On July 26th, 2022, the U.S. Small Business Administration (SBA) announced that the Biden-Harris Administration awarded a record-breaking $154.2 billion in contracts for small businesses. The total was a significant increase from the previous fiscal year’s total for small businesses. The SBA reports that federal contracts for small businesses, along with $72 billion in subprime contracting goals, supported over one million American jobs. Earlier, in June, the SBA changed how it calculates a business concern’s number of employees under SBA size standards.
Federal Contracts for Small Businesses
According to the SBA, the U.S. government itself is a significant customer of products and services and is required by law to consider buying from small businesses. The government yearly spends over $100 billion on small business contracting. Therefore, government contracts for small businesses represent a huge financial opportunity for qualifying business entities. Title 13 Part 125 of the Code of Federal Regulations (Title 13) regulates government contracting programs. Title 13 includes the SBA’s responsibilities when providing contracting assistance. Meanwhile, the Federal Acquisition Regulation (FAR) governs the government’s purchasing process. Reasons the government contracts small businesses include:
- Ensuring large businesses don’t “muscle out” small businesses;
- Gaining access to new ideas and developments that small businesses can provide, just as diversity within the workplace can itself drive small business innovation;
- Supporting small business job creation and economic development; and
- Offering disadvantaged socio-economic groups greater opportunities.
Record $154.2 Billion in Contracts for Small Businesses
Additionally, the SBA sets contracting goals for each federal agency and works with government buyers to ensure that they prioritize small businesses. In fiscal year 2021, the federal government awarded 27.2%, or $154.2 billion, of its total contracting funds to small businesses. Markedly, the amount is an $8 billion increase from the fiscal year 2020 total, which had set the previous record.
The SBA uses an annual government-wide scorecard tool to assess how well federal agencies reach their small business contracting goals. The scorecards also provide transparent contracting data and help to report agency-specific progress. Highlights from the individual scorecards in the previous fiscal year include:
- 11% spending for small disadvantaged businesses for the first time in history
- 4%, or $25 billion in contracts for service-disabled veteran-owned small businesses, a $1 billion spending increase over the prior year
- $26 billion, or 4.6% of total funds, went to women-owned small businesses for the third year in a row.
In Conclusion
Although the total dollar value of contracts for small businesses increased in fiscal year 2021, the number of small businesses receiving federal contracts decreased. This figure continues a 10+ year trend of decreases in small businesses. With this in mind, the government introduced a policy to increase the small business base. Under the policy, the government would track new entrants to ensure that new contractors can enter and locate opportunities in the federal marketplace.