The federal procurement process represents a significant opportunity for promoting the growth of small businesses. The SBA is charged annually with assessing how federal agencies meet their contracting goals. The “prime and subcontracting component goals include goals for small businesses (23%), small businesses owned by women (5%), small disadvantaged businesses (5%), service-disabled veteran-owned small businesses (3%), and small businesses in HUBZones (3%).” Currently, according to Federal agency, reporting 23% of prime contracts and 36% of subcontracts are to going to small businesses in the aggregate for all federal agencies.
However, a 2015 report called into question the “methodologies that present a false impression of the percentage of procurement that small businesses actually receive.” A recent investigative report on some federal contracts concluded that the report “raises profound questions about the government set aside programs for small businesses and whether or not they’re really working for small businesses. And whether or not actually large companies are gaming the system to benefit at the expense of legitimately small companies.”
A 2021 report by the U.S. Women’s Chamber of Commerce indicates that between FY 2017 and FY 2020 America lost 24% of our small business federal suppliers. The number of women-owned suppliers dropped more than 22% and veteran-owned suppliers decreased by over 17%. Fewer small businesses are even trying to compete for federal contracts. According to the report, this has “resulted in larger contracts going to fewer and larger firms, thus limiting competition to a list of preferred vendors comprising only a small percentage of the total contractor market.”
Recommendations
New independent research should be conducted to determine the success of federal agencies in meeting the goals for small business contracts.
Fully use the SBA’s existing authority under the Small Business Act to rebuild the nation’s small business economy in general and specifically create a Small Business Defend America initiative for Department of Defense procurement and use the SBA authority to be a DOD prime contractor, create Defense Production Pools and target specific small businesses (ex. veterans) for subcontracting.
