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The New OMB Memo: A Hidden Threat to Small Business Federal Contractors?
The federal government is making a big move to centralize its procurement efforts under the General Services Administration (GSA). A new Office of Management and Budget (OMB) memo outlines this push for consolidation, but what many might not realize is its potentially immense impact on the small business community. The memo, surprisingly, doesn’t even mention “small business,” yet its implications for these vital contractors could be profound. This isn’t just theory; history has shown that similar strategic sourcing initiatives have significantly hurt small business participation.
What’s Changing? Over the coming months, new Federal Acquisition Regulations (FAR) will be proposed. These regulations will require agencies to use existing government-wide contracts and “Best-in-Class” (BIC) vehicles for common goods and services before looking to their own contracts. Crucially, the control and management of these contracts will increasingly shift to the GSA. This OMB memo also highlights several concepts that will put significant pressure on small businesses.
The Hurdles for Small Businesses The memo prioritizes requirements that are easy to standardize and involve highly commercialized products and services. These items will be acquired without customization, a process that naturally favors larger contractors with broader capabilities.
Another major shift is the centralization of relationships. As procurement consolidates at GSA, success will depend on relationships with GSA officials. This puts small businesses, who have historically built strong ties with contracting officers at specific agencies, at a potential disadvantage.
Furthermore, the emphasis on Best-in-Class (BIC) contracts introduces its own set of challenges. These contracts come with “rigorous requirements definitions” and “strong vendor management” demands. While intended for efficiency, these can inadvertently create significant barriers to entry for smaller firms. The memo’s focus on volume-based savings, where the government leverages its massive buying power for economies of scale, also typically favors larger companies. Simply put, while all companies must adapt, small businesses often lack the scale and resources to do so as easily as their larger counterparts.
Lessons from the Past: Data Doesn’t Lie This isn’t mere speculation. As experts have pointed out, contract consolidation has been detrimental to small businesses before, and it’s poised to be so again. Data from past initiatives underscores this concern. Over the first six years of category management (2016-2022), there was a stunning 26% decrease in small business utilization across BIC vehicles. An earlier program focused on office supplies saw a similar 26% drop.
At its core, strategic sourcing minimizes the channels for acquisition, reducing the “lanes” where contractors can supply services and products. There are also inconsistencies among BIC vehicles concerning small-business factors like size standard recertification, bid requirements, experience qualifications, on-ramping, and the tracking of set-asides. Collectively, these initiatives have led to less access and transparency in government procurement activities and opportunities, increasing requirement bundling, vendor consolidation, and market uncertainty.
Moving Forward While the goal of strategic sourcing initiatives may be valid, the OMB memo seems to overlook the full implications of its policies. The administration often speaks of lowering barriers to entry, yet the current policy is likely to do the opposite, favoring larger and more established players.
For federal procurement to truly succeed and harness the innovation and strength small businesses bring to the market, small business contracting policies cannot be an afterthought. They must be integrated from the very start, ensuring that these vital contributors are not sidelined but are instead empowered to continue driving value.
Tags: federal procurement, small business, OMB memo, contract consolidation, strategic sourcing, GSA, Best-in-Class, BIC contracts, government contracts, federal acquisition regulations, FAR, small business utilization, federal contractors, market uncertainty