Federal Spending Up, Small Business Solutions Down

May 11, 2023

Written by Brad Kraay

In recent years, there has been a significant and well publicized increase in federal spending, driven by various factors such as infrastructure investments and defense budgets. Paradoxically, this surge in spending has been accompanied by a concerning decline in small businesses participating in federal contracting. In this post, we chose to explore this trend and its potential implications. Federal spending has experienced a substantial increase across multiple sectors, ranging from healthcare and technology to defense and infrastructure. This surge in spending is driven by the government’s initiatives to address pressing national priorities and stimulate economic growth. However, this upward trend also sheds light on and magnifies the decrease in small businesses securing federal contracts, creating a disconnect between the flourishing federal spending and the participation of these vital economic contributors.

Several factors may account for the decrease in small businesses participating in federal contracting. Complex regulations in a compliance driven market, increased competition from large corporations, and the tightening of eligibility criteria could discourage small business owners from pursuing federal contracts. Furthermore, the extensive bureaucracy and lengthy procurement processes may pose significant barriers for small businesses lacking the resources and expertise to navigate them effectively—we would argue the lack of knowledge is a significant factor. The decline in small business participation in federal contracting is a matter of concern as these businesses are crucial for fostering innovation, economic growth, and job creation for our nation’s economy.

To reverse this trend, there is a need for streamlined procurement procedures, enhanced accessibility to contracting opportunities, and increased support for small business development, a focus of ours. Government agencies should actively engage with small businesses (some do a fantastic job of this already), provide clearer guidance, and help them navigate the complexities of federal contracting successfully with individual agencies. After all, competent small businesses can make the government’s life much easier. As federal spending continues to rise, it is imperative to address the decline in small businesses participating in federal contracting—a passion of ours. By implementing strategies to enhance accessibility, simplify processes, and support small businesses, we can ensure their continued contribution to economic growth while leveraging their innovation and agility to fulfill federal contract needs effectively while contributing to the success of far more small businesses than exist today in the federal space.