Minority contracts fall for first time in decade

May 13, 2012

U.S. government contracts to black-and Hispanic-owned small businesses fell last year for the first time in a decade, declining at a sharper rate than awards to all companies.

Contracts to the black-owned firms dropped 8 percent to $7.12 billion in the fiscal year that ended Sept. 30, compared with fiscal 2010. Awards to Hispanic-owned businesses decreased 7 percent to $7.89 billion, according to federal procurement data.

Contracts to the two minority groups fell at a faster pace than all contracts, which dipped 1 percent as the U.S. government slowed spending to help reduce the federal deficit. The gap may reflect stiffer competition over a shrinking pool of revenue and the recession’s greater impact on black and Hispanic firms.

“When the masses catch a cold, we get pneumonia,’’ said Harry Alford, president of the National Black Chamber of Commerce in Washington.

Timberlyn Smith, owner of Mustardseed Cultural and Environmental Services in Kansas City, Mo., said she began worrying last year after she saw fewer government requests for proposals in her line of work. Her company assesses the environmental impact of projects such as air traffic control towers and roads.


(The Washington Post/Source: Procurement data compiled by Bloomberg)

At information sessions for small businesses, she said she was surprised to see representatives from corporations. “Big businesses are taking a lot of smaller crumbs we were able to get before the recession,’’ said Smith, who is black.

Michael Pena, who owns a small business in North Bend, Wash., said he thought being Hispanic would help him get more government work. That hasn’t happened, he said.

“There’s large competition with the big boys,’’ said Pena, owner of ImmunoSolutions, which trains military personnel on how to deal with potential bioterrorist attacks.

Small businesses are generally defined by the government as having fewer than 500 employees or less than $7 million in average annual sales.

Their awards fell 5 percent last year, though there were a few bright spots. Contracts to businesses owned by Asian and Pacific Islanders rose about 1 percent. Awards to Alaskan Native-owned firms, which benefit from a program that reserves contracts for them, jumped 5 percent.

Some black and Hispanic firms qualify for a federal program that sets aside work for small, economically and socially disadvantaged businesses. No contracts are reserved specifically for either minority group.

No ‘leg up’

The absence of these set-aside programs may help explain the dip in awards for some minority groups, said James McCullough, who leads the government contracts practice at Fried Frank Harris Shriver & Jacobson in Washington.

“They don’t have that leg up, so the downturn in the economy since 2008 is just pounding them,’’ he said.

The government also has goals for awards to small, disadvantaged businesses, though it doesn’t have separate targets for ethnic groups within that category, said John Shoraka, the Small Business Administration’s associate administrator for government contracting and business development.

Small, disadvantaged businesses won about $34 billion in contracts last year, or 8 percent of the $433 billion in eligible awards, exceeding a 5 percent target set by the government, according to federal data posted online.

Even so, Robert Burton, former acting administrator of the Office of Federal Procurement Policy, said some groups in that category “are clearly struggling more than others.’’

“That decline is dramatic,’’ Burton, now a partner at the law firm Venable in Washington, said. “The government needs to take a close look at this.’’

— Bloomberg Government

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