There is a conundrum throughout the Federal agencies awarding contracts, they are required to award 23% of all contracts to small business owner but few small contractors can qualify for projects of this size. The agencies also argue that they do not have the funding necessary to manage several small projects instead of a single large project. Small contractors can perform some of the work for these large projects, but often they cannot qualify for the bonds to bid the entire project. This has created a divide between the size of projects meant for small business goals and the amount of bonding a contractor is qualified to receive. A joint venture is often used to overcome this divide, it allows two small businesses to work together and they can still qualify for the set-aside opportunities of the federal government. The issue is that if a small contractor forms a joint venture with a larger company they lose their small contractor advantages. Therefore, these small companies are no longer allowed to go after set-aside projects to meet the 23% goal of federal agencies. We are hoping in the future that the regulations will become similar to a mentor-protégé program, allowing small businesses to team up with larger construction companies and still allow the work completed by the small business to count toward their goals. The federal procurement rules must contain mandates and incentives for larger companies to team with emerging and truly small contractors with limited experience. If these changes are made to the current federal system for awarding contracts, it will lead to an increase in participation of genuinely small contractors. Also, it will maintain the purpose of the Miller Act for surety companies to use sounds underwriting principles to determine the contractors qualified to perform the work.
For more information please see the article by Lenore Marema, the Vice President of The Surety and Fidelity Association of America.