TOPICS
TOPICS
Small firms squeezed by growth in multiple-order contracts
Small- and mid-sized companies have been squeezed as agencies have shifted more of their information technology spending to large multiple-order contracts, according to a new industry analysis.
A report published by the Reston, Va., market research firm INPUT, found that IT spending through governmentwide acquisition contracts and multiple-award contracts went from just 6 percent of all IT spending in 1997 to almost one quarter of it in 2005.
In the past three years, that trend has translated to companies with more than $1 billion in revenue from prime contracts seeing a boost in their share of multiple-order IT prime contracting dollars, INPUT analysts found.
Companies bringing in less than $250 million have seen a steadily declining share of those federal contracts, the analysts said. Companies in the $250 million to $1 billion revenue group maintained a level share of those contracts from 2003 to 2005, the analysis showed.
"Mid-sized firms, in particular, are not big enough to be credible primes for the large-scale awards yet are too big to qualify for the [small and disadvantaged business] set-aside awards," analysts wrote.
Researchers found that, adding to the problems of the smallest vendors, the numbers of companies with less than $10 million in annual business grew 38 percent from 2003 to 2005. In this period, those companies' share of prime awards under multiple-order federal IT contracts fell about 5 percent.
Small- and mid-sized businesses are turning to strategies that allow them to compete in a supersized federal marketplace, researchers found. These include subcontracting with larger groups to gain the required experience and credibility that large contracts demand. They can also adjust their products or services to become more niche-oriented and make them stand out when it comes time to form multiple-company teams.
Angela Styles, a former head of procurement policy at the Office of Management and Budget and now a contracts lawyer with the firm Miller & Chevalier, said one of the challenges of multiple-order schedules is that if a company misses the opportunity to become listed when the schedule is first established, it will be shut out for the entire duration, which could be five to 10 years. Large businesses may be more able to devote resources to tracking and taking advantage of the limited windows of opportunity.
But she said subcontracting, which was not included in the INPUT analysis, provides key opportunities for small- and medium-sized businesses. "A lot of companies don't want to be the prime contractor," Styles said. "A lot of subcontractors learn how to be a federal contractor from their prime contractor, and these teaming arrangements."
While some small businesses have trouble transitioning out of preference programs as they grow larger, those that have established strong agency relationships generally succeed, she said. But medium-sized companies making their first approach to federal contracting could fall between the cracks and have trouble, she added.
Still, creating preference programs for medium-sized businesses, along the lines of those that already exist for firms owned by minorities and veterans and those in disadvantaged areas, would only add to the complexity that contracting officers face, Styles said.
Agencies use multiple-order contracts in part because they are easier and faster than traditional competitions. Simplifying the preferences for small firms would help contracting officers understand and use the programs available to help disadvantaged businesses, Styles said.
COMMENTS
- The problem for small companies operating on government contracts is the lazy incompetent manner in which government employees operate. At least in Defense Department, the military program manager that seeks a contract does so by trying to attach to an existing contract and get to the people they want. Thus, if I want a BAH contract I ask BAH where they have contracts. Once I find the contracts that exist I look for one that includes what I want to do in the scope of the contract and then I simply place a task order on the contract. The small and even the large contractors have no chance to bid on the task because it never appears as a RFP. The contractor selection process is so time consuming and complicated that any government employee is going to avoid a new RFP process at all costs. Likewise, if I do go for a RFP from the contractor community, the process is so expensive and uncertain that any small firm cannot afford to get involved in the bidding to become the prime and the small firms have to rely on being subcontractors to the big boys! This increases the cost to the taxpayer because the small firm has to rely on the large to get a contract and the large adds a big layer of overhead to the cost that produces nothing for the people of the United States! A small firm cannot afford to spend extensive amounts of staff time to write a response for an RFP on a government contract and cannot afford to answer many contracts. The cost of the process is so great it is ridiculous. Government contractors have to protect their assets and are not interested in development of a group of small firms to do contract work that may cost the contracting officer significantly. The process is broken, far too complicated and requires far too much up front cost for small firms with almost no probability of payoff. Therefore, the small firms do not even respond to RFPs. Ask the contracting officials and they should tell you that they cannot award contracts to small firms because small firms do not respond to the RFPs. Taxpayer Posted December 21, 2006 7:23 AM
