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Look to Small, Minority Businesses for Job Creation

By Roger A. Campos
Federal Times
September 1, 2011

Reducing the deficit is necessary for the nation's long-term fiscal health, but the main focus of Congress and the president should be creating jobs. The American people realize this. A CBS News/New York Times poll conducted June 24-28 reported that 53 percent of those surveyed said jobs and the economy are the No. 1 issue; only 7 percent cited the budget deficit and national debt as their top concern.

It doesn't take an economist to ascertain that the major obstacle to creating jobs is insufficient demand for goods and services. To create jobs and spur economic growth, our policymakers should focus on how to build demand for products made by American businesses — particularly small and minority businesses, which create two-thirds of net new jobs.

What is needed to achieve this goal? Interest rates already sit at historic lows, and the largest banks are hoarding cash reserves, with little evidence that they are eager to lend to small businesses. While capital is the lifeblood of all businesses, their lifesaving medicine is selling more products. Without increased demand and sales, more businesses will struggle — and job growth won't pick up.

So while new small-business programs emphasizing microloans and business startups may be worthwhile, the government should be focused on contracting more with established small and minority businesses. These businesses are an underutilized national resource. Without spending an extra penny of taxpayer money, the federal government could save thousands of small businesses and create thousands of jobs by increasing contract goals.

Our government should reprioritize and expand doing business with small and minority businesses. In a recent letter to the president, the Minority Business RoundTable recommended that the Office of Management and Budget director issue a memo to all federal acquisition, contracting and procurement managers directing them to utilize to the maximum extent practicable the Small Business Administration's 8(a) and other programs for small, disadvantaged businesses to increase contracts to capitalize on the growth of these businesses.

According to the Census Bureau, from 2002 to 2007 minority businesses' growth increased at twice the rate as nonminority businesses to 5.8 million firms. Hispanic businesses grew 44 percent to 2.3 million, while African-American businesses grew 61 percent to 1.9 million businesses. Yet, the federal government's goal is to provide only 5 percent of contracts to these businesses, within the total 23 percent small-business contracting goal the government has never reached.

In June, SBA reported that agencies in fiscal 2010 failed once again to meet the goal of awarding 23 percent of contracts to small business. That means big business received the bulk of all government procurement awards — more than $600 billion, and many millions of dollars on a sole-source basis that dwarf small-business set-asides.

Moreover, the American Small Business League reported that it found $8.8 billion in big-business awards counted as small business, and this is just the tip of the iceberg. The Fairness in Procurement Alliance also cited that agencies did not certify their numbers as being accurate, as required by OMB. So the reality is that the government has significantly overrepresented its total small-business contracting awards in fiscal 2010.

What is needed to maximize job creation is a strategy to reprioritize contracting goals by directing officials to utilize small businesses as the preferred method of contracting to the maximum extent practicable and eliminate big-business contract bundling that takes away opportunities for small businesses to compete.

A 1 percent increase in federal government contracts to small and minority businesses would translate to $6 billion, potentially creating thousands of jobs.

If the government would prioritize the small-business sector for increased contracts, jobs would be created and the U.S. economy would see positive growth, restoring confidence in the financial and consumer marketplace.



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