INSIGHTi

Federal Small Business Contracting Goals
Updated July 26, 2023
Origins
Since 1988, the federal government has maintained annual goals for small and small “disadvantaged”
business participation in federal contracting. At that time, Congress required that small businesses receive
“not less than 20 percent of the total value of all prime contract awards for each fiscal year” and that small
disadvantaged business (those owned and controlled by socially and economically disadvantaged
individuals) receive “not less than 5 percent of the total value of all prime contract and subcontract
awards for each fiscal year” (P.L. 100-656). Congress has since increased the small business contracting
goal.
Current Small Business Contracting Goals
There are five government-wide statutory small business contracting goals set by Congress:
Table 1. Statutory Contracting Goals
Type of Firm
Goal Measure of Contract Awards
Small Businesses
23% Dol ar value of prime contract awards
Small Disadvantaged Businesses
5% Dol ar value of prime and subcontract awards
(criteria for social and economic disadvantage apply)
Women-Owned Small Businesses
5% Dol ar value of prime and subcontract awards
Service-Disabled Veteran-Owned Small Businesses
3% Dol ar value of prime and subcontract awards
HUB (Historically Underutilized Business) Zone Small Businesses
3% Dol ar value of prime and subcontract awards
Source: 15 U.S.C. §644(g)(1)(A).
Notes: Prime contracts are made directly to a business from an agency, whereas subcontracts are made between prime
contractors and businesses. Some federal prime contracts require a contractor to subcontract with small businesses to
create more opportunities for those firms. While the above goals were created through legislation, executive action has
altered them; In FY2023, agencies must col ectively award at least 12% of contract spending to Small Disadvantaged
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Businesses, per Office of Management and Budget Memorandum M-23-01, as part of an effort to increase this share of
award dol ars to 15% by 2025.
Agency Goal-Making
The Small Business Administration (SBA) oversees small business procurement goal-making for
individual federal agencies. It consults with agencies to establish annual goals for small business
participation in contracting that collectively add up to the statutory, government-wide goals, as required
by Section 15(g)(2) of the Small Business Act.
SBA negotiates with agencies to create small business and small disadvantaged business goals (SBA
added small disadvantaged business goals to the negotiation process in FY2022, per the Office of
Management and Budget Memorandum M-22-03). SBA sets agency goals for HUBZone businesses,
women-owned small businesses, and service-disabled veteran-owned small businesses at the statutory
level; it bases subcontracting goals on recent attainment levels.
Goal Negotiation and Guidelines
SBA’s “Goaling Guidelines” describe the goal negotiation process. According to the FY2023 Guidelines,
“Before the beginning of the fiscal year, SBA provides agencies with a proposed goal, and agencies
respond with an acceptance of the proposed goal or a counter-proposed goal.” The SBA will then
“determine if these individual agency goals, in the aggregate, meet or exceed the government-wide
statutory goals.” If an agency and the SBA cannot agree on an agency’s goals, the agency “may submit
the case to the Office of Federal Procurement Policy at the Office of Management and Budget for
resolution.”
Aspirational Goal Attainment
Agency goal attainment is an aspirational pursuit without punitive consequences for failure to meet goals.
The SBA creates annual Small Business Procurement Scorecards and the GSA produces annual reports,
which can attract scrutiny of contracting practices. Any agency that does not achieve a goal must submit a
“corrective action report” to the SBA, denoting the reasons it failed to achieve the goal and proposing a
“corrective action plan.”
Scorecards and Reports
Since 2007, the SBA has issued a Procurement Scorecard for the 24 CFO Act agencies every fiscal year.
The SBA gives agencies small business contracting credit in every category applicable to a contract
recipient. For example, a contract with a small business that is women-owned and service-disabled
veteran-owned would count towards an agency’s small business goal, women-owned small business goal,
and service-disabled veteran-owned small business goal. The SBA also “double-counts” certain prime
contracts awarded in disaster areas (15 U.S.C. §644(f)) and in Puerto Rico and other covered territories
(15 U.S.C. §644(x)(1)). Section 318 of P.L. 113-76 requires the SBA to also count Department of Energy
first-tier subcontract awards towards small business goals.
In the FY2022 Procurement Scorecard, the SBA gave the federal government the grade of “A.” The
grades on agency scorecards were also “A’s,” except for the Departments of Defense, Health and Human
Services, Treasury, and Veterans Affairs.
In addition to the SBA’s Procurement Scorecards, GSA’s annual Goaling Reports, available through the
SAM.gov data bank, monitor goal achievement. The Small Business Act also requires GSA to provide a

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report on all prime contract procurements made each fiscal year. The report must be provided to the
President and Congress and made available on a public website. Per Section 15(h)(3)(A)(ii) of the act, it
must include “all procurements made for the period covered by the report and may not exclude any
contract awarded.”
FY2022 Goal Attainment
According to the SBA, the federal government reached or exceeded three of five prime contracting goals
in FY2022.
Table 2. FY2022 Contract Awards
SBA Scorecard
Percentage
Type of Firm
Goal
Dollars Awarded
Small Businesses
23%
26.50%
Small Disadvantaged Businesses
11%a
11.38%
(criteria for social and economic disadvantage apply)
Women-Owned Small Businesses
5%
4.57%
Service-Disabled Veteran-Owned Small Businesses
3%
4.57%
HUB (Historically Underutilized Business) Zone Small Businesses
3%
2.65%
Source: SBA, Government Wide FY2022 Small Business Procurement Scorecard.
Notes: SBA excludes certain contracts when procurement data is unavailable or because the work cannot realistically be
performed by small businesses. According to the SBA’s Goaling Guidelines, most excluded contracts are acquisitions on
behalf of foreign governments, awarded to mandatory and directed sources, or funded with non-appropriated, agency-
generated funds. Purchases valued at less than $10,000 are also excluded because they are not tracked in the Federal
Procurement Data System. The value of contracts with these exclusions is referred to as the “small business eligible”
value.
In FY2022, agencies were required to collectively award at least 11% of contract spending to Small
Disadvantaged Businesses, per the Office of Management and Budget Memorandum M-22-03.

Author Information

R. Corinne Blackford

Analyst in Small Business and Economic Development
Policy




Disclaimer
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to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of

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IN12018 · VERSION 5 · UPDATED

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