In a recent procurement “report card,” the federal government received an overall B grade for its efforts to spend money with small businesses in 2011-12.

But when it came to awarding prime contracts, the report reveals, federal agencies achieved their goals in only two of the five categories: Small Disadvantaged Business and Service Disabled Veteran programs. In the subcontracting arena, goals were achieved in only two of the five categories: Woman-Owned Small Business and Small Disadvantaged Business.

Overall, federal agencies awarded $89.9 billion—22.25 percent of their prime contracting dollars— to small businesses, just shy of a goal of 23 percent. (For a complete listing, view the chart published with this article.)

At first glance, a 1 to 2 percent shortfall may not appear significant. However, while appearing small, even a 1 percent difference in federal contracting equals millions of dollars of lost opportunities to small businesses. Thus, the government’s B grade, when goals were not met in six out of 10 categories, appears overly generous.

Problem Areas

And judging from the report’s peer review ratings, it appears that several agencies realize there is room for improvement in a wide range of areas, including agency commitment to small business programs, community training, mitigation of contracting bundling and more.

The peer reviewers were most critical of agency efforts to increase the small business supplier contracting base, to educate those companies about contracting opportunities, and to expand those same opportunities in the procurement process.

Many small businesses here in Kansas City agree these are major impediments. Federal definitions regarding “suppliers,” coupled with outdated statutory definitions and onerous warehousing requirements, create additional barriers to small business material suppliers.

Similarly, unusual contract forms such as Indefinite Delivery Indefinite Quantity (IDIQ) contracts, otherwise known as Job Order Contracts (JOC) or Task Order Contracts (TOC), intimidate potential participants from entry into this market.

For those successful subcontractors seeking to move into prime contracting work with the government, the large dollar amount typical for federal contracts can quickly burn up existing bonding capacity or so restrict that capacity as to make it impossible for the business owner to seek other nongovernment work.

What Needs to Happen

These areas require detailed and considerate attention. Remedial steps should include, at a minimum: » Increased funding and staffing for the agency best suited to address all of these issues—the Small Business Administration. » Increased regional outreach and training sessions need to be conducted. They should provide detailed information about the certification process, schedule contracting, bonding and joint venture or mentor/protégé arrangements. » More aggressive sanctions need to be applied against larger companies that masquerade as “small business” to obtain certain small business procurements. » Creation of an agency or small business association panel that can suggest amendments to outdated definitions and regulatory restrictions that are no longer relevant to today’s federal procurement systems.

As politicians remind us at election time, small business remains the backbone of this country’s economy. This should be the overriding argument in justifying the necessary resources to ensure small business success at reaching stated government goals, and awarding the government a resounding and unchallenged A on next year’s report card.

© Denise Farris, Farris Law Firm LLC. (August 2013). All rights reserved.

This article may not be reprinted or reproduced in any manner without the written consent of the author. dfarris@farrislawfirm.com // www.farrislawfirm.com The above information is provided free of charge and is not intended to be viewed as the provision of legal advice. Specific information may be secured through contacting the procurement departments of the governmental entities or seeking specific legal counsel regarding same.