The federal government awarded $154.2 billion to small businesses in fiscal year 2021, up $8 billion from the previous fiscal year, according to data released Tuesday by the Small Business Administration.
This is a record 27.2% of all federal procurement funds, exceeding the government’s goal of 23%.
“We are pleased to see more dollars and a greater percentage going to small businesses,” said SBA Administrator Isabel Guzman, adding that many of the changes announced by President Biden since taking office are beginning to take effect. These efforts are aimed at leveling the playing field for small businesses competing for federal contracts, an area that many have struggled with.
However, there is work to be done. The number of small businesses receiving their first contracts declined again in FY2021, continuing a multi-year trend. According to the latest data, 71,441 small companies received contracts, 5.7% less than the 75,726 in 2020.
In contrast, about 125,000 small businesses contracted with the federal government in fiscal year 2010, according to a report by PolicyLink and The National Equity Atlas, which used SBA data from the USC Equity Research Institute (ERI).
Small business advocates cite several reasons for the difficulty small businesses have in obtaining government contracts. Part of the problem is due to competition from larger, more established firms with more experience, said Shane McCall, an equity partner at Koprince McCall Pottroff who works with small businesses. There may also be procedural headaches and statutory requirements that prevent some companies from applying in the first place, he said.
The federal government’s bonding requirements, in particular, disproportionately affect disadvantaged businesses, said Judith Dangerfield, a senior fellow at PolicyLink, a national research and action institute focused on advancing economic and social equity. These business owners must overcome the same bias they face in banking and finance — the idea that race equals risk, he said. “As a result, linkages have been a barrier to participation for DBE companies for decades,” he said.
The best federal agencies for small business contracts
Guzman said that he is happy with the positive developments of the last event. Read also : Whitmer Announces Michigan Businesses To Receive Support Through Growing Up MI Business Plan. Notably, 21 of the 24 agencies audited by the SBA received an “A+” or “A” grade on the scorecard.
The 11 agencies that will receive 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 Small Business Administration.
Ten agencies received an “A” rating: the Agency for International Development, the Department of Agriculture, the Department of Defense, the Department of Education, the Department of Energy, the Department of Justice, the Department of Transportation, the Department of Veterans Affairs, the National Aeronautics and Space Administration, and the Social Security Administration.
Government goals for women and minority businesses not met
However, it is by no means a perfect system, especially for women-owned small businesses and those located in historically underserved business zones (HUBZones). The federal procurement target for women-owned small businesses has been met twice since it was established in 1994 and the HUBZone target has never been met, Goldman Sachs CEO David Solomon wrote in a recent CNBC opinion piece in which he expressed the bank’s support. To see also : Femme Fire Books opens its first store in Riverside. The SBA was reauthorized by Congress more than two decades ago to provide more capacity to help small businesses.
In 2021, women-owned small businesses received $26.2 billion in federal contracts, 4.63 percent of all eligible dollars in fiscal year 2021, the SBA said. The target was 5%.
HUBZone small businesses, meanwhile, received a historic $14.3 billion in federal contract awards, representing 2.53% of all eligible FY 2021 dollars. According to Guzman, this is the highest level in about 10 years, but it is still far from the government’s legal target of 3%.
While the agency didn’t meet those goals, “they’re still on the horizon,” Guzman said.
For women-owned businesses, the SBA has increased the number of certified businesses to nearly 6,000 from about 1,000. It has also expanded NAICS codes, the government’s classification system for business categories, for which women-owned businesses can receive awards. More than 92% of federal spending is covered by NAICS codes eligible for WOSB (Women Owned Small Businesses) awards, according to the SBA.
SBA also continues to work to help HUBZone businesses compete for federal contracts. In 2020, the agency simplified the rules to help these businesses compete more effectively. Guzman said the agency wants to do “broad outreach” and make sure more businesses are aware of the simplified rules.
Helping small businesses get more federal contracts has been President Biden’s goal. Notably, spending by disadvantaged small businesses reached 11% for the first time, according to new SBA data. The goal is to achieve 15% of federal contracts by 2025.
White House reforms for Main Street
Late last year, the White House announced major reforms to promote fairer purchasing practices. One example is the federal government’s efforts to reform its use of “category management,” which has helped stabilize procurement dollars, said Eliza McCullough, a partner at PolicyLink. On the same subject : Open House for New Dunkirk Certified Community Behavioral Health Clinic. The practice allows federal agencies to purchase contracts as an organized entity, rather than as thousands of independent buyers. This helps eliminate redundant procurement opportunities, but the unintended result is that small and disadvantaged businesses receive a smaller proportion of the contracts, he said.
Reforms to ease disparities include giving agencies automatic “credit” in category management for all awards made to small and disadvantaged businesses and strengthening the voice of small business equity concerns in category management governance, McCullough said.
“Along with increased investment in historically black colleges and universities and other institutions serving communities of color to foster the next generation of Black, Latino, and Tribal-owned small businesses, these reforms democratize access to federal contracts and promote inclusive business development.”, said McCullough.
