Government Contracts Monitor

Feds Fall Short on Small Business Subcontracting and Other Goals for FY14

July 20, 2015

The U.S. Small Business Administration (SBA) recently announced the federal government’s Fiscal Year 2014 (FY14) small business goaling results and Small Business Procurement Scorecard. According to SBA, the federal government awarded a total of $91.1 billion in prime contracts to small business – an $8 billion increase over FY13. SBA naturally highlighted the fact that this equaled 24.99% of contracts awarded – the highest percentage since the 23% prime contracting goal was established in 1997 – enabling the government to meet this goal for a second year in a row. This achievement was accomplished through improvement in all five categories, including a record $13.5 billion in awards to Service-Disabled Veteran-Owned Small Businesses (SDVOSBs). However, the government failed to meet its 5% goal for prime contract awards to Women-Owned Small Businesses (WOSBs) and its 3% goal for HUBZone small businesses. The government also failed to meet its 34.06% subcontracting goal, and actually showed a decline from 34% to 33%. Importantly, this data and the continuing shortfalls in various categories, both government-wide and for specific agencies, create marketing opportunities for large and small businesses alike in putting together new proposal teams and marketing to the respective agencies.

By way of background, and as you likely already know, Congress has established an annual overall small-business contracting goal of “not less than 23 percent of the total value of all prime contract awards.” Congress also has established goals of 5% for awards to each of (i) Small Disadvantaged Businesses (SDBs), including 8(a)s, and (ii) WOSBs, and 3% for each of (iii) SDVOSBs and (iv) HUBZone Small Businesses. Similar goals exist for subcontracting by large businesses, requiring 36% of eligible subcontracting to go to small businesses, with the same percentages as for prime contracting applicable to each of the same four sub-categories. All of these goals are minimums, which agencies are encouraged to exceed. Indeed, each year each individual agency negotiates with SBA individual agency-specific goals for the coming year, based upon the specific agency’s past performance in each category. Thus, a specific agency’s goals may be significantly higher if the agency has shown an ability to achieve higher percentages in the past.

The FY14 prime contract goaling numbers evidence the continuing emphasis on small business contracting, which is reinforced by the fact that agencies are now required to consider success in these areas in personnel evaluations, and bonus and promotion decisions, for senior agency officials.

This means that agencies across-the-board are focusing on at least maintaining, and likely increasing, their small business prime contracting, not only in the aggregate, but also in each of the relevant subcategories. In order to understand the mindset of any particular agency, it is important to analyze that agency’s goaling scorecard, and specifically the agency’s negotiated goals and past progress. Agency scorecards are available on SBA’s website at www.sba/content/small-business-procurement-scorecards. These scorecards reflect both the agency’s past openness to and success in contracting with the various small business communities, as well as areas in which the agency is falling short and may be particularly open to appropriate small business marketing initiatives.

Similarly, the continuing overall shortfall for small business subcontracting, and particularly the continuing shortfalls in overall small business, SDVOSB and HUBZone small business subcontracting, presents marketing opportunities for large businesses in assembling their proposal teams. Large businesses have the opportunity to set themselves apart from their competitors by aggressively seeking out and including in their proposals outstanding small businesses that will help both them and their customer agencies increase and exceed the agencies’ respective small business subcontracting goals. This is particularly important in those RFPs in which subcontracting plans and/or past subcontracting performance are identified evaluation factors.

For large and small businesses alike, it is worth spending time focusing on the ways in which you can use this data to enhance your agency-specific marketing efforts, and how to address counter-marketing efforts by your likely competitors, particularly as we enter into the important fourth fiscal year quarter when agencies will be looking to enhance their FY15 goaling performance.