Page 48 - Federal Computer Week, January/February 2019

48
January/February 2019 FCW.COM
TheLectern
The real barriers to
entry in the federal
marketplace
The reasons new companies are discouraged from pursuing government business don’t fit the traditional narrative
BY STEVE KELMAN
Since at least the 1990s, there has been interest in and around the contracting community in addressing the difficulties new entrants, particularly small businesses, face in participating in the federal marketplace. In his 2015 book on the HealthCare.gov fiasco, Steven Brill refers to the clique of contractors competing for federal busi- ness as “the usual suspects,” which — depending on how old one is — denotes either the 1995 film by that name star- ring Kevin Spacey or the famous line near the end of “Casablanca.”
The belief is that these usual suspects are stodgy and overpriced and could use a strong dose of competition from new players. In its most radical forms, the criticism is overblown, but I think it is almost certainly true that not enough new blood infuses the world of govern- ment contracting.
There is also a traditional story explaining why new contractors face these barriers. I first heard it when I came into government in the early 1990s. That story has two main vil- lains. The first is special “socioeco- nomic” requirements imposed on gov- ernment contractors that do not exist outside government, which means the requirements create a disincentive to participate in the market.
The canonical example was the affir- mative action requirements imposed only on government contractors by an executive order from President Lyn- don Johnson. It required companies to develop affirmative action plans with goals and timetables that often came close to quotas. Other mandates require contractors to promote a drug- free workplace or prohibit the govern- ment from buying from companies that use child labor.
The second barrier is various require- ments for contractors to submit infor- mation about their costs to help the government negotiate better prices, along with provisions making contrac- tors subject to government audits of the information submitted. If those audits identify problems with the information, criminal penalties are possible.
Turning a skeptical eye on criticisms
The narrative about the negative effects of socioeconomic requirements was a central tenet of the professional pro- curement community’s criticism of how government contracting worked. Whenever organizations of contracting professionals were asked to make sug- gestions for improving the system, pro- posals to reduce “government-unique”
socioeconomic requirements were high on the list.
The recommendations were seldom successful because it was often too politically attractive — especially but not exclusively in Democratic admin- istrations — to add ever-new require- ments for what seemed to be such attractive causes. When I was in the government, I would counter the call to use the “enormous buying power of the government” to promote such causes by saying that power should be used to get a good deal for the taxpayers, which was harder if companies refused to pur- sue government business because of other requirements. Fortunately, I had enough clout in the administration to stave off many of those suggestions, but I made few friends in the process, especially among labor groups.
Contractors also endorsed the criti- cism of socioeconomic requirements, but they were chiefly concerned about the data disclosure and auditing require- ments. Again, they argued that it was a powerful disincentive to new partici- pants seeking federal business because complying with the requirements was expensive and created significant legal risk.
When I was in the government, I fully bought into both narratives and