The federal government has a statutory goal of awarding 23% of contracts to small businesses, which are defined as businesses that are “independently owned.” However, according to a new report issued by the American Small Business League (ASBL), 77.6 percent ($16 billion) of the federal government’s contracting spending on small businesses actually went to large companies in 2011.
In addition, of the 100 most lucrative small business contracts awarded in 2011, 72 of them went to large companies that exceed the Small Business Administration’s small business size standards, up from the 60 last year.
Companies that received “top 100″ (meaning greater than $86 million) federal small business contracts in 2011 include: Lockheed Martin, Boeing, General Dynamics, Rolls-Royce, British Aerospace, AT&T, SAIC, CVR Energy, Spectrum Group, Blue Cross and Blue Shield, Rockwell Collins, Harris Corporation.
According to the report, there are several explanations as to how this happens: It’s an inevitable result of small businesses getting acquired by large firms; small business contracts are awarded to small subsidiaries of large companies; and large companies can be awarded small business contracts after “outgrowing” their small business status. In all these situations, the business may still qualify as a small business due to provisions in the FAR (part 19) that make them eligible to bid on small business contracts for five years after losing their small business size.
In other cases, human error is to blame. An agency might need something only a specific large company could provide (iPads from Apple, for example) and incorrectly code the transaction as a “small business” transaction rather than the opposite.
According to the SBA’s Inspector General, agencies awarding contracts to large firms and counting them toward toward small business goals is the SBA’s top management challenge.