Encouragement of Small Business - Research Paper Example

? Encouragement of Small Businesses s 6th August Introduction According to Compton (2009), entrepreneurship has been the greatest catalysts of economic growth in both the 20th and 21st centuries. This is evident by the fact that most economically developed countries have a high number of entrepreneurs who are risk takers, resource managers, innovators, as well as creators. Entrepreneurs by choice opt not to be in full employment since they prefer exploring the opportunities that are available within the market and therefore, they end up creating employment for themselves as well as others. The national governments in nearly all the countries tend to promote entrepreneurship because of its significant contribution to national growth in terms of tax contribution and the employment opportunities that it offers to its citizens. One of the ways through which the national governments promote entrepreneurship is by encouraging small businesses through financial incentives, training for small entrepreneurs, providing exposures to such small businesses, and even reserving some government contracts to small businesses. By reserving certain government contracts to small businesses, it offers them an opportunity for growth, expansion, exposure, and even it shields them from competing with large businesses that have massive financial resources that small businesses cannot compete against (Compton, 2009). It is important to note that under the Small Business Act, a small business is defined as a business that is owned and operated by an independent person (S), and it is not a dominant player in the market. This present paper will focus on the encouragement of small businesses by the government through the Federal Acquisition Regulation (FAR), which spells out regulations for government officials when they are making purchases of government’s goods and services. Through the FAR, the government has been able to create a network of resources that provides for contract opportunities to level the playing field when procuring goods and services. This strategy allow small businesses to compete fairly in the process. In specific, the paper will provide answers to four questions that pertain to federal procurement process. Socio-economic considerations of the federal procurement process Broaddus et al. (2009) that the legal framework that is in place requires that the United States government to engage in an efficient and competitive process when it is procuring goods and services. Besides abiding by this legal framework, the government has further instituted various policies in the acquisition process in a bid to promote certain socio-economic objectives. The policies have been aimed at proving more contracting opportunities to vulnerable groups such as small businesses owned by youths, small women-owned businesses, veteran-owned small businesses, and service-disabled veteran-owned small businesses. However, these small businesses are required to abide by the ancillary requirements as stipulated in the law and in executive orders. According to Keyes (2003), the main socio-economic consideration of the federal procurement process is the uplifting of small businesses that are owned by disadvantaged group or persons, who face economical and social disadvantages. These businesses have been accorded special status by the Small Business Act in regards to the U.S government procurement process. Therefore, it is more likely for these small businesses to be awarded a government contract since the government aims at improving the social and economic conditions of the people who run the small businesses, their families, and the community at large. Gender is also a factor that is considered in the government procurement process, in order to favor small businesses that are owned and managed by women entrepreneurs who are normally clustered as a disadvantaged group because of the various challenges that they face. Keyes (2003) stated that the consideration of women in the federal procurement process is encouraged by the fact that women play a significant role in the society (Keyes, 2003). In addition, the federal procurement process also considers the geographical location of the business, within the country. This consideration is aimed at favoring small businesses that are located within social and economically deprived areas within the country such as areas where majority of the population are living below the federal poverty line. By favoring such small businesses, the federal government aims at creating employment opportunities in these areas through the small businesses that have been contracted, and therefore, being able to improve the living standards in such areas (Keyes, 2003). The age factor is also considered in the federal procurement process. This is because small businesses that are owned and managed by veterans receive a special treatment in the procurement process. This consideration is in line with the knowledge that older people (veterans) are not able to get demanding jobs that are well paying and therefore, they remain social and economically disadvantaged. By awarding these businesses contracts, the federal government aims at improving the lives of veterans as well as creating employment opportunities for others in the society (Keyes, 2003). Contract financing via loan guarantees versus private financing and their individual impact on minority vendor With reference to the writings by Compton (2009), he cited that FAR 32.001 (1), described contract financing as “an authorized government disbursement of monies to a contractor prior to acceptance of supplies or services by the government.” According to Broaddus et al. (2009), the federal government issues contract financing when there is a demand for it from the contractors and that without it, the contractors will not be able to deliver goods and services that have been procured by the government. It is also important to note that the federal government issues contract