2016 SBA scorecard includes ups, downs, impact of overseas contracts

If one is a chance, two’s a coincidence, and three is a pattern, does four set a standard?

For the fourth year in a row, the federal government reached its small business contracting goals, spending nearly $100 billion — or 24 percent of its contracting dollars — on small businesses.

That’s a $9 billion increase over fiscal 2015 numbers. The government also scored an A+ on its procurement scorecard, according to the Small Business Administration.

“It is a win-win for federal agencies to get small business contracts into the hands of the innovative small business owners that create jobs in their communities and help to fuel the nation’s economy,” said SBA Administrator Linda McMahon in a statement.

SBA officials credited the string of good grades to more data-driven analysis, and goals that better reflect the procurement abilities of each agency. Kenneth Dodds, SBA’s director of policy, planning and liaison, said SBA also gave agencies tools that allow them to compare how they’re doing against the government average in certain industries.

Dodds said of the 24 CFO agencies that were scored, four of them met nine out of the 10 goals for both prime and subcontracting goals. They were the Nuclear Regulatory Commission and departments  of Commerce, Homeland Security and Labor.

None of the agencies had a perfect score.

Along with hitting its small business goal, the government as a whole also hit a milestone by meeting its Small Disadvantaged Business goal, nearly doubling the 5 percent target.

“It’s been trending up,” Dodds said. “Last year we actually hit the highest achievement to date. So [fiscal] 2015 was the highest that we’ve ever done, and we did it again this year. So it continues to go up. One of the biggest contributors is the Department of Defense. If they meet their goals, the government does well, because they’re half the spend. In this case, they did meet their SDB goals.”

DoD surpassed its 5 percent goal for prime contracting SDB goals, hitting 8.77 percent. However, for its SDB subcontracting goals, DoD only hit 4.40 percent of its 5 percent goal.

Including overseas contracts

While the government overall hit the general small business contracting goal, it failed to meet its HUBZone and Women-Owned Small Business (WOSB) goals. Last year, for the first time, the government reached its 5 percent women-owned small business (WOSB) contracting goal since the bar was set in 1996. This year the government only spent 4.79 percent of its dollars on WOSBs.

For HubZones, or historically underutilized business zones, the government only got halfway to its 3 percent goal.

The reason for the dip? Removing the overseas contract category from the exclusions list.

John Shoraka, managing director at PilieroMazza Advisory Services, said historically, overseas contracts were excluded from the dollars that SBA looked at in its scorecard. But that changed, said Shoraka, who most recently served as SBA’s associate administrator of government contracting and business development.

“When the Obama administration came in, the thought process was that we didn’t want to be accused of comparing apples to oranges, so we continued excluding and calculating the same way,” Shoraka said. “Over time though, the question became — and quite frankly there was a lot of discussion on the Hill with the small business committees — why are you excluding certain things. We actually did a reanalysis of what was being excluded and based on a memo that the Office of General Counsel prepared, we looked at certain things that we really couldn’t justify continuing excluding them. One of the larger ones was overseas contracts. When we stopped excluding that, that by definition just increased the base, and when you increase the base, you bring that under management. So now agencies were being goaled not only on their continental United States contracts. When we graded them we would be evaluating how they were performing on their overseas contracts as well.”

Because of that change, about $60 billion was added back into the base for scorecard review.

The spirit of the law

The ink on the 2016 scorecard is barely dry, but SBA officials and agencies already have their sights set on next year’s scorecard, which includes a new addition; the fiscal 2017 grade will factor in small business participation.

Shoraka said the reason the scoring will change is due to the last National Defense Authorization Act.

“The National Defense Authorization Act was pretty prescriptive with respect to weight on subcontracting,” Shoraka said. “It increased the weight for subcontracting, it reduced the rate for prime contracting and it said that we also had to weigh participations, but it didn’t say what participation would look like. We spent a good amount of time looking at what that means. Next year’s scorecard, even though the percentages are statutory … the ultimate grade of an agency will also incorporate how they’re engaging and participating small business.”

One of the challenges of factoring participations, Shoraka said, is the government’s strategic sourcing initiative. Reaching 23 percent of only 10, 15, or 20 contractors, might meet the goal of the small business contracting goals, Shoraka said, but it doesn’t really meet the spirit of the law.

Despite some heated discussions with the Office of Management and Budget, and the Office of Federal Procurement Policy, small business participation was added to next year’s scorecard.

As for any other changes that might happen, Dodds said leadership is taking a bit of a wait and see approach since this is the first year of a new administration.

“I have no doubt that they’ll want to take a look at the scorecard and make their tweaks in accordance with their ideas,” Dodds said. “I don’t think we’ve had enough time yet to do that. We have the scorecard that we have for this year. We already know what the parameters for that are. I’m sure as we go forward there will be some changes to it, but I just don’t know what those will be yet.”

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