Increasing Small Business Participation on Multiple-Award Contracts

Late last week, the Office of Management and Budget’s Office of Federal Procurement Policy (OFPP) published a memorandum for senior procurement officials across the federal government that some are calling a gamechanger if the guidance can be effectively implemented. Titled “Increasing Small Business Participation on Multiple-Award Contracts,” the memo is intended to grow the number of opportunities available for small businesses when agencies are developing strategies for multiple-award contracts.

Observers of the federal market have noted for several years now that the implementation of Category Management principles, and the growing tendency by federal agencies to use “Best-in-Class” (BIC) contracts, such as the General Service Administration’s One Acquisition Solution for Integrated Services (OASIS) and the National Aeronautics and Space Administration’s Solutions for Enterprise Wide Procurement (SEWP), are hurting the ability of small businesses to compete in the contract marketplace. The OFPP’s memo seeks to reverse this trend.

GovWin IQ’s Federal Market Analysis (FMA) team published a Federal Contracting Trends to Watch in 2024 report just last December that illustrated some of the challenges facing small businesses. For example, the data analyzed by FMA showed that the number of small businesses in the federal marketplace has been declining precipitously in recent years despite the federal government spending more than $400B in contract dollars annually.

Spending on BIC contracts has been rising as well, with nine out of the top ten BICs all reporting significant increases in usage.

These challenges are present despite the fact that federal contract spending with small businesses rose to a three-year high of $171.2B in FY 2023.

The OFPP has clearly noticed the disconnect between more contract dollars flowing through multiple-award vehicles unfavorable to small businesses in an environment when small businesses are earning more contract dollars in general. In an effort to address this disconnect, the OFPP identified the following actions to strengthen small business participation on multiple award contracts.

• Agencies should carefully consider total or partial small business set-asides when planning new multiple-award contracts. “This is especially important,” opines Christine J. Harada, the memo’s author, “when contracts with small business incumbents are expected to be recompeted on a multiple-award contract.”
• Agencies should consider using on-ramps for new multiple-award contracts to allow for the addition of small and large businesses during the performance period for long-term (i.e., five years or more) contracts. If on-ramps are not included, agencies are expected to explain why in their acquisition plans. Agencies have used on-ramps for years, so adding these would be nothing new.
• When an entity outgrows its small business size status during the period of contract performance of a set-aside multiple-award contract it should be allowed to remain on the contract as a small business until recertification. Agencies are discouraged from using “off-ramps” to remove a business from a set-aside multiple-award contract because of a change to its size status, except where size status changes as a result of a merger or acquisition of the business.
• Agencies should set aside orders over the micro-purchase threshold for small business contract holders when the contracting officer determines there is a reasonable expectation of obtaining offers from two or more small business contract holders. Called the “rule of two,” this guidance should, in practice, lead to the award of more contracts to small business, particularly if it is applied to BICs and other vehicles in the multiple-award contract setting.
• Increase the number of awards made to small businesses under the simplified acquisition threshold to the maximum extent practicable. As Harada points out, most simplified acquisition dollars currently go to businesses that are other than small.
• Acquisition, program, supply chain, and small business offices in each agency should periodically evaluate where the challenge of using BICs is affecting the contracting base, especially for large and/or high priority requirements. Doing so should enable agencies to continue taking advantage of the benefits of using BICs while also supporting the small business contracting community.

Industry should keep a close eye on developments related to the OFPP guidance. It could make a big difference to small businesses competing in the marketplace.