COMMENTARY: New OMB memo ignores the small business impacts of contract consolidation

The Office of Management and Budget's new memo that describes how more procurement activity will be consolidated at the General Services Administration never uses the term "small business."

But the memo’s impact on that community of contractors could be immense.

Over the coming months, new Federal Acquisition Regulations will be proposed that will require agencies to use existing government-wide contracts and best-in-class vehicles ahead of their own contracts when buying so-called common goods and services.

Simultaneously, the control and management of these contracts will shift to GSA if they are not already housed there.

OMB's memo also emphasizes several concepts that will put pressure on small businesses.

The memo prioritizes requirements that "are easy to standardize" and "involve highly commercialized products and services.” Those items will be acquired without any customization, which tends to favor larger contractors with broader capabilities.

As centralization happens at GSA, the centralization of relationships will quickly follow. Success will depend on relationships with GSA officials. That potentially will be a disadvantage for small businesses who have built relationships with contracting officers at specific agencies.

The emphasis on best-in-class contracts also brings challenges. The footnotes describe BICs as bringing with them "rigorous requirements definitions" and "strong vendor management” requirements, which can create barriers to entry for small businesses.

The memo also emphasizes volume-based savings where the government will leverage its buying power to achieve economies of scale. This approach also typically favors larger companies.

Yes, companies of all stripes will have to work with these requirements. But small businesses are at a disadvantage because they don’t have the scale and resources to easily adapt.

This isn’t just theory. As Lisa Shea Mundt of the Pulse of GovCon has so eloquently stated on LinkedIn: “Contract consolidation is bad for small business. It was bad before, and it will be bad again.”

She links to 2022 congressional testimony by her business partner, Amber Hart, which includes data on the impact on small businesses of category management and BIC contracts.

Over the first six years of category management (2016-2022), there was a 26% decrease in small business utilization across BIC vehicles. An earlier program focused on office supplies also caused a 26% drop.

“At its core, strategic sourcing initiatives minimize channels for acquisition and reduce lanes where contractors can supply services and products,” Hart said in her testimony.

There are many inconsistencies between the BIC vehicles when it comes to small-business factors such as size standard recertification, bid requirements, experience qualifications, on-ramping and the tracking of set-asides.

“These collective initiatives have resulted in less access and transparency into government procurement activity and opportunities and has increased requirement bundling, vendor consolidation, and market uncertainty,” Hart said.

I am not arguing against strategic sourcing initiatives, but OMB's memo indicates the government is not thinking through all the implications of its policies. On top of that, the administration talks about lowering barriers to entry, yet the policy set forth in this memo is likely to favor larger and more established players.

When it comes to procurement, small business contracting policies should not be a bolt-on. They should be integrated in from the start.

OMB's memo does a disservice to the value, strength and innovation that small businesses bring to the market.