Abstract: In 2017, U.S. federal agencies awarded over $86 billion in contracts to small businesses owned by members of under represented groups. The vast scale and scope of public procurement coupled with policies for supporting small disadvantaged businesses may drive federal agencies towards greater inclusiveness in awarding contracts. However, the level of inclusiveness varies considerably across different federal agencies. The authors posit that differences in three key organizational mechanisms associated with federal agencies’ decision-making processes influence an agency’s level of inclusiveness in awarding contracts. They test these ideas using the annual small business procurement activities of 41 federal agencies, large and small, from 2002-2011. The authors find empirical evidence for economically significant effects of discretion, discrimination, and oversight on an agency’s inclusiveness in awarding contracts and discuss the scholarly, managerial, and policy implications.
Keywords: representative bureaucracy, decision-making processes, SUR, contracting, small businesses