There’s good news and bad news when it comes to small businesses and government contracting.

First, the good news: According to the SBA’s fourth annual small business Procurement Scorecard, small businesses got a record number of federal contracting dollars in 2009. Contracting to all five categories the government measures—small businesses, women-owned businesses, businesses owned by service-disabled veteran, businesses in HUBZones (historically underutilized business zones) and small “disadvantaged” businesses—rose compared to 2008 figures.

Now, the bad news: In every category except “small disadvantaged,” the federal government fell short of its annual small business contracting goals.

Some $97 billion or nearly 22 percent of prime federal contracts awarded between October 1, 2008 and September 30, 2009, went to small businesses. That’s an increase from $93 billion in 2008, but falls some $5 billion below the 23 percent goal that was legislated in 1997.

SBA Administrator Karen Mills says, “This represents real progress, but not enough. We must reaffirm our commitment to ensuring that the 23 percent goal is met and exceeded.” This is the fourth year the scorecard has been issued, but the first time that the SBA used a letter-grade system to rate federal agencies’ performance. The grading is part of efforts to make the data more transparent.

Sixteen agencies were graded A or B, which means they either met or exceeded their goals; four agencies were graded D or F. Goals were set individually for each agency by negotiating with the SBA and were based on past performance and the number of procurement opportunities that were realistically available for small firms.

Reporting on the data, the Wall Street Journal noted that many organizations, including the U.S. Government Accountability Office, have criticized the SBA for not tracking contracts accurately, and have contended that many contracts supposedly set aside for small firms actually go to large companies posing as small ones.

Joe Jordan, the SBA’s associate administrator for government contracting and business development, told the Journal the SBA has boosted efforts to prevent fraud and correct errors. However, the American Small Business League, which has long criticized the SBA’s data, contends the problems have not been resolved. “Generally speaking, we are finding fraud and abuse at the same rate,” Christopher Gunn of the ASBL told the Journal.

Some of the agencies that got poor grades argue that the grading system does not take subcontracts—which are more likely to go to small businesses—into account. The SBA has said it will do more to unbundle big contracts into separate, smaller ones that are easier to award to small companies.

Small businesses have profited from the American Recovery and Reinvestment Act’s stimulus spending, which started in early 2009. Many of the stimulus contracts are small, making them good fits for smaller businesses. As of early August (per the SBA) 30 percent of these contracts have gone to small firms.

You can find the full scorecard and an explanation of the methodology used for grading federal agencies at the SBA’s website.

Source:  http://smallbiztrends.com/2010/09/small-businesses-federal-contracting-good-bad-news.html

For the first time since 2005, the Small Business Administration reports that the share of federal contracts going to small business increased over the previous year. But the federal government still fell short of its small-business contracting goals, and longstanding criticisms about how the government keeps score continue to cast doubt on the agency’s report card.

The Small Business Act (pdf) requires the federal government to set a governmentwide goal that 23 percent of all prime contracts go to small businesses. According to the S.B.A.’s 2009 Small Business Procurement Scorecard, released last Friday, 21.9 percent of such contract dollars, or about $97 billion, went to small businesses. That’s a small improvement over 2008, when small firms captured just 21.5 percent of federal contract dollars, a low since at least 1998.

“I’m not going to say we’re satisfied until we’ve hit the goal,” said Joe Jordan, the S.B.A.’s associate administrator for government contracting and business development. “But before I got here, numbers were below goal and going down, and we’ve made progress in every contracting category.”

Mr. Jordan credited engagement from the Obama White House for the improvement. “When you see the vice president ask cabinet secretaries how they’re doing on small business contracting, they go and ask their acquisition officers,” he said. “So small business moves to the top of the list of priorities.”

But only nine of the top 24 federal agencies reported improved performance in 2009 — and overall numbers improved only because one of those happened to be the Defense Department (pdf), which accounts for about 70 percent of all government procurement. Meanwhile, 15 of the agencies did not meet their own goals for small-business contracting (the Defense Department came close), and 11 of those actually turned in worse performances than last year. The S.B.A. negotiates separate goals with each agency, based, Mr. Jordan said, on what those agencies buy and the prevalence of small businesses in those markets.

Among the poor performers were the General Services Administration (pdf), where small-business spending rose but its share of total spending fell by nearly a third, and the Department of Housing and Urban Development (pdf), where small businesses’ total dollars and share of all contracting fell precipitously.*

Moreover, as we’ve reported previously, these tallies certainly inflate the government’s performance. For one thing, the S.B.A. does not count certain contracts as “eligible” for small business — so contracts awarded overseas, or drawn up by agencies that don’t follow the normal acquisition rules, for example, are excluded from the total, even though small businesses do sometimes win those contracts. According to data provided by procurement analyst Eagle Eye Publishers, small businesses won about 9 percent of such excluded dollars in 2008, and adding those dollars back to the total reduced the small-business share by more than 2 points. (In 2010, Eagle Eye was purchased by Bloomberg, which would not provide similar figures for 2009.)

