No More Easy A’s: Strengthening the Procurement Scorecard

Since 1988, Congress has required a portion of all federal contracts to go to small businesses, opening the door to a multi-billion-dollar market.

After failing to meet the 23% small business procurement goal between fiscal year (FY) 2006 and FY12, the federal government has met or exceeded the goal for nine consecutive years. In FY21, small businesses earned $154.2 billion, or 27.23%, of federal contracts—the highest share in at least a decade and a half.

Those top-line numbers are trending positive. Yet a market this large, with so many different buyers, has significant variation. The Small Business Administration’s (SBA) Small Business Procurement Scorecard is an important tool for understanding the small business contracting market and holding federal agencies accountable for meeting their procurement goals.

Examining the Scorecard

SBA works with federal agencies to set procurement goals and then reports annually on agency performance against those goals in its Procurement Scorecard. Together with SBA, agencies set prime and subcontracting goals for small businesses. The scorecard also reports performance against subcategory goals for contracting with women-owned small businesses, small disadvantaged businesses, service-disabled veteran-owned small businesses, and small businesses located in Historically Underutilized Business Zones (HUBZones).

In FY21, all but three of the 24 agencies assessed in the Procurement Scorecard received an A or A+ grade for their performance in small business contracting. These grades are determined by a formula that accounts for prime and subcontracting awards, a comparison against historical data, and the results of a compliance review.

While the scorecard is an important monitoring tool, the grades can obscure poor performance against subcategory goals. In FY21, for example, the Department of Energy and NASA received A grades, yet both agencies failed to meet prime contracting goals for women-owned small businesses, service-disabled veteran-owned small businesses, and small businesses located in HUBZones.

The scorecards also paper over concerning trends in the number of small businesses participating in federal contracting. As outlined in a BPC report on small business contracting, the number of small businesses providing common products and services to the federal government shrank by 38% between FY10 and FY19. In FY21, 83% of agencies awarded fewer prime contracts to small businesses than the year before. Four agencies—each of which received an A or A+ grade—had declines of 10% or more.

While goals are important for communicating priorities, they also have downsides. Small business owners and former agency officials have told BPC it is important to align goals with the diversity of small business ownership. Women, for example, own about 20% of employer businesses in the United States—yet the women-owned small businesses goal has remained at 5% for over 20 years. Even this small goal has only been met twice.

Enhancing the Small Business Scorecard

Members of Congress from both parties recognize the importance of having good data on small business contracting. One bipartisan effort to expand reporting, the Small Business Scorecard Enhancements Act, is included in the FY23 National Defense Authorization Act (NDAA) alongside other small business reforms.

In step with BPC recommendations to improve transparency, accountability, and oversight of small business procurement, key provisions of the FY23 NDAA aim to bolster transparency in the federal contracting process by requiring the scorecard to include the number and total dollar amount of awards through sole source contracts and competitions made to:

• Women-owned small businesses
• Small businesses in HUBZones
• Service-disabled veteran-owned small businesses
• Small disadvantaged businesses

Including more information in the scorecards would bring much needed accountability to federal contracting – something small business owners want to see happen. Policymakers and small business need to know how well federal agencies are meeting contracting goals to remove the mystery around the procurement process, expand accessibility, and increase the success of the program. One business owner told us, “Procurement goals are just that: goals. There is no accountability for any agency to spend dollars with small businesses.” Another said, “We open up our life, our net worth to these people, and there’s no accountability on the government side.”

Looking Ahead to the Future of Small Business Contracting

Inclusion of the Small Business Scorecard Enhancements Act in the NDAA is a step forward to address problems in federal contracting. However, business owners still face numerous structural barriers when pursuing federal contracts, including a complex and arduous process to even be considered as a seller and be able to bid for contracts. Prior BPC work has highlighted potential policy options to strengthen small business contracting, including:

• Ending agencies’ ability to double-count when reporting contracting goals,
• Creating processes to aid new entrants to the procurement process and help established contractors “graduate,” and
• Raising the simplified acquisition threshold so more small businesses can participate in federal contracting.

Individual pieces of legislation addressing these structural gaps can help improve procurement for small business owners, however these barriers can be best addressed by modernizing SBA through reauthorization. Strengthening the procurement process will benefit small businesses and their government customers.