DOD, VA, DHS Moving In The Wrong Direction: A Closer Look At The 2011 SBA Small Business Scorecard

The Department of Defense, Department of Veterans Affairs, and Department of Homeland Security, among other federal procuring agencies, awarded smaller percentages of contracts to small businesses in 2011 than in the previous year, according to the 2011 SBA Small Business Procurement Scorecard.

Fewer small business awards by major procuring agencies was an important contributing factor to the government’s overall drop in small business contracting, off more than $6 billion from last year.  Although most of the news was grim, a handful of agencies continue to demonstrate a strong commitment to small business, while others improved their results from 2010–though still have a ways to go.

First, the bad news.  The Department of Defense, by far the largest procuring agency, saw small business awards drop from 20.94% in 2010 to 19.8% in 2011.  In dollar terms, DoD small business awards fell from $61.12 billion in 2010 to $57.4 billion in 2011.

DoD was not alone in regressing from 2010 levels.  The Department of Homeland Security awarded 29.07% of contract dollars to small businesses in 2011–a laudable number, until one considers that DHS had awarded 32.38% of its contract dollars to small businesses the previous year.  In dollar terms, awards fell from $4.8 billion to $4.5 billion.  To me, the SBA’s award of an “A” grade to DHS, despite its regression–and failure to hit its 2011 goal of 33.5%–shows that something is amiss with the SBA’s grading system.

The VA, too, took a step backward.  In 2011, the VA awarded 33.66% of contracts to small businesses.  Again, it sounds good, until one recalls that the VA awarded 37.35% of its contracts to small businesses the prior year.

The VA also regressed in terms of awards to a key constituency: service-disabled veteran-owned small businesses.  VA awards to SDVOSBs amounted to 18.22% in 2011, down from 20.05% the prior year.  VA subcontract awards to SDVOSBs constituted just 0.2% of subcontract dollars, far short of the VA’s 3% goal.  I wonder whether the VA’s backsliding on awards to SDVOSBs will give greater urgency to Aldevra and other SDVOSBs angry about the VA’s contracting practices with respect to SDVOSBs.

The DoD, DHS, and VA were not alone in regressing from their 2010 small business contracting achievements, but they were the most notable.  Agencies improving their small business awards in 2011 included USAID, Commerce, Education, HHS, HUD, Interior, Transportation, Treasury, GSA, and NASA (though it should be noted that not all of these agencies met the government-wide 23% goal).  The USDA slipped slightly, but still awarded more than 50% of its contract dollars to small businesses, justifying the “A” it received from the SBA.

Despite these bright spots, 2011 was a rather dark year for small government contractors.  In order for 2012 to be better, major procuring agencies–particularly DoD–will have to improve.  In my view, DoD should be embarrassed by its failure to award even 20% of prime contract dollars to small businesses in 2011.  Let’s hope things get better in 2012.

5 thoughts on “DOD, VA, DHS Moving In The Wrong Direction: A Closer Look At The 2011 SBA Small Business Scorecard

  1. The major problem that I see is the large businesses setting up shell or front companies and winning the small business set aside contracts and the small businesses are not getting any of the work. With the massive size of the awards it is skewing what is actually being awarded to “real” small businesses.

    • Sue,

      Thank you for the comment. There is no doubt that some large businesses are playing the “pass-through” game. I’ve written about it in a couple of previous posts, involving a Pennsylvania DOT DBE fraud conviction, and an Ohio DOT DBE fraud settlement. I hope that cases like this are rare, but as the headlines show, they do exist.

      I agree that larger-value awards are hurting small business awards. Increased award size is also a reason why many small businesses believe that they must team with other companies in order to succeed.

      Thank you again for the comment.

      Steven

  2. Would you be in favor of the government NOT spending as many tax dollars in small business set asides IF they are getting more value for the dollars? In other words, are you saying it is better for the government to spend a million dollars on a small business set aside contract, when a larger company’s bid was $100,000 less?

    • Mike,

      Thanks for weighing in. I am in favor of the government reaching its 23% small business goal. Small businesses can provide great value in many cases, but the reason the set-aside programs exist is because without them, smalls would often not be able to compete effectively against their larger competitors, whether that be on price or other factors. I respect your position in this time of budgetary difficulties, but Congress has set forth a 23% small business goal with the understanding that reaching the goal might sometimes require agencies to deviate from what is the best value for the government, dollar-for-dollar. I support that policy, but recognize that others may have a different opinion.

      Thanks again for contributing.

      Steven

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