Small firms miss out on federal deals

Critics question a new act that raises procurement goals.

By Ian Mount, FSB contributor

(FSB Magazine) -- In May, the House of Representatives passed the Small Business Fairness in Contracting Act, which would raise the government goal for small-business participation in federal procurement contracts from 23% to 30%. Time to celebrate? Probably not.

Small-business contracts have long been a victim of fuzzy math. In a December report, the Small Business Administration proudly noted that in fiscal 2005, $79.6 billion, or 25% of the $314 billion federal procurement budget, went to small businesses. Both numbers inspire raised eyebrows : The $314 billion excludes, through a litany of loopholes, about $64 billion in government contracts, even though the law specifies that the goal shall be based on "the total value of all prime contract awards for each fiscal year."

Also, according to data collected by Eagle Eye Publishers (, a Fairfax, Va., company that tracks SBA numbers, the $79.6 billion figure includes at least $3 billion that went to divisions and subsidiaries of large corporations. So the small-business take falls to just 20%.

The new act does propose closing some accounting loopholes, but it continues to count many large-business contracts as "small" until 2012. Even the sponsor of the act, Representative Bruce Braley (D-Iowa) concedes that "until federal agencies take contracting goals seriously, nothing will change for the better." The bill now goes to the Senate.

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