Agencies Break Records Meeting Small Business Contracting Goals

Agency buyers met and exceeded their statutory goal of awarding 23 percent of contract dollars to small businesses in fiscal 2014, the Small Business Administration announced on Friday, handing out a best-ever 24.99 percent of awards to eligible small firms and topping the previous record of 23 percent last year.

Small businesses overall received $91.1 billion in federal contracts, an increase of $8 billion over the fiscal 2013, according to SBA's annual score card. The evolving methodology of the score card has been criticized by some lawmakers.

Twenty agencies received “A” or “A-plus” grades on the latest assessment, with the perfect scores going to the U.S. Agency for International Development and the Commerce and Homeland Security departments. The government as a whole earned an “A.”

The only agency to receive a failing grade was the Energy Department which, as its response noted, uses a “unique long-standing business model, whereby 85 percent of our total procurement bases go towards the operation of our site and facility management contractors.”

Five agencies met the criteria in all four categories, which include small businesses owned by women, small disadvantaged businesses, service-disabled veteran-owned small businesses, and small businesses located in Historically Underutilized Business Zones. Those agencies were the Homeland Security, Agriculture, Treasury and Transportation departments, and SBA itself.

The Defense Department, which received an "A," accounted for the largest share of small business contracting dollars, representing $54.3 billion out of the $91.1 billion total that went to small firms. Hence SBA Administrator Maria Contreras-Sweet made the announcement Friday in a press conference at the Pentagon with Frank Kendall, undersecretary of Defense for acquisition, technology and logistics.

“The Defense Department’s outstanding progress allowed us to make our goals by having two of three dollars small-business eligible,” she said as she introduced military service procurement chiefs, one Virginia Pentagon contractor who is a veteran and another from Baltimore who hired employees who previously were incarcerated. “The DoD has walked the walk and made great strides,” she said. It’s a “shining example of what leadership can do,” because small businesses that work with the federal government average nearly double the revenue of those that do not.

Category records were broken governmentwide, she said, with the contracts for disadvantaged businesses rising from 5 percent to 9.5 percent, those to service-disabled veterans’ firms from 3 percent to 3.7 percent, and those going to women-owned firms rising from 4.3 percent to 4.7 percent, “just shy of the goal.”

Contreras-Sweet stressed that President Obama has been personally involved in steering contracts to small business -- a sector that is “more nimble, more agile, and which drives innovation” with new patents, she said. “The jobs tend to be American, neighborhood and local manufacturing.”

Kendall called the day “a very important milestone,” citing his five-year effort with Ash Carter—now the Defense secretary, to develop the Pentagon’s “Better Buying Power” initiative for small and large contractors. “Two of its elements involve small business,” he said. “Innovation and efficiency to control costs” and, “for practical reasons, small businesses tend to be leaner and more anxious to get the work, so it’s more economical for us.”

Kendall added that, “We’re not satisfied with ‘A,’ next year we’re going for ‘A-plus.’ ”

John Shoraka, SBA’s associate administrator for government contracting, explained the grades are based 80 percent on the number of prime contractor dollars recorded in the federal procurement database, 10 percent for subcontractors and 10 percent on subjective success factors such as leadership, and controls on data measurement quality. He acknowledged the criticism that SBA’s baseline for determining the award percentages is not comprehensive, excluding, for example, leasing dollars and funds for overseas contingency operations. “We are working with the Office of Federal Procurement Policy for next year to eliminate as many exclusions as possible,” he said, which actually makes it harder to meet the goals.

One reason for the recent improvements, he added, is that Senior Executive Service managers are now accountable for their agency’s small business award performance.

A dissenting view on Friday came from House Small Business Committee Chairman Steve Chabot, R-Ohio, who challenged the score card’s methodology, saying its baseline depends too much on prime contractors.

 “The SBA is robbing small businesses,” he said, pointing to $78 billion in federal contract dollars reported into the federal procurement data system but not in the baseline. “For every dollar the SBA doesn’t count, small businesses are losing 23 cents” or nearly $18 billion in fiscal 2014 contracts. “The reason Congress asks for these numbers is so we can use them – not so that the administration can pat itself on the back once a year,” Chabot said. “These are supposed to provide insight to help Congress craft policies that strengthen our industrial base. This sort of misreporting doesn’t help.”