Having spoken with a number of local, Miami-Dade County government vendors it appears that many federal government contracts are going to big business. Despite the reasoning that government has a local preference and that it aims to help out small business, this has not entirely been the case. Throughout Miami-Dade County various workshops and seminars have been held for small businesses that hold such certifications as a SBE or CSBE. Despite programs aimed at generating activity for small business and the local community it has been increasingly difficult for small, local companies to win government contracts.
According to local vendors, most of the Miami-Dade projects are going to medium and large companies while small companies are sitting at home or attending these seminars trying to win new work to sustain their businesses. Other companies with little luck are simply disappearing from the market.
Meanwhile companies like Dell Computer, General Electric and Boeing have moved in. All three were actually counted as “small businesses” doing work in Florida last year. These three Fortune 500s – along with a dozen other billion-dollar companies – soaked up at least $76 million in federal contracts that were recorded as going to small businesses during fiscal year 2008.
The issue of how federal dollars are spent is critical in a state like Florida where 90% of all businesses have fewer than 20 employees and government contracts represent a valuable lifeline amid a tanking economy. While the federal government should be giving around 23% of all direct, or prime, contracts to small companies it has missed the mark during the last three years.
It is simply not fair that Fortune 500 companies have been recorded as “small companies” in federal government contracts. According to the Small Business Administration small companies throughout the U.S. have received a record $93.2 billion in prime contracts in 2008. While that was $10 billion more than the previous year, it only represented 21.5% of all deals.
Some U.S. government agencies have been overstating their commitment to small business. Under federal guidelines, companies that start small and grow large – as well as small companies that are acquired by larger firms – can maintain the small-business status of their long-term contracts for up to five years.
The multiple loopholes, incomplete government data and the challenge of prying information out of privately held companies make the problem difficult to quantify.
The American Small Business League estimates more than $100 billion a year in small business contracts goes to Fortune 500 companies and others that are clearly not small.
Even successful small businesses have found the process challenging.
Structured Cabling Solutions, a Hialeah, Florida company that designs and installs data and communications networks, spent about nine months compiling the documents required to become a government contractor.
Among its 32 employees are two estimators and three project coordinators who focus on drumming up new clients. But even with an experienced staff, the process of bidding on federal contracts is so time-consuming the firm can only compete for a handful a year. The company only pursues Florida deals but often finds itself up against out-of-state firms with a strong national presence.
Large companies clearly have an advantage because they can afford to play the numbers game and submit more bids at lower prices leading to greater chances of success – particularly in a bad market.
The company recently won its first contract — a deal with the National Park Service to provide data and electricity cabling in the Everglades.
The contracting issues are not new. The Government Accountability Office and the SBA have produced more than a dozen reports since 2000 highlighting problems. While some contractors may misrepresent or erroneously calculate their size, most incorrect reporting results from errors made by government contracting personnel.
The House of Representatives is hoping to close some of the loopholes by making it illegal for publicly traded companies, and any firm with more than 50 percent foreign ownership, to be counted as a small business for the purposes of meeting federal agency contracting goals.
However the federal government could just as easily raise the federal small-business target from 23% to 30% of all federal contracts. Although this might not help considering the fact that the government has not been meeting their small business goals to begin with.
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