SBA proposal means well, but likely to hurt business

Sometimes good intentions have bad results.

Such is the case with an initiative propsed by the Small Business Administration (and imposed by the Office of Management and Budget) meant to help small businesses obtain work at Hanford.

While that sounds good in theory, the program actually could be a detriment to our local economy.

The Tri-City Development Council has big concerns that the initiative may end up with less Hanford work going to local companies, making it a challenge for start-up and niche businesses to compete for the jobs.

The SBA and the OMB are pushing DOE to take on direct accountability for work awarded to small businesses. The way the system had been working, contractors were the ones awarding most of the work to small businesses as subcontracts, largely removing DOE from the equation.

DOE's Hanford Richland Operations office now plans to take a different approach, with a new goal to spend 5 percent of its budget with contracts awarded directly to small businesses this year. That's $50 million worth of work. That amount would increase to 10 percent in future years.

Contractors doing work for DOE at Hanford must pass along 40 percent to 65 percent of their work to small businesses. And they usually surpass that figure. Of that total, nearly 50 percent of the subcontracted work goes to small businesses within 100 miles of Hanford.

Washington Closure Hanford is a prime example of this system. It holds a $2.3 billion contract for cleanup work along the Columbia River for the DOE. But it hires many local small businesses to execute some of that work, rather than use its own employees. A subcontract for one Kennewick business it hired this year was for $4.3 million. That's a lot of money to a small business.

In 2011, Washington Closure Hanford -- one of DOE's prime contractors at the site -- used small businesses to do $119 million worth of work.

CH2M Hill Plateau Remediation spent $186 million with small businesses. Mission Support Alliance spent $48 million locally and Washington River Protection Solutions spent$39 million.

TRIDEC wants to see that flow of money continue to local small businesses but worries that they won't be able to get the jobs if they have to deal directly with the DOE and the cumbersome federal government system that comes with it. Prime contractors have a much easier path to working with small businesses.

"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.

If the DOE awards contracts directly, many local businesses will be excluded because they are not large enough to do business with the federal agency. Companies better suited to do that would already have been doing work nationwide and can have up to 500 employees under some SBA categories.

The cost of bidding federal contracts is much higher than bidding on a subcontract. A long wait exists between the time bids are taken and awards are announced. When a prime contractor is awarding subcontracts, it takes one to three months. DOE, on the other hand, would need nine to 18 months to do the same. A small business can't afford to wait that long for work.

TRIDEC expects that DOE would want to simplify by awarding larger contracts to fewer businesses, instead of the hundreds of small businesses that currently benefit from the work as subcontractors.

It seems obvious that prime contractors are better suited to work with small businesses, rather than a direct role being played by the DOE. The simple solution would be to give DOE credit for money awarded to small businesses via its prime contractors. After all, it's the same money, just one layer removed from DOE when it is being paid to the small businesses.

Let's let reason rule over a good intention with the potential for a disastrous outcome. This initiative needs to be reconsidered immediately.