Win-Win Game-Changer in Government Contracting: A Change To The Simplified Acquisition Threshold

The business of contracting (and subcontracting) with civilian, defense and intelligence agencies of the federal government can be a tremendous opportunity for those who crack the code, persevere and receive some old-fashioned, but never out of style, luck. For the vast majority, however, it is a frustrating black hole sucking the life from companies of every size and discipline due to any number of business processes and life cycles unique to this domain.

When you consider the initial registration to be a government contractor, the multiple classifications such as NAICS and PSC used to describe products and services, the small business programs and, of course, the Sources Sought Notices, Requests For Information, Requests for Quote, Requests for Proposal, Contracts, Contract Vehicles, Task Orders, Delivery Orders…

I think you get the idea.

Even so, companies from around the globe continue to stick their proverbial toes in the water to gauge the opportunity based on what they’ve seen and heard about the mythical ease of achieving a windfall in Government Contracting. In the end, some are able to carve out an existence to sustain an established or desired lifestyle, and others achieve the growth that allows them to execute the succession event they envisioned at the start of their journey in GovCon.

Of the many challenges facing Government and Industry today, in my opinion, efficiency is at or near the top of the list. Achieving and maintaining efficiency in business operations speaks directly to the cost of doing business, something Government is desperately trying to decrease, as are the companies who support them. For agencies it means more or fewer dollars to execute and sustain organizational missions, and for vendors it means being in or out of the competitive range and realizing profit objectives, or not. So when movement occurs at the legislative level with potential to benefit both sides in the area of reducing costs, it’s a good thing. When that activity also comes with an indirect bonus of increased revenue opportunities for American Small Businesses, it’s a great thing!

Recently, when I read the blog by my friend and government contracts attorney Steven Koprince about the proposed change to the Simplified Acquisition Threshold, I was excited, but for the wrong reason. I took the proposed change as an action by Congress to enhance opportunities for small business concerns, an incorrect assumption. That would actually be an indirect (yet tremendously huge) benefit. I learned, through a conversation with a former federal procurement executive, the real driver for this proposed bill is efficiency in contracting. So in this case, as I was told, it’s all about Uncle Sam. That’s a good thing too and here’s why. When I believed it was occurring primarily to benefit small business, I said it was doomed because the large business lobbies would work to kill it. Why? Think ‘Who Moved My Cheese?‘ But now understanding the real push behind it, this changes things, including my opinion.

Now let me share why I see the efforts proposed by the U.S House of Representatives in H.R.1735 (2016 NDAA) as a big deal.

If you review the House and Senate versions of the 2016 NDAA, language related to ‘achieving more efficiency’ literally riddles these documents. Apparently, it’s important to both sides. How they plan to get there appears to be an entirely different matter. Section 854 of the House version spells out expanding the number of buys made using the Simplified Acquisition Procedures at FAR Part 13 by increasing the threshold from $150,000 per action to $500,000 per action. As best I can tell, the language associated with buys made within the Simplified Acquisition Threshold would remain intact. That is, they would continue to be ‘reserved exclusively for small business concerns.’ The only way to make this even better is by changing ‘reserved’ to ‘set-aside’ which is something I continue to put on the table to Congress. After all, some agencies already do it in one form or another, so why not?

Now I routinely discuss the many benefits companies can derive from including Simplified Acquisitions (we call them ‘low-hanging fruit’) as a part of their pipeline diet to include the fact fiscal obligations to these buys have increased an average of one billion dollars each fiscal year since FY2010. Should this rule be implemented and things were to stay relatively proportional to how they look today for Simplified Acquisitions, the overall fiscal spend for these streamlined buys could increase to as much as $70 billion (versus the current $19 billion) effectively accounting for more the twice the obligations made against the Federal Supply Schedule.

I think I just heard someone yell ‘Blasphemy!’ so let me ratchet it up a notch.

Currently, close to seventy percent of obligations made using Simplified Acquisitions do not result from buys made against an established contract vehicle such as a BPA, FSS, GWAC or other Indefinite Delivery Vehicle. This creates an inherent lower cost of doing business since the need to pursue a ‘hunting license’ is largely not a factor. Then there is the point of quotes versus proposals. The largest bucket of obligations each year are awarded via a purchase order which is an ‘offer’ from the Government to purchase goods or services from a vendor. These are usually the result of a response submitted via a Request for Quote vice a Request for Proposal, the latter usually requiring a higher level of effort for respondents. For the record, buys made using a purchase order are not orders placed against a contract vehicle.

As for the threshold change, even though agencies can already exceed the current threshold by exercising the exception at FAR Subpart 13.5, allowing Simplified Acquisition buys valued up to $6.5 million per action, this change truly does represent a significant shift in favor of small business concerns who already receive the majority of Simplified Acquisition dollars, but not nearly enough based on the intent of this type of procurement. A good chunk of the responsibility here is on the back of the small business community for leaving money on the table.

Agencies get a ‘win’ by virtue of the reduced administrative burdens associated with these buys, a tenet of why they were originally created. But there is another benefit the Government can realize as a result of this proposed change. Based on the current math used to calculate small business goal achievement, agencies would have an easier time at succeeding.

I have often asked myself “If Uncle Sam truly realizes better efficiency when using Simplified Acquisition Procedures, why not expand its use?”

I may finally get an answer to this one.

Peace!