Federal Small Business Contracting Goals

Federal Small Business Contracting Goals

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Federal Small Business Contracting Goals
Updated May 14, 2024
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 (SDBs)
5% Dol ar value of prime and subcontract awards
Women-Owned Small Businesses (WOSBs)
5% Dol ar value of prime and subcontract awards
Service-Disabled Veteran-Owned Small Businesses (SDVOSBs)
5% 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); P.L. 118-31.
Notes: Prime contracts are made directly to a business from an agency. 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. P.L. 118-31, the National Defense Authorization Act for Fiscal Year 2024,
increased the SDVOSB goal from 3% to 5%. Executive action increased the statutory SDB goal; in FY2024, agencies must
col ectively award at least 13% of contract spending to SDBs, per Office of Management and Budget Memorandum M-24-
01, in order to increase this share of award dol ars to 15% by 2025.
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Agency Goal-Making
The Small Business Administration (SBA) oversees small business procurement goal-making for
individual agencies. It consults with agencies to establish annual goals for small business participation in
contracting that collectively add up to the government-wide goals, as required by Section 15(g)(2) of the
Small Business Act.
SBA negotiates with agencies to create small business and SDB goals (SBA added SDB 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, WOSBs, and SDVOSBs 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 toward an agency’s small business goal, WOSB goal, and SDVOSB 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 toward small business goals.
In addition to 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 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.”
FY2023 Goal Attainment
According to the latest-available Procurement Scorecard, the government reached or exceeded three of
five prime contracting goals in FY2023.

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Table 2. FY2023 Contract Awards
SBA Scorecard
Type of Firm
Goal
Percentage
Dollars Awarded
Small Businesses
23%
28.35%
Small Disadvantaged Businesses (SDBs)
12%a
12.1%
Women-Owned Small Businesses (WOSBs)
5%
4.91%
Service-Disabled Veteran-Owned Small Businesses (SDVOSBs)
3%b
5.07%
HUB (Historically Underutilized Business) Zone Small Businesses
3%
2.78%
Source: SBA, Government-wide FY2023 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.
a. In FY2023, they were required to col ectively award at least 12% to SDBs, per Office of Management and Budget
Memorandum M-23-01. In FY2024, they must col ectively award at least 13% to SDBs, per Office of Management and
Budget Memorandum M-24-01.
b. P.L. 118-31, the National Defense Authorization Act for Fiscal Year 2024, increased the SDVOSB goal from 3% to 5%.

Author Information

R. Corinne Blackford

Analyst in Small Business and Economic Development
Policy

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