DoD suspends advantagefor minority prime bids
By Staff -- Purchasing, 4/22/1999
The Department of Defense has suspended its 10% price advantage for Small and Disadvantaged Business (SBDs) because it has exceeded its mandated target of providing 5% of contract dollars to them. SBDs are firms owned by minorities (largely Black, Hispanic, Asian, or Indian). Under new administration guidelines on preferences for minority-owned firms, the 10% price advantage is available only in certain industry SIC codes where such firms have not typically won a proportionate share of government contracts in the past.Meanwhile, SBDs have successfully delayed, with aerospace industry support, a new regulation requiring that they establish their status as SBDs through third parties rather than by self-certification. They claim this would add extra costs and administration to their businesses.
During the six-month reprieve to July 1, the Administration has promised to review the matter. Third-party certification is a new federal regulation that applies to all government contracting, not just DoD's. Minority contractors, however, have been actively solicited by larger firms, such as defense aerospace contractors. DoD requires primes to give minority firms 5% of their subcontracts.
The government's move to require third-party certification is designed to prevent minority representatives from "fronting" for larger or non-minority shareholders.
Bill Lewandowski, vice president for supplier management at the Aerospace Industries Association, says that the regulation on third-party certification contradicts the basic Small Business Administration law allowing self-certification. That law permits prime contractors to accept self-certification from SBDs and count them toward meeting the 5% subcontracting requirement from DoD. The only safeguard against fronting, however, is a procedure that allows the government or a private party to challenge a company's SBD status through the SBA.
"No other classification of subcontractors (such as firms owned by women or persons with disabilities) has to go through such a certification process," Lewondowski notes.
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