Geography of Small Business Contracts: Where Federal Procurement Dollars are Awarded to Small Businesses

This report reviews state-level data on the volume of federal contract dollars awarded to businesses, particularly to small businesses, for fiscal years 1997-2023. Overall, the geographic distribution of small business contract dollars has been fairly consistent for the past 30 years, with certain states perennially among the top recipients of small business contract dollars. With some exceptions, states with relatively more people, businesses, and economic activity—and relatively higher levels of state GDP—are states that have received the most federal contract dollars, and/or small business contract dollars. These states include large states (by population) such as California, Florida, New York, and Texas. The per capita contract award values for the largest population states indicate that their awards were not disproportionately high relative to their populations. Certain states have relatively smaller economies and received a comparatively large share of dollars relative to their economic size. These states include those with proximity to federal government headquarters in the District of Columbia as well as those with proximity to major defense facilities. For example, Virginia received almost twice as many federal contract dollars as California in FY2023. Also, because defense-related contract spending typically constitutes around 60% of overall federal contract spending, places that receive more defense contracts—such as the locations with permanent military installations—are generally top contract recipients. States that have historically had neither the nation’s highest levels of population nor state GDP activity but nevertheless received top shares of federal contract dollars include Alabama, Arizona, Connecticut, DC, Maryland, Missouri, and Virginia. The shares of federal contract dollars in these states account from around 5% to nearly 15% of annual state GDP. States that have consistently had the highest ratios of federal contract spending to state economic output, although they were not among the top recipients of contract dollars, include Alaska, Alabama, Kentucky, Mississippi, and New Mexico. Historical data show that all states generally saw surges in contract dollars (in real terms) following the September 11 attacks of 2001. Post-9/11 policies yielded substantial procurement policy changes, which are reflected in contract award data from FY2001 onward. Contract award dollars increased in real terms across states, with certain states experiencing growth of over 200% in small business award dollars between FY2001-FY2010. With some exceptions, decreases in real contract dollars occurred in the years 2010-2013—potentially reflecting enactment of the Budget Control Act of 2011 (P.L. 112-25) and reduced appropriations—before they generally increased again.