Small Businesses on Hunt for Awards, Dollars in Federal Market

The number of small firms doing business with the federal government dropped 44% from fiscal 2010 through fiscal 2021.

The 52,000 small business vendors who have participated in the federal market in fiscal 2022 so far is about on pace to match the 73,000 from fiscal 2021. If this year’s count surpasses last year’s, it would be the first uptick since 4% growth in 2017—the only year-over-year increase in more than a decade.

The dwindling pool of small business federal contractors belies a Biden administration push to increase the level of procurement dollars going to those vendors.

In December, President Joe Biden asked federal agencies to boost their award of contracting dollars to small-disadvantaged designated businesses and to hit 11% government-wide. The current statutory goal is 5% and Biden’s long-term goal is that 15% of federal contracts will go to small disadvantaged businesses by 2025.

Rep. Nydia Velázquez (D-N.Y.) held a Small Business Committee hearing June 14, during which she highlighted the government’s category management initiative—using consistent definitions and buying processes government-wide to save money—as an element to the decline in small company contractors.

Velázquez has called for more stand-alone contract opportunities and the creation of entry-level government-wide contracts for the smallest firms, among other proposals.

Concentration of the small business cohort in federal contracting has occurred at the same time as the number of dollars awarded to small business have grown, according to Bloomberg Government data. Federal contract dollars awarded to small businesses increased by 49% from fiscal 2012 to fiscal 2021. In fiscal 2021, small business-designated firms brought in $148.6 billion in revenue.

One avenue for small businesses to enter the federal market is the Small Business Innovation Research program (SBIR), which is up for decennial reauthorization. A US Chamber of Commerce letter to congressional leaders, signed by numerous firms, requests an extension of the program. The letter says it’s an “essential part of America’s innovative high-tech ecosystem” and warned that “even the threat of a short-term disruption” of the program “could have a severe effect on R&D-focused small businesses.”

SBIR and the corollary Small Business Technology Transfer program are set to expire September 30 if Congress doesn’t act.

The issue of “SBIR mills”—companies abusing the program—is being discussed as part of the China competition bill (H.R. 4521) and SBIR reauthorization negotiations, according to Velázquez’s office.

To contact the reporter on this story: Patty Nieberg in Washington at pnieberg@bloombergindustry.com

To contact the editors responsible for this story: Amanda H. Allen at aallen@bloombergindustry.com; Fawn Johnson at fjohnson@bloombergindustry.com