ANALYSIS: Signs of small business shifts to watch out for
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It's unlikely that the Trump administration will completely abandon small business contracting, but a change in who those dollars go to appears likely with DEI efforts being rolled back. In this analysis, we establish a baseline for where the spending is today.
Small business contracting goals have long been a staple of the federal market as agencies collect and report spending with a range of minority-owned businesses.
The new Trump administration and its rollback of diversity, equity and inclusion rules appears certain to upend the small business market.
Programs that set goals for awarding contracts to small business categories like women-owned, 8(a) and tribally-owned businesses are established by laws.
Congress in 1988 passed the law that required that 23% of federal prime contract dollars go to small businesses. The same law established a 5% goal for small disadvantaged businesses, also called 8(a).
Setting aside the Trump administration's actions, the 8(a) program has been under attack in recent years. In July 2023, a federal district court ruled that the Small Business Administration cannot automatically allow companies into the program if the owners were members of a historically-discriminated against group.
Instead, the individual must outline how they faced discrimination that hurts their chances at business success.
The Ultima v. Agriculture Department case is currently under appeal, with the company arguing that the lower court should have found the preference program unconstitutional.
If that happens, the 8(a) program would cease to exist.
I do not believe that the government will stop working with small businesses, but we may see a significant shift in how that spending changes.
Below are a set of charts that breakdown federal fiscal year 2024 spending by large and small businesses, and then by the different small business categories the government.
This is baseline that will help us track the changes going forward. We pulled this data from Sam.gov’s data bank, which unfortunately does not include spending with women-owned businesses.
Large versus Small
Large Businesses: 70.6% ($532.2 billion)
Small Businesses: 23.3% ($176.1 billion)
Small Business Breakdown
Minority-Owned Businesses:
- 10.07% of total government dollars ($75.9 billion)
Alaskan Native Corporations:
- 2.09% of total government dollars ($15.7 billion)
Tribally Owned Firms:
- 1.00% of total government dollars ($7.5 billion)
American Indian Owned:
- 0.80% of total government dollars ($6 billion)
Native Hawaiian Owned:
- 0.37% of total government dollars ($2.8 billion)
Indian Tribe (federally recognized):
- 0.32% of total government dollars ($2.4 billion)
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