Small Businesses Contracting in the SLED Government Market

1. Introduction & Methods

Overview

The State, Local, and Education (SLED) government market offers vast opportunities for businesses, with a total valuation exceeding $1.5 trillion annually. This market provides approximately 400,000–500,000 competitive opportunities each year.

Government Levels in SLED:

Certain sectors showed resilience despite the broader downturn:

• States
• Cities
• Counties
• Special Districts
• Independent K-12 School Districts
• Public Colleges & Universities

Focus on SDBEs

This report highlights opportunities for Small and Disadvantaged Business Enterprises (SDBEs), encompassing:

• Minority-Owned Businesses (MBE)
• Woman-Owned Businesses
• Veteran-Owned Businesses
• Service-Disabled Veteran-Owned Small Businesses (SDVOSB)
• HUBZone Certified Businesses
• Other small business set-asides

2. Support for Small Businesses

Resources and Initiatives

State and local governments collaborate with communities and private-sector partners to provide essential support for small businesses. These initiatives are designed to:

• Create fair opportunities for small businesses in government contracting.
• Foster economic development by encouraging local entrepreneurship.

Key Areas of Support

• Certification Programs:

  Enable small businesses to qualify for specific contracts.

• Financing Assistance:

  Provide loans and grants to support growth.

• Business Development:

  Offer workshops, outreach, and training.

• Regulatory Compliance Support:

  Help businesses navigate government rules.

Example: Virginia Department of Small Business & Supplier Diversity (SBSD)

Virginia’s SBSD promotes small business growth through:

• Certification programs to ensure eligibility.
• Dedicated outreach to improve participation in contracts.
• Compliance monitoring to ensure fair treatment.

Important Considerations for Small Businesses

• Registering federally does not automatically fulfill state/local requirements. Always check the specific rules of the state in which you operate.
• Explore nationwide resources, such as Small Business Development Centers (SBDCs) and Apex Accelerators (formerly PTACs), to guide compliance and bid preparation.

3. Governors Commit to Backing Small Businesses

State governors have consistently highlighted small business support in their State of the State Addresses, reflecting a bipartisan commitment to local economic growth.

Examples of Commitment:

• Governor Ned Lamont (Connecticut):

  “We want to make sure small businesses thrive in communities where housing and infrastructure support them.”

• Governor Josh Shapiro (Pennsylvania):

  “We’ve funded over 1,000 small business startups, prioritizing women and minority entrepreneurs.”

• Governor Daniel McKee (Rhode Island):

  “Investments in small businesses are vital to sustaining our state’s economic momentum.”

Governors’ budgets increasingly emphasize funding, goals, and benchmarks to expand opportunities for small businesses.

4. Bid Growth for SDBEs

Overview

The number of bids targeted toward Small and Disadvantaged Business Enterprises (SDBEs) has increased substantially over the last six years. This growth reflects government efforts to create more inclusive procurement practices and support local economies.

Key Trends

• 2018–2023 Growth:

  Bids for SDBEs have increased by 155%, with a particularly sharp rise in the years following 2020.

• 2020 Surge:

  A 38% increase in bid opportunities was seen from 2019 to 2020, attributed to expanded support and an increased allocation of set-aside contracts.

• Post-2020 Recovery:

  Governments prioritized SDBEs in the wake of economic recovery, allocating resources to promote diversity and local entrepreneurship.

Factors Driving Growth

• Government Initiatives:

  Increased funding for programs supporting small businesses and disadvantaged enterprises.

• Economic Trends:

  Post-pandemic economic recovery efforts emphasized local and minority-owned businesses.

• Policy Shifts:

  More contracts were explicitly set aside for SDBEs, especially in areas like infrastructure, education, and public health.

Implications for Small Businesses

• Expanded opportunities across all SLED government levels.
• Greater competition but also increased support through outreach, training, and funding programs.

5. Government Level Insights

Overview

This section analyzes how different types of SDBE set asides have evolved as a share of total bids. These shifts indicate changing priorities and focus areas within the SLED procurement ecosystem.

Key Insights

• Minority-Owned Business (MBE):

  ★   Largest share of total bids but declined from 63.5% in 2018 to 58.0% in 2023.
  ★   Reflects a steady but slightly reduced focus on MBEs, as other set-aside categories grew.

• Small Business Set-Aside:

  ★   Increased from 31.7% in 2018 to 40.2% in 2023, showing strong growth.
  ★   Indicates rising support for small businesses in general procurement.

