In a significant shift for small business contracting, the Small Business Administration (SBA) has revised its goals for fiscal year 2025. This adjustment aligns more closely with traditional targets, specifically emphasizing the need for federal agencies to award at least 5% of all contracts to small disadvantaged businesses (SDBs). The decision, announced on January 24, aims to streamline contracting goals across various socioeconomic categories, reflecting a standardized approach for all agencies.
New Contracting Goals and Their Implications
The updated goals come in the wake of ongoing discussions about diversity, equity, and inclusion (DEI) within federal contracting. The Biden administration has set an ambitious target of 15% of prime contracts to be awarded to SDBs, a move that highlights the administration’s commitment to supporting underrepresented businesses in government contracts. However, the recent reset has raised concerns about the potential impact on the SDB program, particularly for companies participating in the 8(a) program, which is designed to assist disadvantaged small businesses.
Changes to Agency-Specific Goals
Historically, each federal agency had its own SDB contracting goals, with some agencies surpassing the 5% threshold. For instance, in fiscal year 2017, the government achieved 9% for SDBs. The recent changes, however, signal a reduction in individual agency targets, which may lead to a decreased focus on the 8(a) program. A former SBA official, speaking on the condition of anonymity, noted that this shift could redirect agencies’ attention to other contracting areas, such as HUBZone, where the government has struggled to meet its 3% prime contract goal.
Performance Trends in Small Business Contracting
- In fiscal year 2023, federal agencies awarded a record $76.2 billion to small disadvantaged businesses, exceeding the Biden administration’s goal of 12%.
- Overall, small businesses received 28.4% of all eligible federal contract dollars, totaling $178.6 billion—an increase of $15.7 billion from the previous year.
- The governmentwide small business contracting goal remains set at 23%.
Impact of Policy Changes
The SBA’s decision appears to align with broader policy shifts under the current administration, particularly concerning DEI initiatives. President Trump’s executive order, issued on January 20, called for the termination of DEI programs across federal agencies. As a result, the small business set-aside program may face challenges as it tries to adapt to these changing priorities. John Shoraka, a former SBA administrator, expressed concerns that the 8(a) program could suffer from these changes, particularly as agencies approach the fiscal year-end and rush to fulfill contracting obligations.
Bipartisan Support for Small Businesses
Despite the recent adjustments, there is optimism among stakeholders about bipartisan support for small businesses. Cy Alba, a partner at the law firm PilieroMazza, noted that conversations with representatives from the new administration indicate a commitment to aiding small business growth. This support includes ensuring compliance with the Small Business Act, which has historically aimed to bolster small business participation in federal contracting.
Conclusion
As the SBA implements these new goals, the focus will be on how federal agencies adapt to these changes and what it means for the future of small business contracting. The landscape of federal contracting is evolving, with significant implications for both small businesses and the agencies that rely on them.
