What to expect as contracting moves to GSA

Less competition, fewer socioeconomic set-asides, more Schedule and SBIR Phase III, bigger small businesses, and hardly any new entrants

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An Executive Order requires agencies to shift more contracting to GSA. What does that mean for small businesses?

On a recent episode of Off the Shelf, host Roger Waldron asked Larry Allen, the GSA Associate Administrator for the Office of Governmentwide Policy, that question: how would policy changes—such as consolidating procurement at GSA—impact small business contractors? Allen answered by saying he was proud of the ‘A+’ grade that GSA received from SBA on the 2024 procurement scorecard.

I was in charge of the latest SBA scorecard, and I noticed a flaw in Larry Allen’s reasoning: The scorecard doesn’t measure how GSA does with small businesses when GSA awards the contract. Instead, the scorecard only evaluates an agency based on the contracts the agency funds. This is a key distinction because consolidation will increase the number of contracts that GSA awards for other agencies, while the scorecard that earned GSA its ‘A+’ only measured contracts that GSA funds itself.

The consolidation at GSA is required by Executive Order 14240, Eliminating Waste and Saving Taxpayer Dollars by Consolidating Procurement. “It is time to return the General Services Administration to its original purpose,” the Executive Order states. OMB implemented the Executive Order by directing agencies to centralize “procurement functions” with GSA when the centralization would promote “greater economy and efficiency.”

In the consolidation of procurement functions to GSA, other agencies will be sending their contracts—contracts that they fund—to GSA to run the competition and issue the award. The scorecard doesn’t evaluate that, since the scorecard is based entirely on the funding agency. So I was curious what I could find about how GSA performs with small businesses when GSA acts as the awarding agency. In other words, as more agencies send their contracts to GSA, how should we expect GSA’s treatment of small businesses to differ from what the agencies would do on their own?

I found a lot of differences in how we should expect GSA to perform. Here’s a quick summary, with graphs, data, and analysis to follow:

1. GSA-awarded contracts have less competition—fewer offers per contract.

2. GSA is just as likely to use small-business set-asides, but less likely to use SBA’s socioeconomic programs. GSA also focuses on the SBIR Phase III authority.

3. Predictably, GSA really likes to use the Federal Supply Schedule.

4. When GSA awards to small businesses, it awards to larger small businesses—those that average in the tens of millions in annual revenues. GSA hardly ever awards to small businesses that are new entrants.

As an awarding agency, GSA isn’t an ‘A+’

First, to Larry Allen’s point: Yes, GSA got an ‘A+’ on the SBA scorecard, but that was because of contracts that GSA funds out of its own operations. Think rent on government-occupied buildings, the vehicle fleet, or land ports of entry. On those GSA-funded contracts, GSA awards over 42% of its contract dollars to small businesses.

GSA does far worse on contracts that it awards for other agencies. In 2024, for contracts that GSA awarded for agencies other than GSA itself, GSA awarded only 20.8% of contracting dollars to small businesses. It missed every governmentwide goal for the small-business categories and underperformed the Federal government in every category. (For this chart and the rest that follow, I’ll call the contracts that GSA awards for other agencies “GSA-assisted.”)

Now, I know Guy Timberlake has been vocal about grade inflation on the SBA scorecard. But even with SBA’s favorable criteria, this isn’t an ‘A+’ performance, or even an ‘A’ performance. On GSA-assisted awards, the agency missed the small-business goal by over 2 percentage points and underperformed the government as a whole by 8 points. I’d give that a ‘C.’

GSA awards have less competition

OMB’s memo consolidation mentioned “economy” and “efficiency” as reasons to consolidate buying at GSA. But more competition didn’t make the list. I found that, for standalone contracts, GSA-assisted awards have less competition than ones that agencies award themselves. For the Federal Supply Schedule, however, the orders receive slightly more competition.

The higher number of offers for Schedule orders is probably because GSA tends to post its orders on eBuy, while other agencies might just ask for three quotations based on authority in the existing FAR 8.4. Overall, reduced competition would typically mean fewer opportunities for small businesses to compete for and win contracts.

