Small businesses struggling to win Recovery Act contracts

Small businesses are struggling to get their slice of the $787 billion economic stimulus package, lawmakers and entrepreneurs said during a Senate hearing on Thursday.

Ninety-four days after President Obama signed the 2009 American Recovery and Reinvestment Act into law, federal agencies have awarded small businesses only 10 percent of stimulus contracts, according to data released during the Small Business and Entrepreneurship Committee hearing. Those contracts are worth a total of $389 million.

"This is simply unacceptable," said Sen. Olympia Snowe, R-Maine, the committee's ranking member. "Small businesses deserve their fair share."

Snowe said small businesses, many of which have been particularly hard hit by the economic recession, should receive at least 23 percent of federal stimulus contracts. That would match the government's overall small business contracting goal.

According to Automatic Data Processing Inc.'s Small Business Report, 80 percent of all private sector jobs that have been lost since November 2008 have come from small businesses. The report classified small businesses as firms with fewer than 500 employees.

"For this trend to change, small businesses need access to capital and increased sales volume," said Sen. Mary Landrieu, D-La., chairwoman of the committee.

On Wednesday, Landrieu and Snowe sent letters to the nation's governors urging them to use a portion of their Recovery Act funds for small business contracting.

Small Business Administration leaders told lawmakers to be patient, and noted signs of progress. As of April 15, small businesses had won 1.8 percent of all stimulus awards, according to SBA data. By May 5, that figure had increased to 6.3 percent, and by Thursday, it had reached 10.3 percent.

"We have seen a steady increase [in contracting], but the absolute value is not where we want it to be," said Joe Jordan, SBA's associate administrator of government contracting and business development.

SBA has partnered with the General Services Administration to disseminate information about small business stimulus contracting opportunities, Jordan said. And, earlier this week, SBA launched a new Web site where small firms can find Recovery Act subcontracting opportunities.

An April 3 Office of Management and Budget memorandum strongly encouraged agencies to take advantage of small business contracting programs. The memo suggested that agencies coordinate with SBA to identify qualified and capable firms at the national and local levels to respond to solicitations.

"Because support of small businesses furthers the economic growth and job creation purposes of the Recovery Act, agencies should support projects that provide maximum practicable opportunities for small businesses," the memo stated.

But, small business owners testified Thursday that the administration's message does not appear to be getting through.

Sylvia Medina, who serves on the board of directors of the advocacy group Women Impacting Public Policy, said many agencies are struggling to issue stimulus contracts quickly, in part because of depleted acquisition workforces. One way out of that bind is to rely on existing contracting vehicles.

"That is good news for small businesses with existing contracts, but not for small businesses who are mostly subcontractors or do not hold contracts," said Medina, who also runs North Wind Inc., an environmental services firm in Idaho Falls, Idaho.

Medina was particularly critical of the Energy Department, which spends 85 percent to 90 percent of its annual procurement dollars on large contractors running the government's national laboratories.

"Small businesses are, for the most part, second-tier subcontractors … through these [facilities management contracts]," she said. "The difficulty under this scenario is that stimulus funding will largely be awarded to these large prime contractors. So, instead of directly contracting with small businesses, Energy will have to find a way to effectively work with its prime contractors to ensure that meaningful work flows down to … small business subcontractors."