TRIDEC worried by DOE initiative

The Tri-City Development Council is concerned that an initiative intended to provide more work to small businesses at Hanford may do more harm than good to the local economy.

It could lead to less work at Hanford being awarded to Mid-Columbia businesses and make it more difficult for start-up and niche companies to compete for work, TRIDEC said in a message to its members.

The Department of Energy is being pressured by the Small Business Administration to assume direct accountability for small business contract awards. Now most small business awards come through subcontracts -- work not awarded directly by DOE, but by its large contractors.

The DOE Hanford Richland Operations Office has a new goal this year to spend 5 percent of its budget or about $50 million in awards directly to small businesses, according to DOE. That would increase to 10 percent for the next two years.

"While on the surface this sounds like a good thing, TRIDEC has concerns about the impact of this change to our members and our local economy," said the TRIDEC message.

Now Hanford contractors are required to pass along 40 percent to 65 percent of their work to small businesses and are exceeding those goals, TRIDEC said. Almost 50 percent of that work goes to small businesses within 100 miles of Hanford, according to TRIDEC.

For instance, Washington Closure Hanford holds a DOE contract to do $2.3 billion worth of work to clean up Hanford along the Columbia River.

Instead of doing all that work with its own employees, it hires small businesses, many of them in the Mid-Columbia, to do some of that work. In January it awarded Cheyenne Electric of Kennewick a $4.3 million subcontract to install water lines and electricity and build roads, parking lots and container transfer areas at the 618-11 Burial Ground for upcoming environmental cleanup work there.

Last year Washington Closure Hanford spent $119 million with small businesses as one of several DOE prime contractors at Hanford. Washington River Protection Solutions spent $39 million locally last year, CH2M Hill Plateau Remediation Co. spent $186 million with small businesses last year and Mission Support Alliance spent $48 million locally, according to TRIDEC data.

That spending drives long-term economic development in the Mid-Columbia, TRIDEC said.

"Although the current dollars going to small business is significant, the SBA does not give government agencies credit for prime contractor small business awards," TRIDEC said. "TRIDEC believes that this policy must be reconsidered in order to continue benefits to small businesses and to the government."

Many of the local small businesses with Hanford subcontracts now would not be large enough contract directly with DOE, according to TRIDEC.

Companies in the best position to bid on direct DOE contracts for small businesses likely would be those that have a nationwide presence already. They can have up to 500 employees and qualify as a small business under some Small Business Administration categories.

Bidding for a federal contract costs far more than bidding on a subcontract in the current system because of government regulations and the length of time between the request for bids and announcement of winners, according to TRIDEC.

"Prime contractors are positioned today with resources and subject matter experts to award subcontracts much faster and aligned to the scope and schedule of cleanup priorities," TRIDEC said.

When Hanford contractors award subcontracts, the process takes one to three months, according to TRIDEC. But DOE typically would require nine to 18 months if it were awarding a contract directly to a small business, according to TRIDEC.

TRIDEC also expects DOE to meet its obligations by awarding large contracts to one or two small businesses, while now the system spreads work to hundreds of small businesses.

DOE offices have been advised to look for scopes of work that can be removed from contracts and awarded as small business prime contracts such as information technology, waste shipment, sitewide training and radiation services.

The Richland Operations Office already has awarded a contract this year estimated to be worth about $99 million over six years to HPM Corp. of Kennewick to provide occupational medical services at Hanford after accepting bids only from small businesses. The occupational medicine contract was not restricted to small businesses the last time it was awarded and HPM had work then as a subcontractor.

TRIDEC is recommending that instead of requiring DOE to contract directly with small businesses, it be given credit for DOE money already being spent with small businesses through subcontracts awarded by DOE's prime contractors.

"With declining funding it is in the best interest of the government to eliminate duplicate roles and the resources required to prepare, award and oversee small business acquisitions," TRIDEC said.