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Small Business Contracts With Feds Should Receive Legal Review

A recent New York Times report indicated that small business contracts with federal agencies dipped 11 percent over the last fiscal year.

Still, the federal government continues to award hundreds of billions of dollars in private business contracts – some $460 billion by the end of last fiscal year. Plus, Congress just approved a $1.1 trillion spending bill for this fiscal year, and that’s going to include a large number small business contracts.

These jobs can be the critical lifeblood of a small operation. Small businesses received about 18 percent of all federal contracts.The downward trend means not only is the process for securing the contract growing more competitive, but maintaining this work requires companies to be thorough in all aspects of their operation.

A recent survey by American Express reveals that over the last year, the amount of time and money that small business contractors invest in seeking federal contract opportunities averages about $129,000. That’s a nearly 50 percent increase over the course of the last three years.

The good news for those who stay in the game is that landing that first contract win is taking less time. Ten years ago, it took almost three years and an average of nearly 6 unsuccessful bids before a small firm procured its first federal contract. Those surveyed over the last three years say it took just 1 year and an average of 3 bids to get to that same place.

Still, it’s a considerable investment, and small business owners need to make sure they are fully prepared even before they start pursuing bids.

Most federal agencies require their contractors to have some degree of compliance with regulatory guidelines. The extent of that depends on your industry and the size of the contract.

Even those companies that have already secured contracts sometimes require assistance to help redevelop or restructure internal policies and controls to comply with ever-evolving legislation and ethical requirements.

For example, companies that aren’t familiar with the law may run afoul of things like the ostensible subcontractor rule. This is the U.S. Small Business Administration rule that says a business and subcontractor violate the federal contract agreement when the subcontractor performs the primary and vital work – even if the small business performs the management function.

There are also a number of other limitations on subcontracting, per FAR 52.219-14. Companies are subject to compliance verification of these rules through a review conducted by the contracting officer technical representative or the contracting officer.

While historically, these reviews may not have been especially thorough, government regulators may be paying closer attention now that the overall number of contracts being awarded has shrunk.

The primary reason for the decline, according to the Times, is a significant reduction in Defense Department spending. At the end of last fiscal year (Sept. 30, 2013), the Pentagon had awarded about $308 billion in private contracts, down about $54 billion from a year earlier.

Becoming effective in the set-aside process of federal contract procurement will require small businesses to be diligent in their development and oversight. We can help.

The Law Offices of Ira S. Newman provides small business representation in New York City, Long Island, Great Neck and throughout the area. Call 516-487-7375 or send us an e-mail.

Additional Resources:
Federal Contracts Plunge, Squeezing Private Companies, Jan. 15, 2014, By Danielle Ivory, The New York Times
More Blog Entries:
New York Non-Compete Litigation on the Rise, Sept. 4, 2014, Great Neck Small Business Lawyer Blog