Competition in Federal Contracting Continues to Decline
Last week, the White House announced that the Federal government awarded a record $169.2 billion in contracts to small businesses in FY2022. Not only an all-time high, but it was also a significant increase ($8.7B) above FY2021.
However, the overall number of prime small business contractors continues to shrink, with just 62,670 in FY2022, down more than 4% from the 65,428 reported in FY2021. While the amount of taxpayer dollars being spent through federal contracting continues to increase, the number of small businesses receiving prime contract awards has been declining. So, more and more dollars are going to fewer and fewer firms. Between fiscal 2010 and fiscal 2021, the number of small businesses receiving government contracts fell from 121,270 to 65,428.?
In 2022, the federal government awarded over $705B in unclassified prime contracts. Of that amount, the largest 200 contractors received 65.3% of those awards. According to Bloomberg, that leaves approximately 90,000 vendors to compete for the remaining 34.7% of contracts. These alarming statistics show that the strategy to leverage the purchasing capacity of the Federal government to spur economic growth and global competitiveness is ineffective without a significant change in industry posture and courageous actions from our leaders. Lack of enforcement from a diminished acquisition workforce, lack of oversight from a distracted and unmotivated Congress, and disorganized/ineffective engagement from small and mid-size business advocates is creating national risks throughout the Federal supply chain.
In February 2022, the Under Secretary of Defense for Acquisition and Sustainment reported that the number of small businesses in the Defense Industrial Base shrunk by over 40% over the past decade. According to Deputy Secretary of Defense Kathleen Hicks, “if the Defense Industrial Base continues along the same trend, DoD could lose an additional 15,000 suppliers over the next 10 years. This downward trend is a national security and economic risk to the nation…”
The government is working to include more small-business owners, including expanding technical assistance for new contractors, higher priority tiers in certain government contracts, and intensifying outreach to expand through efforts like the Community Navigator Program. However, more needs to be done.
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1)?????SBA needs to be added to the Federal Acquisition Regulation (FAR) Council to ensure there is a voice for small firms and an advocate for increasing competition
2)???Agency Office of Small Disadvantaged Business Utilization (OSDBU) needs to be elevated and empowered to the report direct to the Secretary level
3)????Programs like the Manufacturing Extension Partnership (MEP), SBIR/STTR programs need to be significantly expanded with an increased focus on bringing innovative technologies to Stage 3 (commercialization)
4)???The Federal government must increase the sole source threshold for 8(a), Women owned, HUBZone, and Service-Disabled Veteran owned firms, giving contracting officer more flexibility to utilize these smaller firms and award contracts in a faster, more streamlined process.
This downward trend is a growing risk to our national security and economic superiority that is leading to declines in key domestic capabilities and requires swift action to reverse.