One of the industry reporters I enjoy working with reached out to me the other day and inquired about the impact of small business subcontractors being stiffed on work by large primes. Specifically, he wanted to know how it affected government agencies.
He cited the results of a new survey that found 29% of small companies have been stiffed by a prime on subcontracting work after being listed as a sub on the bid proposal. And for companies with more than ten years of experience, 38% say they have been stiffed.
My first thought is those numbers are probably low compared to what actually happens. My second thought is, unfortunately, this is nothing new.
The habit (or practice in the case of some companies) of "losing the phone number” of the small businesses who helped them win contracts happens more often than not. In some cases, the cause for subcontractors not getting work is due to changes in scope or funding, while other times it stems from primes using small companies to "represent” them as part of their required small business subcontracting plan. Many times the plan from the start is not to include these small businesses in post-award activities. Ultimately, these companies will state to the agencies their original partners were not available when the work started and were unable to identify other viable small business partners, for one reason or another.
I have actually spoken to and dealt with large companies over the years, who have told me all of this verbatim. I've also witnessed it happening to companies I worked for in the past, and some I work with now.
The impact on the agencies is cut and dry. They don’t get the level of small business participation they seek or require, and little is done to hold the primes’ feet to the fire. The net effect is that agency-specific maturation of their respective small business industrial base is constrained. The innovations and efficiencies that might have been realized as a result of these more nimble and forward-looking companies being engaged, are delayed or lost.
One of the comments/suggestions I’ve offered up for years is finding a way to include the small business subcontracting goals as performance-based contract line items (CLIN’s) with dollars attached to them. If the prime does not deliver against that CLIN, they don’t get paid the amount they would have subbed to a small business.
Let me add, the practice of "losing the phone number" is not limited to large business vs. small business.
What are your thoughts?
The Chief Visionary
"The person who says it cannot be done should not interrupt the person doing it."
The only legislation that matters, outside the Small Business bills floating around Congress as political window dressing during an election year, are ones that hold large firms accountable for enforcement of subcontracting plans. Everything else is nonsense, like raising the bar of 25% of contracts to small businesses? The current goal of 23% is not being met. Please...
I always speak about this very issue to many senior leaders during conferences around town, OSDBU reps, COs, etc. as they are not doing their jobs enforcing the rules. They all give lip service to "we have to do better," while at the same time getting awards for being small business friendly?
It is the enforcement that matters, but regretfully the current state of affairs is "write a fantasy subcontracting plan, but we don't care if you ever execute it." Accountability in this area would go a long way to ensuring success for small businesses. I won't hold my breath for change anytime soon.