Small-biz set-asides may harm firms, expert says

There may already be too many set-aside categories for small businesses, according to at least one expert. The sheer number of categories, and the targets set for agencies to award certain numbers of contracts to each, has the unintended consequence of squeezing some small businesses out of the game, he said.

The plethora of small business programs “has disenfranchised many of those who are not eligible to the extent that they no longer back the very programs they once were glad to support,” Scott Bellows, a program manager at the South Carolina Procurement Technical Assistance Center in Columbia, S.C., said Nov. 7.

And yet, the government is now considering creating yet another category, for businesses that employ military veterans.

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During a hearing, Bellows told the House Small Business Committee’s Contracting and Workforce Subcommittee that the small-business programs, such as those helping companies owned by service-disabled veteran and women, and the 8(a) companies, don’t do as much as most people think to help small businesses at large.

Many of the same contractors tend to get the work over and over. That makes it hard for other small companies to break into the market, he said.

To break in, business owners “soon realize that it’s a long, uphill battle,” he said.

Bellows said the government, along with the Small Business Administration’s annual small business score card, should take a different look at the awarded set-aside contracts.

“If one asks how many ‘unique’ vendor contracts were awarded during a certain period of time, you might just come away with a different impression of how these programs are promoting small business development and helping to revitalize our economy,” he said.

The score card gave the government overall a B in awarding contracts to small businesses in fiscal 2010. The government has a goal to award 23 percent of contracts to small companies. In 2010, it reached 22.7 percent. It missed many of its goals for the specific categories of small businesses.

President Barack Obama’s Interagency Task Force on Veterans Small Business Development has recommended the government should consider giving companies with at least 35 percent of its employees as veterans a special status in federal contracting. They likened the new category to the Historically Underutilized Business Zone small business program. For HUBZone status, 35 percent of a small firm’s employees must live in an economically depressed zone.

The task force said the new small-business category would not take too much regulatory efforts. The task force wants the Veterans Affairs and Defense departments, as well as SBA and the Office of Management and Budget, to further explore the idea.

The task force is interested in the hiring aspect of creating the new category.