Small Businesses Losing Out Huge in Contracting

Small Businesses Losing Out Huge in Contracting

By Gloria Larkin


A recent report from the Washington, D.C.-based Bipartisan Policy Center (BPC), Supporting Small Business and Strengthening the Economy Through Procurement Reform, authored by its Director of Strategic Initiatives Dane Stangler, offered some stark and disappointing data. The numbers concerned the involvement and impact of small businesses in the world of federal contracting.


One of the most eye-popping facts concerned the number of small businesses that are providing common products and services to the federal government; it shrank by 38 percent from 2010 to 2019. Even more troubling was the number of small businesses entering the procurement marketplace as new entrants, which declined by 79 percent from 2005 to 2019.


What might make the numbers of 38 and 79 percent even more interesting is that the federal government has continued to meet its topline goal of awarding 23 percent of procurement dollars to small businesses annually.

Contract Spending

However, the federal government has fallen short of meeting important goals for specific types of businesses. For instance, 5 percent of contract spending is supposed to be directed to women-owned small businesses (WOSBs) ― but the WOSB goal has only been met twice (2015 and 2019) since it was established in 1994. Ouch.


And the HUBZone (Historically Underutilized Business Zones) goal of 3 percent has never been met. That, according to the report, “equates to billions of dollars in spending” not ending up in the coffers of the communities they’re intended to elevate.


Then a subsequent Government Accountability Office (GAO) analysis found that the Office of Management and Budget had “overstated” the impact of category management, thus miscalculated the small business impact. Upon further review, the GAO came to the conclusion that “more than 53 percent of the contracts that had been eliminated” had previously been won by small businesses.


Taking the macro view on this issue, it’s worth restating that what amounted to tens of thousands of contracts eliminated by category management, more than half had previously been won by small businesses. As one small business owner said at a Senate hearing, “the government-wide push to increase the use of category management leaves small businesses shut out of opportunities to contract across the government.”

Next Steps to Right this Wrong

What to do? The next step is working to figuring out what can be done to right this wrong. In roundtables convened by the BPC, Goldman Sachs 10,000 Small Businesses Voices and the Washington-based think tank Center Forward, small business owners have expressed various concerns. They range from time-consuming process requirements to the indifference of prime contractors to a feeling that the federal government isn’t as interested in their success as it claims to be.


The Biden Administration and Congress have opportunities to take bipartisan action to reverse the aforementioned data, make it easier for small businesses to participate in federal procurement and provide the infusion that small businesses can make into our economy, if given the proper opportunities.


On the brighter side, know that there are legislative opportunities for reforms. They include the infrastructure package and Small Business Administration reauthorization, which would encompass increasing diversity; enhancing assistance for small businesses to increase competition and economic vitality; and improving transparency, accountability and oversight.


In the near-term, an infrastructure package offers an important avenue. Another opportunity is SBA reauthorization, which could be on the table later this year or in 2022.

Gloria Larkin is President and CEO of TargetGov, American Express Procurement Advisor and a national expert in business development in the government markets.  Email, visit or call toll-free 1-866-579-1346 x 325 for more information.

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