NCPA - National Center for Policy Analysis

Contract Set-Asides Fall To Cost-Effectiveness

December 16, 1997

Federal agencies are responding to the president's "reinventing government" initiative by seeking to become more cost-effective. Ironically, one of their cost-cutting measures is to reduce the dollar amount of government contracts let under the Small Business Administration's 8(a) program, which sets aside some contracts for "disadvantaged" small firms -- usually those owned by minorities.

  • In fiscal 1996, 13 of the 17 major federal agencies cut participation in the $6.6 billion federal program by $492 million.
  • While federal contracts awarded under the 8(a) program increased overall by $204 million in 1996, that was due to increases at only four major agencies -- Defense, Justice, Agriculture and Labor.

Officials in the agencies cutting back on 8(a) contracts contend it takes more monitoring and paperwork to contract with smaller businesses than with larger firms. To cut costs, they are bundling contracts together and using firms approved by the General Services Administration -- which don't include many of the small contractors.

Contract recipients and beneficiaries are reportedly so concerned about the program's future that they are pushing the SBA to establish a "Swat Team" to intervene when agencies shift contracts out of the 8(a) program.

Although a Supreme Court decision two years ago curtailed the federal government's use of affirmative action programs, 10 of 12 suits since then challenging the 8(a) program have been dismissed. Still, a suit by a white contractor challenging HUD's contracting policies earlier this year caused the agency not to renew about $30 million in 8(a) contracts.

The White House has defended 8(a), and early in 1998 the administration plans to publish affirmative action "benchmarks" to spur agencies to expand such affirmative action programs. To increase political support for 8(a), they plan to make it easier for white women to qualify for the contracts.

Source: Michael K. Frisby, "SBA 8(a) Program to Aid Disadvantaged Firms Locks Horns With Government Cost-Effectiveness," Wall Street Journal, December 16, 1997.


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