financing under certain conditions of which one of them is that the financing is only issued to cover for what is actually need for efficient and prompt delivery of the goods and services that have been procured. Secondly, the government issues the financing in order to avoid any undue risk of loss of money because of lack of funds to finance the contract. Another major condition is that the for small businesses to receive contract financing, the value of the contract that they have, should exceed $100,000 of which the billing for the first delivery is scheduled to be after four months (Broaddus et al. 2009). Examples of contract financing include financing via loan guarantees and contract financing via private funds without government guarantee. Under contract financing via loan guarantees, contractors are able to obtain financing through the Small Business Administration, which is a federal loan guarantee agency that offers loan guarantee facility. Through the guarantee from the federal loan guarantee agency, the contractor can apply and get a loan from the private financial institutions, which will then rely on the guarantee given by the agency to advance the loan. Through this type of contract financing, the minority vendor does not have to bear any burden arising from the contract work and he / she will not perform the contract work using personal funds. The minority vendor is also able to assured of government commitment on the contract and he/ she will not incur any significant financial loss in case of a misfortune. However, it is important to note that when the federal government will be issuing payments for the contract work, it will make deductions that include the amount of loan advanced and the interest on the loan. Therefore, through this form of contract financing, it is highly likely that the minority vendor will earn less money than originally stipulated, mainly because of interest deductions and taxes (Keyes, 2003). Through private financing, minority vendors use their own funds to complete the contract work and therefore, the personal funds will be depleted upon completion of the entire contract work. Secondly, the minority vendor takes up personal risks in regards to financing of the project, meaning that in case of any misfortune, a vendor will suffer great financial loss. However, private financing is more advantageous for the minority vendor than receiving finance via loan guarantees because upon completion of the contract work, the minority vendor will receive the full lump sum payment excluding minor charges like taxes, unlike under financing via loan guarantees where the lump sum payment greatly decreases after interest and taxes deductions. Protections that are available to a diverse contractor for his or her intellectual property To begin with, Keyes (2003) described intellectual property as “a category of legal rights that grant owners certain exclusive rights to intangible assets or products of the human intellect such as images, design, symbols, names, artistic and literary works, and inventions.” Compton (2009) on his part stated that when dealing with government contracts, a diverse contractor should take necessary precautions to guard his or her intellectual property. The precautions should be applied more so when a diverse contractor is required to use his/ her proprietary information, designs, software, and / or products in order to complete the government’s contract, since it may be necessary for him/ her to release such proprietary information. It is important to note that these precautions should be in line within the Federal Acquisition Regulation schemes. According to Compton (2009), one of the protections that are available to diverse contractors in government contracts is that they are allowed to withhold and identify their intellectual property rights in order to prevent infringement. In addition, the diverse contractor should give a valid reason for asserting any restricted rights to ensure that they cannot be any violation. Another form of protection that is available to a diverse contractor for his / her intellectual property is the markings on documentations, software, and data that is made available to the government during contract work. These markings restrict the government officials from disclosing or sharing the intellectual property with the public (Keyes, 2003). However, it is of essence to note that diverse contractors are unable to protect their intellectual properties, which are related to national security or a specified foreign policy. Analysis of the title policy versus license policy under part 27of the Federal Acquisition Regulation Under part 27 of the Federal Acquisition Regulation, there is a clear established polices and procedures that are used for disclosing and assignment of ownership of patentable inventions. Title policy states that all patentable inventions should be disclosed to the relevant government agencies within a reasonable time and the contractor may choose to retain such title to his/ her inventions. Title policy prohibits the government from exploring the contractor’s invention or disclosing it to the public. License policy acknowledge that a something of value has been patented and it encourages the government or private companies to develop the patented invention in which case they receive the exclusive license to the invention. Under license policy, the contractor is paid for the inventions as the government or private company retains the license of using and commercially developing the invention. In addition, the license policy also provides for the contractor to earn royalties accruing from the use of the invention. References Compton, B, P. (2009). Federal Acquisition: Key Issues and Guidance. U.S: Management Concepts Publications Broaddus, M, A. Gullo, M, G. Helt, M. and Van Huis, A, W. (2009). Federal Acquisition Regulation (FAR). U.S: CCH Inc Keyes, W, N. (2003). Government contracts under the Federal Acquisition Regulation. Minnesota, U.S: Thomson/West Read More