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Federal Market Intelligence for Small Business |
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HSBC: Number of small business federal contractors has been decliningCategory Management, Tiered and Best-in-Class blamedMore than 16,000 small business federal contractors providing common products and services to the government left the federal market in the past three years, Rep. Kweisi Mfume, D-MD, stated as he opened a recent House Small Business subcommittee hearing on the drop. He, along with witnesses at the Oct. 13 hearing, primarily blamed the government’s Category Management initiatives, which began in 2016 and have included Tiered Spending and “Best-in-Class” contracts, for the shrinking number of small business suppliers. Those practices generally have resulted in larger awards going to fewer firms. “A select number of small businesses were able to navigate and benefit from this complex system, while many others were pushed out entirely,” Mfume said, adding that 95,237 small vendors of common goods and services dropped to 79,114, from fiscal 2016-2019. That is a drop of 17%. Mfume’s figures are from a Government Accountability Office report of November 2020. However, small business participation in the federal market already had been falling for several years before category management was introduced. According to the same GAO report, the number of small vendors of common good and services declined by 25% from fiscal 2010 to 2016. For the entire period of fiscal 2010 to 2019, the drop was 38%. GAO Report The GAO report on category management was a focus of the HSBC’s Infrastructure and Contracting Subcommittee hearing. Category management targets common goods and services spending, which totaled $354 billion in fiscal 2019. Only suppliers in that pool were counted in the GAO’s figures. The common spending accounted for 60% of total contract spending of $586 billion that year, GAO said. The GAO said small businesses have received 30% or more of the common spending since 2016, but the number of small vendors fell each year. The number of large vendors also fell, by 10%, from fiscal 2016 to 2019. Small business owner testimony Alba M. Alemán, founder and chief executive of Citizant Inc., a small business technical services provider in Chantilly, VA, said at the hearing that category management, while initially modest, has morphed into a much more damaging policy with its “Tiered Spending” and “Best-in-Class” (BIC) initiatives. “Whereas large contractors have the experience and credentials to qualify for nearly every single BIC, small businesses are hard-pressed to qualify for even one BIC contract,” she testified. The BIC policies have hurt her own firm. When COVID-19 hit, “five of our contracts were either cancelled or consumed by BIC holders,” Aleman said. Lynn Ann Casey, founder and chief executive of Arc Aspicio LLC, a small business provider of professional services in Washington, DC, said her company has participated in Tier 1 through Tier 3 contracts under category management. Her firm also is a mentor to an 8(a) company. Despite such experience, she says category management has been challenging for her firm. “Both Arc Aspicio and our protégé, who are in different stages of company maturity, have seen a significant reduction in the number and size/scope of opportunities available for us to pursue competitively,” Casey said in her testimony. “Similarly, we have seen many new and re-compete contract opportunities move to Best-in-Class contract vehicles where we were not a prime contractor and therefore could not pursue follow-on work. Agencies have raised significant concerns about not being able to allow their incumbent small businesses to bid for their re-competes,” Casey added. Also, see our story on DOD small vendor decline in this issue.
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