February 8, 2008

The President Signs Into Law Increase in the Use of Small Disadvantaged Businesses in Defense Department Prime Contracting

WASHINGTON, DC — The United States Hispanic Chamber of Commerce (USHCC), the leading advocate for the 2.5 million Hispanic-owned businesses in the United States, praised the President for signing into law H.R. 1585, the Defense Authorization Act for Fiscal Year 2008, which includes a provision regarding the utilization of Small Disadvantaged Businesses (SDBs) in DOD contracting.

“It is encouraging,” said USHCC Board of Directors Chairman David C. Lizárraga, “to see that the Department of Defense is being required to improve its prime contracting with Small Disadvantaged Businesses through the expanded use of the Price Evaluation Adjustment (PEA).”

The Federal government uses the PEA authority when considering contract proposals from SDBs. The PEA gives these businesses a slight price advantage in open competition for selected prime contracts.

The Department of Defense (DOD) was previously required to use the PEA authority, but an amendment in 2003 waived the PEA requirement as long as DOD met its 5% goal for prime contracts awarded to SDBs. The language in the Bill’s Report helps close this loophole by directing DOD to use PEAs more often.

According to the House Committee on Armed Services, in recent fiscal years the DOD has awarded prime contracts to SDBs exceeding 5% of the value of all DOD contracts. However, the agency has failed to effectively utilize SDBs in a number of key industries, such as telecommunications, electronics, information technologies, and similar technical fields.

The Committee indicated that it “encourages the Department of Defense to examine areas of contracting wherein the utilization of SDBs is not meeting the 5% goal and adopt policies and procedures designed to increase SDB utilization in those areas.”

“The DOD, like many large Federal agencies, can improve its utilization of SDBs,” said USHCC Interim President Augustine Martinez. “In the case of the Department of Defense, which accounts for the vast bulk of procurements in the Federal marketplace, an increase of a few percentage points would represent a tremendous improvement in SDB participation in DOD contracting.”

Bill Miera, Chairman of the USHCC Federal Procurement Committee, believes that “the Report language in this Bill should serve as a wake-up call to the Federal marketplace where the PEA authority has been underused or simply not used at all in recent years.”

“Businesses of all sizes and capacities deserve greater recognition,” said USHCC Board member David Hernandez, CEO of Liberty Power. “These businesses can compete successfully, providing quality products and value to the Federal government in service areas that include energy, IT and telecommunications – industries that have been historically underrepresented in procurement strategies.”

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