Government rife with opportunities for small IT companies, survey finds

Small businesses stand a good chance of winning large federal information technology contracts, even though the deck may seem stacked against them, a new study from a Reston, Va.-based market research firm concluded.

The study, released Wednesday by INPUT, suggested that small companies specializing in information security, computer system consolidation and development of compatible IT networks, may have an edge in winning large government awards, despite widely used contract bundling practices said to favor bigger vendors.

INPUT analyst Ashlea Higgs came to this conclusion based on a survey of available federal IT contracts valued at $500 million or more. Contracts falling into this category have a combined worth of roughly $85 billion, the report said.

Those projects surveyed displayed a common need for security devices and typically involved integrating a multitude of legacy applications, leaving plenty of room for businesses with niche expertise to compete and win work on larger projects, the INPUT report concluded.

In the security arena, federal agencies will draw on companies that have developed software to detect intrusions and scan IT systems for vulnerabilities. Agency budgets and procurements planned for fiscal 2004 also reflect a desire for products offering safe data transmission and storage, according to the report.

Agencies will also hire niche companies to help them connect their computer systems with others across the government, to facilitate information sharing. For example, the National Science Foundation's "Advanced Cyberinfrastructure Program," a modernization project seeking to help different scientific research communities interact more frequently and pool resources, will likely require software to enable all users to access shared data. This is a place where small companies could contribute, INPUT said. The NSF contract has an estimated value of $5.1 billion and will be awarded by mid- to-late fiscal 2004.

The Homeland Security Department, and other large federal agencies, will also be looking to combine hundreds to thousands of legacy applications into single computer networks. Small companies can offer technology to help agencies integrate the legacy systems rapidly, the INPUT report said.

Homeland Security is developing a Security Planning and Integrated Resources for Information Technology (SPIRIT) system that will provide such opportunities for small businesses. As part of this project, the department will award contracts in four sub-areas: information management, information systems engineering and design, information systems operations and information systems security. Together, the contracts for this project are worth about $10 billion.

Departing OMB technology chief Mark Forman, has emphasized similar opportunities for IT contractors at past industry conferences. At a February event, he told Silicon Valley tech gurus that the government is looking to secure all existing computer networks against hackers before tackling new projects.

James Kane, president and chief executive officer of Federal Sources Inc., a market research firm in McLean, Va., said at the same conference that 8 percent of $59 billion in projected federal IT expenditures in fiscal 2004 will go toward security, up about 3 percent from this year.

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