Interview transcript:
Terry Gerton Under the Trump administration, there’s been quite a change in how the federal government is setting its targets for small business contracting goals. Tell us what you’re seeing.
Stephanie Ellis So when Executive Order 14151 was introduced, which the title to that executive order is Ending Radical and Wasteful Government DEI Programs and Preferencing, that put in to effect a lot of changes in the way that the agencies were setting the small business contracting goals, particularly those that are applicable to woman-owned small businesses, to service-disabled veteran small businesses, to the small disadvantaged businesses that had the biggest effect on those, which that includes the 8(a) program. So going back a few years when President Biden was in office, he had issued an executive order, which was to — the purpose of that was to increase the federal contracting small business goals, especially focusing on 8(a) participants in small disadvantaged businesses. And the plan with that was to increase contracting, particularly to the small disadvantaged businesses, taking it from the statutorily required 5% up to 15% by 2025. Again, when the administration changed, there was the executive order that happened. And at that point, what the executive order called for was to terminate or lower the, what it considered DEI initiatives, to the maximum extent allowed by law, which — that’s the actual language in that executive order. So again, the aim then was to remove those programs that focused on diversity and equity and inclusion and bring everyone back down to what the statutorily required minimum was before President Biden had put his initial executive order into place.
Terry Gerton So just to restate what I think I heard, there are some statutory requirements for service-disabled, veteran-owned, small-business, HUBZones, women-owned and 8(a)s. The Biden administration had gone above those, and the Trump administration is taking us back to those levels.
Stephanie Ellis That’s correct, yes. The levels that have been, that are in the statutes, small disadvantaged businesses are set at 5% statutorily, and now it’s back to that. Service-disabled, veteran-owned small businesses also have a 5% goal. Woman-owned small businesses also have the 5% goal, and then HUBZone businesses, there is a 3% goal set for that. Interestingly, the service-disabled veteran goal had, in 2024, increased from 3% to 5% and since that was written into law, that is their new minimum. Otherwise, it would have gone back, but they kind of got in under the timeline there, and have a larger goal for agencies to meet now.
Terry Gerton The group that seems to be taking the largest hit in terms of a lower goal is the 8(a) program. The Small Business Administration is in the middle of auditing the 8(a) program as well. So what does that mean for the firms that were relying on those set-asides?
Stephanie Ellis Well, there, again, still is a 5% contracting goal for agencies to meet. So it hasn’t gone away completely, but the contracting dollars that are being directed to that have certainly been decreased and the focus is now more on just small businesses in general. So the small business overall contracting goal is still set at 23% of all federal contracts, which, last year in 2024, it came out to about 183 billion contracting dollars that went to small businesses. So there’s still that there. And we are still seeing in our firm also, there are still people that are interested and wanting to be part of the 8(a) program as well. So I think that federal contractors out there, they still see value in the program and it hasn’t completely gone away, but I think they’ll find over time that there is less of a focus on the 8(a) due to the socially and economically disadvantaged requirements that it has, and more focus shifted to just small businesses overall.
Terry Gerton I’m speaking with Stephanie Ellis. She’s an attorney with Koprince McCall Pottroff. Well, as you mentioned, the total small business set-aside of 23%, some agencies are actually raising their overall small business goals. So is that a little bit of a silver lining?
Stephanie Ellis Yeah, I think that is. A lot of the agencies seem to want to work with small businesses, which is great because those are the businesses that really make up kind of the fabric of our country. And having individuals that are able to pursue their passion and their goals, that is much more aligned with small businesses than it would be with a large corporation.
Terry Gerton Where are you seeing the most growth and the most opportunity for folks to enter government contracting as small business?
Stephanie Ellis Looking into small businesses generally, there is not a specific certification to be considered a small business. So as long as you meet the size limitations under the NAICS [(North American Industry Classification System)] code, then you are considered a small business. So that kind of sidesteps all of the red tape that you have to go through. However, I do think that, again, there is value in the other three programs as well. The, by far at this point, the most difficult program to get into is the 8(a) program, which, it has been that way since its inception. It has been kind of the gold standard but with our experience at our firm, it seems like they’re really tightening up on sticking to those — the socially and economically disadvantaged requirement as well.
Terry Gerton So with all of that change in the air, what are the recommendations that you are offering for small businesses in terms of competitive strategy? What should they be thinking about? Is it subcontracting? Is it priming? Where do you see the biggest opportunities?
Stephanie Ellis Yeah, if you’re a small business and you’re looking to get into federal contracting, I think that really a good place to start, if you don’t have a lot of experience there, would be looking into the SBA’s Mentor-Protégé program, which if you are not familiar with that, it pairs an “other-than-small business” (or large business) with a small business, or a WOSB, an SDBOSB, an 8(a) or a HUBZone, so any of the SBAs, socio-economic set-asides. And together the mentor and protégé are able to pursue contracts as a small business. So again, if you’re just kind of getting into this industry — say you’ve got lots of experience in the private industry but you don’t in government — that is a great way for a small business to kind of get its feet wet. Learn some of the differences between working on private contracts or working on federal contracts. And then it also can help to enhance past performance, which for federal government contracts is always a very big requirement to win awards. So again, it pairs small, inexperienced, or not as experienced, federal small business contractors with larger ones, and the small business then gets a plethora of benefits from working with them and pursuing contracts together.
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