A large percentage of them are. When starting out many small businesses exclusively work as subcontractors to larger entities which must partner with smaller businesses to meet set asides.

Some contracts require the prime contractor to be a small business. Often when this is the case and the contract is large the small business acts almost purely as a pass through to a larger contractor. Taking a percentage off the top and filling a couple of slots on the contract while the larger contractor does fills most of the slots and takes the majority of the money.

true in some cases, but some set asides require the small to do a certain percentage of the business

Which is why I said often and not always.