Advancing Small Business Inclusion in Public Procurement: Evidence from U.S. Federal Government R&D Contracts

Darden Business School Working Paper No. 4852064

Forthcoming at Production & Operations Management Journal

37 Pages Posted: 5 Jun 2024

See all articles by Dwaipayan Roy

Dwaipayan Roy

University of Virginia - Darden School of Business

Anant Mishra

University of Minnesota - Twin Cities - Carlson School of Management

Kingshuk Kanti Sinha

University of Minnesota - Twin Cities - Carlson School of Management

Date Written: June 03, 2024

Abstract

To encourage the inclusion of small businesses in public procurement, the U.S. federal government has established the set-aside program, a preference program that mandates government agencies to award a portion of their annual contracting dollars to small businesses. We study whether and to what extent the performance of R&D contracts awarded through this program differs from those awarded through open competition. Our results based on a large dataset of federal R&D contracts indicate that, despite restricting competition to small businesses, set-aside R&D contracts experience lower levels of schedule and cost overrun compared to R&D contracts awarded through open competition. Furthermore, although set-aside R&D contracts experience lower levels of schedule and cost overrun when they are awarded to more experienced contractor firms, the benefits of experience arise primarily from a contractor firm's experience in executing R&D contracts across different agencies compared to the firm's experience with the same agency. Finally, set-aside R&D contracts awarded early in a federal fiscal year experience lower levels of schedule and cost overrun compared to those awarded later in the fiscal year. Additional post-hoc analysis focusing on the underlying dimensions of different-agency experience highlights the asymmetric effects of related-agency experience and unrelated-agency experience of contractor firms on the performance of setaside R&D contracts awarded by the Department of Defense. We find that while related-agency experience improves contract performance, unrelated-agency experience has a detrimental effect on contract performance. Taken together, the study findings demonstrate that policy initiatives for encouraging the inclusion of small businesses in public procurement may not necessarily compromise contract performance. Importantly, our findings emphasize the need for federal agencies and contracting officers to pay greater attention to the underlying dimensions of contractor firm experience and the timing of awarding a set-aside R&D contract as these factors can translate into improved contract execution and efficient utilization of taxpayer money.

Keywords: preference programs, small business, R&D contracts, public procurement, inclusive supply chains

Suggested Citation

Roy, Dwaipayan and Mishra, Anant and Sinha, Kingshuk Kanti, Advancing Small Business Inclusion in Public Procurement: Evidence from U.S. Federal Government R&D Contracts (June 03, 2024). Darden Business School Working Paper No. 4852064, Forthcoming at Production & Operations Management Journal, Available at SSRN: https://ssrn.com/abstract=4852064 or http://dx.doi.org/10.2139/ssrn.4852064

Dwaipayan Roy (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Anant Mishra

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

Kingshuk Kanti Sinha

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

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