Under President Biden, the federal government is taking concrete steps to up spending on contracts with small businesses. Recently, the Executive Office of the President released a memo directing agencies to move forward on this priority.

The hoped-for outcome is two-fold: (1) elevating the share of contracts to small disadvantaged businesses (“SDBs”) to 15% by 2025; and (2) increasing the baseline spending on contracts with other socioeconomic businesses (e.g., WOSBs, SDVOSBs, and HUBZones).

Before jumping into the memo’s direction to federal agencies, let’s recall what SDBs are.

Small Disadvantaged Businesses

To be an SDB, a firm need not pass a formal certification process. But it must self-certify that it meets several requirements, including:

  • One or more disadvantaged persons must own at least 51% of the firm.
  • One or more disadvantaged persons must control the firm.
  • The disadvantaged persons must be socially and economically disadvantaged, as those concepts are defined by SBA’s regulations under the 8(a) program.
  • The firm must meet the size standard (connected with the NAICS code) assigned to the procurement.

All 8(a) program participants qualify as SDBs. But a firm can still self-certify as an SDB even if it is not an 8(a) program participant if it meets all the eligibility criteria.

Initiatives to boost spending to SDBs and other small businesses

Now, let’s return to the memo. There, the administration instructs agencies to implement 5 “management actions” to achieve the increased spending thresholds.

  • Agency-specific goal negotiated with SBA. Each agency will negotiate a SDB-spending goal so that cumulatively 11% of total eligible Government contract spending in FY 2022 goes to SDBs. Again, SDBs include 8(a) companies, and 8(a) companies already receive about 10.5% of prime contract awards. Still, this 11% SDB goal reflects a significant increase beyond the current 5% goal of SDBs. SBA will also work with other offices, such as OMB and the National Economic Council, to identify possible higher spending goals for contracts with WOSBs, SDVOSBs, and HUBZone firms.
  • Review category management practices. For several years, the Government has used category management as an overall procurement strategy. This helps agencies buy goods and services falling in large categories (e.g., professional services, medical supplies, etc.) as an organized entity, rather than as numerous independent buyers. Through the memo, OMB revises guidance to agencies to better align category management practices with amplifying contract spending for small businesses.
  • Increase number of new federal contractors. Over the past two decades, the number of new small entrants to the federal marketplace has declined significantly. A recent study found that newcomers often face difficulty navigating the federal marketplace and have a hard time finding new contracting opportunities. So, the Government will take multiple steps to help new and prospective small business contractors.
  • Hold certain SES officials accountable for small business contracting goals. Senior executive service (SES) officials are the Government’s high-level managers. Now, agencies will include progress towards achievement of small business contracting goals in evaluations of SES personnel in charge of acquisitions or who oversee agency programs supported by contractors.
  • Connect agency small business offices with senior leadership. The law already provides that agencies with procurement powers must possess sustain an Office of Small and Disadvantaged Business Utilization (OSDBU). These offices act as liaisons between acquisition officials and small businesses and advise agency officials about small business issues. Now, agencies will report to SBA whether OSDBU directors have sufficient access to senior agency leadership.

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Overall, the memo’s directives seem like important steps to boosting contracts with small businesses, including SDBs. Of course, time will ultimately tell whether these steps will make an appreciable difference. If nothing else, however, that the Administration is even thinking about small businesses is a positive development for the contractor community.

If you have any questions about federal government contracting, give us a call at 913-354-2630.

Biden Administration Plans to Increase Contracting to Small Businesses was last modified: December 20th, 2021 by John Mattox