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Federal Subcontracting – The Hidden Federal Marketplace

According to the SBA, Small Business received 26.5% of the $501B federal marketplace in 2019. That amount of $132.9B was record setting, surpassing the previous high of $120.8B in 2018. While this is obviously a very large sum, what is often overlooked is the amount of business small businesses do as subcontractors. During 2019, 24.5% of federal prime spending was to small business prime contractors, equating to $122.6B.
 

Federal Spending Type

Total Spending

Small Business Prime Contracts

$132.9B

Small Business Subcontractors

$122.6B


Why is Small Business Subcontracting so Large?

The federal government grades large contractors on their ability to include small businesses in their contract awards. Failure to meet the federal requirements on contracts results in diminished past performance leading to a reduction in future awards.

Example:
Looking at the OASIS Scorecard for grading applicants to this GWAC, we see that 25% (1,000/4,000) of a large vendor’s Past Performance score comes from how well they did at meeting their small business goals. In terms of the overall OASIS application, this accounted for (1,000/10,000) or 10% of their total score. We see this setup across all government procurement.

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