Data on small business contracting revised

After uncovering a technical error, the Small Business Administration has revised its statistics on the value of contracts federal agencies awarded to small businesses last year.

Small companies garnered nearly $3 billion more in prime government contracts in fiscal 2003 than reported three months ago, according to SBA's updated figures. This brings the revised value of fiscal 2003 transactions to $65.5 billion, a new all-time high.

At the same time, the total value of contracts awarded last year is also higher than originally thought, so the percentage of contract dollars going to small business is lower than previously stated. The corrected figures show that agencies granted small businesses 23.6 percent of $277.5 billion in prime contracts.

This is nearly 2 percentage points lower than originally reported, but even with the downward revision, agencies slightly exceeded the congressionally mandated governmentwide target for small business contracting. "We topped the 23 percent [goal]," said Seth Becker, an SBA spokesman. "That's very, very important."

The extra $3 billion means that "many more small businesses got helped," Becker said.

But procurement experts said the percentage statistic is more meaningful. With overall prime contracts awarded on the rise, small businesses naturally earn more government dollars, they noted. The question is whether this increase is keeping pace with the upswing in total contract spending.

"We're more interested in the percentage, frankly," said Molly Brogan, government affairs manager at the National Small Business Association, a group representing more than 150,000 small companies nationwide. The revised percentage is still acceptable, she said.

The previously reported percentage of 25.4 seemed too good to be true, Brogan noted. SBA's small business contracting statistics, based on information collected by the Federal Procurement Data Center, a branch of the General Services Administration, have never inspired confidence, she said.

General Accounting Office researchers have repeatedly questioned the reliability of data collected by the center. Changes to the data collection method scheduled to kick in for the next round of statistics should improve the quality of reporting, Brogan said. In the meantime, she plans to sift through information from the database with a "more finely toothed comb."

SBA revised the fiscal 2003 statistics after discovering an error in the transfer of data from the Defense Department, Becker said. The revision does not reflect any change in the way SBA counts small business contracts, he said, and is simply the result of a computer glitch. Defense spokesman Glenn Flood confirmed that there were issues with the original data transfer.

But Rep. Nydia Velazquez, D-N.Y., who has long been skeptical of the Bush administration's efforts to support small business contracting, turned a critical eye on the updated figures. "I believe this discrepancy only reiterates what we have been claiming for the past two years. The contracting records . . . [are] inaccurate."

The government's small business contracting statistics will get another boost if the SBA changes the definition of what qualifies as a small company, as proposed in a March Federal Register notice, said Paul Murphy, president of Eagle Eye Publishers Inc., a Fairfax, Va.-based market research company. Under the proposal, SBA would classify certain companies as small businesses according to the number of workers employed, rather than revenues.

Based on a statistical analysis of fiscal 2003 procurement figures, Eagle Eye researchers concluded that, "the proposed revisions will grow the small business share of federal procurement simply by reclassifying large companies that currently exceed revenue-based size standards, with no new small business spending by federal agencies."

The proposed change makes sense from an administrative perspective, Murphy said, and reflects an honest effort to "accurately define the nature of small businesses." He added he does not think SBA had any "nefarious" motivations for proposing the change.