OMB Increases Small Disadvantaged Business Contracting Goal for FY 2023

Published: October 13, 2022

Federal Market AnalysisContracting TrendsOMBPolicy and LegislationProcurementSBASpending Trends

Last week, OMB announced a new target of 12% for the percentage of federal contracting dollars slated for small disadvantaged businesses (SDB) in FY 2023.

In a memo to the heads of federal departments and agencies, OMB raised the SDB goal for federal prime contracts from 11% in FY 2022 to 12% in FY 2023. The ultimate Biden Administration goal is to increase contracting to SDBs to 15% by FY 2025.

To register as an SDB, a company must be 51% or more owned and controlled by one or more disadvantaged persons.  Person(s) must be socially disadvantaged and economically disadvantaged. Additionally, the firm must be small according to the Small Business Administration’s size standards.

According to OMB, increasing the share of contract dollars awarded to SDBs supports a more “dynamic and resilient supplier base and creates opportunities for entities owned by underrepresented individuals.”

Agencies continue to make progress in awarding contracts to SDBs. In FY 2021, agencies awarded $62.4B to SDBs, totaling 11.01% of all federal prime contract dollars and exceeding that year’s goal of 5%. The chart below shows the percentage of SDB awards achieved against the goals for each year.  FY 2022 totals are not yet available. 

In June of 2022, OMB released a memo providing agencies with strategies for meeting SDB goals and striving to increase SDB contracting year-over-year to reach the ultimate goal of 15% in total contracted dollars by FY 2025. Strategies offered by OMB include the following:

  • Use both existing and open market contracts to reach a mix of new entrants and seasoned 8(a) and other SDBs.
  • Review acquisitions under the Simplified Acquisition Threshold (SAT).
  • Take advantage of GSA’s new 8(a) STARS III government-wide acquisition contract.
  • Review SBA’s 8(a) no-contracts list of eligible firms.
  • Use 8(a) sole-source authority, or seek approvals from SBA to run competitions among 8(a) firms, for contracts below the 8(a) competitive threshold.
  • Leverage an 8(a) contractor for a construction project.
  • Consider software development requirements that might be suitable for the 8(a) program.
  • Maximize opportunities for SDBs when using the GSA’s Federal Supply Schedule (FSS) program.
  • Use the category management Quick Decision Dashboard and the Small Business Dashboard to quickly identify the existing contracts that provide access to SDB contractors.
  • Search SBA’s DSBS.gov by NAICS to find ready and willing SDB firms to meet requirements.
  • Consider Women-Owned Small Business (WOSB) set-asides or HUBZone set-asides.
  • Use innovative buying practices, such as those showcased on the Periodic Table of Acquisition Innovations.
  • Work with SBA’s Procurement Center Representatives.
  • Proactively use the “Acquisition 360” survey & meet with new SDBs.

Agencies may face budget challenges in meeting new SDB goals due to the current state of appropriations. Because agencies are operating under a Continuing Resolution for FY 2023, they are not able to start new projects, making it difficult to award new contracts, even to SDBs. With the uncertainty regarding the timing of final FY 2023 appropriations, meeting new SDB goals may prove difficult.  

Federal SDB contractors should position themselves within the federal government’s strategies above to award a higher percentage of contract dollars to them over the next several years. SDBs should also plan for increased federal business and tactics to scale their business to meet demand. Large contractors should align themselves with SDBs to position themselves for subcontracts on procurements slated as SDB set-asides.