Administration Announces Record Contract Spending on Small Disadvantaged Businesses and New Steps to Create Contracting Opportunities for Disadvantage
Administration Announces Record Contract Spending on Small Disadvantaged Businesses and New Steps to Create Contracting Opportunities for Disadvantaged Businesses through the Bipartisan Infrastructure Law
The Federal Government is the largest consumer of goods and services in the world, spending roughly $600 billion each year. Thanks to President Biden’s Bipartisan Infrastructure Law , states, territories, Tribes, cities, and local authorities will spend hundreds of billions of dollars to rebuild our communities in the coming years. The Biden-Harris Administration is committed to ensuring that federal investments build wealth and opportunity for underserved entrepreneurs and small business owners. On the centennial of the Tulsa Race Massacre, President Biden announced a number of steps to narrow the racial wealth gap, including setting a goal of increasing the share of federal contracts going to small disadvantaged businesses (SDBs) to 15 percent by 2025 – a 50 percent increase from most recent spending levels.
Just over one year later, new data shows that the Biden-Harris Administration is delivering. The U.S. Small Business Administration’s (SBA) annual Small Business Procurement Scorecard for Fiscal Year 2021 shows a record level of Federal contracting dollars awarded SDBs, a category under federal law for which economically disadvantaged Black-owned, Hispanic-owned, and other minority-owned businesses can compete for federal contracting opportunities. In addition to advancing more equitable federal procurement, today the Administration is announcing new steps to expand contracting opportunities for historically disadvantaged businesses, including those owned by women and people of color, under Federal grants created through the Bipartisan Infrastructure Law.
Increasing Federal, State, and local contracting opportunities with underserved businesses not only helps more Americans realize their entrepreneurial dreams, but also narrows persistent wealth disparities among groups that have long faced economic barriers. According to a recent analysis from the White House Council of Economic Advisers, closing the gap in small business ownership rates between Black and white households and between Hispanic and white households could close the gap in average net worth between these groups by 22 percent and 17 percent, respectively.
The following initiatives represent early steps by the Biden-Harris Administration to ensure equitable procurement opportunities, both in contracts awarded by the Federal Government and state and local contracts awarded under federal grants. In the months to come, the Administration will take additional actions to expand access to capital, help underserved businesses navigate the procurement process, and support state and local government efforts to increase business diversity.
Today, the Administration is:
- Setting a New Record for Procurement Spending on Small Businesses, Including Small Disadvantaged Businesses (SDBs) and Service-Disabled Veteran Owned Businesses. The SBA’s Small Business Procurement Scorecard shows that in Fiscal Year 2021, the Biden-Harris Administration awarded a record amount of contracting dollars to small businesses, including underserved small businesses. In total, $154.2 billion, or 27.2 percent of all contracting dollars, went to small businesses, an $8 billion increase from the previous fiscal year. This includes:
- $62.4 billion, totaling 11.01 percent of all contracting dollars, in contracts to SDBs, far exceeding the 5 percent statutory goal established in the Small Business Act; and
- $25 billion, or 4.41 percent of all contracting dollars, to Service-disabled Veteran-owned small businesses, compared to the 3 percent statutory goal.
SBA’s Small Business Procurement Scorecards can be reviewed at https://www.sba.gov/scorecard. These record levels of contracting followed a range of Administration actions, including an interagency push for increased SDB spending in the 4th quarter of Fiscal Year 2021 and the launching of a new government-wide acquisition contract that exclusively engaged information technology SDBs. In December 2021, the administration released a strategy to further increase equity in federal procurement over the next several years.
- Launching a government-wide Bipartisan Infrastructure Law technical resources assistance and engagement program to reach small and minority-owned businesses. Beginning this summer and continuing throughout the year, federal agencies will host events aimed at supporting more equitable contracting opportunities under the Bipartisan Infrastructure Law:
- The Department of Transportation (DOT), in collaboration with the Minority Business Development Administration (MBDA), General Services Administration (GSA), Environmental Protection Agency (EPA), and SBA, will host regional outreach events to provide technical assistance to underserved businesses, and create opportunities for key stakeholders across the contracting landscape to connect, including federal and State DOT officials, prime contractors, and industry.
- The Department of the Interior (DOI) will host Bipartisan Infrastructure Law -focused “Industry Days” aimed at publicizing contracting and financial assistance opportunities and matching financial assistance awardees with capable small and disadvantaged businesses as potential subcontractors.
- DOT will provide small and underserved business owners with technical assistance and capacity building activities through its Connections MarketPlace platform, featuring roundtable sessions where small business owners can learn how to navigate the DOT contracting process, effectively market to large primes contractors for subcontract opportunities, and hear insights on the ins and outs of government contracting from industry leaders. These sessions are tailored to creating meaningful connections and will ultimately help small business owners build their federal contracting footprint. Since the program launched in February 2022, DOT has already hosted 11 sessions with over 1,900 participants.
- Providing dedicated support at MBDA Business Centers to help businesses become “contract ready.” The Bipartisan Infrastructure Law made the MBDA permanent. Now, MBDA is awarding nearly $3 million in funding to 26 of its Business Centers to support the hiring of federal contract specialists in each Center focused on assisting underserved businesses access contracting opportunities, including those stemming from Bipartisan Infrastructure Law funding. Specialists will provide wide-ranging technical assistance to help small businesses, including by facilitating access to capital and by coordinating targeted matchmaking between underserved businesses and both government acquisition offices and prime contractors.
