The federal government has fallen further short of its goal of awarding nearly a quarter of its contracts to small businesses, according to data released Friday by the U.S. Small Business Administration.

Federal agencies awarded 21.5% of their contracts worth just over $93 billion to small businesses in fiscal 2008, which ran from Oct. 1, 2007 through Sept. 30, 2008, falling short of its 23% goal set by law.

The report also revealed that federal agencies missed the target by a wider margin than in the previous fiscal year, when 22% of contracts worth about $83 billion were awarded to small companies. Experts who track federal contracting trends attributed the slippage to big-ticket spending on defense contracts, an arena typically dominated by large firms.

The news come as the Obama Administration earlier this week announced a new government-wide push to increase outreach efforts by federal procurement officials and other agencies to connect small businesses with government contracting opportunities.

Hit by the recession, small-business owners are eager to win Uncle Sam as a new customer, and right now there are billions of dollars of extra dollars up from grabs as contracts start to flow from the $787 billion economic-stimulus package passed five months ago.

The SBA's third annual scorecard, drawn from data supplied by 24 federal agencies, showed that the agencies missed the overall target of awarding 5% of their contracts to women-owned businesses, an additional 3% to service-disabled veteran-owned companies and further 3% to small business located in historically underutilized business zones, known as HUBZones for short.

The shortfall for women-owned businesses remained unchanged from the previous fiscal year at 1.6%. However, federal agencies made progress toward meeting targets for service-disabled veteran-owned businesses and HUBZone companies with narrower contract shortfalls of 1.5% and 0.7%, respectively.

The most positive development was in contracting awards to small "disadvantaged" businesses. Federal agencies awarded 6.8% of their contracts to small firms in this category exceeding the 5% target, and up from 6.6% during the previous fiscal year.

Determined annually in consultation with the SBA, each federal agency has a different small business contracting goal, including for specific subcategories, which when combined meet the 23% target. According to the SBA's scoreboard, only one agency, the General Services Administration, met or surpassed its goals in all areas. In contrast, two agencies, the Office of Personnel Management and USAID, met none of them. Another laggard was the Department of Defense, which was among a group of five agencies that only met or surpassed one of its five targets.

On Tuesday, Commerce Secretary Gary Locke and SBA Administrator Karen Mills announced a government-wide plan that includes federal agency procurement officials holding or participating in more than 200 events over the next 90 days to share information on government contracting opportunities, including those available under the American Recovery and Reinvestment Act.

"We have already begun taking aggressive steps to connect small businesses with contracting opportunities, as well as increase our outreach to federal agency procurement officers to make sure they get the information and tools they need to help them connect with these good, innovative small companies," said Mills.

As of early August, federal agencies had awarded about $8.1 billion in stimulus contracts, of which about $1.9 billion, or 23.4%, went to small firms.

Paul Murphy, president of Eagle Eye Publishers Inc., a market research firm that analyzes federal government contracting trends, says the new initiatives are needed: "It's critical to ensure that small businesses gain access to contracting opportunities and aren't bypassed in favor of the speed and cost-saving measures associated with awarding contracts to larger incumbents."

Finding out about contracting opportunities can be a challenge for small businesses with no prior experience. First, a business must identify which government agencies are buying what they are selling, register with them and then network with key decision makers. This can put small businesses at a disadvantage compared to larger firms that have a staff well versed in the intricacies of government contracts and can devote more time and resources to pursuing leads and crafting bid proposals, according to government-contracting consultants.

Source: The Wall Street Journal