M-22-03, Advancing Equity in Federal Procurement

EXECUTIVE OFFICE OF THE PRESIDENT
OFFIC E OF MAN AGE MEN T AN D BU D GET
WA SHINGT O N, D.C. 20503

December 2, 2021
M-22-03
MEMORANDUM FOR THE HEADS OF EXECUTIVE DEPARTMENTS AND AGENCIES
FROM:

Jason S. Miller
Deputy Director for Management

SUBJECT:

Advancing Equity in Federal Procurement

The Federal Government is the largest consumer of goods and services in the world,
spending more than $650 billion each year. This purchasing power makes Federal procurement
a powerful tool to support small business growth and build generational wealth throughout the
United States, including for firms owned by underrepresented individuals.
The President has set a policy of using Federal contract spending to support small
businesses and advance equity. In Executive Order 13985, Advancing Racial Equity and
Support for Underserved Communities through the Federal Government (the Executive Order),
the President directed agencies to make Federal contracting and procurement opportunities more
readily available to all eligible vendors and to remove barriers faced by underserved individuals
and communities.1 In his June 2021 speech commemorating the centennial of the Tulsa Race
Massacre, the President announced an additional step. He set a goal of increasing the share of
contracts awarded to small disadvantaged businesses (SDBs) to 15% by 2025. And he charged
every agency to assess available tools to increase opportunities for small businesses and
traditionally underserved entrepreneurs to compete for Federal contracts.
This memorandum implements the President’s commitments to increase spending to
SDBs to 15% by fiscal year (FY) 2025 and to increase baseline spending for the additional
socioeconomic small businesses and traditionally underserved entrepreneurs recognized in the
Small Business Act. These additional businesses include women-owned small businesses
(WOSBs), service-disabled veteran owned small businesses (SDVOSBs), and small business
contractors in Historically Underutilized Business Zones (HUBZones). 2 To achieve the
President’s commitment, the memorandum instructs agencies to take five management actions,
which have been developed in partnership with the Small Business Administration (SBA) and
Federal buying agencies. These actions will help to increase spending to underserved
The Executive Order calls for a comprehensive approach to advancing equity for all, including “people
of color and others who have been historically underserved, marginalized, and adversely affected by
persistent poverty and inequality.”
2
For purposes of this guidance, the term “socioeconomic small business” refers collectively to SDBs,
WOSBs, SDVOSBs, and HUBZone small business contractors.
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communities and to broaden participation from within these communities. As a result, they will
strengthen the breadth and depth of the Federal Government’s small business supplier base,
which has eroded significantly over the past decade.
These actions will also advance the third priority of the President’s Management Agenda
(PMA): managing the business of Government to build back better. The Biden-Harris
Management Agenda Vision (November 2021)3 recognizes that fostering lasting improvements
in the Federal acquisition system, including through the management actions described in this
memorandum, can create opportunities for underserved communities. The PMA Vision states,
“By creating more opportunities for all types of businesses and underserved entrepreneurs to
compete for Federal contracts, the Federal marketplace can serve as a platform to create a more
equitable economy.”
Management Actions
Federal agencies should take the following five management actions to implement the
commitments described above.
1. Agree with SBA on an agency-specific SDB contracting goal for FY 2022 that will allow
the Federal Government to cumulatively award at least 11% of Federal contract spend
to SDBs in FY 2022.
Federal law contemplates that the Government will structure its approach to procurement
in a manner that increases access for socioeconomic small businesses and establishes a baseline
of goals for overall small business contracting. In FY 2020, 10.45% of Federal agencies’ total
eligible contracting dollars went to SDBs.
To meet the President’s 15% goal by FY 2025, agencies and SBA shall negotiate interim
SDB contracting goals for FY 2022. These interim goals shall demonstrate improvement at each
agency. Taken together across the Government, these goals shall result in the award of 11% of
total eligible contract spending to SDBs. Increasing Federal spending with SDBs can accelerate
inclusive entrepreneurship, narrow wealth gaps, and create a more dynamic and resilient supplier
base. SBA plans to reflect in agencies’ FY 2022 small business scorecards agency efforts to
increase SDB spending. And SBA will work with the Office of Management and Budget
(OMB), the Domestic Policy Council (DPC), and the National Economic Council (NEC) to
identify possible increases in the floor amount of spending for WOSBs, SDVOSBs, and
HUBZone contractors that agencies should strive to achieve in FY 2023.
2. Review and adjust category management stewardship practices to boost contracting
opportunities for SDBs and other socioeconomic small businesses.
Since 2014, the Executive Branch has organized its buying practices for common goods
and services (which make up about 60% of total Federal contract spending) using the
stewardship principles of “category management.” Under category management, teams of
experts in each significant category of Federal contract spending (e.g., professional services,
3

