Agencies set record for small business contracting

Federal agencies awarded a record level of business to small companies in fiscal 2003, according to recently released statistics.

If accurate, these statistics are surprising and indicate a dramatic improvement in the government's efforts to encourage small business contracting, procurement analysts said Tuesday.

More than a quarter, or $62.7 billion, of the $247.1 billion federal agencies granted in prime contracts last fiscal year, went to small businesses, according to data published last week by the Small Business Administration. In contrast, small businesses garnered slightly less than 23 percent of contract dollars available in fiscal 2002.

SBA based these figures on information reported by the Federal Procurement Data Center, a branch of the General Services Administration charged with compiling contracting statistics. General Accounting Office researchers, however, have repeatedly questioned the reliability of data collected by the center.

Under federal law, the government must aim to award at least 23 percent of prime contract dollars to small businesses. "We not only exceeded those standards, but we set an all-time record, awarding a higher percentage of federal contracting dollars to America's small businesses than ever before," said SBA Administrator Hector Barreto.

Barreto attributed the government's record-setting success partly to the National Business Matchmaking Program, where SBA brings together small business owners and federal procurement specialists to discuss future contracting opportunities. To date, more than 4,000 small businesses have participated in the matchmaking program, he said.

The 2003 percentage is also high because of continued attention to the 8(a) Business Development Program, designed to assist companies owned by "socially and economically disadvantaged individuals," and the HUBZone program, meant to help businesses in "distressed urban and rural areas," Barreto said.

"I believe that our continued commitment to those programs combined with our strong efforts in other areas-such as contract unbundling-will make 2004 another banner year," Barreto stated. SBA in October 2003 finalized regulations limiting contract bundling, the process of combining two or more contracts into a large single agreement. Small businesses often have difficulty meeting a bundled contract's requirements.

Under the regulations, effective in November 2003, SBA must review bundled contracts valued at or above specified thresholds to ensure the agreements are an appropriate size. The rules require SBA to scrutinize contracts exceeding $7 million at the Defense Department, $5 million at NASA, the Energy Department and GSA and $2 million at other agencies.

These rules took effect after the close of fiscal 2003 and did not influence small business contracting statistics for that year. It's hard to predict how significant an impact the regulations will have on 2004 numbers, said Angela Styles, former head of procurement at the Office of Management and Budget. Styles left OMB in September 2003 to return to Miller & Chevalier, a Washington law firm that specializes in contract law.

To maintain and build on fiscal 2003 progress, agencies must stay focused on small business contracting, Styles said Friday. "I think the one thing that's more important than anything else is leadership and accountability," she said.

Styles added that she was pleasantly surprised to see the fiscal 2003 statistics presented by SBA. "I wasn't expecting [the levels of small business contracting reported] to be so high," she said. "But I'm thrilled that they are."

Small business contracting likely benefited from increased attention on Capitol Hill, said Molly Brogan, government affairs manager at the National Small Business Association, a group representing the interests of more than 150,000 small companies nationwide. President Bush also helped by setting an aggressive agenda, she said. "Contracting has been very important to him," she added.

Last year the House Small Business Committee held several hearings on federal agencies' role in supporting small companies. Fiscal 2003 statistics reported by the FPDC "confirm that we are making progress on a number of important fronts," said Senate Small Business Committee Chairwoman Sen. Olympia Snowe, R-Maine.

But Rep. Nydia Velazquez, D-N.Y., ranking member of the House Small Business Committee, stopped short of praising last year's record-setting statistics. "For an administration that has persistent and real credibility issues with the numbers it presents to the public . . . the recently released small business federal contracting numbers raise many questions," she said. Committee members will review the figures and will release a score card "revealing the true federal contracting climate for small business" later this year, she said.

Brogan called the reported fiscal 2003 numbers "fantastic," but said she is somewhat cautious in her praise, given concerns GAO has raised about the reliability of similar statistics.

"We continue to find that [Federal Procurement Data Center] data are inaccurate and incomplete," wrote William Woods, GAO's director of acquisition and sourcing management, in a Dec. 30, 2003 letter to OMB Director Joshua Bolten. "Although we have not fully assessed the extent of reporting errors, we have found sufficient problems to warrant concern about the current reliability of [Federal Procurement Data Center] information."

Studies by agency inspectors general show many of the errors in the database stem from "mistakes by agency contracting personnel," Woods noted. Agency officials attributed blunders to "a lack of training, high personnel turnover, the complexity of the . . . systems and frequent changes to [Federal Procurement Data Center] data entry requirements," he wrote.

October 2003 revisions to the data entry method should help reduce errors, Woods said. But these changes took place after the end of fiscal 2003.

Even if numbers entered into the data system are accurate, they may not provide a full picture of small business contracting, said Steven Schooner, a George Washington University professor specializing in procurement law. For instance, the figures reflect contracts awarded, but do not indicate whether agencies follow through on agreements to let small business complete the specific project.

Assuming the fiscal 2003 statistics reported by SBA are accurate, they are "very, very impressive," Schooner said. "It's astounding if they've done it," he said, adding that he is not sure what might account for the apparent "huge jump forward" in small business contracting.