The federal government allocated $154.2 billion to small businesses within the 2021 fiscal yr, a rise of $8 billion from the previous fiscal yr, in response to Small Business Administration figures released Tuesday.
This is a record 27.2% of all federal contract funds, exceeding the federal government’s goal of 23%.
“We’re excited to see more dollars and a greater percentage going to small businesses,” said Isabel Guzman, SBA administrator, adding that several changes President Biden has announced since taking office are taking effect. These efforts aim to level the playing field for small businesses competing for federal contracts, an area where many have struggled.
However, there continues to be work to be done. The variety of small businesses receiving prime contracts fell again in fiscal yr 2021, continuing a long-term trend. The latest figures show that 71,441 small businesses were awarded contracts, down 5.7% from 75,726 in fiscal yr 2020.
In contrast, roughly 125,000 small businesses signed contracts with the federal government in fiscal yr 2010, in response to report by The National Equity Atlas, developed by PolicyLink and the USC Equity Research Institute (ERI), which used SBA data.
Proponents of small business cite several reasons for the difficulties small businesses face in obtaining government contracts. Part of the issue comes from competition from larger, more established firms which have more experience, said Shane McCall, an equity partner at Koprince McCall Pottroff who works with small businesses. He said there is also procedural issues and statutory requirements that prevent some corporations from applying.
In particular, the federal government’s bond requirements are likely to have a disproportionate impact on disadvantaged businesses, said Judith Dangerfield, a senior fellow at PolicyLink, a national research institute and motion focused on advancing economic and social equity. These business owners have to overcome the identical prejudice – the notion that race equals risk – that they face in banking and finance, she said. “As a result, binding has been a barrier to DBE corporations’ participation for a long time,” she said.
Top federal agencies for small business contracts
Guzman said she was delighted with the positive developments previously fiscal yr. Notably, 21 of the 24 agencies monitored by the SBA received an “A+” or “A” rating on their scorecard.
The 11 agencies that received an “A+” rating are: Department of Commerce, Department of Homeland Security, Department of Labor, Department of State, Department of the Interior, Environmental Protection Agency, General Services Administration, National Science Foundation, Nuclear Regulatory Commission, Office of Personnel Management and Administration Small Businesses.
Ten agencies received an “A” rating: 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, National Aeronautics and Space Administration, and Social Security Administration.
The government’s targets for girls and minority-owned businesses weren’t met
However, it is just not a great system, especially for small businesses owned by women and people situated in historically underutilized business zones (HUBZones). The goal of federal female-owned small business contracts has only been met twice since its inception in 1994, and the goal of HUBZone has never been met, Goldman Sachs CEO David Solomon wrote in a recent CNBC article expressing support for the bank for the primary reauthorization of the SBA by Congress in greater than twenty years to provide it greater capability to support small businesses.
In 2021, women-owned small businesses received $26.2 billion in federal contracts, representing 4.63% of the full qualifying dollars in fiscal 2021, the SBA said. The goal was 5%.
HUBZone’s small businesses, meanwhile, received a historic $14.3 billion in federal contracts, which translates to 2.53% of the full qualifying dollars in fiscal 2021. That’s the very best level in about 10 years, Guzman said, but still wanting the goal. the federal government’s statutory goal of three%.
While the agency fell wanting those goals, Guzman said they were “still on the horizon.”
For women-owned corporations, the SBA increased the variety of certified corporations to almost 6,000 from around 1,000. It also expanded the NAICS codes, the federal government’s classification system for business categories for which women-owned corporations can receive deferred awards. According to the SBA, greater than 92% of federal spending is roofed by NAICS codes that qualify for WOSB (Women Owned Small Businesses) awards.
The SBA also continues to work to assist HUBZone corporations compete for federal contracts. In 2020, the agency simplified the foundations to assist these corporations compete more effectively. Guzman said the agency goals to “wider coverage and be sure more corporations know concerning the simplified rules.”
Helping small businesses win more federal contracts was President Biden’s goal. Notably, spending by disadvantaged small businesses hit 11% for the primary time, in response to latest SBA figures. The goal is to succeed in 15% of federal contracts by 2025.
White House Reforms for Main Street
Late last yr, the White House announced key reforms promoting fairer purchasing practices. One example is the trouble to reform the federal government’s use of “category management,” which has contributed to the consolidation of dollar contracts, said Eliza McCullough, a PolicyLink contributor. The practice allows federal agencies to purchase contracts as an organized entity slightly than as 1000’s of independent buyers. This helps eliminate redundant purchasing decisions, however the unintended result’s that small, disadvantaged firms receive a proportionately smaller share of the deals, she said.
Reforms to mitigate the inequality include giving agencies an automatic category management “credit” for all awards given to small, disadvantaged firms, and a stronger voice on small business equity in category management, McCullough said.
“With increased investment in historically black colleges and universities and other institutions that serve communities of color to uplift the following generation of black, Hispanic and tribal-owned small businesses, these reforms democratize access to federal contracts and support inclusive business growth McCullough said.