WASHINGTON — The U.S. government has missed its small-business contracting goal every year in the past decade, a sign of the continuing barriers facing companies competing with larger rivals for federal work.
The government has a target of awarding 23 percent of eligible prime, or direct, contracts to small businesses. It awarded 21.8 percent of $423 billion in such awards in the fiscal year that ended Sept. 30. The Pentagon, which represents more than two-thirds of all prime contract revenue, has also missed its goal for 10 years, according to federal procurement data.
The shortfalls have spanned both Republican and Democratic administrations, which have prodded officials to boost small- business awards. President Obama’s Office of Management and Budget told agencies in a February 2011 memo that their underachievement deprives taxpayers and “takes away opportunities for small businesses to create jobs and drive the economy forward.”
The government’s track record is “a real eye-opener,” said Robert Burton, former acting administrator of the Office of Federal Procurement Policy and now a partner at the law firm Venable LLP in Washington. “As goes the Department of Defense, goes the rest of the agencies. If DoD doesn’t make it, probably the rest of the government isn’t going to make it.”
Agencies may be reluctant to take chances on small businesses, defined by the government as having fewer than 500 employees or less than $7 million in average annual sales. They generally don’t have the performance records of large corporations that are “known quantities,” Burton said.
“I’m convinced that if the government wanted to meet the goal, they could do it, but I don’t know that the government really wants to do it,” he said.
The Small Business Administration is working with agencies to help them meet their goals, John Shoraka, a SBA acting associate administrator, said in an e-mail.
“The goal is to make the goal,” Shoraka said. “Twenty-three percent is within reach, and the SBA thinks it should be the government’s objective to meet that goal.”
The federal government has “lofty goals,” said Steve Westerlund, president of Aquasis Services, a small business in Pensacola, Fla., that collapsed after doing work for the Department of Defense for 27 years. “But nothing ever happens.”
Westerlund said his company did “the non-sexy stuff,” which included delivering mail, maintaining laundry equipment in military dormitories, and providing administrative support for Naval flight training at Whiting Field near Pensacola.
His military contracting officer told him in September 2009 that 30 of his 100 employees were being converted from contractors to federal workers, as part of a government effort to outsource less of the work, he said. Westerlund’s company had about $4.5 million in annual revenue at the time.
“I couldn’t believe it,” he said. “I knew that was the beginning of the end.”
Westerlund lost his remaining employees the following year and had to close his business. He said he’s now living off savings and still looking for federal contracting work.
It’s getting harder to win federal awards, said Annette Wright, president of Toledo, Ohio-based Unity Cable Technologies Inc., which has done work for the Pentagon and the Department of Homeland Security.
Wright started her company in 1994 as a wireless cable and electrical product supplier. She said she once had three employees, and that she now can’t afford to support anyone besides herself.
“I can’t pay anybody if I’m not winning contracts,” Wright said. “I will bid on supplying blankets these days if I can find them and be competitive on it.”
Small business contract winners such as Jeanne Peck, president of Nash Locke, a McLean, Va.-based technology company, said they’re not surprised by the government’s poor showing.
“I don’t want to sound like sour grapes, but I think people are comfortable doing business with people and companies they know,” Peck said. “Most little companies don’t have three or four years to mess around building brand new relationships. It is very hard to stay alive.”
Peck’s company won its first direct contract in September, when the Army Corps of Engineers awarded Nash Locke a $52,800 order to manage a technology project, according to the government’s federal procurement database.
The company had been a subcontractor for the Pentagon and Department of Education for four years, which she said helped keep her business afloat as she tried to persuade the government to give her that first direct contract.
Some members of Congress want to boost the government’s goal and penalize agencies.
Rep. Sam Graves, R-Mo., in January introduced a bill, HR 3850, that would lift the target to 25 percent and withhold the bonuses of senior agency executives if their agencies miss goals.
“The fact that the federal government hasn’t met the 23 percent small business contracting goal is very disappointing, not only for me but for thousands of small businesses who are losing out on opportunities,” Graves said in an e-mail. “It is particularly frustrating that the Department of Defense, which accounts for approximately 70 percent of all federal contracting, has steadily decreased its small business share over the past several years.”
The Pentagon’s direct awards to small businesses have been decreasing since 2009. The Defense Department had a goal of awarding 22.3 percent of eligible prime awards to small businesses in fiscal 2011. It awarded 19.9 percent of $290 billion in such contracts that year.
Total military contracts, including subcontracts, to small businesses have increased from fiscal years 2010 to 2011, Andre Gudger, director of the Pentagon’s office of small business programs, said in an e-mailed statement. The total figures for subcontracts aren’t publicly available.
“DoD has several ongoing initiatives that will continue to increase opportunities for small business participation in DoD acquisitions,” Gudger said.
The Department of Energy, the second-largest buyer across the government, missed its goal of 6 percent last year, awarding $1.3 billion, or 5.3 percent, to small businesses. The Department of Health and Human Services, the third-largest buyer, exceeded its goal of 19.5 percent, awarding $4.5 billion, or 24 percent, to small firms.
— With assistance from Kathleen Miller in Washington.
Graves idea of chopping SES and ES folk’s money, including their supposed Annual Bonus’s for not getting the job done, is probably the best idea to come out of Capitol Hll in the last 25 years. The normal GS-3 to 7 federal worker sees everyday the frequent abuses these SES and ES folks do everyday so they can keep getting these bonus’s. It’s sickening and disgusting and both the Senate (especially Susie Collins and Oly Snowe) and Congress see this going on everyday. That they don’t do anything about it just tells me that they need to go. It also tells me that the Inspector General needs to go as well. The IG is the responsible official to see that these goals are met, and reported, to both House’s. People, the job is not getting done and ethics & integrity are the reason’s.
The DoD IG has been, for at least the last 20 years, seen as the Official Keeper of The Whitewash since anytime any IG or other DoD Investigator finds outright fraud, waste and abuse at the SES or ES level they are immediately told to either shut up and ‘lose’ the report (now a days by shredding it for hamster and Guniea Pig cage lining) or see their career as trashed as soon as they file their report. I know as mine was when I started asking questions about historical and surplus weapons ‘disappearing’. Bill Cohen, to his credit, was a fine SECDEF. But he learned, too late, that the folk’s who were supposedly working for him weren’t really working for him. They were working for those GS-12’s and up, the SES and the ES folk’s who stood to ether make, or lose, a huge amount of money in the Federal Contracting Sector thru bid rigging, contract fraud and, in more than one instance, outright conflict of interest ownership in a company providing contracting services to their own Agency in which they were the Deciding Official and the Contracting Officer. There were even documented cases of C.O.’s sitting on Agency HR Promotional Selection Panel’s to select their own successor, thus perpetuating the cycle of corruption. So when small business tells me that they are having trouble even getting in the front door, please, GAG ME WITH A SNOWSHOVEL ! This isin’t anything new, just same old same old.