An Overview of Small Business Contracting

Congress has broad authority to impact the federal procurement process and how agencies purchase goods and services from private sector firms. One way in which Congress has exercised this authority is by adopting measures to promote contracts and subcontracts with “small businesses.” This report discusses federal contracting preferences for firms that meet the Small Business Administration’s definition of “small.” It also provides information on statutory and regulatory requirements for agencies to award contracts to small businesses, as well as federal assistance for small business owners seeking government contracts. Small business contracting policies and programs respond to the congressional directive to ensure that a “fair proportion” of federal contract and subcontract dollars is awarded to small businesses. Congress established government-wide goals for the percentage of federal contract and subcontract dollars awarded to small businesses each fiscal year. The Small Business Administration (SBA) negotiates small business procurement goals with each federal agency, negotiating agency-specific goals that collectively add up to the government-wide goals in statute. The SBA publishes annual Small Business Procurement Scorecards and the System for Awards Management (SAM.gov) posts an annual Small Business Goaling Report, which measure goal achievement. There are procurement goals for both prime and subcontract dollars for small businesses, small businesses owned by socially and economically disadvantaged individuals (SDBs), women-owned small businesses (WOSBs), small businesses located within a HUBZone, and service-disabled veteran-owned small businesses (SDVOSBs). In recent years, the government has generally succeeded in meeting the government-wide goals for awards made to small businesses, SDBs, and SDVOSBs. It has also met its subcontracting goals for small businesses and WOSBs. It has had difficulty meeting the WOSB and HUBZone prime contracting goals. A collection of laws and regulations underpin small business contracting efforts. In order to facilitate contracting opportunities for small businesses, Congress has authorized federal agencies, under specified circumstances, to set aside contracts exclusively for small businesses; authorized federal agencies to make sole-source awards to small businesses; and authorized federal agencies to set aside contracts for, or grant other contracting preferences to, the four types of small businesses for which there are small business procurement goals: SDBs, SDVOSBs, WOSBs, and HUBZone firms. Congress tasks the SBA and agency procurement personnel with reviewing and structuring proposed procurements to maximize opportunities for small business participation. Also supporting small businesses in the federal market are technical assistance providers, small business contractor mentor-protégé programs, and subcontracting policies and regulations. Observers may judge the relative success or failure of federal efforts to create small business contracting opportunities by whether the government and individual agencies meet small business procurement goals. The publication of goal attainment data and SBA Procurement Scorecards offer an accessible way to examine the level of small business contracting each year, but may focus reviewers on readily measured information (dollars awarded) rather than broader assessments of the effectiveness of contracting programs and policies. Moreover, the procurement goals themselves may not reflect overall policy aims, because of how they are expressed by monetary value, and/or because of how high or low they are relative to the availability of small suppliers. Other valuable information might include measures of market diversification, competitiveness, or concentration. Contemporary issues of interest to congress include regulatory initiatives and defense acquisition reform legislation.