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Is the Federal Government Failing Small Business?

In a year when federal contracting opportunities are very limited for small businesses, the government receives a "D" in entrepreneurship from Congress.

Opinions expressed by Entrepreneur contributors are their own.

For entrepreneurs, a contract with the federal government can be the key to growth and success. And with the government promising to create an environment where small businesses can flourish, it would seem that many entrepreneurs will get that shot at success. But is that really the case? Not according to a recent report published by congressional Democrats.

The U.S. federal marketplace, totaling $235.4 billion in 2002, "remains largely closed to small enterprise in America," says Nydia Velázquez (D-N.Y), ranking member of the House Committee on Small Business. She says she's very concerned that, while the federal marketplace is growing, the small-business share is actually shrinking.

Velázquez' comments are backed by the fourth annual Scorecard, a report issued by congressional Democrats in June that shows the federal government has missed its small-business goals for the third year in a row. This failure cost small businesses an estimated $13.8 billion in federal contracting opportunities. The overall grade received by the government in Scorecard IV was a D; out of the 21 agencies examined (accounting for 96 percent of federal procurement), there were no As, 4 Bs, 5 Cs, 9 Ds and 3 Fs. For a student, such grades would signal the sad end of his academic career.

"It's very frightening that federal agencies consistently miss their small-business goals, and how cavalier they are about it," says Velázquez. "This year, the grades are the worst they've ever been, even though President Bush put opening up contracting to small business at the top of his small-business agenda. I'm also concerned that women- and minority-owned businesses are essentially shut out of the federal procurement arena." She noted that in 2002, minority-owned firms lost approximately $2 billion in federal contracting opportunities and women-owned businesses lost almost $5 billion.

Kristie Darien, director of government affairs at the National Association of the Self-Employed, praises Velázquez's efforts to get the agencies to do a better job with their procurement and considers the Scorecard assessments regarding procurement to be "pretty accurate."

"Procurement specifically relates to doing business with the federal government, and it really hasn't improved," Darien says. "Small-business owners have to go through all series of paperwork in order to do business with the federal government. And even when they're done with the certification, it doesn't mean anything, since the government has a quota for small businesses it wants to work with." She adds that the administration that claims its determination to promote entrepreneurship should do more to give small businesses a fair shot at competing with larger businesses. And, as the awareness of the issue grows, the situation should get better, "because it can't get worse," says Darien.

A representative of the SBA agrees that the federal agencies didn't reach their small business goals in 2002, but she says she wouldn't give the government a D.

Linda Williams, associate administrator at the SBA's Office of Government Contracting, says that instead of giving the agencies numerical or alphabetical grades, the SBA, in its own report, looks at percentages. "We work with the agencies to establish goals such that on the aggregate we can achieve 23 percent small-business goals and all the other associated sub-categories goals. At the end of the fiscal year, we evaluate the accomplishments against the goals," explains Williams. "If you read Mrs. Velázquez's report, you see that she tends to grade the goals as well as the achievements."

Even taking into account different approach to grading, however, the SBA's yearly report also shows that they failed to achieve their small-business goal in the 2002 fiscal year. According to Williams, accomplishments for 2002 stand at 22.62 percent, a slim 0.38 percent short of the goal. The results also went down compared to the previous fiscal year (22.81 percent).

To achieve the 23 percent goal for 2003, Williams says, the SBA tries to work with the agencies to create an environment where small businesses can be competitive. "We're very active in outreach training, working with the agencies, doing a lot of nationwide matching events," she says, "all this is to help increase opportunities for small businesses."

A business matchmaking initiative is the SBA's latest nationwide effort to bring together small-business owners and the federal procurement agencies. The SBA has already held matchmaking events in Orlando, Florida; Birmingham, Alabama; and Chicago. "The process of finding contracts is no longer like looking for a needle in the haystack. Our matchmaking initiative is a good way of matching up supply and demand," says SBA spokesperson Tiffani Clements. "We pre-screen all the businesses and set up actual appointments so they can actually sit down and have anywhere between 7 and 21 appointments and sign a contract," Clements explains, adding that the participating businesses range from hi-tech services to embroidery businesses.

One of the matchmaking initiatives other goal's is to extend contracting opportunities outside the nation's capital, because, according to Clements, currently about 80 percent of federal contracts go to firms within the Beltway.

If you're interested in participating in the SBA's matchmaking events, visit, where you can browse through the participating buyers, read about past events and register for a future matchmaking event near you.

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