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.

By Olena Gerus

Opinions expressed by Entrepreneur contributors are their own.

For entrepreneurs, a contract with the federal government can bethe key to growth and success. And with the government promising tocreate an environment where small businesses can flourish, it wouldseem that many entrepreneurs will get that shot at success. But isthat really the case? Not according to a recent report published bycongressional 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 HouseCommittee on Small Business. She says she's very concernedthat, while the federal marketplace is growing, the small-businessshare is actually shrinking.

Velázquez' comments are backed by the fourth annualScorecard, a report issued by congressional Democrats in June thatshows the federal government has missed its small-business goalsfor the third year in a row. This failure cost small businesses anestimated $13.8 billion in federal contracting opportunities. Theoverall grade received by the government in Scorecard IV was a D;out of the 21 agencies examined (accounting for 96 percent offederal 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 academiccareer.

"It's very frightening that federal agenciesconsistently miss their small-business goals, and how cavalier theyare about it," says Velázquez. "This year, thegrades are the worst they've ever been, even though PresidentBush put opening up contracting to small business at the top of hissmall-business agenda. I'm also concerned that women- andminority-owned businesses are essentially shut out of the federalprocurement arena." She noted that in 2002, minority-ownedfirms lost approximately $2 billion in federal contractingopportunities and women-owned businesses lost almost $5billion.

Kristie Darien, director of government affairs at the NationalAssociation of the Self-Employed, praises Velázquez'sefforts to get the agencies to do a better job with theirprocurement and considers the Scorecard assessments regardingprocurement to be "pretty accurate."

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

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

Linda Williams, associate administrator at the SBA's Officeof Government Contracting, says that instead of giving the agenciesnumerical or alphabetical grades, the SBA, in its own report, looksat percentages. "We work with the agencies to establish goalssuch that on the aggregate we can achieve 23 percent small-businessgoals and all the other associated sub-categories goals. At the endof the fiscal year, we evaluate the accomplishments against thegoals," explains Williams. "If you read Mrs.Velázquez's report, you see that she tends to grade thegoals 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 achievetheir small-business goal in the 2002 fiscal year. According toWilliams, accomplishments for 2002 stand at 22.62 percent, a slim0.38 percent short of the goal. The results also went down comparedto the previous fiscal year (22.81 percent).

To achieve the 23 percent goal for 2003, Williams says, the SBAtries to work with the agencies to create an environment wheresmall businesses can be competitive. "We're very active inoutreach training, working with the agencies, doing a lot ofnationwide matching events," she says, "all this is tohelp increase opportunities for small businesses."

A business matchmaking initiative is the SBA's latestnationwide effort to bring together small-business owners and thefederal procurement agencies. The SBA has already held matchmakingevents in Orlando, Florida; Birmingham, Alabama; and Chicago."The process of finding contracts is no longer like lookingfor a needle in the haystack. Our matchmaking initiative is a goodway of matching up supply and demand," says SBA spokespersonTiffani Clements. "We pre-screen all the businesses and set upactual appointments so they can actually sit down and have anywherebetween 7 and 21 appointments and sign a contract," Clementsexplains, adding that the participating businesses range fromhi-tech services to embroidery businesses.

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

If you're interested in participating in the SBA'smatchmaking events, visit www.businessmatchmaking.com, where you can browsethrough the participating buyers, read about past events andregister for a future matchmaking event near you.

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