SBA Releases 2011 Small Business Procurement Scorecard–And The News Ain’t Good

The SBA has released its 2011 Small Business Procurement Scorecard, and the news ain’t good.  The scorecard indicates that government-wide, just 21.65% of prime contract dollars went to small businesses.  The result falls well short of the government-wide 23% goal, and also represents a significant backslide from last year, in which small businesses were awarded 22.66% of contract dollars.

The SBA gives the government a “B” for its overall efforts, but I come from a family of educators, and know that a “B” is not deserved if a student is not making adequate progress.  With government-wide small business prime contract spending dipping by more than a full percentage point in the last year, the government is in for some well-deserved criticism.

Although there were a few bright spots, the government’s sub-goals also trended in the wrong direction.  Despite the implementation of the women-owned small business program, WOSB contracting dipped from 4.04% to 3.98%, more than a point shy of the 5% goal.  Small Disadvantaged Business contracting came in at 7.67%, ahead of the 5% goal, but not as strong as last year’s 7.95% result.  HUBZone contracting, too, fell significantly, down to 2.35% from 2.77% last year.  The HUBZone Program goal is 3%.

Among the four socioeconomic set-aside programs, only the service-disabled veteran-owned small business program showed improvement.  Awards to SDVOSBs amounted to 2.65%, a modest improvement from last year’s 2.5% result.  Unfortunately, even with the small improvement, the government still fell short of its 3% SDVOSB goal.

Small business subcontracting was also down slightly, from 35.4% in 2010 to 35%.  This result fell short of the 2011 35.9% goal.  Subcontracting with SDBs and SDVOSBs increased slightly, while subcontracting with WOSBs and HUBZones decreased by a small amount.  SDVOSB and HUBZone subcontracting did not meet the government-wide 3% goal.

The SBA’s press release announcing the results reads like the work of a spin doctor, trumpeting that “in FY2011 the federal government awarded more than $91.5 billion in federal contracts to small businesses,” without offering a comparison to last year.  (In case you’re wondering, the government awarded about $97.9 billion to small businesses the last time around).  Despite the focus of the press release, the government must know that this data is not good news.  In fact, a cynic might wonder whether the release of this not-so-great data on July 3, right before the Independence Day holiday, is the SBA’s version of “Take Out the Trash Day.”

The SBA should not be spinning this data in a positive light, but telling it like it is: the government not only failed to meet its goals, but took several steps backward.  Some might call this a “B” effort, but I’d mark the report card with “not making adequate progress.”

4 thoughts on “SBA Releases 2011 Small Business Procurement Scorecard–And The News Ain’t Good

  1. The drop in small business procurement can be attributed to a Federal procurement program which is quietly being implemented across all agencies. This program was specifically mentioned in a 2005 OMB memorandum which stated that it would be used to cut costs for government purchases of goods and services. That program is Strategic Sourcing.

    Strategic Sourcing is a recognized procurement procedure which has worked well in the Private Sector by saving millions for major corporations, however, this procedure may not work as well in the Public Sector.

    One aspect of Strategic Sourcing is to shrink the base of vendors in order to leverage the entity’s buying power. The displacement of a vendor is of no concern in the Private Sector, but is of concern in the Public Sector where the displacement of small businesses and the loss of sales made to the Government will result in job losses which will cause financial distress for the business and its employees who are laid-off.

    But, there is another loser…the State and Federal Governments. The loss of jobs will prompt the States to incur costs for unemployment benefits and the costs of the social safety nets, BUT the overwheming loss will be the economic loss due to jobs that have been lost. The economic loss can be quantified and at an 8% unemployment rate it is in excess of $100,000 per lost job over the next 15-20 years. The damage that has been caused by the Federal Strategic Sourcing Initiative (FSSI) will silently impact the US Economy for years to come.

    BUT, here is the main concern. The Federal government is implementing FSSI across all federal government procurements. The next victim will be the IT Small Business federal contracting community. I am doing research on Strategic Sourcing and would welcome your thoughts.

    Federal Strategic Sourcing is a “self-inflicted wound” for the US Economy and small business.

    • Professor Bornstein,

      Thank you for reading and weighing in. You bring up an excellent point about strategic sourcing and the different natures of the commercial and governmental markets. In the public sector, cost savings are not the only goal mandated by the FAR and the SBA’s regulations. In some cases, Strategic Sourcing may conflict with the goal of awarding certain percentages of contracts to small businesses and various subcategories of small businesses. Strategic Sourcing also dovetails with agencies’ budgetary pressures, something I have been hearing is leading to a greater emphasis on lowest-price technically-acceptable competitions (or a greater emphasis on price within best value competitions).

      For those who are interested in finding out more about Strategic Sourcing in the public sector, I’m pasting a link to an article below. Confirming what you said, one person in the article is quoted as saying ““While the last administration started strategic sourcing, this administration is moving ahead with strategic sourcing on steroids.”

      Thanks again for your comments.

      Steven

      http://washingtontechnology.com/articles/2010/11/04/strategic-sourcing-kempf-field.aspx

  2. This is actually GREAT news! I can’t believe it only dropped 0.06%! Considering that the new WOSB program has probably eliminated over 80% of the WOSB from participating, I would have thought that drop overall would have been far more significant. The system has been broken for WOSB contracting.

    The HUBZone program also should have dropped more since it takes 6 months to 1 year to be certified in the program, and the locations of the HUBZones changed significantly due to the 2010 census. Hopefully, once the companies new to the HUBZone areas are certified (if they can make it through the rigorous process), then that number should rise again.

    Also, I’m shocked the SDVOSB number went up considering the VA’s poor CVE system. That too is good news also that the percent went up – it’s actually quite amazing. What a relief that some SDVOSBs are finding work with the government.

    I know I sound snarky, but the decrease overall is not even remotely reflecting what our PTAC clients are telling us is their reality as small businesses with the govenrnment. This report IS actually good news.

    • Kim,

      Thanks for reading and for your comments. You raise some great points about the difficulties of certifying for WOSB, HUBZone, and SDVOSB firms (I’d add 8(a) to the list, since that certification process is also incredibly time-consuming and frustrating for many small contractors).

      Steven

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