Big Competition

Small business gains pale as focus shifts to large-scale contracts.

In fiscal 2008, much of the focus on small business contracting centered on specific segments of that community. Battles over implementing the women-owned small business contracting

program-which would help federal agencies award 5 percent of contracting dollars to these firms-raged on, courts addressed the constitutionality of the 8(a) program for minority-owned, economically disabled small businesses, and the government began trying to prioritize procurement goals for small business groups.

According to data compiled by Eagle Eye Publishers Inc., federal spending with small business increased by more than $10 billion from fiscal 2007 to 2008. But the 12 percent jump lags behind the total federal procurement spending increase of 18 percent. While small business contracts are on the rise, these firms are capturing a smaller piece of the pie at a time when spending is ballooning.

A number of industry groups and research firms say small businesses are unable to keep up with spending increases because such a large percentage of procurement involves multiple award agreements, such as the General Services Administration's schedules of governmentwide acquisition contracts. Some multiple award contracts are tailored for small businesses, but critics believe the general trend toward these large-scale agreements limits competition and excludes small firms. As spending under these vehicles accelerates, they will become even more important to small businesses hoping to break into the federal marketplace

As the early indicators of a recession began to affect companies, small firms turned to the government for help accessing credit and low-interest loans. Congress and the Small Business Administration turned their attention to cross-industry assistance, forcing them to leave behind small business contracting reforms that were already struggling. The large-scale initiatives that dominated fiscal 2007 largely waned, and concerns about the constitutionality of race and gender-based procurement programs came to the forefront of the debate.

SBA has been stalling on the implementation of the women's small-business procurement program for years, and this year it teamed with the Justice Department to say additional research was needed to ensure the program could withstand constitutional scrutiny. Originally dismissed by critics as yet another foot-dragging maneuver, their concerns might have been legitimized in November by an appellate court decision that determined the Defense Department's price preference program for 8(a) firms was unconstitutional. Legal opinions on the ramifications of this decision differ widely, but some agencies are working with Justice to review existing programs to ensure they can withstand legal challenges.

SBA says it improved tracking and transparency in reporting its fiscal 2007 contracting data, but small business advocacy groups remain skeptical. The American Small Business League, in particular, says SBA's failure to accurately track and honestly report small business contracting figures is allowing large firms to capture procurement dollars meant for up-and-coming companies. This debate, like so many others involving federal opportunities for small firms, seems to be perennial. Priorities for the small business community remain stable, but the procurement environment is changing. Advocates acknowledge that tone and tactics are likely to shift and small companies will have to stay nimble to guarantee their fair share of the opportunities ahead.