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Working for the Enemy: When Government Regulators Contract with Small Businesses

While government agencies like OSHA and EPA don't have the reputation for being business-friendly, they're some of small businesses' best customers, offering billions of dollars in contracts.
July 26, 2013

A letter, phone call or email from the Occupational Safety and Health Administration is about the last thing most business owners want. But for 401 small businesses last year, the word from OSHA wasn’t about a workplace safety inspection or other problem. It was to tell them they had won a contract to supply the government regulator with products or services, part of the $36.7 million total in OSHA purchases from small businesses in 2012.

While regulatory entities like OSHA, the Environmental Protection Agency and the Equal Employment Opportunity Commission are widely, if perhaps unfairly, regarded as obstacles rather than opportunities for business, each year thousands of small companies generate hundreds of millions of dollars in sales by contracting with these erstwhile enemies.

Big Deals

The number and size of these deals are growing. For instance, in the previous fiscal year OSHA awarded just $28.3 million in 458 significant contracts to small businesses, according to OSHA. And the total number of small businesses that sell to the agency is probably substantially higher, because OSHA doesn’t track contracts worth less than $150,000.

OSHA isn't the only agency increasing small-business spending. The federal government agencies that "supposedly" never bring good news have been awarding more and more contracts to small businesses. In the last fiscal year, according to the Small Business Administration, 22.25 percent of all federal prime contracting dollars went to small businesses, up from 21.65 percent the year before. 

That doesn’t sound like much improvement. And it’s still less than the 23 percent of total federal contract dollars that the SBA is legally tasked with channeling to small businesses. But with $404 billion in federal government contracts in 2012 up for grabs, the 22.25 percent that went to small business comes to a wallet-swelling $89.9 billion.

Though this all sounds like good news for small businesses, it's not a fully accurate picture. Despite great outcry from small-business advocates and some added effort at enforcement, contracts are still going to sham businesses set up by large contractors to illicitly qualify them for small-business set aside awards. But it’s clear that, whether the government is meeting its legally set goals for contracting with small business, or rooting out fake small companies with adequate energy and effectiveness, there's opportunity to be had selling to Washington, and that includes the regulatory entities that business owners complain about the most, including the Department of Labor (OSHA’s parent), the Environmental Protection Agency, Department of Commerce, Department of Health and Human Services, and Department of Justice.

The Targeted Agencies

SBA focuses its efforts on the 24 agencies that are the biggest government buyers, and represent the overwhelming majority of all government contracting. At the top is the Department of Defense. DoD is responsible for $275 billion of the $404 billion in federal contract awards for which small business is eligible. But the department performs relatively poorly on small-business contracting. In 2012, Defense awarded just 20.4 percent of its prime contracts to small businesses, far worse than the SBA at 70.9 percent or the Agriculture Department, at 52 percent.

Defense’s poor performance on small-business contracting is largely due to the technical nature of many of its needs, according to Calvin Jenkins, deputy associate administrator for government contracting and business development with the SBA. “They have some challenges because of the types of products and services they buy,” Jenkins says.

It’s even worse at the Department of Energy, the second-largest government procurement agency, which handed just 5.1 percent of its $24.6 billion in eligible contracts to small businesses.

But most agencies are relatively small-friendly. That includes some whose other dealings with small business tend to be regarded less positively. The EPA, for instance, bestowed 23,439 deals on small contractors during 2012. That represents 44 percent of EPA’s total awards, beating the agency’s 42 percent small-business goal and nearly doubling the overall federal government performance.

How You Can Get Involved

What can small companies sell to EPA and other regulatory agencies? Most of EPA’s outlays go for remediation services, environmental consulting computer related services such as hosting, research and development, construction, facilities support, consulting for management and administrative functions and plumbing, heating and air-conditioning contractors.

At OSHA, it’s mostly information technology, standards, management, financial, technical and training support and maintenance and equipment services. In addition to these major categories, many contracts at all agencies are for janitorial services, office furniture and countless other small-business products and services. “There are opportunities in all disciplines,” Jenkins says.

To get started in federal government contracting, firms first are required to register in the General Services Administration’s online System Award Management (SAM) database. There’s no charge for it, but it is required. After that, it’s a good idea to take one of the SBA’s online procurement training courses.

To get an idea of what kinds of opportunities are available for selling to our favorite regulators, anybody can browse FedBizOpps for free. Users can search for opportunities with individual agencies and filter out only contracts with set-asides for small businesses and subcategories such as women-owned, emerging and veteran. A recent search revealed recent small-business sales to regulatory agencies ranging from the new Consumer Financial Protection Bureau to the Consumer Product Safety Commission.

One question that might occur is whether a small business contracting with an agency that regulates it might be seen as a conflict of interest. Not to worry, according to Jenkins.

“A small business being a supplier is not a problem at all,” he says, pointing to the Department of Labor, which directed 34.9 percent of its procurements to small business, beating the goal of 33.4 percent. “There are tremendous opportunities for small businesses with these very same agencies.”

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Photo: Getty Images