Performance.gov/PMA

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medical supplies, industrial products, etc.) help agencies buy as an organized entity, rather than
as thousands of independent buyers. Stewardship practices include using data analysis to inform
buying decisions, adopting vendor management strategies to eliminate redundant actions with the
same contractor, and developing tools to share contract terms and prices paid for goods and
services so buyers can make better-value purchases in the future.
With its focus on interagency collaboration and coordination, category management can
help achieve key Administration priorities, including domestic sourcing and combatting climate
change, by ensuring the many agency buying offices across the Federal Government offer sellers
and supply chains clear and consistent demand signals and predictable work streams. As one
measure of category management’s positive impact, validated agency data shows that category
management has saved more than $33 billion in three years.4
Since 2017, OMB has given agencies credit for contract activity that is aligned with
category management principles, activity we call “spend under management” (SUM). Analysis
of SUM credit since 2017 shows that socioeconomic small businesses have received a
proportionally lower share of spending under category management than other spending. This
trend is most likely a reflection of agencies having generally sought SUM credit for their use of
large, high-dollar Government-wide and agency-wide contracts. Small firms face challenges in
accessing these contracts when agencies do not set them aside exclusively for small business
participation.
In furtherance of the Executive Order, OMB is committed to promoting a stronger and
clearer alignment between the acquisition stewardship practices promoted by category
management and the goal of advancing equity in procurement. The category management
infrastructure built to help the Government become a more organized and informed buyer can be
effective in supporting agencies as they promote more equitable buying practices.
For these reasons, through this memorandum, OMB is revising and clarifying the
guidance in OMB Memorandum M-19-13, Category Management: Making Smarter Use of
Common Contract Solutions and Practices, which provides guidance on the use of category
management. The revisions and updates are set forth in the Attachment and summarized in the
table below.
Revisions and Updates to OMB Memorandum M-19-13 on Category Management
•

Revision/Update
A new Tier 2-Socioeconomic Small
Business (SB) SUM measure takes
effect at the beginning of FY 2022
(retroactive to October 1, 2021) to give
agencies automatic credit towards
agency category management goals for
all awards made to certified and self-

•

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Purpose of Change
Empowering the workforce to pursue
the best acquisition strategy for
reaching underserved small business
communities helps to maximize awards
to socioeconomic small businesses

These savings were cited favorably by the Government Accountability Office in its November 2020
report OMB Can Further Advance Category Management Initiative by Focusing on Requirements, Data,
and Training (GAO 21-40).

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•

•

•

Revision/Update
certified socioeconomic small
businesses5
Agencies are reminded to establish and
implement category management plans
consistent with statutory socioeconomic
responsibilities and the need to
diversify the agencies’ small business
supplier base
Agencies are reminded that category
management plans shall not prioritize
spending on “Best in Class” (BIC)
solutions at the expense of meeting
socioeconomic small business goals
and providing maximum practicable
opportunity to small businesses
SBA and the Department of Commerce,
which includes the Minority Business
Development Administration, are
recognized as voting members of the
Category Management Leadership
Council6

Purpose of Change
•

Using category management practices
to promote industry-specific best
practices reduces burdens on small
business vendors and reinforces small
business goal achievement

