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  2. ASSA Annual Meeting
  3. 2022
  4. Preliminary Program
  5. The Effects of Government Procurement Policies and Practice in Advancing Small Business Contracting Opportunities
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The Effects of Government Procurement Policies and Practice in Advancing Small Business Contracting Opportunities

Paper Session

Saturday, Jan. 8, 2022 3:45 PM - 5:45 PM (EST)

Hosted By: National Economic Association
  • Chair: William E. Spriggs, Howard University

The Effects of Covid-19 on Bid Success Rates of DBE Prime Contractors and Subcontracting Activity

Inhyuck "Steve" Ha
,
Western Carolina University
Samuel L. Myers Jr.
,
University of Minnesota
Man Xu
,
University of Minnesota

Abstract

One area that escaped massive downturns during the 2020-2021 Covid-19 pandemic was publicly financed highway construction and transportation projects. Repaving of highways, bridge repairs, and related public projects often follow seasonal patterns where contracts are awarded throughout the year, but work is undertaken during, for example, during summer months. The market shock of the Covid-19 pandemic resulted in a disproportionate dismantling of women and minority-owned firms in many industries, but not necessarily in the heavy construction industries that rely on federal dollars. Federally financed projects have mandated disadvantaged business enterprise (DBE) goals that should have resulted in increased success among women and minority-owned firms. The success rates, however, may differ between DBE prime contractors and subcontractors because of possibly relaxed enforcement of DBE goals from state authorities during the shut-downs (or remote operations) of many state departments of transportation. This paper tests the hypothesis that the bid success rates for non-DBEs without DBE subcontractors rose during the Covid-19 pandemic while the success rates of DBEs remained unchanged or fell by examining FTA and FHWA contracts before and after the onset of the pandemic. Using Minnesota as an illustration, we measure whether any potential gains to DBE prime contractors during the pandemic are offset by losses to DBE subcontractors. We also disaggregate the analysis to determine whether there are trade-offs between gains to WBEs vs MBEs and whether among MBEs there are trade-offs between Black owned-businesses vs other non-white businesses.

Subcontracting Requirements and the Cost of Government Procurement 

Benjamin Rosa
,
Virginia Tech

Abstract

Government procurement contracts are frequently subject to policies that specify a subcontracting requirement for the utilization of historically disadvantaged firms. I study how such subcontracting policies affect procurement auctions using the data from New Mexico's Disadvantaged Business Enterprise Program. Theoretically, subcontracting requirements reduce prime contractors' private information on their costs by requiring them to select their subcontractors from a common pool of disadvantaged firms. This feature mitigates cost increases from using more costly subcontractors by causing prime contractors to strategically lower their markups. My estimated model reveals that New Mexico's past subcontracting requirements led to minor increases in procurement costs.

Effects of the 8(a) Program in Increasing the Utilization of Small Disadvantaged Businesses in Federal Government Contracting

Sadaf Asrar
,
Optimal Solutions Group
Yash Kothari
,
Optimal Solutions Group

Abstract

The Federal Government established the 8(a) program to improve the capacity and supplier base of small businesses owned and operated by the socially and economically disadvantaged members of society. To help provide a level playing field, the government limits competition for certain contracts to businesses that participate in the 8(a) program. Businesses enrolled in the 8(a) program can: compete for set-aside and sole source contracts; receive support from a business opportunity specialist to aide them in navigating the federal contracting process; form partnerships with more established businesses through the U.S. Small Business Association’s (SBA) mentor-protégé program; and receive management and technical assistance, including business training, counseling, marketing assistance, and high-level executive development. Moreover, procurement through the 8(a) program allows federal agencies to better meet their goal of contracting 5 percent of small business eligible dollars to Small Disadvantaged Businesses. The objective of this paper is to understand the market for goods and services demanded by federal agencies and those supplied by 8(a) businesses as well as to examine the performance of 8(a) business in obtaining federal contracts as they progress from the initial development stage to the transitional stage of the program and assess how they fare once they graduate. To answer these questions, the authors conducted retrospective bivariate and multivariate analyses with a quasi-experimental design by developing panel datasets created using contracting data from the Federal Procurement Data System – Next Generation, business characteristics data from the System for Award Management, and the 8(a) portfolio data from the SBA.

The Effects of Set-Aside Procurement on the Availability of Women-Owned Small Businesses in Federal Contracting

Mark Turner
,
Optimal Solutions Group
Andrey Vinokurov
,
Optimal Solutions Group

Abstract

The Women-Owned Small Business (WOSB) Federal Contracting Program is one of several programs that Congress has approved to provide greater opportunities for small businesses to win federal contracts. One of the functions of the WOSB Program is to restrict competition to qualified WOSBs to increase “their success to compete for and win federal contracts” and ensure “a level playing field on which such small businesses can compete for Federal contracting opportunities.” Under this program, federal contracting officers may set aside federal contracts (or orders) for WOSBs in industries in which the SBA determines WOSBs are materially under-represented. Recent research (Women-Owned Small Business NAICS Analysis, U.S. Small Business Administration, Turner, Mark; Vinokurov, Andrey; et. al.) reveals that WOSBs availability (proportion of WOSBs that are ready, willing, and able compared to all ready, willing, and able firms in each industry) is low when compared to the relative size of women in the population. This study measures the responsiveness of relative and absolute availability of WOSBs that are ready, willing, and able to perform federal contracting in response to federal agencies’ use of set-asides and sole-source contracts.

Discussant(s)
Thomas "Danny" Boston
,
Georgia Institute of Technology
JEL Classifications
  • H7 - State and Local Government; Intergovernmental Relations
  • K2 - Regulation and Business Law