The federal government consistently meets its goal of giving 23% of eligible federal contracting dollars to small businesses, but this overall achievement has overshadowed a growing number of concerns surrounding the small business contracting ecosystem. For example, it has been far less successful in meeting its goals for awards to those who qualify for socio-economic decommissioning, such as And that 23% of contract dollars go to a shrinking pool…
The federal government consistently meets its goal of giving 23% of eligible federal contracting dollars to small businesses, but this overall achievement has overshadowed a growing number of concerns surrounding the small business contracting ecosystem. For example, it has been far less successful in meeting its goals for awards to those who qualify for socio-economic decommissioning, such as And that 23% of contract amounts are awarded to a shrinking group of companies.
Category management is a major contributor to the decline of the small business ecosystem. Small businesses have been warning of the effects for years. Category management reform was also one of the priorities specifically mentioned in the Biden administration’s plan to improve small business procurement.
Now the Small Business Administration is taking steps to initiate this reform.
“That is the main issue that the White House and [SBA] Administrator [Isabella] Guzman wanted us to reach out to you,” Bibi Hidalgo, deputy administrator of the SBA’s Office of Public Procurement and Business Development, the House Committee on Small Business said during a hearing on Thursday. “As a result, we negotiated with [the Office of Management and Budget] and the White House to include all socioeconomic firms — which includes disabled veterans, women-owned businesses, all HUBZone location-based firms, and small disadvantaged businesses — in Tier 2 category management, which is the rating system they had created. That means 33,000 more additional companies are part of this higher tiering category, which will create more access to contract opportunities.”
Hidalgo said her team is still following the data, but anecdotally they’re seeing positive trends because of this change. Some business owners report being contacted for the first time in years, she said. And they’re seeing an increase in new entrants to the program, which is one of the metrics they use to ensure that not only is spending increasing, but the health of the entire ecosystem.
Hidalgo also pointed to increased accountability as a recent change to address these issues. The administration’s reform plan mandated that small business contract goals be included in performance plans for all senior executives.
“This is essentially part of theirs [key performance indicators],” she said. “So we’re seeing a difference. They’re attacking more and more now. That’s what my staff told me just yesterday: Agencies are looking for more companies across all socioeconomic categories.”
But these are not the only challenges; The deeper the government and Congress delve into this problem, the more injustices they discover. For example, Rep. Sharice Davids (D-Kan.) pointed out that small business contracts also tend to be geographically concentrated. She said that “43% of the contracts went to about 17 congressional districts, 12 of which are in Maryland and Virginia.”
Hidalgo said this was largely due to contract bundling. This is a practice where an agency combines a few smaller deals into one larger one to better leverage their buying power. The concept arose from hardware procurement to better ensure the interoperability of the components. However, as the government has moved to buy more services and solutions, contract bundling may look more like a corporate-level acquisition.
Experts have also been sounding the alarm about contract bundling for years. President Biden first announced this as an administration priority in December 2020.
Hidalgo said contract bundling often favors larger companies and small companies working with them as subcontractors. She said the new entrant data her team collects is also analyzed geographically to find ways to facilitate that concentration.
Women-owned small businesses
Hidalgo has also been working to fix small business certification processes, she said. For example, Rep. Chrissy Houlahan (D-Pa.) expressed concern about the SBA Office of Inspector General’s recent findings that out of 15,000 applications for certification as women-owned small businesses (WOSBs), about 12,000 were immediately returned for more information .
“The way it was set up was that they asked applicants for all their documents at once. But it turns out if they didn’t upload them individually then it would only accept one of the documents. So I said, ‘This is unacceptable and we need to fix this immediately,'” Hidalgo said. “My team got it right and fixed it to at least let the business owner know to upload one at a time. And as a result, we see that such differences have an impact. We have now certified well over 5,700 companies; We are on track to certify over 6000 this year. For incomplete applications, I have my pre-screeners work directly with applicants to ensure their application is not rejected and they can work towards a complete application as quickly as possible.”
Hidalgo also said she signed a rule to open a number of new North American Industrial Classification System codes to qualify them for WOSBs. Now 92% of federal spending falls under these codes.