Again, 2021 was a pretty good year to be a small business contractor, despite the continuing downward trend in the number of small businesses working with the government.
Federal agencies hit a new milestone after awarding $154.2 billion in contracts to small businesses last fiscal year. That figure, which is $8.5 billion higher than FY2020, another record year, represents about 27 percent of the total number of federal contracts awarded by the government.
Notably, it’s a few percentage points north of the reported 23 percent target, but the overall number of small contractors has declined. According to SBA Administrator Isabel Guzman, who acknowledged the problem and suggested solutions, 65,000 small businesses received contracts in fiscal year 2021.
“We have to increase competition, and we have to ensure fairness so we can leverage all the great products and services that are available in the marketplace through our federal spending,” Guzman says
One of the main problems behind the phenomenon, according to the SBA, is bundling, or the practice of consolidation, which makes contracts so large that small and medium-sized businesses can’t take them on. The SBA let the media and others know Tuesday that the agency is working with cabinet members to crack down on such behavior.
It is also working to improve its statistics regarding carve-outs. For the first time in the last fiscal year, small business spending fell to 11 percent. Federal agencies also paid out $72 billion to small business subcontractors in the same period.
However, the amount contracted out to women-owned small businesses was below the 5 percent target set by the OMB for the year. Spending among this group was 4.63 percent in fiscal year 2021, up from 4.85 percent a year earlier. The agency is increasing the number of certified firms nearly six-fold and expanding the North American Industry Classification System (NAICS), making women-owned businesses in more diverse industries eligible for federal spending programs.
The government also fell short of its goal of meeting the Z percent target for contracting with small businesses in the Historically Underutilized Business Zone (HUBZone), which may include companies located in some tribal or rural areas. These companies still receive a record $14.3 billion in contracts, or 2.53% of eligible amounts.
Guzman says the agency is working to expand its small business supplier base to ensure more small businesses participate. And the agency wants to continue to tweak the application process; in late April, the SBA solicited comments on a proposed rule aimed at changing business size standards in nine NAICS sectors — such changes would expand eligibility for the agency’s contracting programs. “The SBA is looking for simpler solutions to make it easier for businesses to navigate federal government programs.”