Why are you sitting there waiting for someone else to lead the charge when this is your fight? I’m talking you, those small businesses pursuing federal contracts who literally stand by while someone eats your lunch. What am I talking about? Revenues and profits you left on the table for some ‘other than small business’ to snatch up. I’m not talking chump change either, this is about billions of dollars that could have done much for American small businesses nationwide.
So yeah, I’m a little ticked.
Congress and the White House are still looking for ways to help small federal contractors through overly – complicated and generally ineffective legislation and policies. Most of us have grown accustomed to the annoying buzz of recurring lip service to the point we just swat it away like a pesky fly. The point is, they’re not the cavalry and they’re not coming to anyone’s rescue, especially yours.
But this is not intended as a political post. Actually, I hope the intended audience sees it as a roadmap to limiting future lost revenues. I hope what I share here is a spark that ignites a firestorm of small companies taking the initiative to make themselves ‘viable and visible’ to buying organizations making the purchases to which I refer.
So the point of this post is to reiterate earlier comments and articles I’ve posted that state very simply ‘Small federal contractors leave too much money on the table!‘ and to provide new information to help raise awareness of where the small business community is literally hemorrhaging federal contract dollars.
Here’s the setting.
Uncle Sam has created a purchasing method that reduces the burden for both Government and Industry, has language in the rulebook (FAR) indicating these purchases are designed in part to provide maximum opportunity for small business concerns, and goes even further by specifying a ‘reservation’ for purchases made this way. That reservation, known as the Rule of Two, guides agencies to set-aside purchases made this way when they anticipate receiving at least two bids from small business concerns who are competitive in terms of market prices, delivery and quality. The ‘Rule of Two’ applies when the amount of the purchase falls within the threshold of $3,000 to $150,000.
Over the last five completed fiscal years, obligations made using these Simplified Acquisition Procedures have increased an average of $1 billion each year while during the same period, overall governmentwide obligations reported to the Federal Procurement Data System (FPDS-NG) decreased by $100 billion. I recently published a piece that described the economic impact of Simplified Acquisitions when they accounted for at least $500,000 reaching the coffers of small businesses. Based on initial awards where a small business received one or more contract actions (excluding modifications) totaling $500K, the results showed 1,232 small businesses reached that mark in FY2010, and 2,036 did so in FY2014. Many more reached $350K, $250K, etc. What would be the impact to your small business if you were to accumulate awards at any of those levels this fiscal year?
That’s the back story, now let me tell you about the money being left on the table.
Simplified Acquisition obligations crested $19 billion in FY2014 and small business concerns saw $11 billion of those dollars according to FPDS-NG. Less than half of that amount was the result of set-asides. In fact, the Government achieved twenty-seven percent in set-asides under these buys. The rest of the $11 billion was the result of competitive (unrestricted) and sole-source awards to small federal contractors. Nearly $2.5 billion of the original nineteen billion in FY14 obligations was awarded to ‘other than small business’ concerns via non-competitive methods, and I’m good with that. Think about it. Someone took the time to prepare a justification for those buys, so for the purpose of this conversation, that works.
This is the part that stinks.
The remaining dollars obligated to mid-tier and large companies during FY14 totaled $5.6 billion dollars. These were competitive dollars according to FPDS-NG that fell into one of the following categories:
- Competed Under Simplified Acquisition Procedures (SAP)
- Competitive Delivery Order
- Full And Open Competition
- Full And Open Competition After Exclusion Of Sources
Most of these obligations show having been ‘Competed Under SAP,’ $5.5 billion to be exact. This means agencies had no expectation of receiving at least two offers from small business concerns. In some instances, they may have reached out to small business concerns directly or posted the requirements on FedBizOpps (nearly $2B) and did not receive the responses needed to justify a set-aside. That would be the fault of small business. But it doesn’t end there. Pretty much every dollar was procured competitively which means small companies could have (and in some cases may have) gone after those opportunities. Heck, small business already captured $6B without the use of set-asides, what’s another $5B?
So let’s look at how nearly six billion dollars was left on the table by small businesses during FY2014.
Let me start by saying less than $500 million of the net obligations were the result of modifications and the standout reasons for modifications included:
- Exercise An Option
- Funding Only Action
- Supplemental Agreement For Work Within Scope
Before deobligations were factored in, these three categories accounted for $735 million. Which means the remaining $5 billion resulted from initial awards, both to indefinite delivery vehicles (IDVs) and to standalone contracts. I’ve highlighted the descriptions and obligations representing standalone or Non-IDV Awards:
So a little over $3 billion of the dollars competitively awarded to large companies did not require a GSA Schedule, BPA, GWAC, IDIQ, etc. No additional upfront investment, no hunting license. Not bad. But when agencies did make awards to established contract vehicles, here’s what it looked like:
When it comes to what agencies were buying, just over $3 billion went to the purchase of Goods while the rest was for a wide range of Services. Here’s what the top fifteen of 1,675 Product and Service Codes looked like:
Truthfully, I scanned a number of these buys to see what agencies were actually purchasing and was somewhat surprised at what I found. Generally, the spread of PSC Codes for purchases to large companies, was very similar to the one’s for purchases from small business concerns. When looking at descriptions of the requirements (when available) I found even more similarities, some seemingly exactly the same product or service being purchased from small and large companies, by the same agencies.
Now, this isn’t an accusation against the agencies whatsoever because I’ve written articles about small companies missing opportunities by not making themselves known to buyers through proactive marketing or by responding to agency market research. This is on us, the small business community.
Using basic market research of open sources such as FPDS-NG, you can find vast amounts of very useful information that can help you identify what was being purchased, by which department, agency, contracting office and in several instances, by which PEO/PMO. You just need to look
How many more billions of dollars is the small business community willing to give away? While there are no layups in government contracting, purchases made this way which are geared to small business and have rules written to that effect, are about as easy as it gets.
If you’re a small federal contractor and you want to know more, look me up at Business Over Breakfast™ in McLean, VA every Wednesday at 7:30am. If you’re not local to the DC/MD/VA area, reach out to your local PTAP and have them reach out to me to facilitate a webinar or in-person presentation on this subject. It’s free an extremely informative.
Just imagine the positive economic impact another five billion or three billion would have on American small business. I’d really like to see that happen and we’re ready to be a resource for education and competitive intelligence.
Tally-Ho and Peace!
Guy Timberlake, The Chief Visionary
“The person who says it cannot be done should not interrupt the person doing it.”