarding the use of bundled contracts and the treatment of subcontractors in large contracts. You have asked the Department to discuss specifically its policies regarding the use of bundled contracts and the treatment of subcontractors in large contracts.

The Department is especially appreciative of your concerns regarding the number and size of bundled contracts that have reached record levels and the corresponding effect this trend has on the diminishing number of contract opportunities for small businesses.

On May 16, 2001, Secretary Martinez signed HUD's Small Business Policy which sets high goals for contracting with small businesses in all preference categories. It stated, " the ultimate goal of the department, that at least fifty percent of contract dollars be awarded to small businesses." I am proud to announce that as of today, HUD has awarded 50 percent of its prime contracts to small businesses for fiscal year 2003.

The implementation of this policy has required the close cooperation of all facets of the Department. In response to the President's initiatives, the Department has taken and is taking a number of steps to improve small business programs including the following:

  • "The Forecast of Contracting Opportunities" was completely revamped to be more small business friendly by including e-mail addresses and phone numbers with extensions of contact persons for each procurement. It also contains detailed information about each procurements' time frames as well as a better description of each procurement. Additionally, we update the forecast weekly rather than yearly so that small businesses are aware of significant changes to any procurement on a timely basis. These updates as well as the major document are available electronically and in hard copy. The "Forecast of Contracting Opportunities and its readily availability are crucial to small businesses.
  • Aggressive Outreach activities have been increased across the country so that all small businesses, not just those within the beltway, can take advantage of HUD's procurement opportunities.
  • HUD makes maximum use of small business programs such as 8(a) awards as set asides and non-competitive procurements as authorized by Part 19 of the Federal Acquisition Regulation also known as FAR. OSDBU, formally named the Office of Small and Disadvantaged Business Utilization, as authorized under Public Law 95-507, and in accordance with FAR Part 19, HUDAR 2419.20. Before any contracting action is approved for processing, OSDBU receives the proposal and conducts a review to ensure that small businesses have maximum access and opportunity for prime contracts or subcontracting opportunities.
  • To ensure that large scale contracts are scrutinized for potential division into smaller contracts that offer small business opportunities, OSDBU conducts cost benefit analyses. If a major procurement is determined to be one which small business can successfully perform, then the affected program office is requested to reconsider the contracting action.
  • OSDBU has also prepared a "Benefit Analysis Procedures for Consolidated and Bundled Contracts, January 2003" to provide guidance to program managers to determine whether a procurement is a consolidated or bundled contract. OSDBU has requested the Integrated Procurement Team to conduct a benefit analysis for pending award contracts over $2 million, to determine if the resultant contract will be identified as a consolidated or bundled contract. If the benefit analysis does support the definition of a consolidated or bundled contract, the integrated procurement team must submit a mitigation plan that will outline the steps to be taken to increase small business participation under the bundled contract.
  • Equally important, we have also ensured that all bid solicitation documents contain the required federal acquisition language for subcontracting requirements along with HUD's increased policy goals.
  • HUD's September 9, 2002 revised subcontracting policy also extends that all possible contracting including Government- wide-agency (GWAC) contracts to large businesses, GSA schedule awards, all modifications, extensions and/or options. This policy informs large businesses submitting a proposal of the agency's current fiscal year subcontracting goals; however it also states HUD will consider the contractor's plan for meeting the small business participation goal as part of the evaluation for award. Criteria evaluations include:

    • Total value of the proposed level of small business subcontracting participation as it relates to the total value of the prospective contract; as well as
    • Contractor's historic performance in achieving stated small business subcontracting objectives.
    • The substantive nature of the work performed by small business and specific goals for each type of small business.

  • HUD's small business policy also ensures accountability of senior agency management for improving contracting opportunities for small businesses.

  • During FY 2003, HUD has increased OSDBU staff resources by 140% to facilitate increasing small business participation in HUD small business contracting opportunities, monitor subcontracting compliance and providing greater oversight towards mitigating the impact of contract bundling.

  • At the beginning of FY 2003, OSDBU reviewed more than 599 contract actions for HUD's Strategic Procurement Plan.

  • Further, HUD has implemented several changes to ensure that we identify bundled contracts.

