Introduction

Reserved contracts have become a widely adopted measure to support small businesses in public procurement across various countries, including the United States, Brazil, Canada, the European Union, and South Africa. This blog post delves into the effectiveness of these contracts in enhancing the capacity of small businesses and their participation in government procurement.

Legal Framework and Impacts

Based on the experiences of US federal procurement, this analysis focuses on the legal framework of reserved contracts and their impacts on both small businesses and federal procurement processes. By ensuring a fair proportion of small business participation, these contracts aim to boost the actual and potential capacities of small businesses.

Abstract 

The paper explores the implementation of reserved contracts for small businesses within the context of US Federal procurement. It evaluates the regulatory framework and practical implications to determine if reserved contracts meet legislative goals of fostering small business development and maintaining competitive markets.

Key Findings

– Competition: Despite deviating from the principle of full and open competition, findings suggest that competition within reserved contracts is not necessarily inferior to non-reserved contracts. This is facilitated by increased small business participation and reduced involvement of larger firms. 

– Cost Efficiencies: Reserved contracts do not consistently result in higher procurement costs. In fact, some studies indicate potential cost efficiencies.

– Long-term Growth: There is a concern that reliance on set-asides may hinder the long-term growth and competitiveness of small businesses. These businesses might focus on acquiring multiple socioeconomic attributes instead of expanding their operational capacity, a trend exacerbated by cascade evaluations. 

Conclusion

While reserved contracts provide business opportunities and short-term benefits for small businesses, they may compromise the overarching objective of nurturing a resilient and competitive small business sector. The paper underscores the importance of a balanced approach that supports small businesses while ensuring their sustainable growth and competitiveness in the broader marketplace.

Call to Action

To learn more about empowering small businesses in public procurement through reserved contracts, download the full paper here.

About SAPIENS Working Papers

This analysis is part of the latest issue of SAPIENS Working Papers, an initiative dedicated to showcasing the research of our Early Stage Researchers. These working papers are preliminary drafts of original research, providing a unique glimpse into the innovative ideas and studies emerging within our network. By sharing these works in progress, the SAPIENS Network aims to foster scholarly dialogue, encourage collaboration, and accelerate the dissemination of research insights. This series reflects our commitment to advancing knowledge and supporting the next generation of scholars across various disciplines.