• Woman-Owned Set-Aside:

  ★   Significant growth in early years, peaking in the mid-to-high 50% range, before declining to 30.8% by 2023.
  ★   Suggests shifting government priorities or changes in competitive dynamics.

• Service-Disabled Veteran-Owned Small Business (SDVOSB):

  ★   Peaked at nearly one-third of bids during the mid-decade but declined in recent years.

Key Takeaways

The increasing share of Small Business Set-Asides reflects a broadening focus on supporting all small enterprises, rather than targeting specific demographics.

MBEs and Woman-Owned Businesses continue to play significant roles, but their shares have seen some rebalancing as governments diversify their support initiatives.

6. SDBE Purchases by Level of Government

Overview

Each level of SLED government—state, local, and education—plays a unique role in awarding SDBE contracts. This section examines the contributions of these levels and their priorities in working with small and disadvantaged businesses.

Breakdown by Level of Government

• State Governments (42% of total SDBE bids):

  ★  Largest contributor to SDBE procurement.Often allocate funds for statewide infrastructure, public health, and social services projects.
  ★  Example: State-led initiatives to rebuild roads and improve public transportation.

• Special Districts (20%):

  ★  Focus on niche areas like water management, public utilities, and transit.
  ★  Example: Special districts commissioning projects for water treatment facilities.

• Cities (18%):

  ★  Tailor contracts to meet local community needs.
  ★  Example: Partnering with small businesses for garbage collection and park maintenance.

• Counties (7%):

  ★  Manage regional projects, including public safety and infrastructure.
  Example: County contracts for emergency services.

• K-12 Education (3%):

  ★  Lowest share of SDBE bids, often relying on cooperative purchasing agreements.
  ★  Focus on specific services like food distribution or janitorial needs.

Key Insights

• State Governments:

  Lead in opportunities due to their scale and diverse procurement needs.

• Local Entities (Cities and Counties):

  Provide opportunities for small businesses to serve community-specific needs.

• Special Districts:

  Represent significant opportunities in specialized areas, such as utilities and transportation.

7. Share of Competition Type by Level of Government

Overview

This section details how each SLED government level utilizes various SDBE competition types, providing insights into their specific procurement strategies.

Highlights by Competition Type and Government Level

City Governments

• Dominant Types:

  Minority-Owned Business (MBE) and Woman-Owned Set-Asides.

• Key Focus Areas:

  Local community services, such as road repair, public safety, and education.

• Notable Share:

  MBEs make up 44.7% of city-level SDBE bids.

Special Districts

• Dominant Types:

  Small Business Set-Asides and Veteran-Owned Set-Asides.

• Key Focus Areas:

  Infrastructure and utilities.

• Notable Share:

  Small Business Set-Asides account for 53.4% of bids, reflecting strong support for smaller enterprises.

Counties

• Dominant Types:

  MBEs and Service-Disabled Veteran-Owned Businesses (SDVOSBs).

• Key Focus Areas:

  Public health, emergency services, and regional infrastructure projects.

• Notable Share:

  MBEs make up 38.6% of county-level bids.

Colleges and Universities

• Dominant Types:

  HUBZone and Woman-Owned Set-Asides.

• Key Focus Areas:

  Campus maintenance, research facilities, and student services.

• Notable Share:

  Woman-Owned Set-Asides lead with a 2.47 propensity to purchase.

K-12 Education

• Dominant Types:

  HUBZone and Small Business Set-Asides.

• Key Focus Areas:

  Food services, custodial contracts, and educational supplies.

• Notable Share:

  HUBZone bids are higher than average, aligning with efforts to support underprivileged areas.

State Governments

• Dominant Types:

  MBEs and SDVOSBs.

• Key Focus Areas:

  Statewide infrastructure, healthcare, and public safety.

• Notable Share:

  State governments lead with 46.9% of MBE bids and 50.1% of SDVOSB bids.

Trends and Observations

• Cities and counties focus heavily on addressing immediate, community-based needs.
• State governments lead in overall volume, given their ability to fund large-scale, multi-year projects.
• Special districts and higher education institutions offer niche opportunities, particularly for specialized services and regional projects.

8. Minority-Owned Business (MBE)

Overview

Contracts designated for Minority-Owned Businesses (MBE) are vital to promoting diversity in government procurement. These contracts ensure that businesses owned by racial or ethnic minorities have equitable opportunities to compete and succeed in the SLED market.

Key Statistics

• Growth:

  MBE bids have grown by 132% from 2018 to 2023.

