Hearing of the Investigations, Oversight, and Regulations Subcommittee of the House Small Business Committee - Opening Statement of Rep. Alma Adams, Hearing on Federal Contracting Change Orders

Hearing

Thank you, Mr. Chairman for holding this valuable hearing. Today's discussion continues our ongoing work to help more small businesses compete successfully in the federal marketplace. As this Committee seeks ways to foster small business growth and expansion, we must always carefully consider what is being done to maximize entrepreneurs' participation, including their experience while performing government contracts.

One longstanding barrier to small business participation in the federal marketplace has been the practice of bundling contract modifications, which delays the payment to contractors while increasing the risk they take on. When federal agencies group smaller modification actions together, they reduce the negotiating power of the contractor.

While we have discussed formal contract changes, informal contract changes are not issued in writing and often result from government conduct, unforeseen impediments to performance, or other factors. Much of the time, they are disputed -- leaving the business with costly litigation. These costs hinder the small contractor's ability to perform other contracts and cut into the profits of the firm.

Considering the prevalence of this problem, it is vital we ensure the SBA is doing everything possible to intervene in unnecessary bundling by giving them more power to do so. This raises a number of important oversight questions including whether the SBA has sufficient staff to monitor contract actions during performance and is truly privy to agency actions that negatively impact small businesses generally.

Because of the nature of the work, construction contracts most often have informal changes. This leads to delays associated with recognizing them as official and receiving compensation for them. As other Members have mentioned, this delay greatly affects the capital available to small construction contractors to cover the cost of supplies or the proper bonding.

Often, small business do not have the capital to support large bonds they need to participate in the Federal marketplace. This difficulty is exacerbated when bundled change orders increases the original contract price, thereby requiring a larger bond. Given the delays associated with bundling modifications, that potential increase in bonding could cause a small contractor to not be able to complete performance on the contract. And, in other cases, small contractors avoid bidding entirely, which diminishes the pool of qualified participants.

This Committee must examine how well SBA's rulemaking process functions to boost small businesses' ability to compete for federal contracts and protect them when completing performance.

Mr. Chairman, this Committee has a long track record of working in a bipartisan manner, particularly when it comes to procurement issues. It is my hope we can continue that tradition to further small businesses' role as successful federal contractors. It is all the more critical that this Committee and the SBA work to remove barriers that prevent small firms from successfully performing federal work, and getting paid for all their work done.

I look forward to hearing the witnesses' perspective on how we can best accomplish that task.

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