Freedom of Market Navigation Versus Duty of Economic Rescue: The U.S. Department of the Navy's Use of Set-Asides Parity, Discretion, and Simplified Acquisitions to Contract With Hubzone Small Businesses

Abstract

Since March 1999, the Department of the Navy (DoN) has had an important shore duty: to exercise its purchasing freedoms and powers in ways that will channel government contracts to small business concerns (SBCs) locating and hiring in Historically Underutilized Business Zones (HUBZones). Under the Small Business Act, the HUBZone Program provides these firms with contracting assistance, notably, competitive and sole sources set-asides. In 2005, this assistance was expanded to FAR Part 13 Simplified Acquisition Procedures. The federal government must also spend at least 3% of its prime contract dollars with HUBZone SBCs. During fiscal years 2006-2015, DoN's HUBZone goal achievements experienced a brief dramatic growth followed by a full-circle decline to the decade-old spending and percentile levels. Academic and legal policy literature offers many possible reasons for this unfortunate U-turn. The HUBZone Program's design was often criticized on the grounds that it impedes creating and finding capable and eligible firms; that it may reward already-successful or overly-costly contractors; that it hurts the government's ability to meet its duties to other socioeconomic programs, such as the 8(a) Program; that it is not strong enough to match the 8(a) Program; and that it introduces undue complexity into federal procurement. Beginning in 2011-2012, the federal HUBZone Program lost about 30% of its participants to decertification. Finally, during the first half of the last decade, the HUBZone Program triggered a constitutional stand-off between legislative, executive, and judicial branches on the Program's discretionary parity or mandatory precedence over the 8(a) SDB, WOSB, and SDVOSB programs. The DoN initially scored a judicial victory over the Small Business Administration (SBA) in favor of precedence, but changed its stance three years later with the rest of the executive branch in favor of discretion and parity. This study examines possible root causes and solutions to DoN's HUBZone contracting woes through the use of the generally accepted Cohen-Eimicke Contract Management Performance Model.