SBA Revamps Its Rules on Minority Bidding on U.S. Contracts
The Small Business Administration on Tuesday overhauled its minority set-aside program in response to the Wedtech bribery and influence-peddling scandal.
The regulations, effective immediately, put into effect legislation signed nine months ago by President Reagan. They are designed to minimize political influence on the agency’s 21-year-old program under which firms owned by blacks, Latinos, Asians, Indians and economically disadvantaged women are given preference in the awarding of government contracts.
Among the changes:
- The program director will be a career employee of the agency, rather than a political appointee. SBA Administrator Susan Engeleiter named Erline Patrick, a former staff aide to the Senate Small Business Committee, to the post. “The person in charge will not have to respond as much to the political pressures,” Patrick said.
- Firms that misrepresent their status as minority-owned will be subject to stiffer penalties. The maximum fine was increased from $50,000 to $500,000, and the top jail term from five years to 10 years.
- For the first time, competitive bidding is required among minority-owned firms for manufacturing contracts over $5 million and product and service contracts over $3 million.
- The time a firm may get special preference was lengthened from seven years to nine years, but companies will be expected to derive a steadily decreasing percentage of their revenues from contracts awarded under the program.
- Owners of eligible firms must have a net worth of less than $250,000, excluding equity in their homes or businesses, when they enter the program. The old standard was $750,000, including home or business equity.
- The agency must rule on applications within 90 days.
Patrick, at a news conference, said about 3,000 firms participate. She said the net worth requirement and the initiation of competitive bidding may discourage new participants, but she said she hoped that the deadline for decisions would boost participation.
When Congress passed the law last year, Sen. Dale Bumpers, (D-Ark.), chairman of the Senate Small Business Committee, said it was aimed at preventing the recurrence of Wedtech-type scandals.
Wedtech Corp., a military contractor in New York’s south Bronx, was awarded more than $250 million in no-bid contracts in just four years but became the subject of five criminal investigations.
