The annual small business contracting report card was released last week and showed that federal agencies again exceeded the government’s overall 23% small business use goal.  Federal agencies set a record in FY’22 spending nearly $163 billion with small prime contractors, a figure representing 26.5% of total prime contract awards.  Ten federal agencies received an “A+” on their report card.  So, what’s not to like?  Buried toward the bottom of SBA’s press release was an acknowledgement that while more dollars are going to small businesses, fewer small businesses are receiving those awards.  Despite the administration’s attempt to attract new businesses, it’s clear that a specific type of small business contractor mostly benefits from the government’s set-aside programs.  Specialized contractors with the capability to comply with an ever-growing amount of procurement rules benefit.  Those that merely dabble in the market or that lack the infrastructure to comply with the government’s myriad requirements end up leaving.  With some exceptions, the “larger small” businesses are the ones that benefit the most, while very small firms must make do with either non-FAR based procurements that have fewer rules or work as a subcontractor.  As with their larger counterparts, the bulk of small business contract awards is concentrated into a select group of established contractors.  This doesn’t need to be the case.  The administration and/or Congress could exempt small business contractors from specific rules that have little, if anything, to do with their fulfillment of a government contract.  Another approach would be to acknowledge the costs of specialized cyber, supply chain, telecommunications and other requirements and allow smaller firms to adjust their pricing so that they can actually invest in the needed infrastructure and still make a profit.  The government wants a diverse supplier base and the competition it brings.  The steady paukenschlag of new rules, however, make it cost prohibitive for even larger businesses to participate.  A true good small business news story about government contracting wouldn’t be based just on the dollars that flow to such businesses, but on the number of businesses that are able to participate in the market.