I am grabbing a quick cup of tea before jumping on the Beltway for a long day of proposal work, and using a quick minute to blog. Today, I would like to share with you an article by David Hubler published on December 3, 2008 in Washington Technology. The reason it caught my attention is that I work a lot with mid-tier companies and businesses that are about to graduate from the 8a program. They all face the predicament that this article describes: they are too big to qualify for small business set-asides, but are too small to slug it out with the big guys unless they get smart and strategic about business development. It is unlikely that the Small Business Administration creates a favorable status for mid-tier companies in the near future, or government procurement trends change to accommodate mid-tier businesses. From my observations, the best way for mid-tier companies to thrive is to create a robust bid engine capability on par with the large businesses. But enough of my ramblings – here is the article.
Squeeze is on for mid-tier contractors
By David Hubler
Mid-tier federal contractors face a number of constraints, such as the lack of an unanimous definition of what constitutes a mid-tier company, according to a Dec. 2 gathering of government contractors, procurement officials and congressional staff members.
They also agreed that mid-tier businesses are being squeezed by both small businesses that have government contract set-asides and giant defense contractors that have the money and manpower to win the lions share of awards.
Those were among the issues discussed during a series of panels convened by the Professional Services Council and the U.S. Chamber of Commerce to assess the mid-tier squeeze.
Stan Soloway, PSC president and chief executive officer, noted that a 2005 survey by the Center for Strategic and International Studies revealed that during the past 10 years, mid-tier companies market share of federal IT services declined 40 percent. We’ve also seen significant new competitive pressures grow as larger companies began to create and compete for more small work packages than ever before, he said while defining the squeeze.
Soloway said the governments recent emphasis on task orders played a major role in the decline of mid-tier market share in the IT services sector. As of the 2005-2006 versions of the study, about 50 percent of the addressable market in services was being procured at the task order level, up over 250, close to 300 percent from where it had been several years before, he said.
The House has a Small Business Committee, but there is no mid-tier committee in either the House or Senate, said Alan Chvotkin, PCS executive vice president and counsel. We have no centralized congressional policy, he said.
Al Matera, director of the Office of Acquisition Policy at the General Services Administration, said GSA has no specific definition or acquisition policy for mid-tier companies. As a result, he added, the agency cannot track the value of the contracts it awards to mid-tier companies.
As an example, Matera cited GSAs multiple-award schedules program, which accounts for about $36 billion in annual revenue for 17,000 contractors, about 80 percent of which are small businesses. The other 20 percent, about 3,400 contractors, are characterized as other than small businesses, he said. They receive approximately 65 percent of that $36 billion, or $23 billion in MAS annual sales. Now we know some of that must be going to midmarket companies, he said. We think the dollars are significant, but again, we dont know how much of that $23 billion, $24 billion is going to midmarket companies.
Matera said there is a need to define mid-tier companies, gather and analyze data on them, and explore governmentwide policy considerations.
Thomas Essig, chief procurement officer at the Homeland Security Department, said DHS does not compile data on what happens to its small-business contractors when they graduate into mid-tier status. There really is a significant absence of data, he said. I dont think it makes sense for any individual department to collect the data for itself. I think this has to be a federal-wide issue to figure out where were at. And my recommendation is I would have the Small Business Administration gather the data.
However, not all panelists agreed that small-business status was advantageous. Edward Bersoff, chairman, president and CEO of ATS Corp., said that having been small and mid-tier, let me say in spite of the issues facing mid-tier, its better to be mid-tier than it is to be small because you have a lot more resources at your disposal, and you can do more things.
Bersoff said the mid-tier squeeze is a byproduct of a flawed procurement system. He cited the failure to award the Alliant contract for more than two years.