More Money Proposed for Small Business Government Contracts

A bill was just proposed by Representative Sam Graves (Missouri-Republican), head of the House Small Business Committee, to increase the government share of contracts that Congress asks federal agencies to award to small business.

A small business is typically defined as a business with $7 million or less in yearly revenue or which employees fewer than 500 staff.

At 23 percent today, the proposal seeks to raise the figure to 25 percent, to “make it easier for small businesses to enter this marketplace and compete for contracts,” Graves said in a statement. Graves is also proposing legislation that would “improve data on how often federal agencies consolidate a number of contracts into one large contract, which can make it tougher for small companies to win an award,” according to Bloomberg News.

A 2 percentage point increase translates into viable money for small business and accounted for more than $7 billion in federal awards in 2013. The government often does not reach its contracting targets; however, Graves’s proposal comes as Washington is set to come close to its 23 percent goal for the first time in years—since 2005.

In fact, the government awarded $83.2 billion in contracts to small businesses during year ending September 2013, according to the Small Business Dashboard at data.gov. That total amounted to 23.4 percent of the total contracting pool. Should small businesses have received awards totaling 25 percent of federal contracts, the figure would have been $88.9 billion in government business.

Graves explained that, “Small businesses have proven that they can do quality work cheaper and often faster.”

Chris Young, president of Washington DC-based National Association of Small Business Contractors, told Bloomberg News in a telephone interview that, the proposed legislation “provides a tremendous opportunity for small businesses to grow in the federal sector.” Young added, “Today, fewer and fewer firms are winning contracting dollars and we don’t feel that is healthy for taxpayers or small businesses.”

The Small Business Administration’s yearly procurement scorecard indicates that federal agencies have been ineffective in this sector for at least the past seven years in a row. Small firms received $89.9 billion, which is just 22.25 percent of those contracts deemed eligible for small business, based on federal data published in July for fiscal year ended September 30, 2012.

Mark Amtower, partner at Amtower & Co., a government contracting consulting firm located in Clarksville, Maryland, told Bloomberg News that it makes no sense to increase the targets created for small business spending until agencies either meet existing goals or are punished for failing to meet these goals. “Why raise the bar when you’ve got very few agencies making the existing target?” Amtower told Bloomberg News in a telephone interview. The government has given “a tremendous amount of lip service about what they’re doing to help small business contracting.”

In a February 2011 memo, President Barack Obama’s Office of Management and Budget told agencies, that not reaching this target deprives taxpayers and “takes away opportunities for small businesses to create jobs and drive the economy forward.”

Sources:

Clark, Patrick. Billions for Small Business at Stake in Contracting Targets; Bloomberg Business Week. February 26, 2014.Miller, Kathleen. Higher Goal for U.S. Small-Company Awards Pushed by Chairman; Bloomberg Business Week. February 25, 2014.

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