Top Departments for Small Business Contracting Highlight Issues with Goals

Published: May 18, 2016

Acquisition ReformUSDAContract AwardsDEFENSEForecasts and SpendingHHSDHSSmall BusinessVA

The Small Business Administration (SBA) released the federal scorecards for agency performance against FY 2015 small business contracting goals at the end of April 2016. While progress is tracked on a rolling basis, these reports offer a snapshot of government-wide and department-level progress towards small business targets.

The methodology behind the calculation of eligible funds has been the subject of some controversy, since it relies heavily on prime contracts and results in the exclusion of certain types of contracts as well as entire agencies from the process. While the disconnect between the small business goals and actual awards is apparent at the government-wide level, evaluating agency performance shows how those issues permeate the federal contracting landscape. Data from the government’s Small Business Dashboard was leveraged or this analysis, offering a view that may differ slightly from the SBA’s annual assessments.   

In FY 2015, the agencies with the highest levels of small businesses spending were the Defense Department (DOD), the Department of Veterans Affairs (VA), the Department of Health and Human Services (HHS), the Department of Homeland Security (DHS), and the Department of Agriculture (USDA). These top five departments account for an average of 80 percent of the small business eligible awards from FY 2012 to 2015, with the Department of Defense averaging 64 percent of the total eligible funds for that period. Despite lower levels of investment in small businesses compared to FY 2012, DOD exceeded its targets for FY 2014 and 2015. Even though actual dollars for prime small business awards dropped between FY 2014 and 2015, the department appears to show progress against its goals. This is linked to a drop in the eligible small business funds, which reduces the overall level for the department’s small business goal from 231.3 billion in FY 2014 to 213.4 billion in FY 2015. While the goal percentage increased from 21.4 percent in FY 2014 to 21.6 in FY 2015, the lower level of eligible funds lowers the corresponding amount for the contracting goal.

It’s a steep drop off between DOD and the next highest level of small business awards. Actual small business contracting dollars at the VA saw modest growth from FY 2012 to 2015, growing from 6.2 billion to 6.3 billion and marking a 0.5 percent compound annual growth rate (CAGR). HHS, DHS, and USDA also reported growth in actual small business contracting dollars over the same period, showing levels that reflect 7.7, 6.4, and 3.3 percent CAGRs respectively. Yet, complaints that agencies misreport awards suggest that these levels may be inflated by contracting with large firms and erroneously counting the funds toward small business goals. On the surface, the small business scorecards seem to offer a clear view of improvements to small business contracting, but the numerous variables behind the metrics (e.g. exclusions from eligible funds, changing goals, reporting issues) indicate complex challenges that will be difficult to resolve without clearer strategies and increased transparency in the acquisition process.