Failure to comply with a clause in its contracts left many small business owners out in the cold, say lawmakers.
An investigation by House lawmakers revealed the U.S. General Services Administration has failed to pay thousands of federal contractors since 2008. The majority of these contractors were small businesses, though 1,334 firms were affected and all companies were collectively shorted more than $3 million, according to details obtained by The Washington Post.
The problem stemmed from a failure to comply with the "guaranteed minimum payment" clause outlined in many of its contracts, said The Post. The GSA offers an online catalog of government services known as the Multiple Awards Schedules (MAS) Program from which other agencies can purchase goods and services, such as paper and construction, often at a discount.
To participate in the program, small businesses must go through "a rigorous and often costly" vetting process, said The Post. They also must keep up their sales and meet a $25,000 combined sales threshold in the first two years. If not, they're owed $2,500 upon being ousted, which is supposed to be paid automatically. Apparently, that wasn't happening.
The Republican-led House Small Business Committee discovered this last year, as Committee Chairman Sam Graves (R-Mo.) was reviewing proposed changes to the structure of the MAS program. Graves noticed the GSA couldn't account for minimum payments issued to those companies because they hadn't been paid. A year later, he received a letter confirming "the problem" from GSA Federal Acquisition Services Commissioner Thomas Sharpe. In all, the agency owes $3,108,888.
“GSA’s case for canceling these contracts in terms of dollars saved did not account for paying some of these firms the $2,500 they would be owed under their contracts,” Graves said on Thursday. “When the committee began questioning why the $2,500 was not included in the calculations, it became clear that GSA was not adhering to its own contracts and had not paid the required termination costs to small businesses for at least five years.”
Fortunately, the small business contractors will be paid the money owed to them in coming months.
JULIE STRICKLAND covers start-ups, small businesses, and entrepreneurial endeavors of all kinds for Inc. Her work has been published in Brooklyn Based and City Limits in New York, the Free Times in Columbia, SC, Real Travel Magazine in London, and Daegu Pockets in South Korea. She lives in New York City. @Jules5168