Of late, it seems the federal government’s small business programs have been under attack with fallacies and false narratives, despite having been proved untrue time and time again. Perhaps this is not surprising given the more recent success of the programs. Over the previous eight-year term, the federal government provided an unprecedented commitment to small business programs, which resulted in more federal procurement dollars going to small businesses. In fact, over $90 billion annually went to small and disadvantaged firms and the government met federally mandated small business goals, which either had never been achieved or had not been met for almost a decade.
The federal government’s small business programs are meant to “create an environment for maximum participation by small, disadvantaged, and women-owned businesses” in the procurement process. The programs also support companies owned by service-disabled veterans. Given these programs are congressionally authorized, large businesses and others have frequently fought to discredit them. They have promoted myths with respect to the efficiency or timeliness of these programs in order to propose operational, regulatory, or statutory changes to limit small business participation.
While there are efforts to push back against the negative misconceptions, perhaps they haven’t been vigorously supported enough. Because of this, the dedicated small business career professionals at agencies find themselves on shifting sands with no clear direction from the current administration and totally unsure if they will be supported by senior leadership if they push back against such untruths. What is truly disconcerting is that administration officials charged with fostering and growing these programs are instead making it more difficult for small businesses to participate and benefit.
Much of the false narratives are coming from the likes of the Section 809 panel, large business advocacy groups and those who would like to see the federal procurement process “simplified” at the expense of small businesses.
Deceptions about small business programs are even peddled across federal agencies especially the Department of Defense (DoD), the Veteran Affairs Department (VA) and on Capitol Hill. The fallacies come in many forms and under many guises, but the basic principles are always the same — it is too expensive for the federal government to buy from small businesses, small business procurement is too cumbersome and untimely, and agency missions are negatively impacted when adhering to small business set-aside programs.
These falsehoods have been invalidated time and again, and Congress has consistently reasserted its intent to foster economic development, competition, and the industrial base through the procurement process; nevertheless, those who would benefit financially from weakening the small business set-aside programs never give up. The lack of action by key stakeholders can threaten not only the progress of the previous eight years, but the inherent nature of why these programs were created.
Small business advocates must continually push back and present the case for a procurement process that embraces small business participation, programs and goals. It is imperative we shine a light on the benefits these programs have delivered over the last five decades and ensure they are protected, adequately resourced and managed, and allowed to flourish as they are a critical part of job creation and a thriving U.S. industrial base.
The current environment has allowed the many false narratives to fester and frame the acquisition processes at DoD, the VA, and across federal agencies, resulting in legislative changes through several amendments in recent National Defense Authorization acts. I will not dive into every single procurement practice, statutory amendment, internal guidance or regulation that has been altered over the past year to the detriment of small businesses. However, I do want to elaborate further on the broader policy questions of why small business procurement is not only important, but necessary for national security purposes and our competitiveness across the globe.
The false narratives I outlined above derive from two basic assumptions, which are completely untrue:
An agency’s only objective in the acquisition process is to support the agency mission, and
The federal government should buy like the private sector (a la Walmart and Amazon).
These two false assumptions seem to underlie all of the core arguments posed to circumvent the federal government’s small business programs.
Various reputable studies document the benefits of small business procurement and contradict the argument that small business set-aside procurements are more expensive, take longer and are complicated by unnecessary protests. Even if those assumptions were true, which the facts suggest otherwise; it is still incumbent upon federal agencies to foster and encourage small business participation and use of the set-aside programs. The Government Accountability Office has shown these fallacies not to be true many times, including in this report from 2011, as have the Small Business Administration and the DoD.
Let’s take the first assumption:
An agency’s only objective in the acquisition process is to support the agency’s mission.
When I was responsible for negotiating small business goals with the DoD, I had no problem accepting that the agency’s number one objective was to support the warfighter. However, my counterparts at the DoD clearly understood that engaging small businesses in that process not only benefited the warfighter, but it also benefited the U.S. economy and the national industrial base. In other words, we agreed that there was significant overlap in the three complementary objectives of supporting the warfighter, developing the U.S. economy and developing the nation’s industrial base.
Unfortunately, today’s consensus seems to emphasize the first objective at the cost of the latter two; and in the long run, the lack of a consistent effort to spend DoD funds in a manner that supports the industrial base and develops the economy will, in fact, negatively impact the one objective that is most critical (i.e., supporting the warfighter).
Moreover, Congress intended for the federal government to wield its spending power in a way that supports small businesses and economic growth, this is specifically addressed in the section no. 2 of the Small Business Act.
One could argue, the executive branch must spend its appropriated funds as directed by Congress, but I would argue that even beyond adhering to Congress’ declared policy, buying small actually helps federal agencies meet their missions, today and into the future, and will aide in our efforts to be a global economic leader.
Let’s move on to the second assumption:
Procurement practices of industry are more efficient and creates profits and wealth for shareholders and therefore the federal government should emulate the buying practices used by Walmart, Amazon and the like.
What this love affair with “buying like industry” does not consider, is that the federal government is not a corporation and does not answer to shareholders. The federal government has many competing policy priorities, none of which is delivering profits to shareholders.
History is replete with examples of innovation resulting from the inclusion of small businesses in the federal marketplace and the expansion of small business set-aside programs.
When did Walmart’s supply chain practices and methodologies result in anything other than profits for its shareholders? When did Walmart’s nurturing of small businesses result in innovation, discoveries or the filing of new patents?
In addition, as a SBA report published by the Office of Advocacy stated: “Small businesses are generally considered to be the first line of employment, and thus the initial training grounds for this nation’s workforce. … The most powerful statistic, however, is that 60 to 80 percent of all new jobs come from small businesses.”
Given these facts, it is imperative that the federal government, as the largest buyer of goods and services in the world, understand its responsibility to be a catalyst for the economy, far beyond simply generating “profits for shareholders.” The federal government must account for and incorporate its priorities and responsibilities into its buying practices.
Unfortunately, an uglier undertone is also present in this debate. Steps taken to de-emphasize and curtail the 8(a) Business Development program, which is geared at assisting economically and socially disadvantage individuals can ultimately be harmful to the African American, Hispanic, Asian as well as the Alaskan, Tribal and Native Hawaiian communities. In developing the small business set-aside programs and establishing goals for various socio-economic categories, including socially and economically disadvantaged individuals, Congress recognized that broadening of small business ownership among groups that presently own and control little productive capital is essential to provide for the well-being of this nation (see 15 U.S.C. § 631(d)(2)(A))
The small business set-aside programs are intended to serve that purpose; and weakening them, de-emphasizing them and making it more difficult for eligible individuals and firms to participate in them undermines congressional intent to ensure that underprivileged individuals have access to a pipeline of revenues that can help them start, grow and build their businesses and positively impact their communities.
Education and advocacy with respect to the intent and benefits of the small business set-aside programs is critical at this juncture. National and local groups must coordinate a unified message on the importance of these programs and work with their congressional representatives to hold federal agencies accountable to the broader benefits federal procurement policies can have on economic development, the industrial base and global competitiveness.
John Shoraka is the managing director of GovContractPros, and a former associate administrator of government contracting and business development at the Small Business Administration.