Today, we are going to look at the 8(a) contracting dollars for the last decade. (2009 – 2019). Will the result be similar to the small business contracts that we reviewed last week? Or will the contracting dollars follow the same course as total contracting dollars? That is what we will determine today. I can tell you that 8(a) contracts are declining. But first, we need to provide an overview of the 8(a) BD program. There are many new viewers that do not know anything about this set-aside program.
The 8(a) BD Program Overview
The 8(a) BD Program was developed to assist socially and economically disadvantaged small businesses to be able to compete in the open market. It is a nine-year program aimed at providing business development assistance and contracting opportunities to these businesses. This program provides sole source and competitive opportunities to 8(a) certified small businesses.
I have had my suspicions for years that this program is slowly dying. I have seen more and more contracting activities utilizing other contracting avenues and fewer and fewer dollars being placed into this program.
Let’s see if my suspicions are correct. But let’s first look at government contracting overall.
Government Contracting Overall
Government contracting overall is alive and well. From the graph above (Figure 1) we can see that the Federal Government on average spends $492 Billion a year procuring products and services over the last decade. In fact, this is above the old number of $450 Billion that has been used for years by government personnel when talking about government spending. However, in 2015 procurement spending reached its lowest in years. As a result, we see that procurement spending started an upward trend starting in 2015 and reaching its peak in 2018. Based on the chart we can see that 2019 numbers are approximately 23 Billion below 2018 numbers.
However, 2019 Numbers Have Not Been Finalized.
However, 2019 numbers have not been finalized yet. Furthermore, I don’t believe 2019 numbers will surpass 2018 numbers. This is fine as government spending does fluctuate year to year. The 2019 numbers should be finalized in February 2020. Furthermore, we can see that the government spent $510 Billion so far in 2019. This is above the ten-year average. From the chart and our understanding of the prime contract set-aside goals, we can determine expectations. But before we get into the expectations we need to talk about prime contracting goals for set-asides.
Contracting Goals – Set-asides
The U.S. Small Business Administration (SBA) is responsible for monitoring whether federal agencies are meeting the federal procurement goals established by Congress. What are the contracting goals for prime contracts for each set-aside program?
|Women-Owned Small Business||5%|
|HUBZone Small Business||3%|
|Service-Disabled Veteran-Owned Small Business||3%|
Based on this information we can make some assumptions. The first being that if there is an increase in procurement spending then there should be an increase in each set-aside program. Also, SBA is responsible for proving the Goal statistics for each year. We should be able to rely on SBA’s goal system to ensure that the government is setting aside contracts for each set-aside program. With this information in hand let’s look at how well the 8(a) BD program did over the last decade.
8(a) Contracts Spending Overall
Before we delve into 8(a) Sole Source and 8(a) Competitive lets’ look at how the 8(a) BD program (combined) has done over the last decade. By reviewing Figure 2 below we can see that there is a sharp decline in 8(a) BD Program contract awards since 2016. This does not make sense because we would expect to see 8(a) contracting dollars to be in an upward trend based on government procurement spending. See Figure 3. The 8(a) sole source and competitive procurement dollars have been tracking along the same lines as the government spending until 2016. This is the result that we would expect. However, what happened in 2016 to cause the numbers to change significantly?
We know that Total Contracting Dollars has increased on average 7.15% in the last decade. However, small business contracting dollars have decreased over the last decade by 19.27% and 8(a) contracting dollars has decreased by 48.26% (combined Sole Source and Competitive). Thus, confirming our suspicions that the decrease in 8(a) is far greater than small business. In order to get a better picture of what is happening let’s break out sole-source from competitive contracts.
8(a) Contracts – Sole Source
We really need more data to be able to make any determinations. Therefore, let’s look at 8(a) Sole Source contracting dollars and see how well it faired. Let’s look at figure 4.
By reviewing Figure 4 we can see that over the last decade 8(a) Sole Source contracting dollars have been declining. From the chart (See Figure 5) we can see a steady decrease in 8(a) sole-source contracts. There is a decline that needs to be investigated. As you recall from our discussion earlier, (Figure 1) we know that government contracting began an increase starting from 2015 to 2018. We can see from the chart in Figure 4. The 8(a) BD program contracting dollars has been steadily decreasing since 2009.
