A comparison of last years small business contracting numbers with (right)… (/Source: Fedmine )
The federal government is required by law to try to direct nearly a quarter of all contracting dollars to small businesses, and every year since 2005, officials have reported missing the goal by the slimmest of margins.
Then again, it depends on who is counting.
A number of contractors and advocacy groups say the government has repeatedly inflated the share of contracting dollars awarded annually to small firms, masking serious problems in the procurement process that prevent small businesses from securing more government work.
In 1958, when Congress created the Small Business Administration, it tasked the agency with establishing an annual small-business contracting goal of “not less than 23 percent of the total value of all prime contract awards.”
This month, for the seventh year in a row, SBA officials reported that the government narrowly missed the goal, reporting that small firms received 22.25 percent (or $89.9 billion) of contracting dollars in fiscal year 2012 — better than 21.65 percent last year, but down from 22.7 percent in 2010.
In a blog post announcing the report, John Shoraka the agency’s associate administrator for government contracting, called the achievement “real progress” toward the goal.
However, the SBA’s calculations come with several caveats, in large part because the agency excludes certain contracts and entire agencies from its measure.
Officials do not take into consideration, for instance, any contract work for the Federal Aviation Administration, the Transportation Security Administration or the Central Intelligence Agency, nor do they account for any contracts for goods sold overseas or any work performed outside the United States.
In all, SBA officials have determined that about one-fifth of all federal contract spending is not “small-business eligible,” and so it excludes that portion from its calculations.
The portion includes spending by agencies that are not subject to certain federal acquisition regulations, and those that do not report into the Federal Procurement Data System, from which the SBA pulls its data, Skoraka said. Other exclusions have been made on the basis that those contracts do not lend themselves to competition by small firms.
Shoraka noted that the current list of exclusions was finalized during the second term of former president George W. Bush. The Obama administration elected to leave them in place in order to “compare apples to apples,” he said.
Critics argue that is not what Congress mandated.
“They are simply not following the letter of the law,” said Charles Tiefer, a professor of government contracting at the University of Baltimore Law School. “It states 23 percent of all contracts, and there is no reason to think Congress wanted some of these exclusions.”
Contracts out of reach for small businesses, he said, should be considered as part of the 77 percent of government spending available to large and international companies, rather than removed from the equation altogether. He pointed out that some of the excluded contracts, including intelligence gathering and work overseas, are areas in which government spending has surged in recent years.
The SBA’s Office of Inspector General has also urged the agency to discontinue some of its exclusions, particularly for contracts performed overseas. In an advisory memorandum from December 2011, the office cited a 2008 legal opinion issued by the SBA Office of General Counsel, which states it would be “a reasonable interpretation” of the law to assume the targets include contracts performed outside the country.
Congress has recently taken issue with the exclusions, too. In the 2013 National Defense Authorization Act, lawmakers ordered the SBA administrator to review the goal guidelines to ensure that the process “does not exclude categories of contracts” based on the types of goods or services solicited or, in some cases, whether the agency is subject to federal acquisition regulations.
The nuances of the government’s measurements can sometimes get lost in public discussions about contracting.
In Shoraka’s blog post announcing the government’s performance, he wrote that 22.25 percent represented the small business share of “all” federal contracting dollars last year.
After On Small Business asked about the language, given the exclusions to the calculations, officials updated the blog to read 22.25 percent “of all small business eligible contracts.”
Two studies show small-biz getting 19% of contracts
To get a sense of what effect the exclusions have on the numbers reported, On Small Business asked Fedmine, the data analysis firm that conducts the contracting calculations for the SBA, to crunch the numbers based on total federal contract spending reported into the FPDS, without any exclusions.