Examining the Effects of Set Aside Policies on Competition and Growth for Small and Mid-Sized Suppliers

Abstract

We examine the federal small business set aside program and assess the impact of small business set asides on supplier competitiveness, program participation, and firm growth. We track the performance of over 700 small businesses over a 10-year period (FY2005-FY2014). We analyze firm-level characteristics and attributes of their federal contracting portfolios. Our exploratory study tests hypotheses to (a) determine whether there is a difference between firms that remain a small business throughout the 10-year period and those that transition to the middle market and become mid-sized firms, and (b) establish a framework for future study. Our preliminary results show that there are differences between firms that remain a small business during the 10-year period and those that grow into the middle market. Firm attributes that differ include whether the business is woman-owned, the creditworthiness of the firm, firm efficiency, and the firm's number of corporate relationships. Federal portfolios are also different between the two groups. Firms that grow into the middle market on average have contracts in more agencies, across more product or service lines, and have more contract actions related to multi-award vehicles.