government suspension

GTSI – Example or just first in line?

With the news breaking last week that the SBA had suspended GTSI from winning future contracts, the buzz about the industry is one of shock, confusion, and unanswered questions. “Can’t believe that a big prime was suspended?”  “How did GTSI let this happen?” “Will they prevail in challenging the suspension?”  And most of all I’m hearing, “Will they go after other big primes next?”

The last question is the biggest question mark out there.  The practice of big defense contractor primes being a subcontractor to a small business is common practice.  You’ll see a solicitation out there for a huge IDIQ contract that would be a challenge for a large business to prime; yet it is a total small business set-aside.  I’m all for the set-asides.  Set asides allow innovation and efficiencies to thrive.  Small businesses deserve opportunities to pass these benefits on to the government and diversify the supply of goods and services to the federal government.

Buy why set aside such a huge purchase requests to small businesses that don’t have the resources to prime?  A big prime gets wind of a huge set-aside and immediately starts calling around, “We’d like to be your subcontractor.”  In GTSI’s case, they did this and then went further, by essentially using the small business as just a name. Pretending GTSI employees are the small business employees and performing essentially all the work on the contract.

Situations where a large business is a sub can often turn into a situation where small business money is being passed through the small business and ultimately just going to a large business. What’s the point of the set-aside then?  Yes, the small business gets the points for past performance and credit for the dollars, but does it fulfill the intention of what the set-aside what meant to do?  That is, to promote small businesses? If an agency wants the services of what only a large business can provide then they need to go to large business, yet promote and FOLLOW THROUGH on small business subcontracting requirements.

Other, obvious, large defense primes may be getting some sweaty palms right now.  Would love to be a fly on the wall in those offices.  This scheme is a money maker for big primes. They get their foot in the door regardless of set-asides, was GTSI just the first to have the hammer fall on them? Or, will the other big primes stay safe?