Record Federal Contract Awards Made to Small Disadvantaged Businesses

Introduction

On April 12, 2024, the Small Business Administration announced that, in fiscal year 2023, for the second consecutive year, the Federal Government awarded both a larger amount of contract awards to firms categorized as “small disadvantaged businesses” (SDB), and exceeded the government’s target percentage goal for federal contract awards to SDBs.

For the immediate past fiscal year, the Federal Government awarded a record $76.2 billion in federal contracts, an increase of $5.3 billion over the fiscal year 2022 record level of awards. In addition, the government awarded 12.2% of all federal awards to SDBs, also exceeding the percentage of awards from the prior year.

Discussion

While the government has yet to release the full details of these awards, there appears to have been a significant year-over-year increase in federal agency awards under SBA’s 8(a) business development program for “socially and economically disadvantaged businesses,” a category within the overall SBD family. If that 8(a) growth bears out, it is no doubt due in large part to the speed with which SBA responded to the July 2023 Tennessee federal district court ruling in Ultima Services that found unconstitutional SBA’s reliance on a “presumption of disadvantage” for certain racial groups.¹ Even while the Federal Government announced that it would be appealing the court’s adverse ruling, SBA moved expeditiously to update the required narrative form regarding an individual’s eligibility and providing timely guidance to federal buying activities on how to continue making awards under the 8(a) program, consistent with the federal court ruling.²

These contract award records are impressive by themselves, but even more so as overall federal contract spending for Fiscal Year 2003 topped a record $759 billion, a whopping $63 billion rise in actual spending and a 9% increase over last fiscal year’s record of $696 billion. Both the Department of Defense and the non-defense agencies saw significant actual spending growth over the prior fiscal year and impressive percentage increases (10% and 8%, respectively).

In fact, over the last eight federal fiscal years, overall federal contract spending has increased year-over-year, with the exception of a significant one-year growth spurt in contract awards in Fiscal Year 2020 for the COVID pandemic vaccinations and personal protective equipment.

The outlook for continued growth in federal contract spending is bright, as is the expected awards to SBDs. Under two Executive Orders issued by President Biden³, he committed the government to increase the share of contract dollars awarded to SBDs, tripling the 5% statutory goal of awards to SDBs to 15% by the end of Fiscal Year 2025. The Office of Management and Budget, within the Executive Office of the President, has also set a target of 14% for SBD award in the current Fiscal Year 2024.⁴

Conclusion

Even in light of significant federal budget constraints, and the delay in the enactment of the regular appropriations acts for federal agencies for the past two years, federal contracting spending continues to grow across most federal agencies and most functional areas. We are also watching closely for further developments in both the MBDA and SBA cases, and for further buying actions by agencies. We cover these cases and the spending trends in several of the training classes Centre Law offers the public; the full list of our training courses is available here.

If you have any questions or need any additional information, please do not hesitate to contact the author or the Centre Law attorney with whom you work.

¹ See my August 3, 2023, blog “Federal Court Finds SBA’s 8(a) Program Unconstitutional,” available at https://centrelawgroup.com/blog/federal-court-finds-sba-8a-program-unconstitutional/ (last viewed April 16, 2024); See also Barbara Kinosky’s September 21, 2023, blog “Is this the End of the SBA 8(a) Program,” available at
https://centrelawgroup.com/blog/is-this-the-end-of-the-sba-8a-program/ (last viewed April 16, 2024).
² See also my April 11, 2024, blog “Another Minority Business Development Program Found Unconstitutional.” (On March 5, 2024, a federal district court judge in the Northern District of Texas ruled that the statute and the program operation of the Minority Business Development Agency (MBDA) within the Department of Commerce is an unconstitutional race-based programs that provided preferential treatment to certain groups identified as “socially or economically disadvantaged individuals”), available at https://centrelawgroup.com/blog/another-minority-business-development-program-found-unconstitutional/ (last viewed April 16, 2024).
³ Executive Order 13985: “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government, (Jan 20, 2021), available at https://www.govinfo.gov/content/pkg/FR-2021-01-25/pdf/2021-01753.pdf; and Executive Order 14091: “Further Advancing Racial Equity and Support for Underserved Communities through the Federal Government, (Feb 16, 2023), available at https://www.govinfo.gov/content/pkg/FR-2023-02-22/pdf/2023-03779.pdf.
⁴ See OMB Memorandum 24-01 (10/25/23), “Increasing the Share of Contract Dollars Awarded to Small Disadvantaged Businesses for FY 2024 and in Subsequent FYs”, available at https://www.whitehouse.gov/wp-content/uploads/2023/10/M-24-01-Increasing-the-Share-of-Contract-Dollars-Awarded-to-Small-Disadvantaged-Businesses_Final.pdf (last viewed April 16, 2024).