OMB Releases Guidance to Advance Equity for Underserved Small Businesses in Federal Procurement

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PilieroMazza PLLCThe Office of Management and Budget (OMB) released guidance on December 2, 2021, implementing Executive Order 13985, “Advancing Racial Equity and Support for Underserved Communities through the Federal Government” (EO).  The EO directs agencies to readily make available federal contracting opportunities to all eligible vendors and to remove barriers preventing underserved individuals and communities from entering into procurement opportunities.  Additionally, President Biden has set a goal to increase the share of contracts awarded to small, disadvantaged businesses (SDBs) to 15% by 2025.  Below are five actions all federal agencies are instructed to take to help increase spending to government contractors in underserved communities.  Small businesses should be attentive to how these actions will result in new opportunities for them in 2022.

  1. Federal agencies shall agree to specific contracting goals with the Small Business Administration (SBA) to reach a federal-wide SDB contract spend of at least 11% for FY 2022. In FY 2020, federal agencies awarded 10.45% of eligible contracting dollars to SDBs.  Interim goals set between agencies and the SBA shall eventually lead to the President’s goal of 15% by 2025.  In addition to SDBs, SBA will work with OMB and other councils to identify ways to increase “the floor amount of spending for women-owned small businesses (WOSB), service-disabled veteran-owned small businesses (SDVOSB), and HUBZone” small business contractors for FY 2023. 
  2. Federal agencies shall review their respective category management practices ensuring they are consistent with new revisions made to OMB’s Memorandum M-19-13 Category Management: Making Smarter Use of Common Contract Solutions and Practices. Category management is a federal buying practice that helps agencies buy as an organized entity and eliminate redundancies.  It has saved the federal government more than $33 billion since 2017.  However, as category management principles become more popular, many socioeconomic small business opportunities are being abandoned.  In effect, larger, government-wide contracts are not being set-aside for socioeconomic small businesses, preventing them from participating in a large portion of the federal marketplace. 

    To mitigate these adverse consequences, OMB revised its category management guidance by creating a measure called “Tier 2-Socioencomic Small Business Spend Under Management,” a new socioeconomic small business tier that gives agencies automatic credit towards category management goals “for all awards made to certified and self-certified socioeconomic small businesses.”  Further, agencies are reminded that spending on “Best in Class” vehicles—large, pre-vetted, government-wide solutions—should not be prioritized over meeting socioeconomic small business goals.  Lastly, the SBA and the Department of Commerce, including the Minority Business Development Administration, were admitted into the Category Management Leadership Council to provide a voice for small businesses in developing category management policy.

  1. Agencies shall address the general decline of small businesses in the federal marketplace by taking recommended steps to implement specific contracting initiatives. New small business entrants to federal procurements declined 79% from 2005 to 2019 and 49,000 small businesses in the federal supplier base were lost since 2010.  To address this decline, OMB will develop a plan to better track new contractors entering into federal procurements.  Also, OMB will work with federal agencies to resolve the perceived “lack of visibility into available opportunities” for non-government contracting businesses.

    Further, OMB recommends, among other things, that agencies (i) “engage early in the acquisition process” with their respective Office of Small and Disadvantaged Business Utilization (OSDBU) and SBA’s assigned Procurement Center Representative “to maximize opportunities for small business participation,” (ii) “hold regular meetings with program managers of new socioeconomic small businesses,” and, among other things, and (iii) “strengthen oversight of prime contractor reporting of subcontracting plans and goals.” 

  1. Agencies are now expected to include progress towards socioeconomic small business goals as evaluation criteria in all performance plans for Senior Executive Service (SES) officials. SES managers oversee the acquisition process by planning acquisitions and selecting awardees.  This step will strengthen senior official accountability by upholding the goal for maximum utilization of small businesses in federal contract opportunities.  All necessary agency actions should be taken by January 10, 2022.
  2. By January 10, 2022, nearly all agencies must report to the SBA Administrator and the OMB Deputy Director for Management identifying whether their OSDBU directors report solely to their agency head or deputy. This statutory requirement fosters much-needed communication between agency senior leadership and their socioeconomic small business liaison.  However, federal agency efforts to comply have been lackluster in recent years.  If the OSDBU directors lack access to senior leadership, their report to SBA and OMB “should include a plan on how and when the agency will come into compliance during FY 2022.” 

The President’s EO brings long-awaited attention to the socioeconomic small business community.  Most of OMB’s guidance seeks immediate implementation by federal agencies.  Thus, small businesses should pay close attention to the multitude of new opportunities that will appear in the next year.  SDBs will have access to more federal contracting opportunities, including large, government-wide contracts generally awarded to other-than-small businesses.  Additionally, small businesses that have yet to enter the federal marketplace should find entry much easier with reduced barriers and increased representation via the SBA and their agency offices. 
 
Special thanks to Law Clerk, Daniel Figuenick, for his assistance with this post.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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