Officials say the government kept its promise to small businesses. Did it really?

The numbers don’t tend to stand the test of time.


Officials say the government finally delivered on its contracting promise to small businesses. Don’t applaud just yet. (Brendan Smialowski/AFP/Getty Images)

It’s official. The federal government has for the first time in nearly a decade upheld its promise to award nearly a quarter of all contracting dollars to small businesses, according to a report released Friday.

“When we hit our small business procurement target, it’s a win,” Maria Contreras-Sweet, head of the Small Business Administration, said while making the announcement.

Did they really, though? Did the government actually hit the target?

Only time will tell, but there’s ample room for skepticism. Here’s why.

Once every year, the U.S. Small Business Administration pulls data from a federal database managed by the General Services Administration and issues a report indicating what percentage of eligible government contracting dollars went to small businesses during the previous year. By law, federal agencies are collectively supposed to commit 23 percent of all prime contracting dollars to small companies.

On Monday, SBA officials reported that the government eclipsed that mark last year, funneling 23.39 percent of all federal work to small businesses. It’s the first time the government has hit the target since 2005. Or rather, it would be.

In the fine print at the bottom of the federal database, however, GSA officials note that the SBA’s annual reports are “generated by taking a snapshot of data from the Federal Procurement Data System (FPDS) on a certain date.” They also point out that “FPDS is a dynamic database, and agencies can change historical information if the details of a contract have changed.”

However, unlike the government’s reports on, say, job growth and gross domestic product, which reflect revisions when necessary to previously issued estimates, the SBA does not go back and update its future reports to reflect any changes in the numbers.

Question is, do those initial snapshots stand the test of time?

Without exception, the answer is no.

A comparison of the SBA’s reports and the federal database reveal a disparity every year dating back to 2006, the first year the agency started publishing its small-business contracting scorecards online. More importantly, the variation follows a consistent pattern; that is, for every year since 2006, the updated database numbers show that a smaller share of government work actually went to small firms than what was originally reported.

Moreover, the gap between what was initially reported by the SBA and what the updated numbers show widens over time. In 2012, for instance, the SBA reported that small businesses claimed 22.25 percent of work, based on the snapshot of the moment. Now two years later, the database shows they claimed 22.17 percent, a 0.08 swing.

Going back a year earlier, the difference in what was originally reported in 2011 (21.65 percent) and what the database now shows for that year (21.54 percent) stands at 0.11 percent. The pattern continues for other years, going back to 2006, when what SBA first reported (22.83 percent) is now more than percentage point higher than what the database now shows was actually awarded to small firms (21.73 percent).

Asked about the disparity, SBA officials directed attention to that same footnote about the snapshot in time that appears in tiny print at the bottom of the federal database.

Of course, fractions of or even a single percentage point appear inconsequential on first glance. But with the government spending upwards of $350 billion in what officials consider small-business eligible contracts, a difference of one percentage point represents more than $3 billion in fewer contracts actually being awarded to small businesses than what was originally reported.

So, why do the numbers change? Are more large-business contracts being reported later, thus pushing down the percentage that was awarded to small firms? Or are the initial small-business contracting numbers inflated?

It appears to be the latter. Because while the total amount of contracts that went to small companies the past two years still remains nearly the same in the database as what was first reported by the SBA, the numbers start to sink when you go back any further.

In 2010, for instance, the SBA reported that small businesses were awarded $98 billion, whereas the database now shows they were awarded $96.4 billion, a difference of $1.6 billion. A year earlier, small firms were awarded $3.2 billion less than what was originally declared. Going back to 2008, the difference is now $5.1 billion.

That comes as no surprise to Ashok Mehan, chief executive of FedMine, a Rockville company that gathers and analyzes contracting data from federal databases like FPDS.

Often, he said, his team can see where a contract from several years earlier was manually switched from small-business award to large-business award. If such a change is necessary, he says contracting officers at the agency are supposed to file an official modification notice indicating that there has been a revision.

“That doesn’t always happen,” Mehan said.

Coupled with evidence that many contracts that count toward the small-business goal every year were actually awarded to large corporations, either through misrepresentation by a company or misclassification by an agency, it seems premature to celebrate 2013 as the year the federal government finally delivered on its promise to small businesses.

And with the federal database currently showing that less than 20 percent of the prime contracts awarded so far in 2014 have gone to small firms, this year isn’t looking promising, either.

Follow J.D. Harrison and On Small Business on Twitter.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he runs the On Small Business blog.

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