Sadly, no matter how much a small-business-friendly Congress flaps their arms, proposes legislation, and holds hearings, federal government procurement just can’t stop giving eight-tenths of its contracts to big business. This is notwithstanding the law which requires at least 23% of all federal contracts be awarded to small businesses. The 23% is not an aspirational goal, it is a bottom-line threshold that the government just can’t seem to climb up to – let alone treat as the minimum it was intended to be. The Small Business Administration (SBA) who is responsible for implementing the current law explains their responsibility on their web site: “…the Federal government will achieve not less than 23% to small businesses…”. They recognize their duty is a threshold of 23%, not a goal of trying to achieve 23%.
There is a lot of finger-pointing and teeth-gnashing – but after 30 years, 23% is more elusive now than it has ever been. In a burst of frustration with government agencies and in solidarity with the small business community, Congressman Sam Graves (R-MO) who Chairs the House Committee on Small Business, attempted to increase the threshold to 25% by attaching an amendment to the 2012 National Defense Authorization Act. The Obama Administration disagreed, saying 25% was “overly ambitious”. More jaded small business owners laughed that the government can’t make 23%, so why would increasing it to 25% improve the situation. The amendment went nowhere. This year Chairman Graves has proposed new legislation “Make Every Small Business Count Act of 2013” that would enhance opportunities for small businesses by adding an incentive for prime federal contractors to consider small firms for more subcontracts.
But what you see is not what you got
As with most government goal reporting, the devil is in the details. It is possible for one contract to be counted more than once in the final tally. As deciphered by the non-profit National Association of Government Contractors, if the small business is a veteran-owned, small disadvantaged business in a HUB Zone and awarded a government contract, those same dollars could be reported under each category and each included in the grand total. The grand total reported to Congress would include the duplicative numbers. So, nobody really knows the total amount of contracting dollars going out to small businesses – but what everyone does agree on is that it’s not 23%. The House Committee on Small Business reports their research shows just 19.38% of all federal contracts for fiscal year 2012 went to small businesses – not the 22+% reported by the Administration.
Can it be fixed?
What Congress tries to fix with one hand, it undermines with the other. Ask any member of Congress and they will answer eloquently about the importance of small business to the American economy and how they are doing everything they can to force the federal agencies to meet their contracting mandate. Ask any government agency contracting officer why they aren’t meeting the mandate and you learn that budget reductions have substantially cut contracting staff making a heavier load for those who remain. In addition federal agency “efficiency efforts” allow bundling of several projects into one big package that take the project beyond the financial capability of small businesses. It is definitely more “efficient” and administratively cost effective to put twenty $500,000 contracts into one $10,000,000 contract, than it is to bid out twenty different contracts requiring at least sixty different bids from sixty small businesses. The efficiency math is hard to miss: three bids on one contract, or sixty bids on twenty contracts. And then there is the question of insuring contract performance from twenty contractors instead of taking the efficient route of dealing with just one.
Add to this the lack of penalty to the agencies for failure to meet the mandate and you have a hollow law that gets press coverage each July when the government releases its latest report card for the prior fiscal year and then is mostly shoved onto a shelf with promises to make improvements.
Still a 19% piece of a half a trillion dollar pie is certainly better than no pie at all! But a 4% bigger slice would mean $20,000,000,000 more for small business – and that’s a slice worth fighting for.