The federal government last year fell short of its “small business” contracting goals for the eleventh straight year, a streak that stretches back to the first year of the George W. Bush administration. Federal agencies awarded contracts worth $91.5 billion to small companies in fiscal year 2011, equal to 21.7% of all prime government contract dollars awarded. Despite ongoing efforts to boost small business contracting, 2011 saw a drop of 6.5% from the 2010 total of $97.9 billion, which represented 22.7% of prime contract dollars. With a goal of 23%, however, the government came up short in both years, according to data released by the Small Business Administration (SBA).

 

The government also failed to hit its contracting goals for businesses owned by women or service-disabled veterans, as well as for those located in traditionally underserved and underemployed regions of the country.

 

As AllGov has previously reported, the small business set-aside system is frequently abused. A recent inspector general audit of the SBA listed as the number one challenge the fact that “Procurement flaws allow large firms to obtain small business awards and agencies to count contracts performed by large firms towards their small business goals.” In fact, large businesses have been known to wait until a smaller company has won an SBA contract and then buy out the smaller company and make it a subsidiary.

 

Further, new SBA guidelines went into effect in March allowing larger businesses in 34 industries to qualify as small businesses, because SBA defines “small business” in terms of annual receipts or number of employees relative to average enterprise size in a given line of business, recognizing that a “small” factory will necessarily be larger than a “small” retail shop. Thus a petroleum refining company with fewer than 1,500 employees and a farm with annual revenues less than $750,000 would be considered small, but a wholesale dealer with more than 100 workers and a construction company with receipts greater than $33 million would not.

-Matt Bewig

 

Federal Government Fails Small Businesses for Eleventh Straight Year (by J.D. Harrison, Washington Post)

Big Businesses Still Winning Small Business Contracts (by David Wallechinsky, AllGov)

Obama Administration Allows Bigger Businesses to Qualify as Small Businesses (by David Wallechinsky and Noel Brinkerhoff, AllGov)