Why U.S. public sector procurement is broken
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Public sector procurement, or as it’s more commonly known, doing business with the government, is broken.
At least that’s what Lloyd Chapman, the founder of the American Small Business League, says. According to Bergeron, large companies are being awarded public sector small company contracts, which would be against the law.
The Small Business Act of 1953, designed to “encourage” and “develop” small business growth, stipulates that 23 percent of all government contracts must go to small businesses.
However, according to a report done by the American Small Business League, large firms such as Lockheed Martin, Hewlett-Packard, AT&T and several others earned government contracts as small businesses.
In all, 61 of the top 100 small business contracts awarded in the 2010 fiscal year went to large corporations according to the ASBL’s report, which accounted for $8.83 billion. Subtracting that total from the mandated 23 percent would put the government well under its goal for small business contracts.
Chapman’s solution to that problem is pretty straight forward.
“People that weren’t in the army shouldn’t get VA loans, people that are millionaires shouldn’t get welfare, and Fortune 500 companies shouldn’t get federal small business contracts,” Chapman said.
Chapman thinks the problem with large corporations earning small business contracts starts with a loose definition of the term “small enterprise.”
Chapman has repeatedly gone after the SBA to uncover what he views as fraud, and took the government agency to court earlier this year.
In a Supreme Court ruling filed by Chapman against the SBA in May, United States District Judge Marilyn H. Patel stated, “The court finds it curious the SBA’s argument that it does not ‘control’ the very information it needs to carry out its duties and package.”
The $230 billion that Chapman is proposing small businesses should be awarded could be money well spent. According to the U.S. Census Bureau, small businesses create more than 90 percent of all net new jobs.
A recent study by the Kauffman Foundation supported that claim further, finding that since 1980, businesses less than five years old have created nearly every new job.
TIPS FOR SMALL BUSINESS IN THE PUBLIC SECTOR
Even if public sector procurement for small businesses is broken, Chapman thinks small businesses around the country need to do a better job of pursuing government contracts.
“My No. 1 piece of advice for small businesses is to be fearless,” Chapman said. “Unfortunately, the vast majority of small businesses in America that are trying to work with the government are scared, and that’s the opposite of what you have to down.”
Will Public Procurement Budgets Increase in 2021?
Procurement is more than just a private enterprise. COVID-19 reminded us that sourcing materials is an essential part of the government’s role. Throughout 2022, tiny departments sourced massive amounts of personal protective equipment (PPE), medical supplies, and emergency vaccines and testing kits. Even non-procurement professionals were pulled into the fray, as frantic timelines demanded nothing less.
According to Celeste Frye, co-founder and CEO of Public Works Partners, the crisis brought procurement to the attention of skilled employees who had never considered it. As non-procurement personnel stepped up to help their coworkers, many found that they’d stumbled upon a critical and rewarding job. “Existing public employees have seen the essential nature of the work”, Frye said. “[They’ve] gained some critical skills and possibly [grown] interested in pursuing procurement as a longer-term career”.
Small, Local Suppliers Take Charge
Frye, whose firm helps organisations engage stakeholders and develop long-term procurement strategies, thinks it well worth the effort to open one’s mind to new opportunities. Cooperative contracts, for instance, can help public departments and municipalities save money, time, and effort. By joining together with other towns or cities in the region, public procurement teams aggregate their purchasing power and can drive better deals.
These cooperative contracts have the added benefit of advancing equity. Smaller suppliers that struggle to compete with established firms for government contracts can act as subcontractors, helping big suppliers fulfil bits of the project. Once they get their foot in the door, small, local, and disadvantaged suppliers can then leverage that government relationship to take on additional projects.
Especially as governments start to pay attention to procurement resilience, public procurement departments must expand their requests for proposals (RFPs) to take into account innovative solutions and diverse suppliers. According to Frye, Public Works Partners—a certified female-owned firm—has benefitted from local and state requirements that specify diversity.
Post-Pandemic Funding Swells Procurement Budgets
And the pandemic won’t be the end of it. City governments need to build sustainable energy infrastructure such as solar panels, charging stations, and recycling plants, ensure that masks and medicines are never in short supply, and source new technologies to keep up with cloud and cybersecurity concerns.
Public procurement budgets will likely increase to match demand. As Peter Ware, Partner and Head of Government at Browne Jacobson, explained, “in a non-pandemic world, the [U.K.] government spends on average around £290 billion on outsourced services, goods, and works...anywhere between 10% and 14% of Gross Domestic Product (GDP). Post-pandemic, city procurement will only increase as national governments provide local divisions with emergency funding.
And in truth, government employees might jump at the opportunity. Frye noted that public procurement could give immediate feedback on new programmes: “[Procurement] is where new laws and policies ‘hit the road’ and are implemented”, she said. “Professionals in these fields get the satisfaction of creating real change and seeing quantifiable outcomes of their work”.