The federal government awarded $154.2 billion to small businesses in fiscal year 2021, up $8 billion from the previous fiscal year, according to data from the Small Business Administration released today. Tuesday.
That’s a record 27.2% of total federal contracting funds, beating the government’s 23% target.
“We are pleased to see that more dollars and larger percentages are going to small businesses,” said SBA Administrator Isabel Guzman, in a statement. added that some of the changes that President Biden has announced since taking office are beginning to be implemented. These efforts aim to level the playing field for small businesses to compete for federal contracts, an area many have struggled with.
However, there is still much work to be done. The number of small businesses receiving prime contracts fell again in fiscal 2021, continuing a multi-year trend. The most recent data shows that 71,441 small businesses have received contracts, down 5.7% from 75,726 in fiscal 2020.
In contrast, about 125,000 small businesses contracted with the federal government in fiscal year 2010, according to one report by The National Equity Atlas, conducted by PolicyLink and USC Equity Research Institute (ERI) used SBA data.
Small business advocates cite several reasons for the difficulty small businesses face in procuring government contracts. Shane McCall, equity partner at Koprince McCall Pottroff, who works with small businesses, says part of the problem is competition from larger, older and more experienced businesses. There may also be procedural headaches and regulatory requirements that keep some businesses from filing in the first place, he said.
Judith Dangerfield, senior fellow at PolicyLink, a national research and action institute focused on promoting economic and social justice, said federal government alignment requirements tend to have an impact. disproportionate to disadvantaged business enterprises. These business owners must overcome the same biases — the notion that race is equal to risk — that they face in the banking and finance sectors, she said. “As a result, affiliation has been a barrier to entry for DBE companies for decades,” she said.
The best federal agencies for small business deals
Guzman said she was encouraged by the positive developments in the past financial year. Notably, 21 of the 24 agencies overseen by the SBA received an “A+” or “A” rating on its scorecard.
The 11 agencies that received an “A+” were: Department of Commerce, Department of Homeland Security, Department of Labor, Department of State, Department of Home Affairs, Environmental Protection Agency, General Services Administration, Fund National Science, Nuclear Regulatory Commission, Office of Human Resources and Small Business Administration.
Ten agencies received “A” grades: Agency for International Development, Department of Agriculture, Department of Defense, Department of Education, Department of Energy, Department of Justice, Department of Transportation, Department of Veterans Affairs, Aviation Administration Air and Space National and Social Security Administration.
Government targets for women and minority businesses are not met
However, it’s not a perfect system, especially for women-owned small businesses and those located in historically less-used business zones (HUBZones). Goldman Sachs CEO David Solomon writes in a recent op-ed for CNBC, in which he voiced support for the bank for its first reauthorization of the SBA Congress in more than two decades to give it more capacity to support small businesses.
In 2021, women-owned small businesses received $26.2 billion in federal contracts, representing 4.63% of total qualifying dollars for fiscal year 2021, the SBA said. . The target is 5%.
Meanwhile, HUBZone’s small businesses received a historic $14.3 billion in federal contract bonuses, or 2.53% of fiscal 2021’s total qualifying dollars. This is the highest level in about 10 years, Guzman said, but still falls short of the government’s statutory 3% target.
While the agency has fallen short of these goals, Guzman said “it’s still on the horizon.”
For women-owned businesses, the SBA increased the number of certified businesses to nearly 6,000 from about 1,000. It has also expanded the NAICS code, the classification system used by the government for business categories, for which women-owned businesses can receive exclusive awards. More than 92% of federal spending is covered by NAICS codes that qualify for WOSB (Women Owned Small Business)-specific awards, according to the SBA.
The SBA is also continuing to work to help HUBZone businesses compete for federal contracts. In 2020, the agency simplified the rules to help these businesses compete more effectively. Guzman said the agency aims to “widen the reach and make sure more businesses know about the simplified rules.”
President Biden’s goal is to help small businesses get more federal contracts. Notably, spending by struggling small businesses hit 11% for the first time, according to new SBA data. The goal is to hit 15% of federal contracts by 2025.
White House Reforms to Main Street
Late last year, the White House announced important reform to promote fairer purchasing practices. One example is the federal government’s effort to reform the use of “portfolio management,” which has contributed to the consolidation of dollar contracts, said Eliza McCullough, an associate at PolicyLink. This practice allows federal agencies to purchase contracts as an organized entity, rather than as thousands of independent buyers. This eliminates redundant buying options, but one undesirable outcome is that small, marginalized businesses receive a correspondingly lower contract rate, she said.
Reforms to reduce inequality, McCullough said, include giving agencies automatic “credits” under category management for all awards given to small, fully qualified businesses. difficult circumstances and strengthen the voice for small business equity considerations in portfolio management.
“Along with increased investment in historically black colleges and universities and other institutions serving communities of color to empower the next generation of small Black-owned businesses, Black, Latinx- and Tribal, these reforms democratize access to federal contracts and promote inclusive business development,” McCullough said.
