ECONOMY

New Move to Expand Small-Business Government Contracts, Theoretically at Least

Landing the federal government as a customer could become a whole lot more lucrative.
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The U.S. government spends about $460 billion a year on everything from staplers and office chairs to bulletproof vests and fatigues. And if two bills proposed in the House on Wednesday get a green light on Capitol Hill, small businesses will get an even bigger slice of that pie.

Representative Sam Graves (R., Mo.), chairman of the House Small Business Committee, introduced two pieces of legislation aimed at making government contracting more lucrative and more competitive for small businesses.

The Greater Opportunities for Small Business Act would raise the federal small-business contracting goal to 25 percent, from 23 percent--a hike that would increase government spending at small businesses by about $10 billion annually. Separately, the Contracting Data and Bundling Accountability Act would require greater transparency around contract bundling--that is, the practice of combining smaller contracts into a single massive contract, which can be difficult for small businesses to vie for.

"Both of these bills together go a long way to create a more level playing field for small business owners," says Barbara Kasoff, president and CEO, of Women Impacting Public Policy, an advocacy group that worked with chairman Graves on formulating the bills.

Sounds great, right? The more money going to small businesses (a.k.a., job creators), the better. But critics say the increased procurement goal may be more of a theoretical benefit to small businesses.

Missed Opportunities

"There's been talk of raising the small-business spending goal to 25 percent for years," says Lourdes Martin-Rosa, a government-contracting advisor at American Express OPEN. "I want to see them reach the 23 percent and then talk about the 25 percent, honestly."

Indeed, for the last seven years, the government has failed to meet its current 23 percent small-business spending goal. In 2012, the federal agencies nearly met the mark, as small businesses reported receipt of $89.8 billion, or 22.3 percent of the total procurement expenses for the year.

And while the government looks to be on track to hit its small-business spending goal in 2013 (the final figures should come out in July), the overall spending levels are sure to disappoint. In 2011, the government spent a total of $91.5 billion with small-business contractors, but as federal agencies looked for savings in more recent years, that number has fallen. In 2012, for instance, small businesses landed $89.8 billion in federal contract dollars while the estimate for 2013 is $83.2 billion.

Plus, the government continues to struggle to meet its procurement goals for smaller set-aside programs. The women-owned business program, for instance, has missed its goal to divvy out 5 percent of federal procurement dollars to contractors for as long as the Small Business Administration has been collecting information on federal contracts at SmallBusinessData.gov.

Future Looks Up

Still, Martin-Rosa is optimistic that the federal government will hit its overall goal in 2013, and that 2014 will be a breakout year for small contractors. After the brinkmanship on Capitol Hill last year tied up the government's purse strings and slowed the normal flow of contracts, this year should be much improved, she says.

Lawmakers' willingness to compromise, as exemplified by bipartisan spending bill and the recent deficit deal, should grease the wheels for small contractors, says Martin-Rosa. "What we're seeing is that a lot of the bottlenecks that put contract opportunities on hold are now being released," she says. "2014 is going to be a record breaking year for small business."

IMAGE: Getty Images
Last updated: Feb 26, 2014

DIANA RANSOM | Articles Editor

Diana Ransom is Inc.'s online articles editor. She has been covering the never-dull world of small business and entrepreneurship for years, at a variety of publications, including The Wall Street Journal, SmartMoney.com, the New York Daily News, Fast Company, and Entrepreneur. She lives in Brooklyn, New York.




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