Fewer socioeconomic set-asides, more SBIR Phase III

When GSA awards assisted contracts to small businesses, they are almost always through small-business set-asides, SBIR Phase III, or open competition. GSA uses the SBA programs—8(a), service-disabled veteran-owned small business, and HUBZone—less than other agencies do. GSA’s use of women-owned small business set-asides is slightly higher than other agencies, though.

GSA’s high use of SBIR Phase III (27.6% vs. 0.7% for other agencies) is due to GSA’s Assisted Acquisition Services running a specialized SBIR assistance service. SBIR Phase III authority allows agencies to issue a direct award in any amount for work that derives from, extends, or logically concludes efforts performed under prior SBIR funding agreements. The award is funded by non-SBIR sources. One of the new additions in the FAR-Overhauled Part 6 is the recognition of SBIR Phase III as its own sole-source authority. That’s good news for Ted Dennis, Eric Blatt, and other SBIR specialists.

GSA favors the Supply Schedule

Predictably, GSA likes to use its own flagship vehicle, the Federal Supply Schedule, when it awards contracts for other agencies. The difference overall is not huge: 10.7% of GSA-assisted dollars vs. 7.3% outside of GSA. But the Schedule use makes a much bigger impact on purchases from small businesses. GSA awards 24% of its small-business dollars on assisted acquisitions using the Schedule, compared to 12% outside of GSA.

When any agency uses the Federal Supply Schedule, GSA receives a small percentage of the purchase through the Industrial Funding Fee charged to the contractor. So with assisted acquisitions, GSA will be getting two fees: one from the funding agency for GSA’s assistance, and the second from the contractor through the IFF. George Price started an interesting thread about whether mandating the use of GSA—which the OMB Consolidation memo does—is an augmentation of appropriations.

GSA awards go to larger smalls, not to new entrants

When GSA assists with acquisitions for small businesses, it awards to much larger small businesses. The average annual revenues from prime government contracts are six times greater for small businesses that win small business set-asides from GSA-assisted acquisitions than for those that win other contracts.

Typically, small-business set-asides are the most likely type of contract to result in an award to a new entrant, meaning a business that hasn’t won a contract before. But, in all of 2024, GSA only awarded to 17 new entrants across all its assisted small-business set-asides.

Just 17 new entrants. This data is concerning because small business set-asides are intended to create opportunities for new entrants. But the number of new entrants has been declining. For that reason, encouraging awards to new entrants has become a Congressional priority.

What GSA needs to work on

In the Off the Shelf interview, Larry Allen reported that two-thirds of agencies are developing consolidation strategies with GSA:

We've got three agencies fully signed on already for this and a couple of more are well into the pipeline. I think the last time I looked, we had over two-thirds of the government actively engaged in conversations with our Federal Acquisition Service on elements of acquisition consolidation, and the basic idea is to get away from duplication, lower the government’s collective acquisition overhead, free up resources for agencies to meet their core missions.

Let GSA handle the things like acquisition and contracting that are common to everyone so that agencies can specialize as they need to and make the best use of their resources too. So these are conversations that we’re actively having, not just with customer agencies, but we work with OMB on this on a consistent basis to make sure that they are providing us with the guidance, and that we are acting according to how they would like us to act to fulfill the Executive Order.

With that big a shift to GSA contracting, increasing new entrants needs to be something for GSA’s Assisted Acquisition Services to address. Otherwise, GSA will lose a lot of the dynamism and innovation that comes from buying from small businesses. At the same time, GSA should look closely at how it is performing with small businesses when it acts on behalf of other agencies. With some effort, in its new role, GSA really could earn an ‘A+’.

Sam Le is the managing member of Sam Le Law, where he draws on his 20 years of Federal legal experience and deep knowledge of SBA programs to counsel small businesses through complex regulatory challenges. His website is www.samlelaw.com.