RECENT EXECUTIVE ORDER MAY RESULT IN MORE SDB BUSINESS, WHAT THAT MEANS FOR OTHER SB’S IS UNCLEAR

The Biden Administration has already stated its goal to award 15% of all federal prime contract dollars to small disadvantaged (SDB) businesses by 2025.  The recently-issued executive order promoting diversity, equity, and inclusion in the federal workforce requires OMB to develop a plan to meet either that goal, or one very close to it, a full year earlier.  How this push to increase spending in one small business area will impact other small businesses is unknown, but small business leaders need to understand that this effort could very well have a negative impact their own firms.  The overall goal of awarding 23% of all federal contract dollars to small businesses has not changed and, while some agencies exceed individual goals, few do so by more than a few percentage points.  If the federal government hit all small business subcategory goals for women-owned, service-disabled veteran, and HUBZone businesses, total small business contracting would hit 29%, without even counting business awarded to small firms that have no specific socio-economic status.  Total small business awards would soar to nearly 40% or more when all small business categories, including 8(a) and Alaska-native contracts are considered.  This outcome is highly unlikely given historical spending patterns and the realistic nature of some government projects.  There are only so many that are suitable on which small businesses can compete.  All of this indicates that competition for small business contracts may intensify over the next few years with carve outs for favored groups leaving a smaller market in which others compete.  Small businesses will not only have to be exceptionally competitive, but will also have to comply with many of the same rules as larger firms.  Is it any wonder that small businesses leave the government market each year, even before the political class anoints a new set of favorites?