Government Contracts Monitor

Feds Meet FY16 Small Business Prime Contracting Goals (Except WOSB and HUBZone), But Individual Agency & Overall Subcontracting Shortfalls Persist, Providing Marketing Opportunities

June 6, 2017

The U.S. Small Business Administration (SBA) recently announced the federal government’s Fiscal Year 2016 (FY16) small business goaling results and Small Business Procurement Scorecard. According to SBA, the federal government achieved its 23% small business contracting goal for the fourth straight year, awarding 24.34% of federal prime contracts, totaling $99.96 billion, to small business. While the overall percentage was down from last year’s record high 25.75%, the more important actual dollar value awarded increased more than $9 billion (+10.1%). This increase in dollar value awarded was seen across-the-board in all prime contract categories. Thus, while the percentage of contracts awarded to Small Disadvantaged Businesses (SDBs) declined modestly to 9.52% from last year’s record 10.06%, the dollar value awarded to SDBs increased by $3.7B to $39.13B. A record $16.34B (3.98%) in awards went to Service-Disabled Veteran-Owned Small Businesses (SDVOSBs). While the dollars awarded to Women-Owned Small Businesses (WOSBs) and HUBZone small businesses also increased, the government failed to meet the 5% and 3% goals for those two categories, achieving 4.79% and 1.67% respectively. The government also failed to meet its decreased 33.7% subcontracting goal, coming in at 32.2%, which at least was up somewhat from last year’s 31.2%. 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) SDBs, including 8(a)s, and (ii) WOSBs, and 3% for each of (iii) SDVOSBs, and (iv) HUBZone Small Business Companies (HUBZone SBCs). 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 FY16 prime contract goaling results 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. They likely also reflect the impact of the increased numbers of companies now qualifying as small, as the result of SBA’s size standards increases over the past several years.

The foregoing 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 and FY17 goals are available on SBA’s website. This data reflects 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 shortfalls in overall small business, SDVOSB and HUBZone small business subcontracting, as well as specific agency shortfalls as to all subcontracting categories, present specific marketing opportunities for large businesses in assembling their proposal teams. For example, 15 of 24 agencies (62.5%) failed to meet the 3% SDVOSB subcontracting goal, five failed to meet the 5% SDB goal and two failed to meet the 5% WOSB goal. 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 well worth spending time reviewing this data and focusing on the ways in which you can use the data to enhance your agency-specific marketing efforts, and how to address counter-marketing efforts by your likely competitors, particularly as we approach the important fourth fiscal year quarter when agencies will be looking to enhance their FY17 goaling performance.