September 9, 2005

Small business market share fell in 2004; as usual, accuracy of the official figures is in dispute.

Small businesses won 23.1% of federal prime contract dollars in fiscal 2004, down slightly from the year before, and the market shares for small disadvantaged businesses, 8(a) firms and woman-owned businesses also slipped, according to the Federal Procurement Data Center.

The official figures show the government barely exceeded the 23% goal set by Congress for the second straight year, but many critics contend the report overstates small business awards. In 2003 the Data Center said 23.6% of dollars went to small firms.

"The report shows that the government not only matched its own statutory goal, but it broke records by awarding more contracting dollars to America's small businesses than ever before," said SBA Administrator Hector Barreto. "However, we can still do better. While the federal government reached its goal, I believe it still has room to improve in allowing small business to compete for additional contracting dollars."

Small firms were awarded $69 billion in prime contracts, the report said.

According to the report, SDBs received 6.2% of the dollars, down from 7% the year before, but still above the government's 5% goal. The share going to 8(a) firms was 2.8%, down from 3.6%. Woman-owned businesses claimed 3%, down from 3.2% in 2003, and below the 5% goal.

HUBZone firms increased their share to 1.6%, up from 1% the previous year, but below the goal of 3%. Firms owned by service-disabled veterans approximately doubled their market share to 0.4%, till far from the 3% goal.

Critics inside and outside the government have long dismissed the official totals as inaccurate. Lloyd Chapman, president of the American Small Business League, said the figures "included billions in awards to Fortune 1000 firms and other large businesses in their small business statistics."

"The overall number of small business contracts continues to be inflated due to agencies' practice of miscoding large businesses as small contractors," said Rep. Nydia Velazquez (D-NY), ranking Democrat on the House Small Business Committee. "... Given the current figures and practices, regardless of all the Bush administration's rosy rhetoric, the reality is that small businesses continue to struggle to receive fair treatment in the federal marketplace."

The official figures do not include large agencies such as the Federal Aviation Administration and the Transportation Security Administration, nor contracts awarded overseas or those awarded to Federal Prison Industries and the Javits-Wagner-O'Day Program for disabled workers. The count also excludes most purchases under $25,000.

GSA installed a new Federal Procurement Data System-Next Generation in 2005 in an effort to improve its data collection and analysis.

Highlights of the report:

* Among cabinet-level agencies, the Department of Housing and Urban Development was the friendliest to small businesses, awarding 72.5% of its dollars to those firms. HUD also led in awards to 8(a), SDB and woman-owned companies. (See table, below.)

* The Energy Department again ranked last, awarding 4.2% of its dollars to small firms. More than 80% of Energy's procurement budget goes to the large prime contractors that run its installations; the department has sought legislation to count their subcontracts toward its small business goals.

* The Defense Department, which accounts for around 70% of federal procurement, awarded 22.3% of its dollars to small businesses.

Small Business Contracting

Percentage of dollars in 2004 prime contracts worth more than $25,000

                            All
                    Small   SDB    8(a)    HUBZ    Women    SDV

                    23.1%   18.6%  18.6%   18.6%   18.6%   <0.1%

All Agencies        23.1%    6.2%   2.8%    1.6%    3.0%    0.4%
Agriculture         49.0     8.9    4.0     8.1     6.2     0.5
Commerce            53.3    18.6    4.8     3.4    13.9     0.6
Defense             22.3     5.7    2.7     1.5     2.7     0.3
Education            6.7     2.0    0.4     0.3     1.2     0.3
Energy               4.2     1.4    1.0     0.1     0.6    <0.1
EPA                 29.5    13.6    5.5     0.7     3.3    <0.1
GSA                 42.3     6.4    3.3     2.2     3.6     0.6
HHS                 29.6     9.1    3.0     1.6     5.6     0.5
Homeland Security   38.5     9.5    5.1     2.3     7.0     0.5
HUD                 72.5    39.7   16.8     4.8    30.2     1.2
Interior            55.4    18.2    7.9     7.8     9.4     0.7
Justice             32.8     6.6    1.7     1.8     3.7     0.4
Labor               35.0    12.1    1.9     1.9     6.9     0.9
NASA                14.5     5.9    2.3     0.8     2.3     0.4
OPM                 16.7     2.0    0.1     0.1     8.9     0.5
SBA                 59.1    38.6   13.8     2.2    10.9     0.0
Social Security     43.5    12.7   11.7     3.0     5.5     0.3
State               50.6    20.1    2.9     3.9     6.4     3.3
Transportation      43.1    15.6    8.1     3.3     3.8     0.9
Treasury            29.1     8.3    1.7     0.8     4.9     0.1
VA                  26.7     8.6    5.1     3.1     3.6     1.4