The Washington Business Journal reported the other day that the D.C. government fell far short of reaching a statutory goal related to its efforts to contract with small businesses, according to a report from the D.C. Auditor. Under a law adopted in 2005, each D.C. agency is required to spend half of the dollar volume of its goods and services with small businesses each fiscal year.
All told, D.C. government agencies spent $132.8 million on contracts with small, local and disadvantaged companies in fiscal year 2012. According to the 50 percent standard under the law, they should have spent $661 million, or half of their total “expendable budget” of $1.32 billion. “Expendable budget” is the term used in the statute to indicate their total spending on goods and services. Thus, the D.C. government was, as a whole, more than $500 million short of the goal.
While it’s very important for governments at all levels to contract with small and disadvantaged businesses, it seems that these particular numbers are not especially meaningful.
First, a 50 percent standard is quite high, much higher than similar goals and requirements under federal law. It’s not clear that at this time there are enough qualified small businesses in the area to handle that much work.
Second, it appears from the data in the article itself that this “expendable budget” number can be easily manipulated by each agency.
The article points out, for example, that the D.C. Homeland Security and Emergency Management Agency’s total budget for 2012 was $137.4 million, but that this agency considered its “expendable budget” to be only $63,548, and its small-business goal $31,774. The department reported spending $3.2 million with small businesses, or a full 10,117 percent of its goal. That is more than 100 times the goal. This can happen only if the goal itself has been manipulated to be too small.
The article pointed out that several other agencies were also in that same situation, since they reported that their “expendable budgets” were equal to a sum that was a very small fraction of their total budgets. Indeed, the D.C. Auditor who wrote the report, Yolanda Branche, concluded in the report that “the excessive amount by which some agencies exceeded their SBE goals raises questions about the validity of the declared expendable budgets of certain agencies.”
Accordingly, although we strongly support expanded business opportunities for small and disadvantaged businesses, we are not sure that this report tells us very much that is truly meaningful on the issue.