There is a lot of confusion about Small Business goals that we usually see in Requests for Proposals (RFPs) along with requirements to submit Small Business Subcontracting Plans (SBSPs) and/or Small Business Participation Plans (SBPPs). Hopefully, we can shed a little light on the subject.
Since Small Businesses are credited with most of the technical innovations and job creation in the US, the federal Government has a significant interest in seeing that the small business community remains robust. One of the ways to help company growth and stability is through profitable federal contracting opportunities. To this end, the Government established the Small Business Administration (SBA) through enactment of the Small Business Act of 1953. One of the SBA’s goals is to make sure that Small Businesses win a “fair proportion” of federal contracts. That’s why the Government established prime contracting and subcontracting goals.
Congress has established the following prime contracting goal – 23% of all federal contracts should be awarded to Small Businesses. Further, Congress established the following socioeconomic goals: Small Disadvantaged Businesses (SDBs) – 5%; Woman-Owned Small Businesses (WOSBs) – 5%; Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) – 3%; and Historically Underutilized Business Zone (HUBZone) Small Businesses – 3%. Note that the Department of Veterans Affairs (VA) also has a mandate to track award to Veteran Owned Small Businesses (VOSBs) because of their unique position, but awards to VOSBs are not usually tracked outside the VA.
While these are goals for federal contracts overall, the SBA also negotiates “Agency-wide” goals with each federal Department or Agency each year which may account for some of the different figures you see. For example, for FY 2017, the VA had an overall Small Business prime contracting goal of 28.5% and they exceeded that goal by awarding 29.72% to Small Businesses. They also had an overall Small Business subcontracting goal of 17% which they missed slightly by achieving only 16.60%. (You can see all the Agency goals and achievements for FY 2017 on the SBA website at https://www.sba.gov/document/support–small-business-procurement-scorecard-overview .)
The Agency goals may be higher or lower than the national goals. In addition, the Agency can set goals for each procurement higher than those negotiated with SBA. However, the sum total of all the Agencies’ goals must meet the goals for the federal Government by statute (i.e., 23%, 5% or 3% depending on socioeconomic category).
Since the Government also tracks the percentage of subcontracts as well as Prime contracts, there is a mandatory requirement that Large Business contractors who win federal contracts over the simplified acquisition threshold must give the “maximum practicable opportunity to participate in contract performance” to SDVOSBs, WOSBs, SDBs, HUBZones, and other Small Businesses that don’t fall into one of those categories. If the contract is expected to exceed $700,000 (or $1.5M for construction), the Prime must create a SBSP that meets specific detailed requirements.
For some acquisitions (particularly those from Department of Defense), you may have also seen a requirement to create a SBPP. This participation plan is different from the SBSP in a number of ways and when required, must be submitted by both Large and Small Businesses (unlike the SBSP which is only required from Large Businesses).
The title of the plan is the key to the distinction between the two documents – an SBPP credits the Small Business Prime’s “participation” in achieving the goals and does not mandate any subcontracting (if the goals can be met by the Small Business Prime alone). The SBSP is limited to Large Businesses who must subcontract to meet Small Business goals. SBPPs take various forms and do not conform to the specific requirements that the SBSP does
There are numerous nuances to this subject which can’t be covered in this short space, but the “bottom line” is that there are serious consequences to not achieving your Small Business goals so you need to ensure that your plans are constructed properly and reasonably. If you need help with understanding the Small Business program goals and documents, we may be able to help.