•

Ensuring that use of BIC solutions is
balanced with decentralized contracts
and other strategies that are necessary
to increase diversity within the
agency’s small business supplier base
advances equity in procurement

•

Accounting for small business equity in
category management governance
furthers the consideration of
procurement practices that promote
supplier diversity

Agencies should immediately review and update any internal guidance implementing
Memorandum M-19-13 or other category management guidance to ensure it aligns with the
revisions and clarifications described above and in the Attachment. Agencies should also
clearly communicate these changes with their workforce to support better alignment between
category management stewardship and attainment of socioeconomic small business contracting
goals. OMB and SBA will work with Chief Acquisition Officers (CAOs) and Senior
Procurement Executives (SPEs), directors of agency Offices of Small Disadvantaged Business
Utilization (OSDBUs), and agency senior accountable officials for category management to
monitor implementation.

5

Tier 2-SB credit applies to 8(a) and other small disadvantaged businesses, women-owned small
businesses, service-disabled veteran-owned small businesses, and small businesses working in
HUBZones. Tier 2-SB credit will be awarded to agencies automatically in bi-monthly updates to
category management dashboards found on the Acquisition Gateway: Public Category Management
Dashboards & Analytics | D2D (gsa.gov).
6

The CMLC is the interagency governing body for category management activities.

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3. Increase the number of new entrants to the Federal marketplace and reverse the
general decline in the small business supplier base.
A recent report found that the number of new small business entrants to Federal
procurement decreased by 79% from 2005 to 2019.7 Analysis of agency data reported in the
Federal Procurement Data System finds similar trends regarding the small business supplier base
at large, including a loss of 49,000 small businesses (or 38% of small businesses) in the Federal
supplier base since 2010. These trends are at odds with the Administration’s goal of advancing
equity in procurement and portend a less dynamic and competitive Federal marketplace that
could leave agencies at greater risk of being unable to withstand supply chain disruptions.
The OMB Study to Identify Methods to Assess Equity: Report to the President (July
found that new and recent entrants face difficulties navigating the Federal marketplace
due to inadequate Government outreach to diverse vendors and the lack of visibility into
available opportunities. The report concluded that these shortcomings “create unfair advantages
for incumbent contractors, complicating efforts to diversify the Federal supplier base.”
2021)8

To address these challenges, the following initial Government-wide steps will be taken.
•

New entrant management tools. OMB, DPC, and NEC will work with agencies to develop:
(i) a common definition of “new entrant” for the purpose of benchmarking current
performance and tracking progress over time, and (ii) a plan for public reporting of agency
performance on this metric.

•

Strengthened procurement forecasting capabilities. OMB will work with agencies to achieve
greater consistency across the Federal Government in the availability and quality of
procurement forecasting tools9 by ensuring they provide: (i) early awareness of potential
opportunities, (ii) user friendly search and filter functions, and (iii) advanced information that
can be used to prepare more effectively for competition (e.g., description of requirement,
anticipated place of performance, whether the opportunity will be set aside for small
businesses, fiscal quarter of award).

•

Improved data management. SBA, OMB, the General Services Administration, and other
agencies will work together to provide data analytic capabilities, including on demographic
and geographic information, to help the workforce understand the impact of current buying
practices across industries and sectors and take focused actions in areas with the greatest
opportunity for growth by socioeconomic small businesses. These actions will be informed
by analyses of market trends in the U.S. economy to help determine where adjustments in
procurement practices, including more targeted outreach, can drive more equitable results,
and where other types of government action outside the Federal procurement process may be
required.

7

Supporting Small Business and Strengthening the Economy Through Procurement Reform (June 22,
2021)
8
Study to Identify Methods to Assess Equity: Report to the President (July 2021)
9 Section 8(a)(12)(C) of the Small Business Act requires agencies to compile and make available
projections of contracting opportunities that small business concerns, including SDBs, may be able to
perform.

