DOE starting to implement small business requirement at Hanford

By Annette Cary, Tri-City HeraldApril 18, 2013 

The Department of Energy is starting to implement a new requirement that it award 7 percent of the approximately $2 billion of work done each year at Hanford to small businesses.

As much as $485 million of work annually already is subcontracted to small businesses some years. But it does not meet new Small Business Administration goals because the work is subcontracted by DOE contractors at Hanford rather than directly by DOE.

The change has raised concerns about whether fewer small businesses will be awarded Hanford work and whether Hanford-area companies will face more competition for the work from companies across the nation.

Most Hanford work is awarded by DOE to five large prime contractors -- Bechtel National, Washington River Protection Solutions, CH2M Hill Plateau Remediation Co., Washington Closure Hanford and Mission Support Alliance.

Just 1.3 percent of Hanford work is awarded directly by DOE to small businesses, said Greg Jones, Hanford DOE chief financial officer, at the Bridging Partnerships Small Business Symposium in Pasco on Thursday.

To increase that, bids are being sought for a small business to provide laundry services currently provided to DOE by a large business.

Bids might be sought later this year from a small business for commodity purchases which could be used by all the major contractors.

The plan would help DOE meet its new Small Business Administration goals and might allow commodities to be purchased at a lower cost, Jones said. DOE is considering commodities such as fuel, safety equipment and office supplies for the solicitation. The total value could be up to $50 million.

In addition, DOE expects to seek bids from small businesses as the current contract for analytical services and testing work at the 222-S Laboratory expires. The contract now is held by small business Advanced Technologies and Laboratories.

DOE awarded its occupational medical services contract to a small business, HPM Corp., last year and also contracts directly with small business for some administrative support services.

But as DOE has some concerns as it works to increase its direct small business contracting, Jones said. In 2012 its prime contractors subcontracted work to 1,000 to 1,500 small businesses.

"DOE couldn't administer that much," Jones said. As a result, it probably will bundle work or tasks to award larger amounts of work under a single contract.

"That will make one company very happy," he said.

Jones said he is concerned that too much work will be bundled, shutting out companies that would be good at portions of it.

In addition, the solicitation for the work would be done nationally, which would reduce the likelihood of local companies being awarded the work.

DOE also is concerned about the complex regulatory and work environment small businesses would need to navigate at Hanford and how DOE will handle the additional contract awards and oversight with existing staff, he said.

The large prime contractors who subcontract Hanford work to small businesses have broader staffs, he said. Helping small businesses be successful helps the prime contractors meet performance goals and earn their award payments.

Small businesses might need to sign on to union labor agreements, would need to follow safety protocols and could be required to be part of the sitewide pension plan.

There are issues that need to be worked out for DOE, the prime contractors and the small contractors, Jones said.

"If we do it wrong, all three parties will suffer," he said.

The five prime DOE contractors have been awarding about 55 percent of the value of their subcontracts to small business, and under the new requirements still would have a goal of awarding 52 percent. However, some of that currently subcontracted work could become part of the work DOE is required to contract out directly.

Hanford has been very successful in giving work to small businesses, Jones said. DOE has tried to get credit from the Small Business Administration for the work subcontracted by prime contractors to small businesses but has not been successful, he said.

The current year likely is to be a tough one for small business subcontractors. The Hanford fiscal 2013 budget was cut 7.7 percent in March because of sequestration, so small business subcontracts have been revised, delayed and canceled as DOE has tried to preserve its contractor work force.

Annual Hanford spending, which reached $3.1 billion when economic stimulus money was available in fiscal 2011, will be about $2 billion after sequestration this year, Jones said. The administration budget proposed for fiscal 2014 for Hanford would put the annual budget at about $2.2 billion, assuming sequestration does not continue.

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