Small Disadvantage Business Goals: The Effects of Recent Administrative Changes

Abstract

While the diversification of small federal contractors in the industrial base is embraced across administrations and parties, the federal small business goals had not changed from 1997 until 2021. At that time, the Biden Administration increased the Small Disadvantaged Business (SDB) goal to 15 percent of all prime contract dollars effective fiscal year 2025, with incremental increases from the current 5 percent statutory goal in the intervening years. Concurrently, the Office of Management and Budget directed agencies to, “increase baseline spending for the additional socioeconomic small businesses and traditionally underserved entrepreneurs recognized in the Small Business Act,” specifically small businesses in the historically underutilized business zone program (HUBZones); women-owned small businesses (WOSBs), and service-disabled veteran-owned small businesses (SDVOSBs). The Small Business Act prime contracting goals allocate 23 percent to all small businesses, with subgoals of five percent each for SDBs and WOSBs, and three percent each for HUBZone and SDVOSBs. However, the new SDB goal may increase reliance on 8(a), WOSB, HUBZone, and SDVOSB contracting authorities, harming ineligible SDBs. Without any check on SDB certification, companies may incorrectly claim SDB status, leading to an inaccurate picture on the success of SDBs under the new policy.