Small-business quotas could become even tougher to meet

Joe Jordan is working to build the right supplier base for the federal government, which includes paying a lot of attention to small businesses, he said. But agencies will have a hard time meeting the contracting goals for those companies because they have been living in budgetary limbo for so long, he added.

"I will not declare victory until we're at or above the 23 percent" annual small-business contracting goal and meeting the goals for specific socioeconomic categories of small businesses, said Jordan, administrator of the Office of Federal Procurement Policy, during a speech at the Coalition for Government Procurement's Strategic Sourcing Forum on Jan. 31.

The government has not met the 23-percent goal since 2005, although it has come tantalizingly close in recent years. It reached 21.65 percent in fiscal 2011, which is $91.5 billion of total contacting dollars. Small businesses received 22.7 percent of contracting dollars, or $97.9 billion, in fiscal 2010. The Small Business Administration has not released the numbers for fiscal 2012.

Jordan said agencies will find it harder to reach the goal in fiscal 2013 because of the fiscal unknowns. "We're facing incredible headwinds this year with the budgetary uncertainties," he said.

The bar might soon be even higher. The same day Jordan spoke, Sen. Tom Udall (D-N.M.) introduced the Assuring Contracting Equity Act (S. 196), which would boost the 23-percent goal to 25 percent.

The House wanted the increase last year and put language to that effect in the fiscal 2013 National Defense Authorization Act. The Senate disagreed, however, and NDAA became law Jan. 2 without the change.

Udall also wants to increase the contracting goals for companies owned by women and minorities from 5 percent to 10 percent.

Some small-business advocates question the wisdom of raising the targets.

"I'm a skeptic," said Guy Timberlake, CEO of the American Small Business Coalition. "Since the existing overall goal has not been met, I'm not certain of the benefit other than giving agencies a higher mark to achieve."

Raising the contracting goals could create some friction between agencies and small companies, said Timberlake, a former federal small-business contractor. Agency officials would have to find ways to set aside more business for small companies, whose leaders would expect agencies to meet the goal.

He offered a suggestion for Udall: Require that agencies make all simplified acquisition purchases with small companies. That change would make it much easier for agencies to achieve the small-business contracting goals, he said.

Simplified acquisitions are streamlined purchases that can be as high as $150,000. In addition, recently renewed regulations allow agencies to use those procedures for purchases under a special exception that increases the simplified acquisition threshold to $6.5 million for "certain commercial items," an ambiguous term, according to Timberlake.

Simplified purchases have greatly increased since fiscal 2009, but roughly half of those dollars went to companies that were not small. Timberlake said that under his proposed rule change, at least an additional $8 billion in goods and services would have been channeled to small federal contractors in fiscal 2011.

Moreover, from 2011 until the first part of 2013, the government has awarded $33 billion using simplified acquisition procedures. That total could have boosted fiscal 2011 and fiscal 2012 awards to small businesses by roughly $17 billion, pushing agencies much closer to or even beyond the current small-business contracting goal of 23 percent.

Timberlake also criticized Udall's proposal to increase goals for certain types of set-asides while omitting companies in economically depressed areas, called Historically Underutilized Business Zones, and those owned by service-disabled veterans. Targets for those companies would remain at 3 percent.

"This seems to be a slap in the face, especially considering the agonizing certification and re-certification process to which [those companies] are subjected," he said.

Udall's office has not responded to a request for comment.

The bill has been referred to the Senate's Small Business and Entrepreneurship Committee for further consideration.