Study says SB, DVBE utilization strengthens economy

Excerpt and information taken from DBEgoodfaith.com newsletter:

In recent years, the State of California's small business (SB) and disabled veteran business enterprise (DVBE) programs, which aim to increase the utilization of these firms through various measures, has been accused of diluting the public works market and weakening the state's economy. A new study by two scholars at California State University, Sacramento challenges this assumption and claims that SB and DVBE utilization on state contracts is beneficial for California's economy.“The incremental value of the State’s awarding contracts to SBs and DVBEs is positive, resulting in tremendous net new job creation, creation of net new Gross State Product, net new labor income for California employees, and indirect business taxes,” the study concludes.One of the studies findings highlighted in a California Department of General Services (DGS) press release is that SBs and DVBES produce roughly 50 percent more economic activity per dollar than larger firms.In addition to crunching data, the professors' surveyed SB and DVBE firms, revealing correlations between bid attempts and bid success. “Bid success seems to be a function of the number of applications made. For example, 56.9% of the respondents who have bid two to five times have been successful at least once, and 85.4% of the respondents who bid for at least six contracts have been successful at least once,” states the study.Just over 60 percent of California's SBs and DVBEs have tried to obtain state contracts. Each year, the DGS attempts to contract at least 25 percent of all state contracts to SBs and 3 percent to DVBEs.The survey also revealed why more SB and DVBE firms have not competed for contracts. In the survey responses, over a quarter of the firms indicated that they were not aware of bid opportunities with the state. Still, an overwhelming majority of respondents – 76 percent - want to bid on state contracts.The studies results may have several implications for contractors and suppliers. First, it supports the continued existence of California's SB and DVBE programs. Second, it may spur the Department of General Services to better advertise the programs and the benefits of SB and/or DVBE certification. Third, the state may implement SB and DVBE goals more stringently on contracts. According to the U.S. Small Business Administration, small businesses make up 99.2 percent of all employers in the State of California and employ 52.1 percent of the state's private-sector labor. As a result, “small businesses account for almost all of the economic growth the State has witnessed since 1975.”

To read the full study, visit: http://www.documents.dgs.ca.gov/dgs/PIO/SB/SmallBusinessStudy.pdf