The Biden administration issued guidance Tuesday that it said will commit billions more in federal contract dollars to small businesses majority owned by socially or economically disadvantaged persons.

The goal set by the White House Office of Management and Budget boosts the share of contract dollars awarded for small-disadvantaged businesses to 15% by fiscal 2025.

For fiscal 2021, the most recent year for which totals are available, the government awarded 27% of its prime contracts to small businesses of all kinds, for a total of $154.2 billion. Of that, 11%, or about $62.4 billion, went to SDBs.

Federal agencies will take an interim step toward that goal by pledging individual contracting goals that will allow the federal government to increase the award to 12% in fiscal 2023, which began Oct. 1, the administration said in a memo.

“Increasing the share of contract dollars awarded to SDBs is designed to support a more dynamic and resilient supplier base and create opportunities for entities owned by underrepresented individuals,” it said.

The Small Business Act, which sets government-wide goals for contracting, states that 23% of all prime contracts go to small businesses. It also sets a 5% goal for SDBs and woman-owned businesses, and a 3% goal for service-disabled veteran-owned firms and HUBZone companies, according to the law firm Schoonover & Moriarty LLC.

Between 2016 and 2020, OMB said federal award spending in the SDB category averaged below 10 percent. That’s as the number of new small business entrants to federal procurement tumbled by 60 percent over the last decade.

The Biden administration is seeking to address inequity in federal procurement, modifying category management procedures to buffer small businesses from being bumped by larger contractors, increasing data transparency on awardees and ensuring the 40,000 federal contracting officers who focus on small-business have direct reporting lines to senior leadership to maintain accountability.

It’s the Small Business Administration’s responsibility to ensure the government-wide goal for participation of small businesses is established annually at the statutory levels, and that the reporting agencies’ achievements are relative to the goals.

Agencies receive goal credit for a a contract that is awarded to a priority business.

Individual agencies have also taken steps to pad up small-business procurement.

In the National Defense Authorization Act for 2023, the Pentagon calls for making permanent the DoD Mentor Protégé Program, which partners large businesses with small businesses to help them navigate the defense acquisition system.

Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias within American society because of their identities as members of groups and without regard to their individual qualities, according to the Code of Federal Regulations.

Molly Weisner is a staff reporter for Federal Times where she covers labor, policy and contracting pertaining to the government workforce. She made previous stops at USA Today and McClatchy as a digital producer, and worked at The New York Times as a copy editor. Molly majored in journalism at the University of North Carolina at Chapel Hill.

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