Main menu


Main Street Enterprises Record $ 154 Billion in Federal Contract

featured image

According to Small and Medium Business data released on Tuesday, the federal government awarded SMEs $ 154.2 billion in fiscal year 2021. This is an increase of $ 8 billion from the previous fiscal year.

This is a record 27.2% of the total federal contract fund, which exceeds the government’s target of 23%.

“We are pleased that more dollars and more percentages will be paid to SMEs,” said Isabel Guzman, SBA administrator, and several changes announced by President Biden since his inauguration have taken hold. He added that he was starting. These efforts aim to level the competition for SMEs competing for federal contracts, an area that many are struggling with.

Still, there is something to do. The number of SMEs with prime contracts declined again in 2021 and continued for multiple years. According to the latest data, 71,441 SMEs have won contracts, down 5.7% from 75,726 in fiscal year 2020.

In contrast, according to a National Equity Atlas report produced by Policy Link using SBA data and the USC Equity Research Institute (ERI), approximately 125,000 SMEs signed with the federal government in 2010.

SME supporters cite several reasons for the difficulties SMEs face when procuring government contracts. Part of the problem is due to competition from experienced, large-scale, established companies, said Shane McCall, an equity partner at Koprince McCall Pottroff, which works with SMEs. He said there could be procedural headaches and statutory requirements that prevent some companies from applying in the first place.

In particular, federal joint requirements tend to disproportionately affect disadvantaged businesses and are senior to Policy Link, a national research and action agency focused on improving economic and social equity. Researcher Judith Dangerfield said. She said these business owners must overcome the same biases they face in banking and finance: the idea that race is equal to risk. “As a result, the merger has been a barrier to the participation of DBE companies for decades,” she said.

The best federal agency for small business contracts

Guzman said he was encouraged by the positive progress made last year. In particular, 21 of the 24 institutions monitored by the SBA received an “A +” or “A” rating on their scorecards.

The 11 institutions that obtain the “A +” grade are the Ministry of Commerce, the Department of Homeland Security, the Ministry of Labor, the Ministry of State, the Ministry of Interior, the Environmental Protection Agency, the General Services Bureau, the National Science Foundation, the Nuclear Regulation Authority, the Personnel Management Bureau, and the SME Agency. ..

Ten agencies have received “A” grades: International Development Agency, Agriculture, Department of Defense, Education, Energy, Justice, Transport, Veterans Affairs, US Aerospace and Social Security Administration.

Government goals for women and minority companies have not been met

Still, this is by no means a perfect system, especially for women-owned SMEs and SMEs in historically underutilized business zones (HUBZones). Goldman Sachs CEO David Solomon said that since its founding in 1994, women-owned SMEs have only met their federal contract goals twice, and HUB Zone’s goals have not been met. He expressed his support for the bank in a recent CNBC statement. For the first reapproval by the SBA Congress for over 20 years to provide more capacity to support SMEs.

In 2021, women-owned SMEs received a $ 26.2 billion federal contract, according to the SBA. This represents 4.63% of the eligible total dollars for fiscal year 2021. The target was 5%.

Meanwhile, HUB Zone SMEs have won the historic $ 14.3 billion Federal Contract Award. This represents 2.53% of the eligible total dollars for fiscal year 2021. According to Guzman, this is the highest level in about 10 years, but it still falls short of the government’s 3% statutory target.

The agency did not reach these goals, but Mr. Guzman said, “They are still on the horizon.”

For women-owned companies, the SBA has increased the number of certified companies from about 1,000 to nearly 6,000. We have also extended the NAICS Code, a classification system used by the government for business categories, to allow women-owned companies to receive reserve awards. According to the SBA, more than 92% of federal spending is covered by the NAICS code, which is eligible for the WOSB (Women Owned Small Businesses) reserve award.

The SBA is also continuing to help HUB Zone companies compete for federal contracts. In 2020, agencies simplified the rules to help these businesses compete more effectively. Guzman said the agency aims to “make an expanded outreach and make sure more companies know about simplified rules.”

It was President Biden’s goal to help small businesses win more federal contracts. In particular, according to new SBA data, SMEs’ unfavorable business spending reached 11% for the first time. The goal is to reach 15% of federal contracts by 2025.

Main Street White House Reform

At the end of last year, the White House announced major reforms to promote more equitable purchasing practices. One example is the federal government’s efforts to reform the use of “category management,” which has contributed to the consolidation of contract dollars, said PolicyLink Associate Eliza McCullough. This practice allows federal agencies to purchase contracts as an organized entity rather than as thousands of independent buyers. This helps eliminate redundant purchasing options, but as an unintended consequence, she said, the proportion of contracts received by small, disadvantaged businesses is proportionally lower.

According to McCullough, reforms to mitigate inequality include giving agents automatic “credits” under category control for all awards given to disadvantaged SMEs, and categories. This includes strengthening the voice on SME equity considerations in management governance.

“In addition to increased investment in historic black colleges and other institutions that serve the color community and activate the next generation of black, Latin, and tribal-owned SMEs, these reforms It will democratize access to federal contracts and facilitate comprehensive business development, “McCarlow said.