Small Business Concerns Outlined in GAO’s Review of Category Management

Key Takeaways:

• The GAO assessed OMB’s category management initiative, particularly the program’s requirements, data analysis and reporting, and small business impact.
• Among its findings, the GAO identified OMB’s ill focus on category management requirements definition, agency challenges in analyzing data, and limited small business participation in the initiative.
• The new administration’s small business priorities adjoins with GAO’s recommendations to improve small business participation in category management.

Defined by the GAO as “an acquisition approach intended to help the federal government better manage categories of spending for commonly purchased products and services,” category management seeks to transform government buying practices. Deployed in 2016, the category management initiative directs agencies to buy like a single enterprise in ten common areas of spend, claiming $27.3B in savings from FY 2017 to 2019.  

In November 2020, the federal watchdog issued a report assessing category management, with a focus on agencies’ requirements definition, data analysis and reporting, and small business participation. The 82-page report outlines three central findings in its assessment:

OMB’s Overarching Category Management Guidance Focuses on Contracting Processes Much More than Requirements Definition

In 2019, OMB issued an overarching guidance document to agencies on the category management process. The GAO found the guidance lacked how agencies should define requirements before deciding to award a contract. Rather, the guidance directs agencies to justify contract acquisition strategies and training plans. Requirements definition is vital to standardizing category management efforts, particularly in the acquisition of services.

Poor Data Hinders Agencies’ Efforts to Implement Category Management and Realize the Initiative’s Benefits

Category management requires agencies, particularly Senior Accountability Officials (SAOs), to collect, analyze and share prices-paid data and spending data to help improve the federal government’s ability to buy as a single enterprise. However, SAOs reported challenges in data collection and analysis in successfully implementing category management. The challenges stem from lack of agency access to granular data to facilitate spending analysis, and an absence of government-wide solutions to coordinate spending and prices-paid data.

Obligations to Small Businesses Have Increased, but Fewer Businesses are Winning Contracts, Spurring Continued Concerns

Under category management, OMB establishes category-specific small business goals, varying by category and year based on federal stakeholder input. Overall, federal agencies met or exceeded category management’s overall 30% small business goal yet fell short in certain categories including IT, from FY 2017 to 2019. Moreover, the GAO found that small business obligations grew from $80B in FY 2016 to $90B in FY 2019. Despite this growth, however, the overall number of small business vendors receiving awards for common products and services declined from 95,000 businesses in FY 2016 to 79,000 in FY 2019. GAO attributes to decline to 1.) The lack of scalability for small businesses to compete in larger consolidated purchases in category management, 2.) Time consuming certification processes required under higher tier contracts, and 3.) Lack of publicly available information about on-off ramp opportunities within existing best in class contracts.

As a result, the GAO recommended OMB deviate from its one-size fits all category management training courses and approve tailored training for personnel responsible for small business matters. Additionally, the GAO suggested improvements to OMB’s reporting on potentially duplicative contract reductions, which obscures impact on small businesses and to instead, strengthen the methodology between category management actions and number of contracts eliminated while identifying the time frame covered by such data.

Small business limitations found under the category management initiative are perhaps the tip of the iceberg in challenges faced by small vendors doing business with the government. The GAO’s findings and recommendations reveal long-standing concerns by small businesses, fueling some of the small business priorities already vocalized by the Biden administration, including but not limited to:

• Implementing a small business contracting strategy centered on formula-based awards, small business outreach and counseling and contract award transparency
• $400B under the “Build Back Better” economic recovery plan to support small businesses and address inequalities in federal contracting
• Expanding and emphasizing small business programs supporting woman and minority-owned businesses
• Launching a new Federal Procurement Center to help minority-owned firms apply for and win federal contracts
• Conducting a government-wide review of existing contract bundles to ensure small business participation at federal and state levels

Overall, the GAO made ten recommendations to OMB to “increase emphasis on requirements, lead efforts to address data challenges, and improve training for small business personnel.” OMB concurred with the recommendations, acknowledging room for improvement to strengthen the category management initiative.