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•

Increased transparency for Federal agencies and interested businesses. OMB will work
with the Department of Treasury to add small business user-friendly data capabilities to
USAspending.gov. This action will help businesses who are not current Government
contractors to identify opportunities, and navigate information about purchasing histories and
other relevant geographic or socioeconomic factors.

In parallel with these Government-wide efforts, agency equity teams for procurement
established under the Executive Order are encouraged to pursue additional strategies that can
reverse recent declines in the contracting base and promote greater small business supplier
diversity across business categories. Agencies should consider the following steps:
•

Engage early in the acquisition process with the agency’s OSDBU and SBA’s assigned
Procurement Center Representative to identify barriers to access and craft acquisition
strategies to maximize opportunities for small business participation. In addition, any release
of 8(a) contracts should be paired with new 8(a) opportunities at a commensurate level.

•

Hold regular meetings with program managers of new socioeconomic small businesses to
improve understanding of mission and awareness of upcoming opportunities.

•

Increase use of innovative business practices that reduce administrative burden or increase
the participation rate of small businesses within the procurement process. Many of these
practices are highlighted in the Periodic Table of Acquisition Innovations (PTAI), available
at https://fai.gov/periodic-table.

•

Make commitments for data-driven outreach, including, where practicable, crowdsourcing
tools that allow for dynamic community engagement and supplier scouting targeted at
increasing participation in underserved communities, especially by new entrants, small
business manufacturers, small business service providers of specialized and other in-demand
services, and sellers in supply chains that are the focus of increased domestic sourcing efforts
or are advancing our clean energy future.

•

Track the percentage of contract spending under the simplified acquisition threshold that is
set aside for small businesses.

•

Strengthen oversight of prime contractor reporting of subcontracting plans and goals, as
subcontracting opportunities are often pathways for small businesses to become involved
with Federal contracting.

•

Proactively use the “Acquisition 360” survey to understand better how contractors and
potential contractors from underserved communities experience the Federal contracting
process.10

10

The Federal Acquisition Regulatory Council will soon release a final rule to encourage the use of the
Acquisition 360 tool, which provides a standardized survey instrument to facilitate feedback. This rule
builds on the March 18, 2015 OFPP Memorandum, Acquisition 360 – Improving the Acquisition Process
Through Timely Feedback from External and Internal Stakeholders.

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4. Include the achievement of small business contracting goals as a part of the
performance plans for key Senior Executive Service (SES) officials.
Advancing equity for socioeconomic small businesses will require focused attention,
proactive engagement, and follow-through by the agency’s senior leadership. A decade ago,
achievement of small business contracting goals was added to the performance plans of many
agency SES program officials responsible for procurement. This strengthening of accountability
began a decade-long record of meeting small business contracting goals. 11 However, some plans
did not specifically focus on particular socioeconomic small business goals. And application
was uneven for program officials who can play a significant role in deciding the extent to which
work for their agency is set aside for socioeconomic small businesses.
Agencies are expected to include progress towards achievement of each of the
socioeconomic small business goals, including the heightened SDB goal negotiated with SBA, as
evaluation criteria in all performance plans for SES managers that oversee the acquisition
workforce or agency programs supported by contractors. These managers include the agency’s
CAO, SPE, OSDBU directors, and heads of contracting activities, as well as SES program
officials who participate in planning acquisitions or selecting contractors to support their
projects. In order for changes to maximally affect FY 2022 socioeconomic small business goal
achievement, agencies should take any necessary actions by January 10, 2022.
5. Ensure agency small business contracting offices have access to senior leadership.
The Small Business Act requires that each Federal agency with procurement powers
maintain an Office of Small and Disadvantaged Business Utilization to advocate for small
businesses in procurement and contracting processes. These offices play an important role in
advancing equity by, among other things: working with agency acquisition officials to increase
the probability of participation by small businesses; assisting small businesses in obtaining
payments from an agency (or prime contractor) with which they have contracted; and providing
the agency’s CAO and SPE with advice and comments on acquisition strategies, market
research, and other actions to expand access to the agency’s supplier base.
Section 15(k)(3) of the Act requires that OSDBU directors generally be responsible only
to and report directly to agency heads or their deputies. Implementation of this requirement is
uneven across agencies, however. Sufficient access to senior agency leadership is necessary to
ensure that Federal small business contracting goals are core to each department’s mission and
to facilitate effective collaboration with CAOs, SPEs, and senior accountable officials for
category management.

