Enforcement of Small Business Procurement Goals

Priority Issue Briefs
Enforcement of Small Business Procurement Goals

Until recent efforts by NAGC reversed accepted practice, the federal government failed to meet the provisions of the Small Business Act that require agencies to meet statutory government-wide goals for government contracting. Each year, the contract report required by law demonstrated that agencies continue to fall short of their “goals.” We are now seeking to maintain the consistent pattern where goals are met or exceeded by agencies.

NAGC would argue that part of the problem is terminology. A goal implies that there is a direction in which agencies should target their efforts and that they should aspire to reach the established benchmarks. However, the word statutory is often overlooked when discussed procurement goals. The word statutory reinforces the concept that these goals are authorized and prescribed in law; in other areas of the government or in the private sector, failure to meet a statutory requirement can be legally punishable.

Section 15(g)(1) of the Small Business Act states that all small businesses should have the maximum practicable opportunity to participate in providing goods and services to the government. To ensure that small businesses get their fair share, the SBA negotiates annual procurement preference goals with each Federal agency and reviews each agency's results. The SBA is responsible for ensuring that the statutory government-wide goals are met in the aggregate.

Now that we know these goals are achievable, it is time to make them statutory instead of goals that may or may not be met by agencies.

The current goals are:
· Twenty-three (23) percent of prime contracts for small businesses;
· Five (5) percent of prime and subcontracts for small disadvantaged businesses;
· Five (5) percent of prime and subcontracts for women-owned small businesses;
· Three (3) percent of prime contracts for HUBZone;
· Three (3) percent of prime and subcontracts for service-disabled veteran-owned small businesses.

The government has interpreted the law as though it is an admirable goal – not a statutory requirement. The National Association of Government Contractors continues to support strict enforcement of the 23 percent small-business contracting goal mandated by Congress and believes that small businesses must be allowed to compete for the billions of dollars spent by the federal government to procure goods and services. While efforts to increase the statutory limits, we also believe that the federal government must be required to meet the existing requirements of the law and that small businesses and contractors would benefit significantly if the federal government were held more accountable to meeting the existing statutory goals.

The goaling categories

Agencies are required to annually report their goals, in numbers and dollars, and as a percentage of the total amount to be awarded, for each of the following categories:
· Prime contract awards to be made to small businesses.
· Prime contract awards to be made under the authority of Section 8(a) of the Small Business Act.
· Prime contract awards to be made to small businesses owned and controlled by socially and economically disadvantaged individuals other than 8(a).
· Prime contract awards to be made to small businesses owned and controlled by women.
· Prime contract awards to be made to Historically Underutilized Business Zones (HUBZones) (Only the Departments of Defense, Agriculture, Health and Human Services, Transportation, Energy, Housing and Urban Development, Veterans Affairs, the National Aeronautics and Space Administration, Environmental Protection Agency, and the General Services Administration are required to submit HUBZone prime contract goals for FY2000.)
· Prime contract awards to be made to small businesses owned and controlled by service-disabled veterans.
· Subcontracts to be awarded by prime contractors to small businesses.
· Subcontracts to be awarded by prime contractors to small businesses owned and controlled by socially and economically disadvantaged individuals.
· Subcontracts to be awarded by prime contractors to small businesses owned and controlled by women.
· Subcontract awards to be made to Historically Underutilized Business Zones (HUBZones). (Applicable to all agencies.)
· Subcontract awards to be made to small businesses owned and controlled by service-disabled veterans.

Negotiating the goals

At first glance, it appears that each agency would simply be required to meet the percentage thresholds to comply with the law; unfortunately, however, this couldn’t be further from the truth.

Each year, SBA negotiates with agencies to establish mutually acceptable prime and subcontract goals for each small business category. “SBA must ensure that the mutually established cumulative goals for all agencies meet or exceed the government-wide 23 percent small business goal. SBA can not accept an individual agency’s goal until in the aggregate, the government-wide goal is established.”

Inaccuracies in expectations and reporting

It is pretty easy to see, just by the sample chart above, how inequitable the expectation to engage small and disadvantaged businesses in the procurement process. For example, the Departments of Defense and Energy, who are known for outsourcing and contracting large projects (in dollar and scope), have small business goals of 23 percent and 4.4 percent, respectively. Compare this to the 50 percent goal in the Executive Office of the President or 49 percent in the Department of Agriculture. It should also be noted that even with the DOD’s low small business goal, the Department has frequently failed to meet this target.

The message this sends is that expectations for doing business with small and disadvantaged businesses is not a priority for every agency. The lesson for small businesses competing for government contracts: take a closer look at agencies with higher goals and larger percentage of their contracts going to small and disadvantaged businesses.

Another challenge in understanding the reporting data is that an agency can count prime contract awards to small businesses toward more than one goal. The Small Business (SB) Category shows the total procurement dollars to small businesses, with all other categories being subsets. According to the SBA, a contract may be counted in more than one subset category except 8(a) and small disadvantage business (SDB) that are reported separately, but together form the SDB Government-wide achievement.

For example, if a business is awarded a contract and they are an 8(a), small disadvantaged business, and a veteran-owned small business, the agency is able to count the contract in all categories that apply.

The National Association of Government Contractors supports statutory small business procurement requirements. Additionally, NAGC supports efforts to increase government-wide procurement goals.




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