Are you currently working with the government or have ambitions to join the ranks of other successful businesses that do? In both scenarios, you’re most likely wondering how much the agencies spend. And how much of that “spending pie” is delegated to the category you serve? After all, if there isn’t enough for the contractors vying for that business, you wouldn’t want to expend unnecessary time trying to secure those contracts.
Let’s begin by outlining how the spending dollars are determined. It’s eye-opening for many. Contractors, if they know the process and how to best prepare, have access to contracts because mandatory spending requires the agencies to spend their allotted funds during the government’s fiscal year.
For Mandatory Spending:
This authorized spending category is allocated yearly to programs that support people, businesses, and state/local governments.
- Each year agencies have a certain amount of money they must spend to meet their basic needs.
- The Treasury releases funds to the agencies to spend on contracts, loans, grants, direct payments,
and other programs. - Once they arrive at final decisions on which contractors will benefit from these funds, they get
distributed appropriately to help support the economy.
For Discretionary Spending:
During annual appropriations, Congress and the current President approve this type of spending. It funds programs that support education, housing, transportation, and social service programs, among others.
- The President submits recommendations for the following year’s budget.
- During the appropriations process each year, Congress will review, make revisions as agreed upon,
and then votes on the final budget. - The spending goes to National Defense and other Federal Agencies once the President formally
signs the budget. - Once the accounts are funded, the individual agencies distribute them to the selected
beneficiaries. This action happens yearly, as do the above steps 1,2 & 3.
CLICK HERE to view the President’s budget for 2022
The information below breaks it out for a more detailed understanding of which agencies are responsible for the most contract dollars. CLICK HERE to check out the interactive graphic with more information.
DEFENSE
NAVY ($118.7B)
ARMY ($109.6B)
AIR FORCE ($79.2B)
OTHER DEFENSE AGENCIES ($86.5B)
CIVILIAN
(HHS) Health and Human Services ($38.9B)
(DOE) Energy ($38.6B)
(VA) Veterans Affairs ($38.3B)
(NASA) National Aeronautics and Space Administration ($20.5B)
(DHS) Homeland Security DHS (19.8B)
(GSA) General Services Administration ($18.3B)
(DOS) State ($9.8B)
(USDA) Agriculture ($9.7B)
(DOJ) Justice ($9.6B)
TREASURY ($9.6B)
OTHER ($37.2B)
Where Do the Agencies Spend Their Allocated Funds?
The chart below gives you a clearer idea of how the funds are typically divided. CLICK HERE to check out the interactive graphic with more information.
In 2021, the Federal Government spent about $637 billion on contracts, a $54 billion decrease from 2020 after adjusting for inflation.
Small Business Procurement Scorecard
As reported by the SBA (Small Business Administration), one of the measurements is an annual Scorecard that assesses how well these agencies reach their small business contracting goals. These assessments are there to:
- Measure how well federal agencies reach their contracting and subcontracting goals
- Provide accurate and transparent contracting data
- Report agency-specific progress
Four areas are measured to determine an agency’s overall scorecard grade. To follow are the categories and the percentage of weight each one holds:
- 50%: Prime Contracting Achievement
- 20%: Subcontracting Achievement
- 10%: Comparison of the Number of Small Business Prime Contractors in each of the Five Small
- Business Categories in the agency’s Small Business NAICS Codes Between FY 2017 and FY 2018
- 20%: OSDBU Peer Review on Agency Compliance with Section 15(k) of the Small Business Act
- (currently 21 requirements)
CLICK HERE to view the Scorecard Grade Calculation Methodology
The SBA’s ongoing goal is to ensure that small businesses can thrive by creating circumstances to guarantee their success.
Businesses interested in working with government agencies must pass through a procurement acquisition process. Before approaching any government contract, it’s crucial to have what it takes to confidently address and potentially resolve the government’s qualifications and regulations.
Please remember that federal funding may differ every fiscal year depending on the need, scenario, or executive order. Keep yourself in the loop, so you’re always “in the know” about recent changes.
For your reference: The U.S. Treasury uses the terms “government spending,” “federal spending,” “national spending,” and “federal government spending” interchangeably to describe spending by the federal government.
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