Puerto Rico Small Business Contracting Provision in NDAA

Puerto Rico Small Business Contracting Provision in NDAA

Published on December 13, 2019

Rosanna close-up
Director, Washington D.C. Office

On December 11, 2019, the U.S. House of Representatives passed in a 377-48 vote the Conference Report to accompany the fiscal 2020 National Defense Authorization Act (NDAA), or S. 1790 which authorizes funding for fiscal year 2020 for military and defense activities of the U.S. Government.

Embedded in the massive legislation is Rep. Nydia Velázquez’s H.R. 3372, the Small Business Contracting Credit Act of 2019.

In June 2017, prior to the passage of Hurricane Maria, the GAO conducted a study to examine: ‚Äú(1) trends in small business contracting and the use of SBA programs in Puerto Rico that provide contracting preferences to small businesses and (2) stakeholder views on any challenges that small businesses in Puerto Rico face in obtaining federal contracting opportunities.‚ÄĚ

In its findings, the federal watchdog identified several challenges for small businesses to obtain federal contracting opportunities including a lack of knowledge about the federal contracting process, difficulty meeting procurement and bonding requirements.  Then, three months later, Hurricane Maria hit.

As with other post-disaster experiences, there was an expectation that economic development opportunities would emanate from federal disaster funding. Indeed, one of the most direct ways the government can local economic development is by supporting small businesses through federal contracts. The reality, however, suggests that many Puerto Rican small business are missing out on potential opportunities.

A report published by CNE in September of last year concludes that only 10 percent of federal spending on contracting since the Hurricane have been awarded to local firms.  In fact, of the 45 Federal agencies that contracted recovery work pertaining to Hurricane Maria for the period of October 2017 to September 2018, 24 of the those agencies did not award any contracts to Puerto Rico-based firms.

As part of the 2019 NDAA, Rep. Velázquez included a provision to grant federal agencies the ability to fulfill their small business prime contracting goals much faster by duplicating the value of contract as they relate to their subcontracting goals, as long as those contracts were awarded to businesses located in Puerto Rico.  In yesterday’s package, for the 2020 NDAA, Rep. Velázquez included a provision that goes further and targets the Contractors instead of the agencies, by allowing Prime contractors to double the value of a subcontract awarded to a Puerto Rico small business for purposes of meeting subcontracting goals.

CNE recently launched an innovative digital tool tohelp examine post-Maria contracting practices in the island. The new Federal Post-María Contracting Monitoring Dashboard provides easy access to all available data relating to federal post-Maria reconstruction contracting in Puerto Rico.

The senior Member of Congress recognized CNE’s work after House passage of the bill.  With the House vote, the measure now goes to the upper chamber for a final vote.  If the Senate also agrees to the compromise, the measure would be cleared for the President’s signature.