11

In the National Defense Authorization Act for FY 2013, Congress required agencies to take steps to
ensure that members of the SES responsible for acquisition and other members of the SES, as appropriate,
“assume responsibility for the agency’s success in achieving each of the small business prime contracting
and subcontracting goals and percentages by (1) promoting a climate or environment that is responsive to
small business concerns; (2) communicating the importance of achieving the agency's small business
contracting goals; and (3) encouraging small business awareness, outreach, and support.” Pub. Law No.
112-239, 126 Stat. 2076, sec. 1633(b), 15 U.S.C. § 631 note.

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By January 10, 2022, CFO Act agencies12 shall report to the SBA Administrator and
OMB’s Deputy Director for Management whether they currently meet the requirements of
section 15(k)(3). To the extent OSDBUs lack the access specified in section 15(k)(3), the
response should include a plan on how and when the agency will come into compliance during
FY 2022. Reports should be sent to [email protected] and
[email protected].
Related Actions
In assessing procurement barriers pursuant to direction in section 5 of the Executive
Order, agencies have identified challenges facing socioeconomic small businesses as well as
other underserved communities, including individuals who are blind or have severe disabilities,
Historically Black Colleges and Universities and other Minority-Serving Institutions, and Tribal
Colleges and Universities.13 The guidance in this memorandum is intended to inform and
complement the actions agencies are considering for the underserved communities in their
Equity Plans required by the Executive Order. OMB will consider additional management
actions to advance equity in procurement based on these ongoing efforts.
Questions regarding this management guidance may be sent to
[email protected].
Attachment

12

31 USC § 901.
Under section 2 of the Executive Order, the term “underserved communities” refers to “populations
sharing a particular characteristic, as well as geographic communities, that have been systematically
denied a full opportunity to participate in aspects of economic, social, and civic life.”
13

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Attachment

M-19-13 (Revisions)
SUBJECT: Category Management: Making Smarter Use of Common Contract Solutions and
Practices
OMB Memorandum M-19-13 provides guidance on the use of category management—
that is, the practice of buying common goods and services as an organized enterprise in order to
improve the efficiency and effectiveness of acquisition activities—while meeting small business
goals and other socioeconomic requirements. To achieve a stronger and clearer alignment
between category management stewardship principles and small business contracting, agencies
shall implement Memorandum M-19-13 as modified by the following revisions and
clarifications:
Section 1. Annual establishment of category management goals and plans.
Agencies shall continue to develop strategic plans for category management informed by market
intelligence, as provided in section 1, subject to the following changes and clarifications.
a. SUM Credit. OMB will continue to use the three-tier system reflected in M-19-1314 to
measure agency progress in implementing category management principals. However,
OMB will no longer measure reductions in unmanaged (Tier 0) spend and instead will focus
on increasing SUM.
In addition, OMB has modified how credit is provided to agencies under their category
management plans in order to maximize awards to socioeconomic small businesses.
Beginning in FY 2022 (retroactive to October 1, 2021), agencies will receive automatic Tier
2 SUM credit towards agency category management goals for all awards made to certified
and self-certified socioeconomic small businesses. For purposes of this category
management guidance, “socioeconomic small business” refers to 8(a) and other small
disadvantaged businesses, women-owned small businesses, service-disabled veteran-owned
small businesses, and small businesses working in HUBZones. This credit will be tracked
under a new Tier 2-Socioeconomic Small Business (SB) designation.
Agencies shall continue to receive Tier 1 SUM credit for spending awarded to a small
business contractor other than a socioeconomic small business, including under smaller
decentralized set-aside contracts, if that award is designed to achieve small business goals
and is conducted pursuant to a comprehensive, organized, agency-level strategy, as approved

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SUM includes all contract spending that falls under any of three tiers, each of which is defined based on
certain category management principles of stewardship. Tier 1 is agency-wide spending with strong
contract management practices. Tier 2 is procurement spending via Government-wide or multi-agency
contract vehicles that reflect strong management practices, including data and information sharing across
agencies and use of cross-agency metrics. Tier 3 is procurement spending via Government-wide contract
vehicles that meet additional “Best in Class” standards for management and stewardship.

