But fewer of those companies are entering the federal market or competing for the work, the Small Business Administration says.
Federal agencies exceeded the White House’s annual small business contracting goal by awarding a record-breaking $154 billion – but the number of companies in that group continues to decline, according to the Small Business Administration.
SBA Administrator Isabella Casillas Guzman made the announcement on Tuesday along with Transportation Secretary Pete Buttigieg and other top officials during a virtual press event on the results of the federal small business procurement scorecard.
Agencies set a new record in awarding 27.2% of total federal contracting awards to small businesses, earning an “A” for the government-wide score – and beating the White House goal of 23% for fiscal year 2021. However, the number of small businesses, women-owned small businesses and small disadvantaged businesses serving as federal prime contractors continued to fall as part of a years-long trend. Officials said they were trying to counteract the decline through various measures, including protecting against contract bundling.
"We've seen the industrial base decrease 40% over the past 10 years, really showing that less small businesses are trying to do business with the federal government," Guzman said. She described the trend as "concerning" and noted that new small business entrants into the federal marketplace also remain on a multi-year decline.
Some of the administration's goals for the year were not met by agencies, specifically those focused on expanding federal contracting spending on women and minority-owned businesses. Women-owned small businesses received a total of 4.63% of the federal government's total contracting dollars, just short of the White House goal of 5% for the year. While Historically Underutilized Business Zone (HUBZone) received a record-breaking 2.53% in federal contracts — more than $14 billion in awards — that amount was less than the 3% goal.
Still, Guzman said she was optimistic about the overall results of the scorecard and progress made around White House efforts to advance equity in federal contracting "The Biden-Harris administration's first year shows that we have put equity and opportunity for small businesses at the heart of our work – the U.S. has reached the highest level of federal small business contracting in history," she said.
Eleven agencies earned an "A+" grade, including SBA, General Services Administration, the Commerce Department and others, while ten agencies received an "A" grade, including the Defense, Education and Veterans Affairs departments, among others.
White House officials said they were working toward "major reforms" to increase new small business entrants in the federal marketplace, from simplifying the rules and requirements to compete for contracts and expanding outreach to HUBZone and disadvantaged businesses.
"We know that it hasn’t been easy for small businesses – particularly those owned by women and people of color – to reap the benefits of past infrastructure investments," Buttigieg said, adding that he was "proud of the actions this administration is taking to level the playing field."
White House Senior Advisor Keisha Lance Bottoms described equity in federal contracting as a "generational commitment" and said the administration was working to "expand access to capital for small businesses, make historic investments in technical assistance programs to help entrepreneurs thrive and to direct hundreds of billions of dollars in government contracts to small businesses in every single community."
President Biden announced an ambitious plan to leverage the federal government's buying power to address racial wealth inequities in the U.S. last year at an event commemorating the 100-year anniversary of the Tulsa race massacre. The administration said it aimed to steer $100 billion in federal contracts to small, disadvantaged businesses over five years, reflecting a 50% increase in set-asides for those considered SDBs.