To Keep Winning Federal Contracts, Small Businesses Say They Have to Spend More

Cost of doing business with government rose 15 percent in three years, survey shows.

Small businesses upped their efforts to bid on federal contracts, reporting a 72 percent increase in time and money devoted to winning a share of the government’s $90 billion procurement budget, according to the latest annual survey from the American Express OPEN for Government Contracting initiative.

Though overall federal contracting is down 19 percent in fiscal 2015 from fiscal 2010, the survey—completed last summer but released last month—found that, on average, small businesses spent $148,124 in time and money to bid for federal work. That’s a 72 percent increase over the past six years, and a 15 percent increase since 2013.

The most active contractors, however, are the largest, the AMEX study found. Those with 50 or more employees and $5 million or more in revenues report being more active than they were five years ago, versus 34 percent that are less active and 29 percent making the same effort as before.

“Small business contractors report that there are now fewer bidding opportunities and increased competition,” the summary said. “Nonetheless, over the past three years, nearly half of prime contract bids were successful, and two-thirds of subcontracting participation likewise yielded some contracting activity.”

In the area of set-asides, the survey found that minority contractors in fiscal 2015 invested $152,969 seeking contracts, 6 percent more than the $144,676 investment made by Caucasian-owned companies. By contrast, women-owned contractors continue to spend less time and money seeking federal contracts, the survey found. Women-owned firms reported investing $107,774 on average in 2015, only 58 percent of the amount invested by men-owned firms ($170,621).

Asked why contracting activity is lower now than it was five years ago, 62 percent of active contractors agreed with the statement that “It’s getting harder to win contracts because there are more bidders for each opportunity,” up from 52 percent in the 2013 survey. Also, 60 agreed that “It’s getting harder to win contracts because there are fewer bidding opportunities due to contract bundling,” up from 47 percent agreement three years ago.