The Coronavirus Stimulus Package Could do More for Small Business Contractors

Congress is expected to pass a huge coronavirus stimulus package in the coming days. While lobbyists and congressional staffers wrestle over the last bits and pieces to find their way in to the bill, there seems to be a pretty important group left out—small business federal contractors.

Yes, the proposal includes some $300 billion in loans for small businesses. But there is much more that can be done and there can be greater focus on helping small contractors who are facing incredibly tough decisions right now. How can they perform in the event of a lockdown or quarantine? Do they need to lay off or furlough workers? Besides, as some commentators have noticed, businesses who are preparing for both the short-term impact and potentially a long-term economic downturn may not feel comfortable borrowing money. Congress can and should be doing all it can right now to promote small businesses and make it easier to sell to the federal government—both for new entrants to the government market and existing contractors. 

We put our heads together as a firm and thought up some possible additions to the bill that would be narrowly focused on helping small business government contractors:

  • Congress can grant contracting officers greater authority to give sole-source awards to small businesses. Currently, sole-source contracts are only the norm in the 8(a) program, where work valued at less than $4 million ($7 million for manufacturing) is presumed to be sole sourced. Congress can temporarily extend that presumption to all small-business set-aside contracts be they SDVOSB, HUBZone, WOSB/EDWOSB, or just small business.
  • Temporarily require contracting officers to prioritize awards to small businesses when buying off the GSA schedule. GSA schedule contracts can be set aside for small businesses and those with socio-economic statuses, but doing so is currently optional. Giving those businesses a leg up in a time like this could save them.
  • Enact a temporary small-businesses price evaluation preference of 10 percent in unrestricted procurements. The HUBZone program already has such a price preference. The way it works is in a full and open competition where a HUBZone small business makes a bid, the evaluators treat non-HUBZone large business offers as though they cost 10 percent more than they do. This could be easily extended to all small businesses. Ironically, the Congressional Section 809 Panel suggested a 5-percent small business price-evaluation preference in its final report last year. As a substitute for small business set asides, it was a terrible idea. But as an incentive to award to small businesses, it could help small contractors navigate these tough times.
  • Congress could provide contracting officers with loosened authority to make advance or partial payments to contractors. Normally, the idea of paying in advance or for partial performance is anathema to the government. But these are not normal times. Many small businesses live the equivalent of paycheck to paycheck. When faced with the choice of layoffs or bankruptcy, the choice is sadly an easy one–if there is even a choice. But agencies do not want skilled workers to get away (incumbent retention is often prized even if no longer required). If those workers are laid off or furloughed, who’s to say they will be back when work resumes? Flexibility in payment for soon-to-be or partially performed work could help a small business bridge the gap. The government could put in safeguards to ensure such payments are used on payroll including a simple self certification that by accepting such a payment the contractor warrants it will be used on payroll. That way if the contractor uses the money for something else, they could face a False Claims Act violation.
  • Congress could temporarily speed up the timeframe for agencies to pay contractors for work they have performed to 10 days whenever possible from receiving an invoice or acceptance of goods. Currently, the prompt payment clause of the Federal Acquisition Regulation (FAR) requires payment within 30 days of an invoice or delivery and acceptance. The same benefit could be extended to subcontractors by requiring the prime to pay them within seven days of payment to the prime by the government. That’s already the rule on construction work, but could be extended across the board.

As we said, there are likely various ways that Congress could help small business contractors in this or future stimulus bills beyond offering small business loans and hope that it will consider doing so.

[Note: this post may be updated as the coronavirus stimulus package is changing rapidly.]

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