Guest Post: Interesting Math Behind Small Business Goals

By: Guy Timberlake

Organizational culture, bureaucracy, complacency, arrogance and quite simply money are some of the reasons the government contracting stipulation of the Small Business Act of 1953 will never be realized. That’s the part where the U.S. Small Business Administration is chartered with ensuring a “fair proportion” of government contracts for small businesses. Depending on where you sit, the state of that charter is considered to be working “Really Well!” to “Not So Well.” I would fall into a group that camps out closer to the latter which should surprise no one. This however, is not a big picture look at the overall small business program for federal agencies. I just want to look at the math being used. Why? If you look at what we’re told about how the numbers are calculated, it’s kind of a mess. This leads to confusion, questions and tends to support doubts that arise regarding the validity of the numbers being reported. There are changes that have been made and are still being made to provide more transparency into the formulas used by the Government, and that’s a good thing. What I’m challenging is more basic than that and I’ll describe it here. For now,  let’s start at the beginning.

Just what is a ‘fair proportion?’

When you look at the overall impact small business has in supporting the business and mission operations of 25955761_lour federal government it’s pretty incredible. Name an agency or major program that does not have thumbprints of American Small Businesses on it. I can’t imagine there are many, if any, where they are not serving in some capacity, directly or indirectly. Now think of all the job creation that occurs and the giving back to our Nation’s communities coming from those federal contracting dollars. Our ‘proportion’ should be a heck of a lot more than twenty-three percent of some of the overall fiscal contracting spend. For the sake of this piece, let’s say 23% of something (which is better than 100% of nothing) is a fair proportion. The fact is we’re not even getting close to that.

Didn’t the Government hit the small business goal in FY2013?

They did and on paper it looks great until you start peeling back the layers. For example, remember last year 16467121_l whats in the canafter the FY2013 Report Card was released? The SBA Office of the Inspector Generalblew a hole in the small business contracting achievement‘ citing hundreds of millions in obligations to ‘ineligible’ business concerns under the 8(a) and HUBZone programs, and more than one billion to companies who had graduated from those programs. Under SBA rules the latter dollars were technically allowed, but in reality this tactic inflates the numbers reported for the 8(a) and HUBZone programs. Remove those dollars from the FY2013 achievement and where are we then? As a reminder, according to the September 2014 Washington Business Journal article, the SBA OIG only looked at contracts worth more than $3 million. Think about what would have been found had they done a full review.

Is the SBA Inspector General looking at the latest results announced this past week?

I don’t know the answer to that, but I definitely am. On the heels of SBA announcing nearly 25% of FY2014 obligations to small business, I decided to conduct a semi-scientific review to see if this achievement was more accurate than the previous. I began by looking at the ‘Vendor Anomaly Report‘ on FPDS-NG identifying over $400 million in FY2014 obligations to a host of ‘other than small’ companies such as Accenture and Finmeccanica tagged by contracting officers as small businesses. Don’t read anything into it though as I’ve discussed before the many non-nefarious reasons this happens. With that said, I would still like to see a proper Interesting Mathaccounting where these are not included in the final tally. Then I pulled the FY2014 numbers from FPDS-NG looking at total obligations to small business concerns and reviewed the ‘Global Vendor Name‘ criteria to see who popped up. A cursory review of the list presented the names of nineteen organizations who may have been considered small at some point, but definitely not in recent history. Combined with the obligations from the Vendor Anomaly List, I saw close to one billion in small business obligations that were not. Later, I broke the obligations down into set-aside ($59 billion) versus non-set-aside dollars ($39 billion). I took it one step further and subtracted sole-source obligations not tagged as set-asides ($6.5 billion). This left $33 billion in obligations to small business concerns where as best I can tell did not involve federal assistance. If this is the case, why are agencies counting these numbers as the result of their ‘goals?’ The folks at Merriam-Webster define ‘goal’ as “something that you are trying to do or achieve” which to me suggests intent. Where is the intent on the part of Uncle Sam when a small business spends their time and money to capture an opportunity competed full and open?

What would I like to see happen based on this information?

Let’s keep it real and roll back the numbers to the actual achievement. Nearly one billion in small business 32323643_l slice of american dollar pieobligations that went elsewhere and obligations to small business concerns where there was no apparent federal assistance, accounting for roughly 35% of the $91 billion claimed for FY2014. Not only was the goal not achieved, agencies are actually only two-thirds of the way to hitting the government-wide small business goal. American Small Businesses take note. Stop trying to build your future around small business set-asides! Nearly half of the dollars obligated to us each year are not the result of small business set-asides. Treat them like the gifts they are and go fight for the rest, smartly. Peace! Guy Timberlake is the Chief Visionary of The American Small Business Coalition and a long-time partner of Global Services. This post originally appeared on and has been used here with permission.