The White House announced Thursday that federal agencies have been asked to increase their small disadvantaged business contracting goals from 5 percent of annual awards to 11 percent in fiscal year 2022 — moving toward a goal of 15 percent of contracts going to SDBs by 2025.
The administration also announced “major changes” in the use of category management — under which underserved small businesses have historically received a proportionally lower share of contracts — in the form of revised guidance from the Office of Management and Budget.
“Less than 10 percent of federal agencies’ total eligible contracting dollars typically go to small disadvantaged businesses (SDB), a category under federal law for which Black-owned, Latino-owned, and other minority-owned businesses are presumed to qualify,” the administration said in its fact sheet. “Moreover, while women own roughly 20 percent of all small businesses economy-wide, less than 5 percent of federal contracting dollars go to women-owned small businesses.”
“Increasing federal spending with underserved businesses not only helps more Americans realize their entrepreneurial dreams, but also narrows persistent wealth disparities,” the announcement added.
In June, when President Biden was in Tulsa, Okla., to commemorate the 100th anniversary of the Tulsa race massacre in which white mobs wiped out the thriving Greenwood District — known then as Black Wall Street — and murdered an estimated 300 black residents, he said the amount of federal contracts set aside for small disadvantaged business would be increased by 5 percent in order to drive greater opportunity for minority entrepreneurs.
At that time the president did not lay out a timetable or other details, but said that he would make it a priority to move to that contracting goal.
The White House said this week that the 2025 contracting goal is expected to translate to an additional $100 billion to small disadvantaged businesses over 5 years.
Sometime within the next year, the administration said, federal contracting goals will also be updated for other socioeconomic categories of small businesses including women-owned small businesses, service-disabled veteran owned small businesses, and HUBZone businesses.
The administration also released a more detailed breakdown of contracts going to small disadvantaged businesses, showing that in FY 2020 1.7 percent went to black-owned small businesses, 1.8 percent went to Hispanic-owned small businesses, and 2.8 percent went to Asian-American and Pacific Islander-owned small businesses.
“Beginning with FY 2020 data, the federal government will publicly release this disaggregated data on an annual basis so that procurement officials, business owners, and the American people can use it as a tool to track equity and progress over time,” the administration said. “This data will also allow agencies to assess their performance across industries and sectors, helping them better target interventions to areas with the greatest opportunity for growth.”
The OMB guidance on category management says that, beginning in FY 2022, agencies will receive automatic credit for socioeconomic small-business groups as “the importance of small business goal achievement as a key to advancing equity in procurement, especially when coupled with category management stewardship practices,” is reinforced. It “ensures that use of ‘best in class’ solutions is balanced with decentralized contracts and other strategies that are necessary to increase diversity within agency supplier bases.”
The guidance also makes the Small Business Administration and Commerce Department voting members of the Category Management Leadership Council in hopes of giving small businesses a stronger voice in category management governance.
Agency progress toward socioeconomic small business goals will be counted among evaluation criteria in all performance plans for Senior Executive Service (SES) managers who oversee acquisition or agency programs supported by contractors, the White House said. Federal agencies also must report to SBA and OMB their plans to ensure that Offices of Small and Disadvantaged Business Utilization have direct access to senior leadership.
Agencies have also been tasked with “benchmarking the inclusion of new entrants in the federal marketplace and developing strategies for diversifying the small business supplier base.”
“Agencies will work to increase transparency around future contracting opportunities to ensure that more small businesses have the opportunity to compete for them and enter the federal marketplace,” the White House said, without going into further detail.