• Top Contributors:

  ★  State Governments (46.9% of total bids): Lead in offering MBE opportunities.
  ★  Colleges and Universities (12.7% of total bids): Focus on specialized services.

Challenges and Opportunities

• Challenges:

  MBE bids have declined slightly as a percentage of total SDBE opportunities, dropping from 63.5% in 2018 to 58.0% in 2023.

• Opportunities:

  States and higher education institutions continue to lead, providing consistent opportunities for minority-owned businesses in various sectors, from infrastructure to IT services.

9. Small Business Set-Aside

Overview

Small Business Set-Asides are critical tools for governments to ensure that smaller enterprises can compete in the procurement process, particularly in markets dominated by larger corporations.

Key Statistics

• Growth:

  Bid volume for small business set-asides surged by over 300% from 2018 to 2023.

• Top Contributors:

  ★  Special Districts (46.9% of total bids): Special districts lead in prioritizing these set-asides.
  ★  States (31.8% of total bids): Offer significant support for small business contracts.

Benefits for Small Businesses

• Levels the playing field for smaller companies in industries such as construction, maintenance, and consulting.
• Encourages collaboration between small businesses and larger contractors through subcontracting opportunities.

10. Woman-Owned Set-Aside

Overview

Contracts specifically designated for Woman-Owned Businesses are designed to reduce gender disparities in government procurement. These set-asides help foster entrepreneurship among women.

Key Statistics

• Growth:

  Experienced fluctuations, peaking in 2022 before declining to 30.8% in 2023.

• Top Contributors:

  ★  Colleges and Universities: Show the highest likelihood of awarding contracts to woman-owned businesses, with a 2.47 propensity to purchase.
  ★  State Governments: Account for 35.9% of woman-owned set-aside bids.

Observations

• Woman-owned businesses benefit from government efforts to create inclusive procurement processes.
• The decline in 2023 may indicate changing priorities or shifts in industry demand.

11. Service-Disabled Veteran-Owned Small Business (SDVOSB)

Overview

These set-asides are aimed at businesses owned by veterans with service-connected disabilities, recognizing their contributions and supporting their economic empowerment.

Key Statistics

• Growth:

  Bids for SDVOSBs faced a decline from 186 bids in 2018 to 102 in 2022, with a slight recovery to 136 in 2023.

• Top Contributors:

  ★  State Governments (50.1% of total bids): Lead in awarding contracts to SDVOSBs.
  ★  Colleges and Universities (28.1% of total bids): Provide substantial opportunities in specific sectors.

Challenges and Opportunities

SDVOSBs often face barriers related to competition and resource access. However, recent recovery trends suggest increasing support for these businesses.

12. Veteran-Owned Small Business (VOSB)

Overview

Veteran-Owned Small Businesses (VOSBs) contribute significantly to the economy, and governments offer contracts to honor their service and promote their growth.

Key Statistics

• Growth:

  Generally increasing trend since 2018, though 2023 saw a slight decline to levels reminiscent of 2019.

• Top Contributors:

  ★  State Governments (50.3% of total bids): Provide the majority of VOSB opportunities.
  ★  Colleges and Universities: Significant contributors with a 2.64 propensity to purchase.

Observations

VOSB set-asides ensure that veteran-owned businesses remain competitive in sectors such as infrastructure, consulting, and public services.

13. SDB Set-Aside

Overview

Small and Disadvantaged Business (SDB) Set-Asides focus on businesses with economic disadvantages, creating opportunities for them to thrive in the government marketplace.

Key Statistics

• Growth:

  Bid numbers peaked at 63 in 2018, followed by fluctuations, and settled at 45 in 2023.

• Top Contributors:

  ★  States (35.4% of total bids): Most likely to award SDB contracts.
  ★  Counties (17.5% of total bids): A significant contributor among local governments.

Challenges

The cyclical nature of SDB set-aside opportunities indicates the need for sustained government initiatives to stabilize support for these businesses.

14. HUBZone Set-Aside

Overview

HUBZone (Historically Underutilized Business Zone) set-asides support small businesses in economically distressed areas, promoting job creation and community development.

Key Statistics

• Growth:

  Relatively stable, with a peak of 19 bids in 2020 and an average of 10 bids annually in recent years.

• Top Contributors:

  ★  Colleges and Universities: Lead with a 3.18 propensity to purchase.
  ★  o K-12 Education: Higher likelihood of awarding HUBZone contracts compared to other levels.

Benefits

HUBZone set-asides drive economic revitalization in underserved areas while empowering small businesses to access government contracts.