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by the agency after consultation with OMB. Agencies are not required to address plans for
awards to socioeconomic small businesses, as credit will be automatically provided.15
Tier 2-SB SUM is designed to empower agencies to take full advantage of the best strategies
for reaching underserved small business communities. In some cases, this will involve using
existing Government-wide contracts to bring established socioeconomic small businesses
into the agency’s supplier base, helping to broaden the cache and resiliency of those
businesses. In other cases, it will involve awarding small decentralized contracts or medium
or large set-aside vehicles to create diversity by doing business with entities that are new or
recent additions to the Federal market. Tier 2-SB SUM credit will be provided
automatically regardless of the vehicle used to reach the socioeconomic small business.
b. Plan submission and execution. When submitting plans to OMB, the SAO should be
prepared to discuss with OMB’s OFPP and SBA’s Office of Government Contracting and
Business Development (GCBD) any efforts by the acquisition policy and OSDBU offices to
use the new Tier 2-SB SUM credit to increase the participation of underserved communities
while upholding the principles of category management stewardship. The SAO is
encouraged to share any promising strategies and identify areas where further guidance, data
analytics, and/or training (either at the agency or government-wide level) may be needed.
In executing plans, SAOs, CAOs, SPEs, and OSDBUs shall ensure the following:

15

•

The achievement of socioeconomic and other small business goals shall be
prioritized over achievement of category management goals if the achievement of
both goals is not possible. Agencies remain fully responsible for meeting and
exceeding their small business and socioeconomic small business contracting goals.
Steady focus on these goals is a key to advancing equity.

•

The achievement of socioeconomic and other small business goals shall be
prioritized over achievement of Best in Class (BIC) contract goals if achievement of
both goals is not possible. BIC contracts shall not be used where doing so might
imperil the agency’s ability to meet and exceed its socioeconomic small business
contracting goals, or might threaten growth of the agency’s small business supplier base.
BIC contracts are held by high-performing and seasoned contractors, including more
than 2,000 well-established socioeconomic small businesses. Each agency should
carefully consider where these sources can provide benefit if they are not already
included in the agency’s supplier base. At the same time, agencies must recognize that
BIC contractors represent only a small fraction of the total number of small business
contractors who do business with the Government. Also, BICs are generally designed
for more seasoned contractors and therefore are not easily accessed by new and recent
entrants. For these reasons, agencies must actively balance any consideration of BICs
with other contracting strategies, including set-aside contracts, that can help the agency
increase diversity within the agency’s supplier base.

The same caveat applies to references to decentralized set-aside contracts in Attachments 3 and 4.

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If, during the implementation of a category management plan, an agency believes a
category management goal or target needs to be adjusted to achieve small business goals, the
agency should make any necessary adjustments and promptly notify OMB.
Attachment 2 - Roles and responsibilities.
To better ensure the challenges facing small businesses are fully considered in the
governance of category management practices and activities, section I(2) is amended to reflect
that the Small Business Administration will participate as a voting member of the Category
Management Leadership Council (CMLC), and the Department of Commerce will be added as a
voting member, so that the Minority Business Development Agency and the Economic
Development Administration may also contribute to the work of the CMLC.
Sections I(2) and (3) and section II(1) are amended to reflect that the CMLC, category
managers, and SAOs will elevate the importance of requirements development in category
management activities, both at the government-wide and agency levels. These officials will be
expected to promote the early and effective engagement of key stakeholders to shape category
management strategies and acquisition solutions, including program and requirements officials,
end users, acquisition officials, information technology officials, and OSDBUs.

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