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Billions of federal contracting dollars go to women-owned businesses—but it’s still not enough.

In May 2017, the U.S. Small Business Administration (SBA) announced that the federal government exceeded its small business federal contracting goal for the fourth consecutive year, awarding 24.34 percent in federal contract dollars to small businesses. In order to achieve the goal of spending 23 percent of federal contract dollars with small businesses, major agencies of the federal government work with the SBA to establish individualized spending benchmarks, and are encouraged to meet them.  For example, while the Department of Energy (DOE) aims to spend 6.37 percent of its contract monies with small businesses, the SBA, itself, aims for a small business spend of 72.75 percent of its contract dollars. You can see the FY16 agency goals and achievements here.

However, the goal to spend 5 percent of federal contract dollars with certified women-owned small businesses, applies not just to the federal government, but also to each specific agency.[1] And, unfortunately, there was no May announcement that this goal had been met in fiscal year 2016—because it had not. In fact, only 4.79 percent of all federal prime contract spending had gone to certified women-owned businesses between October 1, 2015 and September 30, 2016.  

To explain this underachievement, we could look to policy shifts—such as the fact that, for the first time in several years, overseas contract awards were not counted toward the goal. But, this policy change affected all small business goals—and the federal government did, after all, meet many of these other performance measures. So, policy changes alone cannot bear the full burden of the explanation. Furthermore, the 5% goal has only been met one time since it was established by the Federal Acquisition Streamlining Act of 1994, (last year, to the tune of 5.05 percent, in FY 2015). This poor track record demonstrates that underachievement is a persistent problem with more substantial underlying causes than a change in calculation.

And, to be sure, there are substantial and complex explanations. But here’s an obvious one: four of the five biggest federal spenders, are falling short.

In FY2016, the Department of Defense (DOD), the Department of Energy (DOE), the Department of Health and Human Services (DHHS), the Department of Veterans Affairs (VA), and the National Aeronautics and Space Administration (NASA) spent approximately 84 percent of the federal contracting budget—a total outlay of $341,252,631,158. Among these agencies, however, only the Department of Health and Human Services exceeded the goal of 5 percent prime spending with women-owned small businesses. The remainder clocked in at 4.1 percent (DOD), 4.05 percent (NASA), 3.04 percent (VA), and 1.24 percent (DOE). 

If each of these agencies had spent just 0.3 percent more of their contracting budgets with women-owned small businesses, the federal government would have met its 5 percent goal with flying colors – and this would still mean that the agencies fell short of the benchmark. If, on the other hand, each had spent a full 5 percent of dollars with women-owned businesses, as is encouraged, the share of government contracts going to women business owners would have been closer to 9 percent, or $36,414,246,075.

Of course, it’s important to acknowledge the reality that contracts can only be awarded to those who bid. (I’d call that statement a self-evident truth, but I recently fielded a phone call from an irate businessman, wanting to know why—in his opinion—the government was “privileging women’s businesses” over his own. “Have you won any contracts recently?” I asked, attempting to redirect the conversation to more constructive grounds. “Why try?  They’re not going to give them to me anyways,” he replied.) In other words, it may be that agencies struggling to meet the 5 percent prime contracting goal are buying goods and services from industries in which women are underrepresented, making it difficult for them to find competitive potential vendors. 

Indeed, this hypothesis bears out. For instance, in 2016, DOD spent nearly half of its budget on contracts with manufacturing firms—an industry in which women own only 24 percent of businesses. Yet, even though this would illustrate why relatively fewer DOD manufacturing contracts go to women, the disparity remains startling: According to usaspending.gov, women-owned firms won only 7 percent of all DOD contracts awarded to manufacturing firms, earning only 1.3 percent of the money spent.

Still, the news isn’t all bad. The government, and many of the agencies discussed here, exceeded the 5 percent goal for subcontracts awarded to women-owned businesses, with the government’s spend hitting 5.7 percent. And, as the National Women’s Business Council explored in its December 2016 research on supplier diversity, subcontracting is a valid and important option for women business owners.

With all these figures in mind, what is to be done? The Council recognizes that women business owners are working hard already, but some helpful tips include:

1. Consider getting certified

One of the important things to keep in mind is that statistics on women’s participation in federal contracting use certification as a metric for identifying a business as women-owned. Beyond being able to contribute to the 5 percent goal, certified women-owned businesses are also able to participate in restricted competition awards, or set-asides. You can learn more here: https://www.sba.gov/contracting/government-contracting-programs/women-owned-small-businesses.  

2. Recognize the value in subcontracting

Prime contracts, while impressive and desirable, are not the only opportunities to secure stable business in the federal government supply chain. Women-owned businesses should maximize their opportunities to contract to larger businesses by seeking out prime as well as subcontracts—those in which they supply a prime contractor for the government—as a viable means to test their mettle, scale up their capacity and their receipts, or simply secure good business.

3. Attend procurement events or vendor outreach days

Many federal agencies host informational events designed to provide interested businesses an opportunity to share information about their capabilities, ask questions about the agency’s procurement processes and discuss a general forecast of agency opportunities. Further, the SBA’s Procurement Technical Assistance Center program is aimed at sharing essential information about contracting, such as where to register and what types of contracts have previously been awarded to similar businesses.

The National Women’s Business Council will continue to examine these procurement data and to highlight the opportunities for agencies to engage with women business owners as they fill their contracting needs. In short, NWBC will be keeping the spotlight turned on the government as it works to meet—and exceed—its 5 percent goal in the coming year and beyond. 

Author: Annie Rorem, Director of Policy and Research at the National Women’s Business Council.

[1] As a reminder, a woman-owned small business may be certified as such if it meets these standards.

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