Government Contracts Monitor

Feds Meet FY15 Small Business Prime Contracting Goals (Except HUBZone), But Individual Agency & Overall Subcontracting Shortfalls Persist, Providing Marketing Opportunities

May 1, 2016

In anticipation of this week’s national Small Business Week (May 1-7) activities, the U.S. Small Business Administration (SBA) last Thursday announced the federal government’s Fiscal Year 2015 (FY15) small business goaling results and Small Business Procurement Scorecard. According to SBA, the federal government achieved its 23% small business contracting goal for the third straight year, awarding a record high 25.75% of federal prime contracts, totaling $90.7 billion, to small business. However, while the overall percentage was up from 24.99% last year, it should be noted that the actual dollar value awarded was down slightly from $91.3B. This achievement was accomplished through improvement in four of the five categories, including a record 10.06% ($35.4B) to Small Disadvantaged Businesses (SDBs), a record 5.05% ($17.8B) to Women-Owned Small Businesses (WOSBs) – meeting the 5% WOSB goal for the first time ever – and a record $13.8B (3.93%) in awards to Service-Disabled Veteran-Owned Small Businesses (SDVOSBs). However, the government failed again to meet its 3% goal for HUBZone small businesses. The government also failed to meet its 34.03% subcontracting goal, and actually showed a decline from 33% to 31.2%. Importantly, this data and the continuing shortfalls in various categories, both government-wide and for specific agencies, create marketing opportunities for large and small businesses alike in putting together new proposal teams and marketing to the respective agencies.

By way of background, and as you likely already know, Congress has established an annual overall small-business contracting goal of “not less than 23 percent of the total value of all prime contract awards.” Congress also has established goals of 5% for awards to each of (i) SDBs, including 8(a)s, and (ii) WOSBs, and 3% for each of (iii) SDVOSBs, and (iv) HUBZone Small Business Companies (HUBZone SBCs). Similar goals exist for subcontracting by large businesses, requiring 36% of eligible subcontracting to go to small businesses, with the same percentages as for prime contracting applicable to each of the same four sub-categories. All of these goals are minimums, which agencies are encouraged to exceed. Indeed, each year each individual agency negotiates with SBA individual agency-specific goals for the coming year, based upon the specific agency’s past performance in each category. Thus, a specific agency’s goals may be significantly higher if the agency has shown an ability to achieve higher percentages in the past.

The FY15 prime contract goaling numbers evidence the continuing emphasis on small business contracting, which is reinforced by the fact that agencies are now required to consider success in these areas in personnel evaluations, and bonus and promotion decisions, for senior agency officials. They likely also reflect the impact of the increased numbers of companies now qualifying as small, as the result of SBA’s size standards increases over the past several years.

The foregoing means that agencies across-the-board are focusing on at least maintaining, and likely increasing, their small business prime contracting, not only in the aggregate, but also in each of the relevant subcategories. In order to understand the mindset of any particular agency, it is important to analyze that agency’s goaling scorecard, and specifically the agency’s negotiated goals and past progress. Agency scorecards are available on the SBA’s website. This data reflects both the agency’s past openness to and success in contracting with the various small business communities, as well as areas in which the agency is falling short and may be particularly open to appropriate small business marketing initiatives.

Similarly, the continuing overall shortfall for small business subcontracting, and particularly the continuing shortfalls in overall small business and HUBZone small business subcontracting, as well as specific agency shortfalls as to SDB, WOSB and SDVOSB contracting, present specific marketing opportunities for large businesses in assembling their proposal teams. For example, 12 of 24 agencies (50%) failed to meet the 3% SDVOSB subcontracting goal, while six failed to meet the 5% SDB goal and two failed to meet the 5% WOSB goal. Large businesses have the opportunity to set themselves apart from their competitors by aggressively seeking out and including in their proposals outstanding small businesses that will help both them and their customer agencies increase and exceed the agencies’ respective small business subcontracting goals. This is particularly important in those RFPs in which subcontracting plans and/or past subcontracting performance are identified evaluation factors.

For large and small businesses alike, it is worth spending time reviewing this data and focusing on the ways in which you can use the data to enhance your agency-specific marketing efforts, and how to address counter-marketing efforts by your likely competitors, particularly as we approach the important fourth fiscal year quarter when agencies will be looking to enhance their FY16 goaling performance.

Attorneys

Hopewell Darneille