SBA report on Small Business Procurement Goals
The National Defense Authorization Act of 2013 called for an independent assessment of the small business procurement goals. The SBA has just released a report entitled "Evaluation of the Small BUsiness Procurement Goals Established in Section 15(g) of the Small Business Act: A Report Pursuant to SECtion 1631(d) of the National Defense Authorization Act of 2013". We will summarize some of the findings of this report in this blog but there is always a debate about the validity of the numbers. I attended an NDIA meeting a couple of months ago where many small business owners in the room questioned and doubled the numbers being reported by the government. I guess it boils down to the old adage that the three biggest lies are resumes, "the check is in the mail" and statistics.
The report draws some interesting conclusions. For instance, the report identifies that over 80% of all Federal Procurement is concentrated in 4 main sectors: 1) Construction, 2) Professional, Scientific and Technical Services, 3) Administrative & Support, Waste Management & Remediation Services and 4) Manufacturing. The small business procurement rate was below the 23% goal in all but one of these sectors. Manufacturing was less than half the goal. I don't think it is much surprise that the construction area had a very high award rate as small business was reported to have 45% of the contracts awarded in this area, given that small construction projects can easily be awarded to small business. The report identified that the most serious under utilization of small business was not in the number of awards but instead in the limited size of the awards given to small business.
Some of the major findings of the report include:
- Procurement rates for socioeconomic sub-classes of small business generally reflect patterns of small business procurement rates. Variations in industries and sub-classes make these patterns too complex to summarize briefly
- Shortfalls of small business procurement dollars (relative to goals) tend to occur in industries with a high level of procurement, a very low small business procurement rate and a high concentration of procurement dollars going to a small number of firms.
- Setting procurement goals is a complex process.
Well, I'm not so sure I understand why setting small business procurement goals should be a complex process. I can understand that carrying out those goals might be a complex process but setting the goals? The report also identified that the highest small business procurement rates seemed to follow the highest registration in the SAM database. Again, I don't see why that should be much of a surprise. The Contracting Officer must only use contractors who are registered in the SAM database so if a particular industry doesn't have many contractors registered, it stands to reason that the procurement rate would be lower.
The report identifies some recommendations on how to progress toward meeting small business procurement goals. These recommendations include:
- Fully examine the total value of prime contract awards, without exclusions. (Current data collection practices exclude certain kinds of procurement from the total on which the small business share is calculated. - this is part of the controversy with the statistics I mentioned above).
- Adequately understand and consider inherent differences.
- Refrain from adjusting size standards unless changes are required to reflect market conditions.
The last recommendation is again one of the comments I heard at the NDIA meeting. Not only changing the size standards but penalizing the small business from winning a large award. When the small business is successful in winning a large award that requires a change in business parameters to complete the contract such that the business is no longer considered a small business.
I encourage all small businesses to look at the report. Speak to the local SBA to help get some of these concerns expressed and addressed. Through this type of process the small business will succeed in getting their fair share of the Federal Procurement Pie.