Tap Into the 5% Of Federal Contracting Dollars Allocated to Small Businesses
March 2, 2022
The federal government currently aims to award 5% of all federal contracting dollars each year to small, disadvantaged businesses, including those that are part of the 8(a) Business Development program. This amount will be increasing in the coming years, as the Biden administration has announced a greater commitment to federal spending with small, underserved businesses. Learn why large and midsize contractors are partnering with 8(a) companies, and how your business can find small firms with unique capabilities.
What is the current monetary value of 8(a) contracts?
As of January 12, 2022, the total for 8(a) set-asides in recent years is $95.3 billion (FY 2017 – 2021). The Department of Defense leads the pack of 8(a) funding agencies at $53 billion for FY 2017 – 2021 – not surprising, given DOD’s position as overall top funding agency.
Given the Biden administration’s stated commitment to increasing contracting dollars going to small, disadvantaged businesses, we can expect these numbers will likely grow further in the coming years.
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How is the Biden administration investing in 8(a) contracts?
The Biden administration announced in June 2021 that it would work to increase the share of contracts going to small, disadvantaged businesses (SDBs) by 50% by 2025. This is projected to amount to an additional $100 billion going to SDBs, which will certainly impact the 8(a) program.
At the beginning of December 2021, the White House made an additional announcement of “a set of reforms to the federal procurement process to help meet the President’s ambitious target of increasing the share of federal contracts to SDBs, advance the President’s Management Agenda, and increase opportunity for all underserved businesses.” These include asking agencies to increase their goals so governmentwide spending results in 11% of contracting dollars going to SDBs (the current goal is 5%).
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Are 8(a) contracts still relevant to larger businesses?
To participate in the 8(a) program, a business must meet a number of criteria, including being at least 51% owned and controlled by U.S. citizens who are socially and economically disadvantaged, having a personal net worth of $750,000 or less and an adjusted gross income of $350,000 or less, and having assets totaling $6 million or less.
But even if your business doesn’t qualify for the program, midsize and larger businesses will still want to track 8(a) opportunities:
- Partnering with 8(a) businesses. “As a big or midsize company, I’m interested in the amount of work that’s being set aside for 8(a)s, because they may need a partner, and my company wants to be that partner,” said Paul Murphy, senior data analyst at Bloomberg Government. For any contract that’s designated 8(a), as long as the 8(a) company itself is doing more than 50% of the work, it can team up with additional companies to share the contract work.
- Researching potential acquisitions. Though not all 8(a) companies are necessarily targets for acquisition, some certainly are. Tracking 8(a) companies and contracts, and even partnering with the companies, offers larger businesses the opportunity to build relationships and identify potential targets for acquisition. You can see this in action via our Contracts Intelligence tool. If you apply an 8(a) filter to “vendor socioeconomic indicators,” and then select “other than small business” in the “Contracting Officer’s Determination of Business Size” field, you’ll see familiar large contractors listed as “Parent Vendors,” likely because they acquired the 8(a) business that was the performing vendor.
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