The federal government is required by law to make a certain amount of deals with small businesses as a percentage of total dollars contracted. And while there has been consternation about the issue, it now seems as though all combined agencies may have fallen well short of those goals.
Small businesses are supposed to make up 23 percent of all dollars paid through contracts with the federal government and recent data noted that all agencies combined fell slightly short of that level, according to a report from the Washington Post. However, some now say that the gap between the government's number and reality is actually more like a gulf.
The U.S. Small Business Administration recently reported that 22.25 percent of contracted dollars – totaling $89.9 billion – went to small businesses, only slightly short of the stated goal, but up from 21.65 percent the year before, the report said. However, that included a number of exceptions that in some cases did not count some specific types of contracts, and even entire federal agencies. For instance, the Federal Aviation Administration, Transportation Security Administration and Central Intelligence Agency's contracts were not counted as part of the total, nor were any contracts related to goods sold or work performed outside the U.S. itself. This includes intelligence-gathering efforts, for which government spending has increased significantly during the Obama administration.
In reality, then, the total amount of contracted dollars granted to small businesses came to just 18.98 percent of all deals with the federal government, which is considerably short of the 23 percent requirement, mandated by the law that also created the SBA, the report said. The agency, meanwhile, argues that many deals would have to be excluded from these contract requirements, simply because they may not be conducive to small business competition in the first place.
A controversial move
However, critics say (and the SBA acknowledges) that many of these contracts were only officially exempted from having to be counted toward the total for small businesses during the George W. Bush presidency, the report said. And while the Obama administration was able to remove those exemptions, it chose not to do so, as a means of drawing direct comparison between the figures for the two presidencies and more closely evaluate how the government contracts with companies of all sizes as the effects of the recession wane. However, that has done little to assuage those who believe these dealings are inherently unfair to small businesses.
"They are simply not following the letter of the law," Charles Tiefer, a professor of government contracting at the University of Baltimore Law School, told the newspaper. "It states 23 percent of all contracts, and there is no reason to think Congress wanted some of these exclusions."
In addition, it should also be noted that in some cases advocates have also found a number of contracts that were listed by the federal government as being granted to small businesses, but were actually given to large companies, the report said. There is supposed to be a process in place for dealing with mistakes such as these, but many say that it doesn't necessarily work as designed.
When contracts are falling a little short and independently-run companies are looking to have a bit more flexibility when it comes to their bottom lines, it might be wise for owners to look into their costs for small business insurance. Finding more affordable workers' compensation and general liability insurance policies might allow companies to get their finances under greater control and ensure a more secure future.