Keys to Growing a Small Business in the Federal Market
By Kevin Plexico, Senior Vice President of Information Solutions, Deltek
It’s a great time to be a small business in the federal market! After nearly a decade of budget tightening brought on by the Budget Control Act of 2011, federal agencies are finally back to spending. Civilian agency contract spending has been increasing since 2013 and Defense spending turned the corner in 2016.
With the passage of the two-year budget agreement and the Consolidated Appropriations Act of 2018, growth in federal contracting for the next two years is assured. If Congress follows through with the budget agreement in appropriations for FY 2019, the next two years will see the largest increase in federal discretionary budgets since the economic stimulus legislation.
In FY 2018, the Defense budget alone increased 10%, over $60B, vs. FY 2017. The civilian agency budget cuts requested by the Trump Administration were ignored, resulting in most civilian agencies receiving healthy increases as well. For details on the change in appropriations, check out the blog “The 1.3T FY 2018 Omnibus Budget Bill – What’s in it?” written by our federal market analysis team.
With these increases and the success federal agencies have had of late achieving their small business goals, it’s a really good time to be a small business in the federal market.
But succeeding is not without its challenges. While small business contracting is up and the percent of dollars spent with small business is up, the number of small businesses holding prime contracts has declined. With agencies moving to IDIQ task-order-based contracting, we are witnessing a consolidation of contracting raising the bar for small businesses in securing the cherished prime contract positions.
Deltek’s analyst team, the content contributors to our GovWin IQ service, has done a lot of research on the patterns that define business success in the government market. I recently had the opportunity to share and present this research – the 4C’s of Success in the Federal Market –at this year’s National 8(a) Small Business Conference at the Gaylord in Nashville.
The 4Cs – Capability, Customers (and Partners), Contract Vehicles, and Compliance
- Capability –The ratio of prime contractors to federal buyers is 6:1, meaning for every buyer there’s a least six companies. Except for your current customers, the chances are agencies don’t know you and don’t know what makes you unique. Without differentiation in your capabilities, you look like every other generic small business. Differentiating yourself based on your unique capability and being able to demonstrate that are critical in winning contracts.
- Customers and Partners - To be successful, a company must establish relationships with agency buyers and form good partnerships with companies that can complement your capabilities. The federal market is massive, with over $500B spent annually on contracts. With subcontracting requirements and the nature of federal contracting, it is very much a team sport.
- Contract Vehicles – Agencies have shifted their contracting from awarding an RFP to a single company to adopting IDIQ task-order-based contracts that are held by many companies. In many agencies, if you are not a prime contract holder on one of these contracts, you will have little opportunity to compete for work with those agencies. Take for example the Department of Veterans Affairs. More than 70% of their IT spending goes through their T4 contract vehicle. Without a prime position on the T4 contract, you are essentially locked out of that agency or relegated to fighting for a subcontracting role on individual task orders. Finding and securing positions on the right contract vehicles that are aligned to your target customers is a critical success factor.
- Compliance – It is a four letter word for many, but successful companies embrace compliance and treat it as a competitive differentiator. Agencies are raising the bar in their compliance requirements and it is showing up in solicitations that way. Take for example the GSA OASIS contract. In Section M of this solicitation, the evaluation criteria were developed using a point system. In that point system, over 18% of the points were earned based on a company’s ability to satisfy various compliance requirements and certifications, such as an approved purchasing system, approved billing rates, an acceptable estimating system and an earned value management system. Another 3% of the points were given if the company had past IDIQ or cost reimbursement contracts. While compliance can be expensive and drudging work, companies that invest in it gain a direct competitive advantage over companies that don’t. On the GSA OASIS contract, without satisfying those compliance requirements, you’d have given up 18% of points compared to others—essentially meaning that you wouldn’t have been a viable competitor on that contract.
The 4Cs—Capability, Customers & Partners, Contract Vehicles, and Compliance—are visibly evident in every successful federal contractor I see. For small businesses that are serious about finding success and growth in the federal market, it’s time to take the 4Cs seriously and form a strategy for building and executing on them all as a foundation to your business.
About the Author
As the Senior Vice President of Information Solutions at Deltek, Kevin manages the delivery of Deltek's industry leading government market research and information solutions providing essential information and insights to over 3,400 clients. Kevin has responsibility for leading the industry's largest team of analysts focused on the government contracting industry. He also provides thought leadership and expert opinion to industry executives and is a recognized expert on the public sector market.
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