New Trends in Federal Contracting Benefit Small Businesses
The backlash over the federal government’s reliance on sole-source contracts with large companies in Afghanistan, Iraq, and the Hurricane Katrina clean-up is translating into a major and growing bonanza for small business firms, particularly those run by veterans, women, and minorities, according to Synchris, Inc. of Sterling, VA, epipeline of Herndon, VA, and Set-Aside Alert of Bethesda, MD. The three D.C. area firms, all of which deal daily with small and large federal contractors, outlined the data and little-understood new trends behind the growing number of federal contracts that are becoming available to small businesses.
The share of pre-request for proposal (Pre-RFP) contracting opportunities set-aside for small businesses, including women-owned, minority-owned and disabled-veteran-owned, in three key market segments jumped to 52 percent in 2007 (up from 40 percent in 2002), while the share of opportunities using full and open competition (open to large firms) dropped from 65 to 55 percent over the same period, based on the researched opportunities tracked by epipeline. (The total percentages add up to more than 100 percent since some contracts include provisions for both large and small contractors.) The analysis focused on all federal pre-RFP opportunities in three key areas: Information Technology (IT); Operations & Maintenance (O&M); and Architecture, Engineering Construction & Environmental (AEC). The set-aside contracts for small businesses include those carried out under HUBZone/8(a) provisions focusing on minority and women-owned firms and Service Disabled Veteran-Owned Small Businesses
Ron Smith, CFO, Synchris, Inc., said: “The good news for small businesses is that they are now back on top of much of the federal contracting world. However, the bad news all too often for such relatively small companies is that the competition is tougher than ever among their peers. We are seeing some small businesses left in the dust by competitors that are taking advantage of software and other tools on major IDIQ and GWAC contracts to manage task order responses, subcontractors and past performance data. It doesn’t make any difference if you are a large or small contractor when it comes down to the processes and tactics used to win contracts and keep them by performing to the standards that are going to be demanded of you.”
Tim Walsh, president and CEO, epipeline, said: “The response to the backlash against sole-source contracting is definitely working today in the favor of small businesses, but that doesn’t mean every federal agency is on exactly the same page. For example, we see small businesses doing very well with advertised O&M contracts, while larger firms still tend to dominate more of the advertised IT opportunities. And just because these opportunities are out there does not mean that everyone begins the foot race at the same starting line. The smartest small businesses know that they only really get a shot at things in the critical ‘pre-RFP’ timeframe. It’s a lot like being in a hot real estate market; if you wait to do your house buying until you see what’s in the newspapers, you’ve already lost out on the very best opportunities.”
Based on the contract opportunities epipeline is tracking, Walsh noted that, while the number of small-business set-asides in O&M rose from 54 percent in 2002 to 64 percent in 2007, the number of full and open opportunities (open to large contractors) fell during the same period from 47 percent to 40 percent. Similarly, while the number of small contractor federal IT opportunities increased, from 35 percent in 2002 to 46 percent in 2007, there was a decline in large-contractor IT opportunities, which decreased from 71 percent to just 62 percent over the same period.
Five Emerging Small Federal Contractor Trends
What is behind the increased federal emphasis on small businesses run by women, minorities and veterans? Executives at Synchris, epipeline and Set-Aside Alert outlined five major trends explaining the growing piece of the federal contracting pie available to small businesses:
1. The demise of sole-source contracting and a resulting focus on heightened competition will mean more opportunities for small business. This is where the fallout over contracting concerns related to Afghanistan, Iraq and Hurricane Katrina will end up benefiting small businesses in a major way. Per the Acquisition Advisory Panel report (http://www.acquisition.gov/comp/aap/documents/Introduction%20and%20Executive%20Summary.pdf), federal agencies will be forced to reduce sole sourcing and to put more actions out to bid, where small business can find them. While some of this may end up flowing to what are limited competition situations – such as 8(a) contractors and HUBZones — the overall effect will be a hefty increase in opportunities for small businesses.
2. In a reversal of recent trends, more big federal contracts are and will be “unbundled” for small contractors. Previously bundled contracts suitable only for large contractors are now being deliberately broken up into smaller component contracts, which is how much of the new shift of work to small contractors will take place. For example, NASA and other agencies are embarking on a course of breaking up some of the mega-contracts, creating many more manageable opportunities for small businesses and small business teams.
3. Vet-owned businesses are getting moved to the front of the list in more contracting situations. In addition to Service Disabled Veteran-Owned Businesses, which have recently been given special consideration in federal contracting, it is increasingly the case that federal agencies and big contractors seeking teaming partners are deliberately seeking out veteran-owned small businesses as a general proposition. Veteran-owned businesses that are aware of this shift in emphasis will have the opportunity to profit from it – while those that are unaware may miss out in a major way. It’s a matter of differentiating your company from the pack, and helping federal agencies meet new socio-economic goals.
4. More woman-owned and minority-owned firms are being sought out as partners by big contractors. Increased small business goals at federal agencies are being pushed down on big prime contractors, who are essentially being enlisted to act as surrogates for the government’s acquisition workforce. For small businesses, this means a greater need to find not only the new opportunities — but also the right contacts within the prime contractors that will be outsourcing the work. In particular, the primes must identify and team with more minority-owned, women-owned, veteran-owned and other small businesses in order to meet the increased goals negotiated into their contracts by the agencies. Small business owners need tools to identify the small business liaison offices and business development officials in the primes, and tools to manage teaming partners and subs when serving as a prime contractor.
5. Coming changes in size standards will impact the playing field for small contractors – but in a whole new way. And the effect will depend on how close your company or your competitor is to becoming “large.” New changes in the definition of “small contractor” will allow fast-growing federal contractors to stay in the “small” category longer, making them eligible for more contracting opportunities over a longer period of time. This means they will be able to continue to compete for the small business set-asides for another day. It will become very critical for companies to know where they stand in relation to the standards so they can “size up” the competition.
Commenting on the five trends, Tom Johnson, publisher, Set-Aside Alert, said: “Small business firms are at the threshold of significant changes in the federal contracting environment, both at the agency level and the prime/sub level. The more tools business owners can access, the better prepared they will be in winning opportunities and growing their companies. Market knowledge leads to sales success. Tools that help research opportunities, find partners, narrow the competition, promote strengths and qualifications, and produce better proposals are necessary to support and exploit small business status.”
About the Groups
Based in Sterling, VA, Synchris, Inc. is a provider of virtual workspace software that integrates workflow, document management, communication, and collaboration features into a unified application that seamlessly integrates with the Microsoft desktop. Synchris’ flagship product is Privia® by Synchris™, the leading bid lifecycle management software for businesses bidding on state, local and federal government contracts. For more information, visit www.synchris.com.
Founded in November of 1999, epipeline is an online source for federal contracting opportunity research and business intelligence. The firm’s proprietary short- and long-lead contracting research allows business development professionals and researchers to expand their planning horizons and become more competitive in the $2.8 trillion federal procurement marketplace. For more information, visit www.epipeline.com.
Set-Aside Alert is a federal government contracting newsletter written especially for small, minority, veteran-owned, HUBZone and woman-owned businesses. Subscribers receive daily e-mails of contracting and teaming opportunities and a biweekly news publication with the latest regulatory changes and legislative issues, insider tips and proven strategies used by successful small businesses. For more information and view a sample newsletter, visit www.setasidealert.com.