The House Small Business Committee stated at a hearing on March 5 that preliminary data suggests the federal government met the goal of awarding 23% of prime contracts to small business in FY 2013. This is the first time the government has done so in the past decade.
As we previously reported, according to SBA’s annual procurement scorecard the government awarded 22.5% ($89.9 billion) of prime contracting dollars to small businesses in FY 2012. The government awarded 21.65% of prime contracting dollars to small businesses in FY 2011.
The purpose of the March 5th hearing was to discuss several recent bills seeking to expand small businesses’ access to federal contracting dollars. One of those bills, the Greater Opportunities for Small Business Act (H.R. 4093), sponsored by Sam Graves (R-Mo.), Chairman of the House Small Business Committee, would increase the small business prime contracting goal to 25% and the small business contracting goal from 36% to 40%.
Interestingly, one of TAPE’s primes reported that a recent procurement they were competing on had a 65% small business requirement!
As always, this is seemingly a good thing for small business, but could be problematic. For example, will the contracting officers enforce this larger standard, and how will the actual percentages be established? It’s likely that large businesses are going to take more business to task order contracts, or even add to existing contracts, rather than steer new work to new contracts that will have bigger set-asides.
Another potential issue will be pass-throughs (charges that primes levy on top of the regular billings from subs). Currently, some large businesses are pretty efficient about “subcontractor handling.” If this new legislation causes the large businesses to perceive it’s affecting profitability, the large businesses could simply make the pass-though higher to equalize the profit. What this does is increase profitability for the prime, but really lowers the amount subs can hire people at because the rates are lowered to the sub (to allow for the higher pass-through).
In general, making the 23% goal is a monumental achievement. The goal had not been met for a decade, and the Administration is to be praised for the concerted effort that went into getting there. Good news, for sure.