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May 2004 — Vol. 82, No. 4

SMALL BUSINESS

Prime time for seeking government contracts

Small businesses are winning more federal contracts than ever, and both the state and U.S. governments want more small suppliers

 

If you’ve never marketed your products or services to the government, now might be a good time to consider doing just that. Small businesses won a record amount of federal contracts last year. And both the federal government and the state of Connecticut are actively seeking more small suppliers.

More than $60 billion in federal prime contracts

In fiscal year 2003, the federal government for the first time awarded more than a quarter of its prime contracting dollars to small businesses. The Small Business Administration (SBA) says small businesses did $62.7 billion of business with the government as prime contractors in FY 2003, representing 25.37% of all government prime contracting dollars that year. That’s an increase of $9.7 billion over FY 2002.

Every small-business category tracked by the SBA showed gains in federal contracts. Small disadvantaged businesses were awarded $2.3 billion more in contracts, receiving contracts worth $18.2 billion. Participants in the 8(a) Business Development Program received $3.97 billion more than in FY 2002, for a total of $9.6 billion in FY 2003. Contracts to women-owned small businesses rose by $1.1 billion, from $6.8 billion to $7.9 billion in FY 2003. The HUBZone program was awarded $2.447 billion in contracts. Service-disabled veterans saw a jump in the value of contracts awarded, receiving $510 million in FY 2003, up from $298 million in FY 2002.

Two U.S. agencies in particular showed strong results from their efforts to reach out to small businesses in 2003. The Department of Defense awarded 24.8% of its prime contracts to small businesses, and the Department of Homeland Security awarded 40.68% of its prime contracts to small businesses in its first year.

Revised bidding processes, other reforms

The SBA attributes the increase in small-business contracting to government outreach through traditional contracting methods and to a new Business Matchmaking program, launched last year. This is a series of events around the country that so far have enabled more than 4,000 small businesses to schedule more than 14,500 one-on-one meetings with buyers from federal, state and local governments as well as larger corporations.

Recent changes in federal procurement practices should also mean more small-business contracts. The changes include:

  • an increase in the revenue-based size standard for small businesses in the facilities support services industry, from $6 million in average annual receipts to $30 million, and in the testing lab industry, from $6 million in average annual receipts to $10 million;
  • requiring government agencies to avoid, when possible, “bundling” several requests for proposal into one larger RFP, which can shut out small bidders;
  • integration of the existing Pro-Net database and the Defense Department’s Central Contractor Registration (CCR) database into one database of small businesses that want to do business with the government. Registration in the new CCR is now a requirement for federal contracts;
  • creation of a new industry category, Information Technology (IT) Value Added Resellers, for which the maximum size standard to qualify as small is 150 employees. A small business will be classified as an IT Value Added Reseller if it provides IT equipment and multivendor hardware and software along with significant services on a federal contract; and
  • simplified size standards (see right).

You can get more information about these changes on the SBA's Web site.

State wants more small vendors

Connecticut’s state government recently announced it’s taking steps to let more small and minority-owned businesses (SBE/MBEs) compete for state work.

Under the “Buy Smart, Buy Together” initiative the state launched last fall, the Department of Administrative Services (DAS) is reviewing the state’s major buying categories and examining ways in which buying can be improved. Categories under review include office supplies, advertising, document management services and waste removal.

Prior to “Buy Smart,” most state contracts with SBE/MBEs went to a very small number of vendors, the DAS says. For example, under the state’s current document-management services contract, 130 SBE/MBEs are registered to do business with the state. Of those, 78 vendors (60%) received no business at all in fiscal year 2003, while just eight vendors were getting 68% of the state’s business.

Now, the prime vendor that gets selected by the state for a “Buy Smart” contract will be unable to steer subcontracting work to favored subcontractors. That prime vendor must get competitive quotes from a number of other companies when subcontracting out work.

The DAS says other states that have “Buy Smart” programs have created more opportunities for SBE/MBEs. Delaware saw SBE/MBE participation rise by 8%, and Virginia’s spending with SBE/MBEs went from $8 million to $15 million.

 

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