    • First, HUD trained agency personnel on contract bundling. This training included the definition of a bundled contract, procedures to follow if HUD considers awarding a bundled contract (conduct market research to determine whether consolidation of the requirement is necessary and justified and procedures that the Contracting Officer must follow if it is appropriate to bundle a contract). That contracting officer is also required to determine the benefits that would be derived from a bundled contract.
    • Second, the OSDBU developed and implemented Small Business Review Procedures for Request for Contract Services over $25,000 to ensure that small and small disadvantaged businesses are given maximum practical opportunities to participate as prime contractors and subcontractors. HUD has required a contract bundling review for all task and delivery orders under multiple award contract vehicles.
    • Third, HUD has also included OSDBU as a member of the Contract Management Review Board, which has reviewed more than 2,000 acquisition requests as part of the contract bundling initiative envisioned by the President. The Contract Management Review Board is comprised of HUD principal staff and senior executives and is chartered by the Deputy Secretary to ensure the efficiency, effectiveness, and integrity of the Department's procurement plans, operations and results. This underscores the Deputy Secretary's expectation that the CMRB consider small business participation during its review of strategic procurement plans for all major HUD organizations.
    • Fourth, HUD began using new solicitation provisions to evaluate the subcontracting proposed by offerors under new, competitive, negotiated contracts and competitive task orders awarded under the GSA Federal Supply Schedules. For solicitations exceeding $500,000, HUD has established a subcontracting goal of up to 40 percent of the total value of each contract (including task orders and options) and subsequent modifications. Also, prime contractors must include in their proposals subcontracting goals and how they plan to assist HUD in achieving its small business subcontracting participation goal of up to 40%. Contractors that are unable to meet the established goal due to practical considerations must provide the rationale for the proposed level of subcontracting. HUD considers the prime contractor's plan as part of the evaluation for award.

  • HUD is in the process of evaluating a subcontracting automated reporting/monitoring system that would allow HUD to monitor prime contractor's compliance with their subcontracting plans. Also, this system would allow the agency to evaluate its progress towards meeting its subcontracting goals in a more efficient manner.
  • Our agency plans to measure progress towards mitigating the effects of any potential bundling of contracts by monitoring all primes and their subcontracting plans to ensure compliance. At HUD our subcontracting goal is up to 40% of the total value of each contract not just whatever the prime contractor elects to include. We want to ensure that small and small disadvantaged businesses are given maximum opportunities to participate as prime contractors and subcontractors.
  • As with any program HUD will continue to require identification of alternative acquisition strategies for the proposed bundling of contracts above our specified threshold of $ 2,000,000 and require written justification for the bundling of contracts.
  • HUD also requires a very stringent market research report on all contracts above $500,000 in order to identify small businesses available for contract awards.
  • The Department is committed to increasing opportunities for small businesses at HUD and strengthening compliance efforts to monitor subcontracting plans already negotiated with prime contractors.
  • To further evidence our commitment, I am pleased to let you know that HUD's Small Business numbers as of July 10, 2003 among the designated preference groups are as follows:

Small Business overall - 50%
8(a) - 19%

Small Disadvantaged Business - 8%

Women Owned Small Business- 34%

Veteran Owned Business - 3%

HUB Zone Business - 7%


Department's Commitment to the President's Small Business Agenda.

In summary the staff at HUD are committed to the President's procurement reform initiatives as outlined in the President's Small Business Agenda. We are committed to ensuring that government contracts are open to all small businesses that can supply the government's needs. To accomplish this objective, all federal agencies must be charged with developing procurement strategies that improve the access of small businesses to government contracts and avoid unnecessary contract bundling.

We are committed to working with you, the other federal agencies along with the small business community to make sure that these necessary procurement reforms are implemented. At HUD, we are very fortunate, because we have the sincere commitment of both Secretary Mel Martinez and Deputy Secretary Alphonso Jackson in this movement towards procurement fairness.

The Department is committed to increasing opportunities for small businesses at HUD and strengthening compliance efforts to monitor subcontracting plans already negotiated with prime contractors. We think that we can do better and provide greater access to small businesses across this country to HUD's direct and indirect dollars.

This concludes my statement, Mr. Chairman. Thank you again for the opportunity to appear before this Subcommittee

Content Archived: June 29, 2010

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