Fewer Contractors Participating in SBA Programs Despite Increase in Dollars Awarded

Last week we reported on SBA's (Small Business Administration) scorecard for achieving small business contracting (and subcontracting) goals (see Federal Government Surpasses its Small Business Contracting Goals for Fiscal Year 2018). That's the good news. More than $121 billion dollars in contracts were awarded to small businesses in fiscal year 2018 which marked a $15 billion increase over fiscal year 2017 awards.

The not-so-good news however is that these dollars are being awarded to few and few small businesses. Fewer small businesses are benefiting from these programs designed to benefit disadvantaged business, service disabled veteran owned small businesses, and women-owned small businesses.

Why is that happening? That's one of the questions that the Senate Committee on Small Business and Entrepreneurship wanted answered at a hearing last month where they discussed the re-authorization of SBA's contracting programs. Witnesses testifying at the hearing identified the problem and some of the reasons why small businesses have been discouraged from entering the Federal marketplace. However these testimonies fell short of offering a quick fix to the problem of the shrinking number of small businesses.

The number of contractors working on prime contracts is at its lowest level despite a steady rise in Government contracting spending. In fiscal year 2018, the vendor count was about 115 thousand which is a 27 percent drop over the last 10 years. One reason for this has been a shift of emphasis from prime contracting to subcontracting (including teaming agreements, joint ventures, and mentor-protege strategies). Such subcontracting opportunities are not easy to find so small business are hampered in their ability to know which prime contractors to approach and which agencies to target for subcontracting opportunities.

One panelist did not support the recommendation of the Section 809 Panel to eliminate small business programs for readily available products and services under $15 million, and instead instituting a 5 percent price preference for small businesses. Rather than eliminate these programs, the panelist recommended changes to simplify and streamline small business purchasing programs. Easier said than done, we suppose.

One change that has already been passed but not put into regulations is the ability to count an average of five years of revenue instead of the current three years to determine size. This new law will geatly assist businesses experiencing growth in the federal marketplace.

One thing that no one has mentioned are the size standards. Perhaps the pre-determined revenue and headcount standards are too high. Lower them and the Government might just find some of the larger companies 'sizing out' of SBA's small business programs leaving opportunity for more small businesses to compete for the work.