President Joe Biden and Vice President Kamala Harris announced Thursday a set of reforms to the federal procurement process to help meet an ambitious target of increasing the share of federal contracts to small, disadvantaged businesses (SDBs) advance the President’s Management Agenda and increase opportunity for all underserved businesses.
The actions include, for the first time, asking agencies to increase their goals so that governmentwide spending results in 11% of contracting dollars being awarded to small, disadvantaged businesses, up from the current statutory goal of 5%.
“This is the first step towards meeting the president’s goal of ensuring that 15% of federal contracts go to SDBs by 2025,” the White House noted in a fact sheet.
The administration also for the first time called for the release of disaggregated data of federal contracting spend by race/ethnicity of business owner, which officials called a powerful transparency and management tool.
The administration also plans to implement major changes to the federal government’s use of “category management” to boost contracting opportunities for underserved small businesses, increase the number of new entrants to the federal marketplace and reverse declines in the small business supplier base.
Biden and Harris also are adopting key management practices to drive accountability and institutionalize the achievement of small business contracting goals.
According to the fact sheet, for the first time, agencies are asked to create ambitious goals to exceed the existing statutory goal of 5% by spending 11% of fiscal 2022 governmentwide procurement dollars on small, disadvantaged businesses.
“Small business contracting goals are a key element of our federal procurement system, driving priorities for nearly 40,000 federal contracting officers,” administration officials wrote.
The action puts agencies on a path to meeting the president’s goal of increasing annual SDB spending from an average of 9.8% over the past five years to 15% by fiscal 2025.
“The reforms we are putting in place now will help ramp up the amount of money going to SDBs in the coming years and keep us on a path to meet the president’s goal of an additional $100 billion to SDBs over the next five years,” the White House said.
Over the course of the following year, the federal government will also update goals for other “socioeconomic” categories of small businesses, including women-owned small businesses, service-disabled veteran-owned small businesses, and HUBZone businesses.
The administration noted that the federal government is the largest purchaser of goods and services in the world, buying everything from software and building construction to financial and asset management — making its procurement a powerful tool to advance equity and build wealth in underserved communities.
“Despite this, less than 10% of federal agencies’ total eligible contracting dollars typically go to small, disadvantaged businesses, a category under federal law for which Black-owned, Latino-owned, and other minority-owned businesses are presumed to qualify,” the White House said. “Moreover, while women own roughly 20% of all small businesses economy-wide, less than 5% of federal contracting dollars go to women-owned small businesses. Increasing federal spending with underserved businesses not only helps more Americans realize their entrepreneurial dreams, but also narrows persistent wealth disparities.”
According to a new analysis from the White House Council of Economic Advisers, based on data provided by the Small Business Administration (SBA), differences in business ownership account for 20% of the wealth gap between average white and Black households.
For this reason, at the June 1 centennial of the Tulsa Race Massacre, Biden announced a bold new goal: increasing the share of contracts going to small, disadvantaged businesses by 50% by 2025 — an unprecedented target projected to translate to an additional $100 billion to SDBs over five years.
The White House said the announcement was built on the President’s Day One Executive Order 13985, which directed agencies to work to make contracting opportunities more readily available to all eligible firms and to remove barriers faced by underserved individuals and communities.
Additionally, on Nov. 18, the Biden administration launched its President’s Management Agenda (PMA) Vision.
The third PMA priority — managing the business of government to build back better — recognizes that fostering lasting improvements in the Federal acquisition system can create opportunities for underserved communities, the White House noted.
The PMA Vision states, “By creating more opportunities for all types of businesses and underserved entrepreneurs to compete for federal contracts, the federal marketplace can serve as a platform to create a more equitable economy.”