August 7, 2002


Via Facsimile and Hand Delivery

The Honorable Christopher S. Bond
Ranking Member, Committee on Small Business and
Entrepreneurship
429A Russell Senate Office Building
Washington, DC 20510-6136

     Re:       S. 2753, the Small and Disadvantaged Business
     Ombudsman Act
     
Dear Senator Bond:

     I am writing to advise you and Chairman Kerry of the
Office of Advocacy's assessment of S. 2753, legislation
introduced by Chairman Kerry and cosponsored by you, and
recently marked-up by the Senate Committee on Small Business
and Entrepreneurship (the "Committee").

     Before addressing the legislation, I want to commend
you and Chairman Kerry for the Committee's tireless efforts
to increase small business participation in the Federal
procurement marketplace.  I had the privilege to attend the
recent Homeland Security Expo sponsored by the Committee,
and know that I speak for small businesses across the
country in saying thank you for this tremendous opportunity
to showcase their security innovations.

I.   Ombudsman Responsibilities
  
     The Office of Advocacy would be happy to accept the new
responsibilities and challenges presented by S. 2753
establishing a "Small Business Procurement Ombudsman" within
our office.  We do have concerns, however, regarding the
sufficiency of the resources available to fulfill the
Ombudsman requirements of S. 2753.  Sufficient resources
should be provided from the outset for the Procurement
Ombudsman to accomplish the duties set forth in S. 2753.
The Office of Advocacy does not currently have the resources
to meet the increased duties of S. 2753 and meet our
existing statutory obligations.
     
     One alternative for the Committee's consideration would
be to place the Small Business Procurement Ombudsman in the
Office of Federal Procurement Policy (OFPP).   Creating a
Small Business Procurement Ombudsman in OFPP would also
institutionalize the interests and perspective of small
businesses at the core of the Federal Acquisition system.

II.  Raising the Procurement Goals to 30 Percent

     We feel obligated to caution Congress against
increasing the small business procurement goals at this
time. Current procurement data shows that unless the
problems that prevent small businesses from getting their
fair share of procurement dollars are fixed, a goal increase
may actually result in a lower percentage of contract
dollars being awarded annually to small businesses.  See
February 2001 General Accounting Office (GAO) report, GAO-01-
346, "Trends and Challenges in Contracting With Women-Owned
Small Businesses."  This report documented seven obstacles
to achieving women-owned small business goals.  Two of these
obstacles are the numerous and complex Federal contracting
programs for small businesses and the practice of contract
consolidation (including bundling).  These problems are
further supported by data compiled by the Committee's staff.
According to a chart entitled, "Government-wide Small
Business Procurement Goals," prepared by Committee staff,
the statutory goal increase from 20 percent to 23 percent in
1997 had a negative affect, with the percentages decreasing
from a high of 24.80 percent in Fiscal Year (FY) 1997 to a
current level of 22.81 percent in FY 2001.
     
     The problems discussed above are part of a larger
problem in the acquisition community.  The General
Accounting Office and the Inspector General of the
Department of Defense (DOD IG) have documented the need for
training the existing procurement workforce.  In a February
2000 report, the DOD IG found that "people have not received
adequate training on new procurement regulations.  This adds
up to contracts that do not meet the needs of the agency.."
A more detailed discussion of these and other problems
facing the Federal government was presented in February,
2001 by GAO to the Senate Committee on Governmental Affairs
in testimony entitled "High Risk: Human Capital in the
Federal Government."  Based on these findings an increase in
the annual small business procurement goal to 30 percent
could simply bury the contracting officers, and not yield
the positive result we are all trying to achieve.
     
     To ensure that S. 2753 is an effective tool to help
develop a stronger and more viable small business community,
the Office of Advocacy respectfully recommends that careful
consideration be given to the above-referenced concerns.  We
are committed to working with you and Chairman Kerry to
determine the best manner to proceed to achieve our mutual
goal of increased small business participation in the
Federal procurement marketplace.

                    Sincerely,


                    
                    Thomas M. Sullivan
                    Chief Counsel for Advocacy


cc: Chairman John F. Kerry,
      Committee on Small Business & Entrepreneurship