It's an important question for small businesses. As Independent Street reminds us, and as we noted when we reported that the federal government had failed to fulfill its legal contracting obligations, 23% of all federal contracts are supposed to go to small businesses. Now, not all of these small businesses are small: depending on the industry, such a company can pull in as much as $15 million a year, for example. But it's an important issue. In fact, there's one group--the American Small Business League--that exists more or less solely to try to force the goverment to follow its own rules.

Given that fixed 23% figure, as goes the total number of contracts, so should go the number that are thrown to small businesses. So the question is: is that number poised to rise or to fall with the dawning of a new year, the deepening of a recession, and, of course, the introduction of a Democratic presidential administration? You'd be surprised how two-way the argument is.

On the one hand, Democrats generally like to spend more, and Obama has proposed a $825 billion stimulus plan--just at the outset--that includes hundreds of billions of dollars to be doled out to and spent on the promotion of "green jobs," the construction of new infrastructure, and other vast projects (including, importantly, money to the states). The economic philosophy of John Maynard Keynes is never more in vogue during recessions, so look for continued stimulus spending ultimately targeted towards increasing consumer demand over the next year and beyond.

On the other hand, as this great post on washingtonpost.com (our sister site) makes clear, in recent years federal contracts have ballooned, likely beyond where they should have--this is due to inefficiencies and waste--and Obama has come in promising to trim the federal government's fat. In the previous fiscal year, federal contracts amounted to $532 billion; compare that to the then-record $465 billion in only the previous fiscal year, much less to the $13 billion thirty years ago.

Moreover, the department of the federal government that quite possibly accounts for the plurality of this waste is the Pentagon--among the only departments that are actually potential candidates for less funding and contracting during a typical Democratic administration.

So you can see that a plausible case can be made either way: federal contracts truly could go up or down, and small businesses' share with them. Ideally, you would probably see an overall increase, coaxed by wisely targeted stimulus dollars and tempered by cuts where taxpayer money is being spent imprudently and wastefully.

Of course, another way to increase small business contracts is to ensure, no matter the total in federal contracts, that small businesses are getting their fair--and legally mandated--share. Surely Republicans and Democrats alike can get behind obeying the law.

Source:  http://bizbox.slate.com/blog/2009/01/will_federal_contracting_dolla.php