Government awards over $154 billion in small business federal contracts. But the picture isn’t all rosy.

In 2021, the federal government awarded a record $154.2 billion in small business prime contracts. The most recent data shows that over 27% of prime contracts were awarded to small businesses.

Though there’s a lot to celebrate in the SBA’s 2021 Small Business Scorecard, persistent issues remain.

The Small Business Act sets governmentwide goals for contracting with small businesses: 23% of all prime contracts awarded by the government should go to small businesses. In addition, the Act sets a 5% goal for SDBs (including 8(a) companies) and woman-owned small businesses, and a 3% goal for service-disabled veteran-owned small businesses and HUBZone companies.

For fiscal year 2021, the government mostly met these goals. It awarded 27.2% of its prime contracts to small businesses, for a total of $154.2 billion; 11.0% of its contracts to SDBs (meeting President Biden’s recent directive), worth $62.4 billion; and 4.4% of its contracts to SDVOSBs, totaling $25.0 billion.

These are great accomplishments, and Uncle Sam should be applauded for meeting them. But unfortunately, it continues to fall short in WOSB and HUBZone contracting. In 2021, the government awarded 4.63% of its contracts to WOSBs. Though this represents $26.2 billion worth of government contracts, the governmentwide achievement fell short of its 2020 effort (under which it awarded 4.85% of its contracts to WOSBs) and its 5% WOSB contracting goal.

Once again, moreover, the federal government also failed to meet its HUBZone contracting goal. It awarded only 2.53% of contracts to HUBZone companies, for roughly $14.3 billion. By now, this failure is almost to be expected: as I said recently in Congressional testimony, the federal government has never met its HUBZone contracting goal. Still, considering that the point of the HUBZone program is to drive contracting dollars into communities that are struggling economically, the continuing failure to meet this goal should shame the government.

My recent testimony offered Congress a few ideas to increase HUBZone participation across the federal government. Among them, Congress should consider imposing a HUBZone contracting mandate for an economic development-focused agency (like the Department of Commerce or Housing and Urban Development), much as it did for SDVOSB contracting at VA. 

Unfortunately, SBA’s data also showed that the number of small business contractors continues to decline. This is nothing new. In 2019, Senator Cardin raised alarm at the decreasing number of small business federal contractors. But SBA’s latest data helps show this trend is, by-and-large, continuing:

What does this all mean? 

For small businesses, competition is fierce. Fewer and fewer businesses are competing for larger contract vehicles. This means that businesses must always bring their A-game in federal contracting—and use every competitive advantage at their disposal.

If you have questions about socioeconomic programs, please give me a call.