Why U.S. public sector procurement is broken
Be sure to check out this story in August's issue of Supply Chain Digital. Trust us, it's way cooler!
Public sector procurement, or as it’s more commonly known, doing business with the government, is broken.
At least that’s what Lloyd Chapman, the founder of the American Small Business League, says. According to Bergeron, large companies are being awarded public sector small company contracts, which would be against the law.
The Small Business Act of 1953, designed to “encourage” and “develop” small business growth, stipulates that 23 percent of all government contracts must go to small businesses.
However, according to a report done by the American Small Business League, large firms such as Lockheed Martin, Hewlett-Packard, AT&T and several others earned government contracts as small businesses.
In all, 61 of the top 100 small business contracts awarded in the 2010 fiscal year went to large corporations according to the ASBL’s report, which accounted for $8.83 billion. Subtracting that total from the mandated 23 percent would put the government well under its goal for small business contracts.
Chapman’s solution to that problem is pretty straight forward.
“People that weren’t in the army shouldn’t get VA loans, people that are millionaires shouldn’t get welfare, and Fortune 500 companies shouldn’t get federal small business contracts,” Chapman said.
Chapman thinks the problem with large corporations earning small business contracts starts with a loose definition of the term “small enterprise.”
Chapman has repeatedly gone after the SBA to uncover what he views as fraud, and took the government agency to court earlier this year.
In a Supreme Court ruling filed by Chapman against the SBA in May, United States District Judge Marilyn H. Patel stated, “The court finds it curious the SBA’s argument that it does not ‘control’ the very information it needs to carry out its duties and package.”
The $230 billion that Chapman is proposing small businesses should be awarded could be money well spent. According to the U.S. Census Bureau, small businesses create more than 90 percent of all net new jobs.
A recent study by the Kauffman Foundation supported that claim further, finding that since 1980, businesses less than five years old have created nearly every new job.
TIPS FOR SMALL BUSINESS IN THE PUBLIC SECTOR
Even if public sector procurement for small businesses is broken, Chapman thinks small businesses around the country need to do a better job of pursuing government contracts.
“My No. 1 piece of advice for small businesses is to be fearless,” Chapman said. “Unfortunately, the vast majority of small businesses in America that are trying to work with the government are scared, and that’s the opposite of what you have to down.”
EU and US agree end to Airbus-Boeing supply chain tariffs
The EU and US have agreed to resolve a 17-year dispute over aircraft subsidies, suspending tariffs on billions of dollars' worth of goods that have plagued procurement leaders on both sides of the Atlantic.
Under an agreement reached by European Commission Executive Vice-President Valdis Dombrovskis and US Trade Representative Katherine Tai on Tuesday, the tariffs will be halted for a period of at least five years.
It will bring an end to punitive and disruptive levies on supply chains that have little to do with the argument, which became embroiled in the trade battle. Businesses on both sides of the dispute have been hit with more than $3.3bn in duties since they were first imposed by the US in October 2019, according the EC.
The US imposed charges on goods upto $7.5bn in response to a World Trade Organisation ruling that judged the EU’s support of Airbus, its biggest aircraft manufacturer, unlawful. A year later in November 2020, the EU hit back. The WTO found the US had violated trade rules in its favourable treatment of Boeing, and was hit with EU duties worth $4bn.
In all the tariffs affected $11.5bn worth of goods, including French cheese, Scotch whisky, aircraft and machinery in Europe, and sugarcane products, handbags and tobacco in America. Procurement leaders on both sides of the fence were forced to wrestle with tariffs of 15% on aircraft and components, and 25% on non-aircraft related products.
Boeing-Airbus dispute by the numbers
- The dispute began in 2004
- Tariffs suspended for 5 years
- $11.5bn worth of goods affected by tariffs
- $3.3bn in duties paid by businesses to date
- 15% levy on aircraft and 25% on non-aircraft goods suspended
Both sides welcome end to tariffs
European Commission President Ursula von der Leyen branded the truce a “major step” in ending what is the longest running dispute in WTO history. It began in 2004.
“I am happy to see that after intensive work between the European Commission and the US administration, our transatlantic partnership is on its way to reaching cruising speed. This shows the new spirit of cooperation between the EU and the US and that we can solve the other issues to our mutual benefit,” she added.
Both aircraft manufacturers have welcomed the news. Airbus said in a statement that it will hopefully bring to an end the “lose-lose tariffs” that are affecting industries already facing “many challenges”. Boeing added that it will “fully support the U.S. Government’s efforts to ensure that the principles in this understanding are respected”.
The US aerospace firm added: "The understanding reached today commits the EU to addressing launch aid, and leaves in place the necessary rules to ensure that the EU and United States live up to that commitment, without requiring further WTO action."
This week’s decision expands upon a short-term tariff truce announced in March this year. The EC says it will work closely with the US to try and further resolve the dispute, establishing a Working Group on Large Civil Aircraft led by each side’s trade minister.
Airbus last month signalled to suppliers that post-pandemic recovery was on the horizon, telling them to scale up to meet a return to pre-COVID manufacturing levels. “The aviation sector is beginning to recover from the COVID-19 crisis,” said Airbus chief executive Guillaume Faury, adding that suppliers should prepare for a period of intensive production “when market conditions call for it.”