Middletown-based Rite Solutions has an issue with companies that are no longer small being “grandfathered” in when it comes to competing for U.S. Department of Defense contracts. The 14-year-old company has 125 employees and specializes in submarine-combat-systems software development and does work mainly for the U.S. Navy.
“I have no problem competing with other companies on a level playing field, but we’ve competed for contracts with companies that have 700 employees – and that puts us at a significant competitive disadvantage,” Rite Solutions President Joseph Marino said at the Regulatory Fairness Forum held April 15 at New England Institute of Technology in Warwick. The forum was sponsored by the U.S. Small Business Administration and led by SBA National Ombudsman Brian Castro.
The general rule of thumb is that a small business has up to 500 employees, said Castro. However, qualifying as a small business is also based on company revenue, with determining factors that vary by project, Castro said.
“For government contract purposes, that’s not locked in,” said Castro, who received Marino’s concern from the SBA’s Rhode Island office and presented it to the U.S. Navy.
In response, the Navy “has determined that a more comprehensive review of contract administration of the SeaPort-e vehicle is required,” said Castro, referring to the Navy’s electronic platform for acquiring support services. Contracts are awarded through the Naval Sea Systems Command, called NAVSEA.
“You don’t get any work out of SeaPort-e,” explained Marino. “It gives you the right to bid on tasks.”
Those tasks, or projects, are sometimes awarded in multiyear contracts.
One of the requirements for qualifying as a small business for the Navy contracts is having a three-year average of annual revenue of not more than $35.5 million,” said Marino, whose company revenue is under that cap.
If a company qualifies as a small business through SeaPort-e, then bids on a contract three years later and has passed the $35.5 million mark, or has more than 500 employees, the company’s small-business certification is “grandfathered” in, said Marino.
“I look at is as a loophole and they’re taking advantage of the loophole,” said Marino, who’s suggested a fix.
“My suggestion is that any time you bid on a contract, you have to certify that you’re a small business,” said Marino. “I wouldn’t ask the government to terminate contracts that have already been issued.”
The issue of what qualifies as a small business for government contracts has implications broader than just the issue of fair competition.
“The president has made contracting to small businesses a priority across federal agencies, and as a result, we’re making real progress toward reaching no less than 23 percent of all federal contracts going to small-business owners,” Castro told about 40 people attending the forum.
Some in Rhode Island are seeing progress toward meeting the national goal.
“We’re seeing support for more contracts to small business,” said John Wilkinson, director of operations for the Middletown office of the McLean, Va.-based Research and Development Solutions, Inc., which has about 60 employees and bids on contracts for the Naval Undersea Warfare Center in Newport.
Other issues raised at the forum included anticipated changes in federal regulations that allow small businesses to team up to bid on government contracts, as well as obstacles to fair competition.
“One issue of concern has been the Department of Defense bundling contracts,” said SBA Rhode Island District Director Mark Hayward. “Bundling is putting many parts of the project under one contract and that can exclude some small businesses because they’re not able to provide all the requirements of the contract.”
Castro’s office is looking into the bundling issue, Hayward said.