12/8/21
Great news for small businesses already in the federal contracting space or looking to participate, the Biden administration moving forward with their objective to direct $100 billion in contract opportunities to small, disadvantaged businesses (SDBs) over the next 5 years. The Office of Management and Budget (OMB) has provided a memorandum on December 3, 2021 that provides detailed targets. It also adds meeting SDB contracting levels as a key performance indicator for many senior executive service members such as chief acquisition officers, SDB utilization directors, and other personnel with control over contracting.
Currently SDBs are awarded only about 10% of all contracts despite representing 47% of the private workforce. You can see from the chart below the breakdown of small businesses compared to all businesses.
Chart provided by US Small Business Administration’s Office of Advocacy (http://advocacy.sba.gov)
In addition, minority-owned businesses are severely unrepresented in federal procurement, many of which are SDBs including Black, Hispanic, Asian and Pacific Islanders, Native American, Women, and Rural-owned businesses. Please note the chart below from Whitehouse.gov.
Fortunately, these new goals from the White House are looking to shift that percentage up to 15% over the course of the next 4 years. While it’s certainly not enough, it’s at least a step in the right direction. In FY 2022, agencies will be working with the Small Business Administration (SBA) to determine defined contracting goals to grow SDBs share of contract awards to a minimum of 11%.
It was also announced that the federal government’s category management activity (purchasing commodities in bulk to facilitate lower rates) will be changing to be more inclusive of small businesses. Specifically, they stated that “category management plans shall not prioritize spending on ‘Best in Class’ solutions at the expense of meeting socioeconomic small business goals and providing maximum practicable opportunity to small businesses.”
There will also be plans to help increase small business participation in the federal marketplace and reverse the current trend of decline. By OMBs calculation, the number of new small business entrants to the federal space has declined as much as 79% from 2005 to 2019.
In addition to the goals above, OMB plans to assist agencies, the SBA, and the General Services Administration (GSA) to create new tools to facilitate small businesses to enter the federal space. To be included are augmented data analytic capabilities and enhanced data management regarding demographic and geographic workforce data.
The government stands a lot to gain from bringing more small businesses to the table. U.S. small businesses (499 or fewer employees) employ over 60 million people. As previously mentioned, they employ nearly half of all private employees in the United States. Increasing exposure to SDBs and the diversity of 60+ million workers will offer agencies access to more talent and efficiencies than previously possible, as well as promoting the talents of many minorities that work for SDBs.
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