U.S. May Miss Small-Business Contract Goal for 12th Year in Row

The U.S. government missed its small- business contracting goal in fiscal 2011 for at least the 11th straight year and may be on its way to the 12th.

The U.S. has a target of awarding 23 percent of eligible prime, or direct, contracts to small businesses. It awarded them 21.7 percent of more than $423 billion in such awards in the fiscal year that ended Sept. 30, down from 22.7 percent the previous year, according to data released by the Small Business Administration yesterday.

Federal agencies have awarded 17.8 percent of about $212 billion in eligible contract dollars to small business so far in fiscal 2012, according to the Small Business Dashboard, a government-run website.

The SBA released its report on the government’s 2011 performance yesterday, three months before the 2012 fiscal year ends, so it may be too late for agencies to substantially boost awards to small businesses, Michael Golden, who formerly led the Government Accountability Office’s procurement law unit, said in a phone interview.

“The question is whether agencies can change their contract strategy within a 90-day period,” Golden, a Washington-based partner for the law firm Pepper Hamilton LLP. “For agencies that haven’t made it, I think they will try, but it’ll be a challenge for them.”

Monthly contract spending generally almost doubles each September from the previous month as contracting officers rush to spend money before the end of the fiscal year, according to data compiled by Bloomberg.

‘Need to Improve’

“Releasing the numbers at this point really highlights where there are opportunities for improvement and really puts the attention on the agencies,” John Shoraka, associate administrator for government contracting at the SBA, said yesterday in a phone call with reporters. “This highlights the fact that we need to improve and highlights the agencies that need to focus on that improvement.”

Shoraka said the timing of the report would have a “good impact” on fourth-quarter activity, when spending tends to surge.

“Releasing the scorecard showing that the government missed its small business goal, yet again, this late in the fiscal year, and on a day before a national holiday is unfortunate,” D.J. Jordan, spokesman for the U.S. House Committee on Small Business, said in an e-mail. “Their hope was obviously that no one would pay attention to this embarrassing news.”

Both Parties

Small companies face barriers as they compete with larger rivals for federal work, including budget cuts, in-sourcing and the tapering off of stimulus contracts, Shoraka said.

The Pentagon, which represents more than two-thirds of all prime contract revenue, has also missed its small-business goal for 10 years.

The government’s shortfalls have spanned both Republican and Democratic administrations. President Barack Obama’s Office of Management and Budget told agencies in a February 2011 memo that their underachievement deprives taxpayers and “takes away opportunities for small businesses to create jobs and drive the economy forward.”

“It is extremely disappointing that the federal government has again failed to meet its small business contracting goals,” U.S. Representative Sam Graves, a Missouri Republican who is chairman of the House Committee on Small Business, said in an e- mailed statement. “If the administration takes this priority seriously, these goals are very achievable.”

Agency Grades

Each year, the SBA calculates scorecards that measure how well the government and each federal agency did in awarding contracts to small businesses, defined generally as those with $7 million or less in annual revenue or fewer than 500 employees in most industries.

The scorecards include total spending with small companies and with specific groups, such as those owned by women, service- disabled veterans and minorities.

The reports, which include prime contract dollars and subcontracts to small business, also feature a letter grade from A to F. Agencies that received an A+ met at least 120 percent of their goals, while those given an F achieved 70 percent or less of their goals, according to the SBA.

The Department of Energy, the second-largest government buyer, received an F grade. The department missed its goal of 6 percent last year, awarding $1.3 billion, or 5.3 percent, to small businesses.

Women-Owned Businesses

The Department of Health and Human Services, the third- largest buyer, received an A, exceeding its goal of 19.5 percent and awarding $4.5 billion, or 24 percent, to small firms. The Defense Department earned a B.

The federal government received a B grade overall. It missed goals for women-owned small firms, service-disabled veterans and businesses based in areas that historically have had high unemployment and low incomes.

Even as 2011 marked the first year of a set-aside program for small businesses owned by women, contracts to the firms declined last year for the first time in more than a decade.

Women-owned small businesses received $16.8 billion, or 4 percent, of eligible contract dollars, according to the SBA. The government set a goal in 1994 of awarding at least 5 percent of the total value of eligible contracts to women-owned businesses. It has never met it.

Contracts to black-owned firms dropped 8 percent to $7.12 billion from fiscal 2010 to 2011. Awards to Hispanic-owned businesses decreased 7 percent to $7.89 billion. Contracts to the two minority groups fell at a faster pace than all contracts, which dipped 1 percent as the U.S. government slowed spending to help reduce the federal deficit.

To contact the reporter on this story: Danielle Ivory in Washington at divory@bloomberg.net

To contact the editor responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net

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