The Small Business Administration released its FY 2025 Governmentwide Small Business Procurement Scorecard showing that the federal government awarded 24.7 percent of eligible contract dollars to small businesses against a governmentwide goal of 23 percent, but that the Department of Defense — by far the largest federal contracting agency — fell short of its specific DoD goal for the third consecutive fiscal year. The scorecard also documents 1,091 suspension actions and 628 contract terminations processed through SBA's debarment and suspension program during fiscal year 2025, primarily in connection with small business program fraud, misrepresentation of size status or socioeconomic eligibility, and violations of the limitations on subcontracting rules. The combination of aggregate goal attainment above the governmentwide floor and specific agency failures — particularly at DoD — reflects the persistent structural challenge of integrating small business contracting into large, technically complex defense acquisition programs that tend to consolidate work with large primes.
DoD's Small Business Goal Gap and Structural Factors
DoD's chronic difficulty meeting its small business contracting goals reflects structural features of defense procurement that are largely independent of policy intent. Large defense acquisition programs — aircraft, shipbuilding, missile systems, and major electronics platforms — are dominated by large primes whose supply chains include small businesses but where the prime-level contract dollars flow to companies well above the small business size standards. NAVSEA, for example, contracts the bulk of its shipbuilding dollars with HII and General Dynamics, both large businesses, and the small business percentage of NAVSEA's prime contract awards is structurally constrained by this concentration. DoD has attempted to increase small business participation through subcontracting plan requirements, small business set-asides for services contracts and professional advisory work, and the use of multiple-award IDIQ vehicles that include small business awardees. But the aggregated contract dollar metric continues to reflect the weight of large-dollar major acquisitions in the DoD portfolio. The SBA and DoD's Office of Small Business Programs have both acknowledged that achieving the DoD-specific goal will require either adjusting the goal to reflect the structural reality of defense acquisition or finding ways to carve out more services and IT work for small business competition.
Suspension and Termination Enforcement: What the Numbers Mean
The 1,091 suspension actions and 628 contract terminations processed in FY 2025 represent a significant enforcement activity level across SBA's program integrity portfolio. SBA's suspension and debarment actions in the small business program context cover a specific set of violations: misrepresentation of size status at the time of a set-aside award, misrepresentation of 8(a), HUBZone, SDVOSB, or WOSB eligibility, and violations of the limitations on subcontracting that require small business awardees to perform a defined percentage of contract work themselves rather than flowing it to large business subcontractors. Suspension is a temporary exclusion that prevents a company from receiving new federal contract awards while an investigation is pending; termination of an existing contract is a separate action that removes the company from ongoing work. The volume of actions in FY 2025 reflects sustained investment in program integrity enforcement, driven in part by GAO and SBA IG reports that have repeatedly identified non-compliant small business set-aside awards as a significant source of program integrity risk.
What It Means for Contractors
Small businesses participating in federal set-aside programs — particularly those that have grown near the size standard boundary — should ensure their size recertifications are current and accurately reflect their current revenues and affiliations.
- SBA's limitations on subcontracting rules require small business prime contractors on set-aside contracts to perform at least 50 percent of the cost of a services contract, 15 percent of the cost of a manufacturing contract, or 25 percent of the cost of a construction contract themselves; violations of these percentages are the most frequently prosecuted small business program integrity offense.
- Companies that have grown through acquisition or organic revenue growth since their last SBA size determination should recertify proactively before bidding on new set-aside opportunities; failure to recertify when a company has crossed a size standard is a misrepresentation regardless of whether the company was aware of the standard change.
- The SBA's mentor-protégé program provides a legal structure for large-small business teaming arrangements that would otherwise risk affiliation findings; small businesses pursuing large program opportunities should evaluate the mentor-protégé agreement route before teaming with large businesses in ways that could trigger affiliation.
- The 1,091 suspensions processed in FY 2025 are a reminder that suspension is an administrative action, not a criminal conviction — it can be triggered by an investigation that ultimately does not result in a finding of fraud. Companies that receive suspension notices should respond promptly and engage counsel experienced in SBA program matters to present a factual record to the suspending official.
Limitations on Subcontracting Enforcement and the Ostensible Subcontractor Rule
The limitations on subcontracting rules — which require small business prime contractors to perform specified minimum percentages of work themselves — are among the most frequently violated and enforced provisions in the small business contracting program, and they are the source of many of the 1,091 suspensions and 628 contract terminations reflected in the FY 2025 scorecard. The rules exist because the program's economic development intent is defeated if a small business receives a set-aside award and then subcontracts essentially all of the work to a large business, pocketing the prime contractor administrative margin while the large business performs the actual work and the small business employee population experiences no benefit. The SBA's ostensible subcontractor rule addresses the most extreme version of this pattern: it prohibits small businesses from being "ostensibly" a subcontractor on their own prime award by giving their subcontractor undue control over the contract's key personnel, technical approach, or performance. SBA's Office of Inspector General has published a series of reports documenting how this pattern recurs across multiple procurement categories, and the FY 2025 enforcement numbers reflect sustained investment in detecting and acting on these violations. Contractors in teaming arrangements for small business set-aside competitions should have counsel review their teaming structures against both the limitations on subcontracting rules and the ostensible subcontractor rule before proposal submission to ensure that the arrangement is defensible if SBA or an SBA IG auditor reviews the teaming structure post-award.