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.