By Robb Mandelbaum
New York Times
September 3, 2010
For the first time since 2005, the Small Business Administration reports that the share of federal contracts going to small business increased over the previous year. But the federal government still fell short of its small-business contracting goals, and longstanding criticisms about how the government keeps score continue to cast doubt on the agency’s report card.
The Small Business Act (pdf) requires the federal government to set a governmentwide goal that 23 percent of all prime contracts go to small businesses. According to the S.B.A.’s 2009 Small Business Procurement Scorecard, released last Friday, 21.9 percent of such contract dollars, or about $97 billion, went to small businesses. That’s a small improvement over 2008, when small firms captured just 21.5 percent of federal contract dollars, a low since at least 1998.
“I’m not going to say we’re satisfied until we’ve hit the goal,” said Joe Jordan, the S.B.A.’s associate administrator for government contracting and business development. “But before I got here, numbers were below goal and going down, and we’ve made progress in every contracting category.”
Mr. Jordan credited engagement from the Obama White House for the improvement. “When you see the vice president ask cabinet secretaries how they’re doing on small business contracting, they go and ask their acquisition officers,” he said. “So small business moves to the top of the list of priorities.”
But only nine of the top 24 federal agencies reported improved performance in 2009 — and overall numbers improved only because one of those happened to be the Defense Department (pdf), which accounts for about 70 percent of all government procurement. Meanwhile, 15 of the agencies did not meet their own goals for small-business contracting (the Defense Department came close), and 11 of those actually turned in worse performances than last year. The S.B.A. negotiates separate goals with each agency, based, Mr. Jordan said, on what those agencies buy and the prevalence of small businesses in those markets.
Among the poor performers were the General Services Administration (pdf), where small-business spending rose but its share of total spending fell by nearly a third, and the Department of Housing and Urban Development (pdf), where small businesses’ total dollars and share of all contracting fell precipitously.*
Moreover, as we’ve reported previously, these tallies certainly inflate the government’s performance. For one thing, the S.B.A. does not count certain contracts as “eligible” for small business — so contracts awarded overseas, or drawn up by agencies that don’t follow the normal acquisition rules, for example, are excluded from the total, even though small businesses do sometimes win those contracts. According to data provided by procurement analyst Eagle Eye Publishers, small businesses won about 9 percent of such excluded dollars in 2008, and adding those dollars back to the total reduced the small-business share by more than 2 points. (In 2010, Eagle Eye was purchased by Bloomberg, which would not provide similar figures for 2009.)
Secondly, federal contracting records continue to describe many large businesses as recipients of small business contracts, for one reason or another. Though Mr. Jordan said, “the data in fiscal year 2009 is the cleanest it’s ever been,” the American Small Business League combed through federal records and found that 61 of the 100 businesses that won the most “small business” contracts in 2009 were actually large ones. A similar A.S.B.L. study of 2008 contracts found 60 big companies in the top 100.
Within the overall small-business goal of 23 percent are smaller goals for a handful of distinct socioeconomic groups, and the news was a bit brighter for those small businesses. The government awarded 7.6 percent of contract dollars to “small disadvantaged businesses,” according to the score card, well above the 5 percent goal and an improvement on last year’s performance.
Small businesses owned by women won 3.7 percent of contract dollars, up from 3.4 percent but still short of the 5 percent goal. Contracts to service-disabled veterans comprised 2 percent of the total, up from 1.5 percent in 2008. (The goal is 3 percent.) And the government nearly reached its goal of awarding 3 percent of contracts to small firms in distressed areas known as HUBZones — these received 2.8 percent of contracts, up from 2.3 percent last year.