15. Common Products & Services

Governments across SLED levels procure a wide variety of goods and services through contracts with small businesses. These needs often span both construction and non-construction industries, offering diverse opportunities for SDBEs to participate in government procurement.

Construction-Related Products and Services

The construction sector is a major focus area for small businesses. Common products and services include:

• Road Transportation Infrastructure Construction Services: Includes road paving, repair, and maintenance.
• Building Components Renovation Services: Covers structural improvements, such as roofing, HVAC upgrades, and retrofitting.
• Water Infrastructure Construction Services: Focus on maintaining and expanding public water systems.
• Electrical Trades: Electrical installation, maintenance, and infrastructure upgrades.
• Concrete and Paving Trades: Essential for public works projects.

Non-Construction Products and Services

Non-construction opportunities offer a wide variety of procurement needs:

• Janitorial Services: Regular cleaning for government buildings.
• HVAC Maintenance: Servicing heating, ventilation, and air conditioning systems.
• Garbage Collection Services: Waste management for cities and public facilities.
• Asbestos Removal: Specialized services for safety and compliance.
• Snow Removal Services: Critical in regions with severe winters.
• Audio-Visual Trades: Equipment and services for public events and communication systems.

Implications for Small Businesses

These product and service categories demonstrate the breadth of opportunities for small businesses, allowing them to align their offerings with government needs and enter markets with specialized expertise.

16. Top States by Year

Overview

The distribution of SDBE bids across states provides insight into which regions offer the most opportunities for small businesses. This section tracks shifts in procurement trends from 2018 to 2023.

Key Trends

• New York:

  Dominated the landscape from 2018 to 2021, consistently releasing over 40% of total SDBE bids during that period.

• California:

  Emerged as a significant player, increasing its share to nearly 29% by 2023.

• Ohio:

  Experienced rapid growth, moving from 2.6% in 2020 to 24.4% in 2023, reflecting increased state-level support for small businesses.

Yearly Highlights

• 2018:

  New York (23.7%) and California (13.3%) led the pack, with states like Virginia, Maryland, and Indiana also making notable contributions.

• 2020:

  A steady increase in bids across states, with New York still dominating.

• 2023:

  A diversified landscape emerged, with California, Ohio, and Virginia taking prominent positions, signaling broader opportunities for SDBEs nationwide.

Takeaway for Small Businesses

Understanding the geographic distribution of opportunities can help small businesses target states with the highest potential for SDBE contracts.

17. Key Takeaways for Vendors and Suppliers

Success Strategies for Small Businesses

Understand Government Needs

• Governments publish strategic plans outlining priorities and challenges. Small businesses should analyze these plans to align their offerings with government goals.
• Example: A state prioritizing infrastructure upgrades may have increased demand for road construction and water system services.

Know the Decision-Makers

• Procurement decisions are often influenced by key stakeholders within departments, not just top officials.
• Actions to take:

  ★  Research organizational charts to identify influencers.
  ★  Build relationships with procurement officers and project managers.

Familiarize Yourself with Procurement Processes

• Many opportunities are governed by specific requirements and qualifications for small businesses. These include certifications (e.g., HUBZone, Woman-Owned) and financial benchmarks.
• Proactive preparation ensures readiness when opportunities arise.

Benefits of Applying These Strategies

Small businesses that adopt these strategies can enhance their visibility in the competitive SLED market and increase their chances of securing government contracts.

18. Tips and Resources for Selling to SLED as a Small Business

Recommendations for Small Businesses

1. Attend Government Outreach Events

• Many governments host webinars, workshops, and expos tailored to small businesses.
• Benefits:

  ★  Direct access to procurement officials.
  ★  Networking opportunities with larger contractors for potential partnerships.

2. Obtain Relevant Certifications

Certifications can significantly improve eligibility for set-aside contracts. Common certifications include:

• HUBZone Certification: For businesses in economically distressed areas
• Woman-Owned Small Business (WOSB) Certification
• Service-Disabled Veteran-Owned Small Business (SDVOSB) Certification

3. Leverage National and Local Resources

• Small Business Administration (SBA):

  Provides guidance, funding resources, and training programs.

• Apex Accelerators (formerly PTACs):

  Help with compliance, bid preparation, and navigating procurement systems.

4. Research SDBE Program Goals

Review program-specific objectives and requirements to better align offerings with government expectations.

5. Diversify Your Offerings

Look for opportunities to expand your product or service portfolio based on government demand trends.