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Secret Blacklist Provision in Defense Authorization Bill Signals Death Knell for Small Businesses and Transparency in Contracting

photo: Mayu ;p via Flickr

‘Tis the season for the bloated defense authorization bill to begin its journey towards passage, and as usual if you look hard enough, the legislation is stuffed full of all kinds of goodies. Since defense authorization will always pass, it has become an omnibus wish-list bill for anyone who wants anything out of our government, and this year is no different. Considering the size of this legislation, I will focus in on a particularly egregious section that will most likely pass under the radar of most members of Congress unless action is taken.

Section 815 for S. 3454, the National Defense Authorization Act for Fiscal Year 2011, has the innocuous title of “Reduction of Supply Chain Risk in the Acquisition of National Security Systems.” This section could essentially create “de facto” debarments of small businesses across DoD federal contracting programs, with potential for these “de facto” debarments to touch every corner of federal government contracting, thus creating a blacklist where businesses would be debarred from working with the government. The proponents of Section 815 have justified this blacklist as necessary to ensure national security and mitigate supply chain risk.

The beauty of Section 815 is that any firm placed on this blacklist is done so in secret; so much so that DoD officials are not required to notify the blacklisted parties.  This gets even better based on the language which specifically states that only two Department of Defense (DoD) officials will get to determine if any contractor is a “national security threat” worthy of being blacklisted. This falls on the Director of the Defense Intelligence Agency (DIA) and the Assistant Secretary of Defense for Networks and Information Integration (ASD-NII) to make the recommendation to debar a company from contracting with DoD. Small business advocates are concerned that DoD’s decision may flood every government-purchasing agency with a negative impression of blacklisted companies, and thus lead to “de facto” debarments across the federal government.  . . .

The absolute best part about Section 815 is that it would protect the details of DoD’s decision from disclosure under the Freedom of Information Act (FOIA), protest with the Government Accountability Office (GAO), or an action brought in the federal court system, thus leaving no recourse for any firm that finds itself on the secret Pentagon blacklist.

So let us sum up here. Section 815 in the defense authorization bill is currently awaiting passage in the Senate and will allow two Pentagon officials to secretly blacklist any company from contracting with the government because of national security concerns, but the reasons why do not have to be made public, the blacklisted company does not have to be notified, and it expressly prohibits any action being taken in recourse through FOIA, the GAO or in the federal courts.

What Section 815 amounts to is nothing more than a consolidation of power within a small office in the Pentagon along with reduced transparency, diminished oversight and zero accountability.

Organizations like the American Small Business League (ASBL) are alarmed by this section because of the potential for abuse against small federal contractors. Ninety-eight percent of all firms have fewer than 100 employees, according to the U.S. Census Bureau. Small businesses comprise a vast majority of all federal contractors. Considering the poor track record DoD has in working with small businesses and in trying to circumvent small business contracting goals, it is most likely that small businesses will comprise the bulk of DoD’s secret blacklist.

One of the ironies of this situation is that, considering the current and ongoing state of the economy, the government should be doing more business with small businesses. According to the U.S. Census Bureau, small businesses create over 90 percent of all net new jobs, provide over 50 percent of the nation’s private sector workforce, create half of the country’s GDP and provide over 90 percent of new innovations.

At a time when the U.S. is facing record unemployment and stagnant economic growth, small businesses remain the one vibrant economic sector of the American economy. Section 815 in the defense authorization bill will afford two individuals, within the anti-small business Pentagon, the unchecked power to secretly blacklist as many small businesses at their will, mainly for the only reason that I can think of, which is to get rid of competition for the big defense contractors.

The ASBL has launched a nationwide campaign to remove Section 815 from the Senate defense authorization bill, and this is how you can help. Call, write or email your Senators today and demand they remove this potentially abusive language from the bill. The ASBL has a draft email letter and senate contact information at This aggression will not stand and silence is acquiescence.

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Kevin Baron

Kevin Baron

Kevin Baron has been the Director of Government Affairs for the American Small business League since the summer of 2007. In his capacity he coordinates the organization’s government affairs activities in Washington D.C. and Sacramento. Mr. Baron works with executives and legislators at the state and national level, chambers of commerce, small business advocates, and small business leaders to provide workable solutions for small businesses on a wide variety of issues, including: government procurement, health care, adherence to small business contracting and subcontracting goals, and the elimination of fraud, abuse, and loopholes from small business contracting programs.