- Modernizing the DOT’s DBE rules. Last week DOT issued a Notice of Proposed Rulemaking (NPRM) to modernize the Disadvantaged Business Enterprise (DBE) and Airport Concession DBE (ACDBE) program regulations, last updated in 2014 and 2012 respectively. By modernizing the existing regulations, the proposed NPRM proposed would help further level the playing field for small, disadvantaged businesses seeking to compete for federally-assisted aviation, highway, and transit contracts as well as airport concession opportunities. Mandated by Congress, the DBE and ACDBE programs over their 40-year histories have been intended to prevent discrimination, and remedy the continuing effects of past discrimination against small businesses owned and controlled by disadvantaged individuals. DOT’s Departmental Office of Civil Rights (DOCR) and counterparts at the FAA, FHWA, and FTA developed the proposed updates based on stakeholder feedback and research following the most recent revisions. DOT is seeking additional public comment on the proposed updates to the program before issuing a Final Rule.
- Expanding access to capital for Small Disadvantaged Business working on Bipartisan Infrastructure Law contracts. Many SDBs report challenges in accessing the long-term, affordable financing options often required to successfully compete for and/or deliver on government contracts. To help fill this gap, DOT and SBA are collaborating to connect SDBs pursuing or working on Bipartisan Infrastructure Law contracts to licensed Small Business Investment Companies (SBICs). The SBIC program is a public-private partnership to increase the flow of patient capital and long-term loans to small businesses through SBA-certified private investment funds. SBA and DOT will co-convene a business forum to facilitate matchmaking between SDBs and SBICs and enable continued investment discussions between fund managers and firms. In advance of that convening, SBA will provide SBICs with a prospectus that lays out the benefits of investing in SDBs focused on Bipartisan Infrastructure Law contracts. In the last year alone, these partnerships led to $7.1 billion in financing to more than 1,000 U.S. small businesses across the country. This new initiative builds upon the American Rescue Plan’s investment in the State Small Business Credit Initiative (SSBCI), which will lead to tens of billions in public and private capital to support low-cost loans, microloans for our smallest businesses, and venture capital focused on small businesses, including for businesses owned by underserved entrepreneurs. As of early July 2022, Treasury has approved more than $1.7 billion in capital access programs proposed by 15 states, with more to follow in the coming weeks and months.
- Supporting State, local government, transit agencies, and other grantees. The Biden-Harris Administration is calling on prospective Bipartisan Infrastructure Law grantees to take action to ensure that SDBs have equitable access to contracting opportunities made available through Bipartisan Infrastructure Law -funded infrastructure grants. Already, states and local agencies are stepping up: through the Equity in Infrastructure Project Pledge, prospective grantees have committed to increase prime contracting opportunities for underserved businesses, streamline processes for obtaining necessary DBE certifications, improve payment time, and expand access to financing to help underserved businesses meet infrastructure contracts. The pledge has been signed by the Chicago Transit Authority, the Denver International Airport, the Metropolitan Water District of Southern California, the Port of Long Beach, the Southeastern Pennsylvania Transportation Authority, the City of Denver, and the City of Philadelphia. Interested states, cities, local and regional transportation and public works authorities, and private sector entities can sign on to the pledge here.
- Advancing equity through direct federal procurement. Billions of dollars in Bipartisan Infrastructure Law funding will be spent through direct federal procurement. Today’s steps build on ongoing efforts by the Biden-Harris Administration to leverage the government’s purchasing power to build wealth in underserved communities. In December the Administration adopted a bold set of reforms, including:
- A goal of ensuring that 15 percent of federal contract dollars go to small disadvantaged businesses (SDBs) by 2025, up from the current statutory goal of just 5 percent;
- Releasing, for the first time, disaggregated data of federal contracting spend by race/ethnicity of business owner, a powerful transparency and management tool; and
- Implementing major changes to the federal government’s use of “category management” – a procurement strategy that helps agencies buy goods and services as one organized purchasing entity as opposed to thousands of independent buyers – to ensure that underserved small businesses are not left behind.
Already, agencies are leveraging direct procurement to ensure underserved small businesses can compete for contracting opportunities. For example, the Federal Aviation Administration (FAA), which will award up to $4 billion over the next four years has expanded its use of set aside competitions–whereby contracting opportunities are open exclusively for small businesses–that are targeted at SDBs, HUBZone, Women-Owned Small Business, and Economically Disadvantaged Women-Owned Small Business. FAA has also updated its policy to provide more opportunities for underserved small businesses by increasing the threshold for making noncompetitive awards to SBA-certified 8(a) firms for Bipartisan Infrastructure Law-funded acquisitions, from $4.5 million to $10 million.
These early actions build on important provisions in the Bipartisan Infrastructure Law to expand contracting opportunities for disadvantaged businesses. In addition to making permanent the Minority Business Development Administration (MBDA), the law strengthened its capacity to support underserved businesses seeking access to federal, state and local contracts. The law also reauthorized the Department of Transportation (DOT) Disadvantaged Business Enterprise (DBE) program to ensure that small and disadvantaged businesses continue to have a level playing field to compete for work on DOT-assisted contracts funded under the Bipartisan Infrastructure Law, including billions of dollars that will be awarded to Federal Highway Administration, Federal Transit Administration, and Federal Aviation Administration recipients.
In the months to come, the Administration will highlight additional actions to expand access to capital, help underserved businesses navigate the federal procurement process, and support state and local government efforts to increase business diversity.