Study Is Critical of Federal Contracting Efforts

The number of federal contracts awarded to U.S. small businesses has plummeted more than 20% in recent years, heightening concerns about so-called contract bundling on the nation’s small firms.

That is one of the findings of a procurement report card to be released today by Democrats on the House Small Business Committee. The report concludes that many of the largest federal agencies are failing to set aggressive targets for doing business with small firms and some are falling short of their own modest goals. In fiscal 1999, the government’s 60-plus buying agencies spent more than $189 billion and awarded more than 10 million contracts.

And although the small-business dollar share of the federal contracting pie has been increasing and its percentage share has held steady at around 23% over the last three years, the study found that the actual number of contracts awarded to small firms has plunged from 6.4 million in 1997 to 4.9 million in 1999.

The report examined the procurement practices of 21 government agencies accounting for more than 96% of all federal spending from 1997 to 1999. Using a letter-based rating system--A through F--the report concluded that more than half of the agencies surveyed deserved failing or below-average grades for their small-business contracting efforts.

“It’s back to school for many federal agencies,” said Rep. Nydia Velazquez of New York, the ranking Democrat on the committee.

However, the methodology used by the committee to arrive at the letter grades is bound to raise some objections from the maligned federal agencies. The Department of Defense, for example, received a “D” for its contracting efforts, landing it among the study’s “Failing Five.”

However, federal procurement data show that in 1999, for example, the Pentagon actually exceeded its small-business procurement goal of 20% by awarding 21.2% of its prime contracts to small firms. The study’s authors contend the department deserved the lousy marks in part because its goals were not aggressive enough to begin with.

In 1997, Congress established an overall goal of 23% for the dollar value of all federal contracts to be awarded to small businesses. It directed the Small Business Administration to hammer out contracting agreements with every federal agency, allowing some agencies to set goals below the average, some above it, as long as the 23% overall goal was met.

In fact, the federal government has met or exceeded that threshold over the last three years. But the study is critical of this strategy. It argues that the government’s largest agencies, including the Pentagon, the Department of Education and NASA, which account for the lion’s share of federal contracting dollars, should not be allowed to set contracting goals below the 23% goal. In 1999, for example, NASA’s goal for small-business procurement was 11.3% while the Small Business Administration’s was nearly 70%. The study also examined each agency’s procurement practices with socially disadvantaged and women-owned firms as well as those enrolled in the SBA’s 8(a) program.

No matter what others on Capitol Hill manage to conclude about the study’s methodology for granting letter grades, one figure that is certain to cause concern is the declining number of federal contracts being awarded to small firms.

The study could become a catalyst for new anti-bundling efforts. The full study can be found at https://www.house.gov/velazquez).