Why has SBA not investigated this? Anyone could run the same reports as I did and see that 8(a) numbers are down. Where is the National 8(a) Association? How come they have not gone to bat for 8(a) small businesses?
But hold on we may be ahead of ourselves as we have not looked at 8(a) competitive numbers.
8(a) Contracts – Competitive
Before we go any further let’s look at the 8(a) competitive side of the house. Before I retired from the Federal Government, I say an increase in several 8(a) competitive contracts. Maybe there will be an increase in 8(a) competitive contracts. Let’s review figure 6.
We can see that the 8(a) competitive numbers follow the overall contract spending until 2017 when there is a sharp decline. This decline is like the decline that small businesses experience.
I have taken 8(a) sole source and 8(a) competitive contracting dollars and placed them on a chart to review. Please see figure 7.
From the chart in figure 7 we can see that there has been a steady decline in 8(a) sole source and 8(a) competitive has seen some growth until 2017 when it had a sharp decline. If SBA does not act now there may not be a program in the next 10 years.
What Changed To Cause the 8(a) Contracts Decline?
Why did 8(a)-contracting dollars awarded decline? But the question is actually broader than that. What changed to cause a decline in all set-aside programs? If you remember we had the same decline in small business contracting dollars. Furthermore, it appears as if the 8(a) decline is greater than the small business decline.
I believe I know part of the reason why. The Federal Procurement Policy changed. There were changes to the National Procurement Policy. These changes called for the use of larger procurement vehicles. As a result, more federal agencies are using these larger procurement vehicles which are resulting in fewer contracts being available to small businesses. For example, many agencies are using national IT contracts. Since these contracts are multiple award contracts only those businesses eligible to bid on task orders can submit their bids. These contracts were once performed by many local small businesses in each state. But is this the total problem? No, I think it is a combination and no one issue stands out more than another.
Something Needs To Change Before the 8(a) Program Becomes Useless
The politicians and economists state that small businesses are the backbone of our economy. That is not going to be the case soon unless something is done the way the government is handling small business contracts. There will become a time when no small business owner will want to do business with the government because it will be cost inhibited. The contracts will be too large for any small business to be able to bid on. Furthermore, this will impact our economy sooner or later.
But What About The Number of Certified 8(a) BD Businesses?
We would be remiss if we did not look at the number of small businesses that have 8(a) certification. Those numbers will help to tell the truth. According to an article written in 2016 by Steven Koprince, the number of certified 8(a) firms has been decreasing. In fact, the number of participants in the program is down by 34% from 2010 till 2016.
SBA did acknowledge and recognized that the number of 8(a) participants has been declining and in 2016 & 2017 initiated actions aimed at increasing the 8(a) portfolio by 5% each year. Did it work? I could not find any articles on whether this helped. I did run a Dynamic Small Business Search on the number of 8(a) participants. However, it includes Participants that may be registered in more than one state. The only way to know for sure is to send a Freedom of Information Act (FOIA) request to SBA.
My Thoughts On 8(a) BD Program Dying
It is obvious why the number of 8(a) contracting dollars is down. Between the changes in procurement policy and the declining number of 8(a) participants, it validates the fact that the 8(a) BD Program is slowly dying.
If you are an 8(a) certified business then I would reach out to the National 8(a) Association, local 8(a) Associations, SBA and my local congressional representative to voice my concern. The program is showing a downward decline over the last ten years. In Fact, it is down 48%!!!! Only by banding together can 8(a) small businesses have a voice that can and will be heard. You have the resources to get results. Don’t think that because it will not impact you that you don’t have to act. There are plenty of socially and economically disadvantaged businesses that can benefit from this program. If this can happen to the 8(a) BD program it can happen to any set-aside program.
Yes, I believe the program is suffering a slow and painful death. It is up to you to stop this injustice. Take action NOW!
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