State meets key contracting goal
California small businesses won more than 25% of the $9.5 billion in contracts the state issued in the last fiscal year, officials said, marking the first time in three years the state has met its goal to award at least one-quarter of its contract dollars to small operators. Small-business leaders applauded the accomplishment, which is expected to be officially announced next month.
“It’s great news,” said Randall D. Martinez, co-chairperson of the Small Business Council, an advisory group for the state and chief operating officer for Cordoba Corp. of Los Angeles, an engineering and construction management company.
More dollars for small firms can mean more tax dollars for California, he said. It also can mean more jobs for Californians.
Despite the benefits to boosting small-business participation in state contracts for all sorts of goods and services, the long-standing goal hasn’t often been met.
This “is one of the very few times since [the state] started tracking this in the ‘90s,” said Eric Mandell, head of the small-business office at the Department of General Services, which oversees small-business contracting efforts at state agencies.
The federal government, which has a 22% small-business contracting goal, also has had trouble meeting its mandate.
Details of each state agency’s performance for the fiscal year that ended June 30 and the exact overall small-business participation rate are outlined in a report that has been submitted by the department to the governor’s office for approval before it is released. That could happen as early as next week.
The 25% goal -- which translated to about $2.4 billion in contracts awarded to small firms in the fiscal year that ended June 30 -- is meant to fuel the state’s smallest businesses, which many consider to be the engines of the state economy.
Small businesses, defined by California as those having 100 or fewer employees and average annual revenue of $10 million or less over the most recent three years, total about 1 million firms, or 98% of all businesses.
They employ about 6.8 million people, which is half of the nonfarm workforce.
Martinez and Mandell credit the state’s improved numbers to a push from the top.
In an executive order issued last year, Gov. Arnold Schwarzenegger reiterated the state’s intention to meet or exceed the 25% goal. He required agencies that miss the goal to devise action plans to close the gaps. And he directed the Department of General Services and his small-business advocate appointee (since May, the office has be filled by Marty Keller, a former director of an automotive business trade group) to increase efforts to help the state’s smallest firms learn how to take advantage of contracting opportunities.
State and Consumer Services Agency Secretary Rosario Marin has been another driving force, Mandell said, by taking up the small-business goal “as a personal cause” and meeting with other agency secretaries to underline its importance.
“As with anything, executive support is critical,” said Mandell, who also manages the Disabled Veteran Business Enterprise office.
The Department of General Services is required to compile contract data from each agency into an annual report to the Legislature by Jan. 1.
The report for the 2006 fiscal year, which wasn’t issued until last March, showed that agencies that reported their numbers awarded about 18% of their contracting dollars to small businesses, missing the goal by about 7 percentage points.
Agencies also are required to report how well they do in meeting the state’s goal to award at least 3% of contract dollars to firms owned by veterans disabled during military service. An estimated 80% of those companies qualify as small businesses.
The state missed that goal for the 2007 fiscal year, with a participation rate of 2.5%, Mandell said. That’s slightly higher than the previous fiscal year, when it was 2.42%. In fiscal 2005, just 1.72% of state contract dollars were awarded to firms owned by disabled vets.
In addition, California tracks how many state contracting dollars go to micro-businesses -- those with 25 or fewer employees -- though there is no formal goal for that group. These tiny firms are included in the state’s small-business contract figures.
Small-business participation for fiscal 2007 was helped in part by a streamlined certification process announced in January. The application to be certified by the state as small was slashed from 20 pages to a single page. And the process was moved online. Months of backlogged paper applications have been cleared up and participation has jumped.
The number of certified small businesses in the state’s database has soared to 15,000 from 3,000 last year, Martinez said.
An $11-million annual deal with Office Depot is boosting small-business contract dollars to some degree. The two-year pact, announced last fall, requires the office supply giant to funnel 98% of its state orders through small businesses.
Mandell and his colleagues have been making the rounds at state agencies to help those who missed their mark learn to find the small firms they need.
In some cases, that means packaging a contract bid in a way that doesn’t require a single large vendor, he said.
Mandell hopes to overcome the seesaw effect the state has experienced with its small-business participation in the past, when a high year was often followed by a low year.
Participation rates can be affected by variable accounting choices. For example, when a large state agency such as the Department of Transportation reports a big, multiyear contract in a single year, small-business participation could be increased that first year but depressed in the other years of the contract. Pending budget cuts also could hamper efforts to maintain this year’s success in meeting small-business goals, Mandell said.
Martinez said he would like to extend the state’s efforts even further. He said he would push for legislation requiring municipal contracts funded by the billions of dollars from the state’s recent large infrastructure bonds to meet the state’s small-business goals. That would include the requirement that a certified small business be headquartered in California.
Otherwise, “those are tax dollars lost,” he said.
After more than a decade on the recently re-energized Small Business Council and 25 years of involvement in small-firm issues, Martinez is hopeful about the changes he says are needed to boost small businesses and the state economy.
“If there is any governor that can pull off the challenge,” he said, “I’m convinced it’s this one.”
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Small business’ share of state contract dollars
Here’s a look at how the state did in meeting the goal over the last five fiscal years, which for California end on June 30.
2007: More than 25%
2006: 18%
2005: 22%
2004: 30%
2003: 18%
Source: Times research
