Changes in Procurement Policies Impacting Small Businesses - Good and Bad Part 1

Changes in the way the government is now or will be procuring goods and services, are coming at us from a variety of sources: Executive Orders, the Revolutionary FAR Overhaul, the 2026 budget and embedded NDAA, edicts from OMB and new conflicting/competing bills being introduced by both the House and the Senate.

My aim is to concentrate on the changes affecting small businesses, explaining them in business terms, offering links to government and other useful resources, and detailing the implications of these changes. This will enable small businesses to adjust their business development strategies, remain competitive, and grow profitably in the new federal marketplace.

It is essential to recognize that many changes in procurement policy are not enshrined in law; they are simply directed by Executive Order. The next step involves codifying these changes into law. Nonetheless, this isn't preventing the government from promptly implementing them. We will address the current situation.

EO 14275, signed on April 15^th, is titled “Restoring Common Sense to Federal Procurement” and asserts that it aims to “reinforce the Government’s policy to provide maximum practicable opportunities in its acquisitions to small business…”. However, a detailed examination of the revised wording in the FAR reveals that several former federal procurement practices that benefited small disadvantaged businesses have been altered.

There are two reasons why this is significant. First, the federal government aims to act swiftly and incorporate innovation into its systems and processes. Innovation typically stems from disruptors, which are often small businesses. There are over 10,000 small disadvantaged businesses (SDBs) registered in SAM, the central vendor database. These businesses include 8a, WOSB, and Service Disabled VOSBs. They are owned by individuals from diverse backgrounds, ethnicities, and educational and income levels, residing in urban, suburban, and rural areas nationwide. The government and the American public will now benefit less from their technologies, agility, and business expertise.

The second reason this is crucial is that, according to the Department of Treasury, small businesses have generated 70% of new jobs from 2019 to the present. These new procurement restrictions and burdens could hinder job creation and economic prosperity in many communities moving forward.

This is a summary of the new FAR Part 19 - Small business

• Contracting Officers (CO's) may still consider socioeconomic setasides (8a's, WOSB, SDVOSB and HubZone), but they are no longer required to prioritize them.

  
  

  • Impact: The pressure on contracting officers to reserve procurements for disadvantaged businesses will decrease. Consequently, small disadvantaged businesses will more frequently compete with general small businesses, which may have revenues up to $35 million, greater experience in forming partnerships, established relationships, and resources dedicated to business development.

  
  

  • Unlike previous administrations, the 5% goal for SDB's appears now to be considered a statutory ceiling, not a floor.

  
  

• 8a sole source contracts (under $5.5m) that are expiring will be required to be competed under a GWAC like GSA Schedules rather than given as a direct award, and the CO may elect to conduct a competition among other socioeconomically certified groups without obtaining SBA approval.

  
  

  • Impact: If you are an 8a company that previously received a sole source award, you will need to compete for that work once your current contract ends. Additionally, you might not be eligible to compete if the Contracting Officer (CO) opts to open the competition to other socioeconomically certified companies instead of just 8a's. If you are not an 8a company but have other socioeconomic certifications, you may have the opportunity to compete for work that was previously reserved exclusively for 8a companies.

  • All small government contractors will need to have a GSA Schedule - at least - and to win a prime position on other GWAC's.

    
    

• Task Order level re-certification of small businesses under multi-award contracts (MAC) has been eliminated.

  
  

  • Impact: If a small business holding a prime MAC (like Oasis+, CIO-SP4, GSA Schedules, etc.) expands and no longer qualifies as a small business, it can still compete for task orders set aside for small businesses. Some MACs have durations of 5 to 10 years, which means small businesses could be competing against those that have outgrown the small business category for several years. However, recertification as a small business is necessary after mergers and acquisitions.

  
  

My commentary: Statistically, it is understood that small businesses are the source of innovation, while large businesses focus on scaling. Recently, the Nobel Committee awarded the Nobel Prize in Economic Sciences to three individuals who explored “innovation-driven economic growth,” the “requirements for sustained growth through technological progress,” and “the theory of sustained growth through creative destruction.”

In simpler terms, they explained that our economy depends on small companies with disruptive technologies to challenge the existing dominance of large companies. These small companies grow and eventually become large, only to be challenged by new, innovative entrants. This cycle of creative destruction is vital and beneficial for a strong economy.

This is my concern. Despite rhetoric to the contrary, the FAR overhaul, 2026 budget, NDAA and OMB directives, in an effort to buy cheaply and quickly, favors large, entrenched businesses.

You only need to look at the first row of individuals seated at the inauguration to guess who is benefitting from the current administration’s procurement policies. However, innovation comes from individuals of all backgrounds, cultures, locations, skin tones and educational attainment. If we are not leveraging the brains of all our people, including small, disadvantaged businesses, we will lose. The American people will lose.

In future blog posts, I will outline additional aspects of the FAR changes, the 2026 budget narrative, NDAA, and OMB directives that are transforming the way the government acquires goods and services. I will also discuss the current and ongoing effects on how small businesses compete, succeed, and grow profitably in the evolving federal marketplace.

Watch this space.