The annual dollar value of federal contracts awarded to small businesses broke a record in 2019 for the third year in a row, but the positive numbers obscure the continuing decline in the number of small businesses that participate in government deals.

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The drop can be at least partially attributed to federal agencies consolidating their contractual needs into fewer and larger procurements. While this may be efficient, it also cuts against other government goals like maximizing competition for procurements, according to Tony Franco, chair of PilieroMazza PLLC‘s government contracts group.

“You have a few small businesses that are winners, which is great, but the wealth isn’t being distributed in a way that helps keep a nice, robust small-business base that you think that we would want,” Franco said.

The push toward larger procurements also has the inadvertent effect of testing the resources of those small businesses that do secure contracts.

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And then there is the issue of HUBZone small businesses failing to meet the government’s goal for prime contracting dollars, a persistent problem. The government has never hit its 3% contracting goal for those companies going back to 2006, the earliest year covered by SBA scorecards.

The HUBZone program has historically been subject to “very stringent” requirements, leading to uncertainty both for companies that want to participate in the program and federal staff who need to check companies’ eligibility[.]

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“There’s the issue of constant monitoring of this factor that has really nothing to do with business development and servicing a client,” Franco said. “It’s a very laudable social goal. But that’s not what these companies are really entering government contracting to do. And so you’re not going to find companies other than those that really need the program to make some kind of entry into government contracting.”

Excerpt taken from the article “Small Biz Vendors Decline Despite New Federal Contract High” by Daniel Wilson for Law360.  To view the full article, please visit this link (subscription required).