To assist small businesses, agencies implemented procedures that allow separate requirements of the contract to be set-aside for small businesses. The SBA has issued a rule, effective December 31, 2013, implementing the 2010 Jobs Act concerning SB participation and provide guidance to federal agencies in establishing “reserves”.
A “reserve” is an acquisition using full and open competition and the contracting officer (CO) makes (1) Two or more awards to one type of SB concern and competes orders solely amongst the specified types of SB concerns, if the “rule of two” and other set-aside requirements are met; (2) several awards to different types of SBs and competes orders solely amongst all the SB concerns if the “rule of two” is met; or (3) One award to one type of SB concern and issues orders directly to that concern.
When I heard about this, I thought this was a win for small businesses since current guidance makes it difficult to award large, complex contracts to SBs. This due to the inability to find at least two SBs with technical capability to perform the work as the prime. But is this a “win” after all?
The risk in any Multiple Award IDIQ contract is that there may never be any orders issued (aside from the initial order that satisfies the stated minimum value). It’s a lot of work for small businesses to compete on these types of contracts with little guarantee of continued work. It may sound great to say you were an awardee on a $1B multiple award IDIQ contract, but it’s not much comfort if you never get any orders.
The “rule of two” and other set-aside requirements still apply. As a result, it may still be difficult for small businesses in certain socio-economic categories to be able to bid and perform as the prime contractor. There is an assumption that the COs are looking from the perspective of which parts of the requirement could reasonably be done by small businesses. However, major system requirements may not have significantly large enough portions of this type of work for it to be value-added to small business if broken out.
Even if you get awarded a portion of a requirement, you know that there is at least one other small business that got an award for the same work. Depending on the scope and span of the work relevant to the contract period, this may not result in enough work for each small business to be able to thrive.
Under the second variation, several awards are made to a variety of socio-economic categories and you are all competing for each order. If you are a niche contractor with a unique product/service, that may benefit you since you can “win” those awards for the requirements in your wheelhouse. What if you aren’t? You may have an award, but that does not mean you are guaranteed any work (other than any stated minimums).
The last variation is the best for small businesses since the CO makes one award to one type of small business and issues orders to them. At least that way, you know if there are any orders, you will be the awardee.
I’m not sure this is the positive movement I originally thought. My advice to any small businesses considering bidding on one of these types of acquisitions is to do your homework and make sure that it will be in your best interest to “win” the award before you use your resources to bid on these types of contracts.