AN EVALUATION OF FEDERAL CONTRACT SET-ASIDE GOALS IN REDUCING SOCIOECONOMIC DISCRIMINATION (GOVERNMENT, CONTRACTING)

This dissertation evaluates the effectiveness of federal contract set-aside goals in reducing socioeconomic discrimination. Public Law 95-507 mandates that the head of each federal agency, after consultation with the Small Business Administration, establish realistic goals for each fiscal year for the award of agency contract/subcontract dollars to socioeconomically disadvantaged businesses. This requirement currently represents one of approximately 50 separate federal socioeconomic programs that utilize the federal contracting process as the principal implementing mechanism. Implementation of the federal contract goal-setting procedure has created two unintended negative consequences. First, restricting competition for federal contracts to certain socioeconomically disadvantaged groups raises the contract price to the agency. And second, socioeconomic programs have increased administrative costs to both the agency and the contractor without any offsetting benefits to either party. Given agency budget constraints, the two perversities from implementing the goal-setting procedure have effectively increased the agency's cost of contracting and reduced the demand for targeted awards in the federal contracting market. Although a theoretical argument based upon economic efficiency rationale has been raised to justify use of the goal-setting procedure, this research effort identifies nine linked factors that predict its unsuccessful implementation. Through multiple regression analysis, the results reveal that the federal contract goal-setting procedure has not effected a significant increase in federal contract dollars to socioeconomically disadvantaged groups. It appears that the size of an agency's contracting budget is a more important determinant of the level of federal contract dollars going to the targeted groups than the federal contract goal-setting procedure. And it is determined that an agency's goal-setting decision is significantly influenced by its previous year's achievements. Generally, agencies set goals they know they can meet or exceed--a phenomenon referred to as lowballing.