Written Testimony of Joseph G. Jordan, CEO, FedBid, Inc. for submission to the. House Committee on Small Business

Transcription

1 Written Testimony of Joseph G. Jordan, CEO, FedBid, Inc. for submission to the House Committee on Small Business Subcommittee on Contracting and Workforce for the hearing Contracting and the Industrial Base Part III: Reverse Auctions, Verification and The SBA's Role in Rulemaking Thursday, March 19, 2015 Chairman Hanna, Ranking Member Meng and Members of the committee, thank you for the opportunity to provide written testimony on the topic of reverse auction use within the federal government, including its effectiveness as a tool to strengthen opportunities and access for small businesses. I. INTRODUCTION FEDERAL CONTRACTING IS A CRITICAL ECONOMIC OPPORTUNITY FOR SMALL BUSINESS Certainly, this topic is of keen interest to me, not only because of my current position, but also given that I spent much of the five years prior to my joining FedBid in January 2014 working on these very issues. As Associate Administrator for Government Contracting and Business Development at the U.S. Small Business Administration from 2009 to 2011, we saw the federal government s largest twoyear improvement in small business contracting, prioritized the implementation of the Women- 1

2 owned Small Business Contracting program, and worked with Congress on key enhancements to government contracting regulations and programs for small businesses that were included in the Small Business Jobs Act of Then as Administrator of the Office of Federal Procurement Policy from 2011 to 2013, I made small business one of my top priorities including within my first month on the job issuing a joint memo with then-sba Administrator Karen Mills on strengthening accountability for small business goal achievement and maximizing opportunities for small business contractors. Needless to say, federal contracts present a critical economic opportunity for small businesses. In fact, the statutory goal of 23 percent of federal prime contracting dollars going to small businesses likely represents the single largest federal program aimed at the success of America s small businesses and entrepreneurs to the tune of nearly $100 billion each year. Why is that significant? As the members of this committee know, our nation s economy and our competitiveness in the global market depend on a vibrant, thriving small business sector. Small businesses are our nation s job creators responsible for two-thirds of the net new jobs across the country. Small businesses drive innovation producing up to 16 times more patents per employee than large patenting firms, according to the SBA Office of Advocacy. And, small businesses are the heart and soul of our cities and towns where Main Street businesses and their owners are pillars in their communities, providing not only jobs, but also leadership in areas including philanthropy, education and government. 2

3 Small businesses have proven many times over, if given the chance, they will deliver. Specifically, when we are talking about federal contracting, they deliver in the form of innovation, efficiency, nimbleness to adapt to the unique needs of a government agency, and high-quality services and products. But the federal marketplace is a complex one, and for small businesses, those complexities are often a barrier that is insurmountable due to limited time and resources. It s with that perspective and insight that I approach any assessment of the impact and value reverse auctions offer small businesses in federal contracting. Certainly, we need to ask whether reverse auctions provide savings for taxpayers in the form of lower costs and efficiency? Yes, they do. But if our goal is also to maximize the opportunity for small businesses, then just as important is the question: Do reverse auctions provide greater chances for small businesses to compete and win federal contracts? And, the answer to that is, yes they do. II. REVERSE AUCTIONS INCREASE ACCESS FOR SMALL BUSINESSES As the CEO of the largest commercial marketplace for reverse auctions conducted by federal agencies, it is likely no surprise to the Members of the committee that I believe reverse auctions are a useful tool for expanding opportunities for small businesses. But, in fact, my decision to join FedBid was actually because of my interest in continuing to support small businesses, not the other way around. Reverse auctions, when used appropriately, can be a highly-effective and powerful tool for small businesses and for government buyers, as well. 3

4 A December 2013 report by the Government Accountability Office found that reverse auctions provide a high rate of awards to small businesses. In fact, that report looked at FY2012 acquisition data, and found that about 86 percent of contract awards through reverse auctions went to small businesses. Those acquisitions accounted for $661 million 80 percent of the dollar value of all reverse auction awards. FedBid s own more recent data reinforces this point. In FY2014, of the nearly 31,000 contracts awarded by federal agencies through FedBid s marketplace, 86 percent 26,494 contract awards went to small businesses, including many thousand minority-owned, women-owned and veteran-owned small firms. Looking at dollar value, in FY2014 federal agencies awarded more than $1.5 billion in contracts through FedBid s reverse auction marketplace. More than 75 percent of these dollars $1.19 billion went to small businesses, including: $226 million to veteran-owned small businesses; $176 million to service disabled veteran-owned small businesses; and, $268 million to women-owned small businesses. Importantly, these results are not just specific to contracts directed by federal agencies for small business set-aside awards. On the FedBid marketplace in 2014, small businesses won 64 percent of all non set-aside awards. 4

5 These results have been remarkably consistent year-over-year for the past decade. We attribute this to three primary characteristics of the marketplace and opportunities offered through reverse auctions: i) Relatively low dollar size of the buys which means the contract opportunities are more approachable for small businesses; ii) Ease of access the opportunities are readily available and simply aggregated without access costs; and, iii) Ease of use the marketplace is relatively simple and efficient to use. III. REVERSE AUCTIONS DRIVE COMPETITION AND EFFICIENCY FOR BOTH BUYERS AND SELLERS This data also points to the advantage reverse auctions deliver to government buyers. Reverse auctions help them meet the challenge of finding and engaging small businesses, by providing, in the case of FedBid, instant access to thousands of small businesses across every socio-economic, product and service category. This access translates into increased competition, as is noted in August 2014 guidance from Undersecretary of Defense Frank Kendall on creating and maintaining a competitive environment for supplies and services in the Department of Defense. FedBid s reverse auction marketplace provides a central location for sellers to filter, search and bid on tens of thousands of solicitations from federal, state and local and commercial buyers. 5

6 Federal buyers are able to automatically post combined synopsis/solicitations to FedBizOpps, as required by regulation, and FedBid proactively contacts sellers when opportunities arise to communicate complete, detailed information for each procurement. This approach minimizes the resources required by sellers to pursue each opportunity and compete for contracts, which increases opportunity awareness while lowering sales costs. In addition, because the services are web-based, there is no software to load, and sellers need only Internet access and a browser to participate. Automated bidding and other time-saving features enable sellers to compete on multiple simultaneous opportunities with fewer resources and fewer costs. IV. CONCLUSION REVERSE AUCTIONS LEVEL THE PLAYING FIELD, OPEN DOORS FOR SMALL BUSINESSES As this committee considers the impact reverse auctions can have in providing greater opportunity for small businesses, the compelling result of leveling the playing field is significant. Small businesses do in fact face limited resources, when compared to larger firms, which they can devote to breaking into the complex market that is federal procurement. Reverse auctions are an equalizer on that front, in multiple ways from ease of use and awareness of contracting opportunities to allowing bids from a small business to be considered on their merits, side-byside with those of their competitors. As a result, reverse auctions do provide a critical gateway to small businesses looking to break into the federal contracting marketplace. With regards to awards through FedBid s reverse 6

7 auction marketplace, in FY2014, 94 percent of the companies that won their first-ever federal contract were small businesses. At FedBid, the growth we continue to see in our seller community now topping more than 75,000 companies is being fueled by small businesses that see these results of increased access and competitive opportunity, and because of that view reverse auctions as an increasinglyeffective tool to help them achieve their goals for growing their businesses, and just as importantly, creating good paying jobs as they do. Thank you again for the opportunity to share my perspective on the impact and opportunity reverse auctions provide to small business in the federal procurement marketplace. Respectfully submitted, Joseph G. Jordan Chief Executive Officer FedBid, Inc Leesburg Pike, Suite 602 Vienna, VA