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Federal Market Intelligence for Small Business |
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Competed 8(a) set-asides fell by more than half in two yearsNumber of 8(a) firms dropped by 15% from 2017-2019Small businesses owned by disadvantaged individuals saw growth in federal contract awards in the last two years, but not from the set-asides that target their group. The small disadvantaged firms that participated in the Small Business Administration’s 8(a) Business Development program experienced a steep 57% drop in awards won through competitive 8(a) set-asides, tumbling from $8 billion to less than $4 billion, from fiscal 2017-2019, according to Set-Aside Alert’s analysis of data from the SBA and USASpending.gov. Non-competitive sole-source set-aside awards to 8(a)s also decreased, by 15.7%, during those years. Meanwhile, the number of 8(a) firms also declined during that time period, from 5,260 companies in March of 2017 to 4,450 companies in August of 2019, according to annual management reports from the SBA’s Office of Inspector General. That is a 15% decrease. On the whole, however, the small disadvantaged firms won a 28% increase in contract awards during the 2017-2019 period. The firms benefited from the strong uplift in all federal contract spending, which rose by 25% during that time. Small Disadvantaged Businesses Small business owners who are socially or economically disadvantaged can self-certify as such. The government’s goal is to award 5% of contracts to such firms. Overall, procurements awarded to small disadvantaged firms rose by 28% from fiscal 2017-2019:
The growth was comparable to what all federal contractors were experiencing as federal contract spending increased by 25% from fiscal 2017-2019 (from USASpending.gov):
Despite the growth in awards, the number of small disadvantaged prime contractors fell by 3.3% from fiscal 2017-2019:
8(a) firms The only set-asides specifically targeting the Small Disadvantaged Business category are made through the SBA’s 8(a) program. In recent years, 8(a) has been struggling. Unlike the self-certified firms, the 8(a) owners go through a rigorous review. They gain access to set-asides as well as training and counseling. But the value of those benefits may be shrinking. Federal contract awards achieved through competitive 8(a) set-asides dropped by 57% from fiscal 2017-2019:
8(a) sole-source awards also fell, by 15.7%, during the period:
In addition to the downward procurement trends in recent years, the number of 8(a) prime federal contractors also has dropped, according to annual management reports from the SBA’s Office of Inspector General:
The vast majority of 8(a)s are minority-owned. In fiscal 2020 so far, 94.7% of the awards to 8(a) firms were for minority-owned 8(a) firms. Analysis The drop in set-asides for 8(a)s follows a trend that has affected nearly all small business set-asides for the fiscal 2017-2019 period. As overall federal contract spending has expanded by 25% from 2017-2019, set-aside contract spending has fallen by 37% over that time:
As contract spending has ballooned, there may be less time for contracting officers to create set-asides, which are relatively labor intensive. Multiple-award contracts and category management have resulted in fewer firms in portions of the federal market. But why have 8(a)s been hit so hard, with a 57% drop in awards and lower participation? It could be partially due to an overstretched and understaffed SBA, with less time to assist 8(a)s. Also, SBA’s All Small Mentor-Protege Program, which opened in 2016 and has become very popular, offers the same benefits to all small firms that previously were offered only to 8(a) firms, making the 8(a) program less desirable. Possibly adding to 8(a)’s slump is the perception that the Trump Administration does not strongly support programs for minorities. Trump tried to impose a ban on all Muslims entering the U.S., repealed Obama-era policies on using race as a factor in college admissions, called for eliminating the Minority Business Development Agency, and recently ordered cancellation of anti-racism training for federal workers (see story), among other actions. Trump also has made a number of very controversial statements regarding race, including referring to white supremacists in Charlottesville, VA in 2017 as “very fine people,” calling Mexican immigrants “rapists,” and calling Black Lives Matter protesters “thugs.” Trump has defended his record and claimed that he has done more for Blacks than any other president.
More information:
SBA data: https://bit.ly/3jrnmvo
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