Small businesses’ share in government spending keeps rising

Andrey Kamenov

Andrey Kamenov, Ph.D. Probability and Statistics

The U.S. government has multiple different rules about awarding its contracts — one of these states that every agency should award a specific percentage of the total sum it spends to small businesses. For instance, the Department of Defence set its goal for small business prime contracting in 2018 at 22 percent. It also sets several other goals, including those for women-owned small businesses or small disadvantaged businesses.

Naturally, the goal differs from one agency to another, and the definition of small business itself changes depending on the industry.

On paper, the government’s efforts have been pretty effective. Small firms received 30.5 percent of the government’s total contract spending in 2017, up 1.8 percent from 2015. But these overall numbers don’t mean much to your small business since the percentage varies significantly between different industries and states, so let’s get a more detailed look. For example, it appears that small business’ participation numbers are markedly lower in the midwestern states.

New York and Pennsylvania are also worth mentioning here as both posted a sharp decrease since 2015. In the latter, the percentage of government funding received by small firms has fallen from 62 to 39 percent.

Another important factor, of course, is the industry. Receiving government funding is much easier for a small consulting firm than for a small ship-building business. Let's see how things changed in the past two years.

Here are the top 10 industries by the total amount obligated. As you can see, most of them have shown moderate growth in small business participation.

Even aerospace P&P manufacturing, an industry closely associated with giant corporations like Lockheed and Boeing, is now slightly more welcoming to small businesses. But there's a catch — a significant part of the funding ($90 million) went to Aurora Flight Sciences, which was acquired by Boeing in 2017. It would be interesting to see whether other smaller firms in the industry such as Sunrise Beach Corp. will be able to receive any substantial contracts in the future.

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About Andrey Kamenov

Andrey Kamenov

Andrey Kamenov, Ph.D. Probability and Statistics

Andrey Kamenov is a data scientist working for Advameg Inc. His background includes teaching statistics, stochastic processes and financial mathematics in Moscow State University and working for a hedge fund. His academic interests range from statistical data analysis to optimal stopping theory. Andrey also enjoys his hobbies of photography, reading and powerlifting.

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