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

This article examines the performance implications of the U.S. federal government's small business set-aside program, which mandates that at least 23% of federal contracts be awarded to small businesses. Analyzing 30,902 federal research and development (R&D) contracts, the study finds that set-aside contracts experience significantly lower schedule and cost overruns compared to contracts awarded through open competition. The performance benefits of set-aside contracts are primarily associated with contractor firms' experience executing R&D contracts across different federal agencies rather than repeated experience with the same agency, and contracts awarded early in the fiscal year perform better than those awarded later. A focused analysis of Department of Defense contracts reveals that related-agency experience (notably with NASA) improves performance, while unrelated-agency experience may hinder it. These findings suggest that small business inclusion policies can promote participation without compromising contract outcomes and highlight the importance of considering contractor experience dimensions and award timing in federal procurement decisions.