Secondly, federal contracting records continue to describe many large businesses as recipients of small business contracts, for one reason or another. Though Mr. Jordan said, “the data in fiscal year 2009 is the cleanest it’s ever been,” the American Small Business League combed through federal records and found that 61 of the 100 businesses that won the most “small business” contracts in 2009 were actually large ones. A similar A.S.B.L. study of 2008 contracts found 60 big companies in the top 100.

Within the overall small-business goal of 23 percent are smaller goals for a handful of distinct socioeconomic groups, and the news was a bit brighter for those small businesses. The government awarded 7.6 percent of contract dollars to “small disadvantaged businesses,” according to the score card, well above the 5 percent goal and an improvement on last year’s performance.

Small businesses owned by women won 3.7 percent of contract dollars, up from 3.4 percent but still short of the 5 percent goal. Contracts to service-disabled veterans comprised 2 percent of the total, up from 1.5 percent in 2008. (The goal is 3 percent.) And the government nearly reached its goal of awarding 3 percent of contracts to small firms in distressed areas known as HUBZones — these received 2.8 percent of contracts, up from 2.3 percent last year.

*The S.B.A., incidentally, fell just short of its own small-business goal. That goal was quite high, though (67 percent), and the agency ultimately graded (pdf) itself an “A.”

Source:  http://boss.blogs.nytimes.com/2010/09/03/small-gains-for-small-business-in-federal-contracting/?emc=eta1

A record number of federal dollars went to small businesses in 2009, although the federal government once again fell short of reaching its annual goal, according to a report from the Small Business Administration.

Nearly $97 billion or 21.9% of prime federal contracts went to small firms between Oct. 1, 2008 and Sept. 30, 2009. That's up from the $93 billion that small businesses landed a year earlier, but still about $5 billion short of the 23% target established in a 1997 law.

"I think the goal is feasible for next year," said Joe Jordan, the SBA's associate administrator for government contracting and business development. The government has missed its target in recent years in part because some contracts, such as those for weapons systems or massive construction projects, are more suited to larger firms, he said.

The SBA's fourth annual scorecard, issued Friday, evaluated 24 federal agencies on contracts awarded to small companies. For the first time, the agency used a letter-grade system in an effort to bring more transparency to the data. (See a complete list of agencies and their grades.)

Sixteen agencies received letter grades of A or B, meaning that they almost met or exceeded their goals for the year.

For example, the Department of Education got an A for surpassing its target of 12.8%, hitting 16.4%, or $244 million. The Social Security Administration received a B for nearly reaching its goal of 32.53%, with 32.47%, or $403 million.

The goals were negotiated by each agency and the SBA, and were based on both past performance and the number of feasible procurement opportunities available to small businesses.

Four of the agencies received a grade of D or F, including the Department of Justice, which awarded $1.9 billion or 24.5% of its prime contracts to small businesses, far from its 36.8% goal. The Office of Personnel Management awarded $224 million, or 14%, which was less than half of its goal, and received an F.

The SBA has previously been criticized by watchdog groups and the U.S. Government Accountability Office for failing to accurately track procured contracts, and for allowing large firms and fake companies to receive small-business contracts. The SBA says it has boosted efforts in the last year to remove fraud and errors in the procurement system, Mr. Jordan said.

Still, organizations such as the American Small Business League, which issued its own report on fiscal 2009 contract recipients, maintain that many government-hired firms claiming to be small are actually large businesses.

"Generally speaking, we are finding fraud and abuse at the same rate," said Christopher Gunn, ASBL's communications director.

The SBA says it plans to do more to make federal dollars available to small businesses, including "unbundling" or separating big-business contracts into separate contracts.

A number of agencies that received low grades say many of their prime contracts are better handled by larger companies, and that the SBA's grading system should take subcontracts – which often go to small companies – into greater account.

One boost for small businesses has been the stimulus contracts that began rolling out in early 2009 as part of the $787 billion Recovery Act. Although stimulus jobs amount to only a small portion of overall government work, they are often modest in size and well-suited for small firms. Through early last month, small businesses have landed 32% of stimulus contracts, according to preliminary data.

The SBA's scorecard indicates that the government, while showing improvement over 2008, is still not meetings its targets for women-owned or service-disabled veteran-owned companies, or for small businesses located in historically underutilized business zones or HUBZones. Federal agencies did meet their goals in awarding contracts to small "disadvantaged" businesses, a category that is based on the owner's socioeconomic background.

For stimulus contracts, however, the government is meeting or exceeding its goals in all subcategories, Mr. Jordan said.

Write to Emily Maltby at emily.maltby@wsj.com

Source: http://online.wsj.com/article/SB10001424052748703882304575465972025697554.html?mod=googlenews_wsj