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$5 Billion to 20,000 American Small Businesses

Here’s what I would like to see.

That the five billion dollars left on the table for large companies during FY2014 will never happen again and for that same bucket of money to be captured by American owned and operated small federal contractors in FY2015. In fact, I’d like to see 20,000 American small businesses each get $250K of that bucket. Wouldn’t that be awesome? Think of the overall economic impact on small business, our Nation and our communities.

It could happen.

But wait! Why are you sitting there waiting for someone else to lead the charge when this is your fight? I’m talking to you, those small businesses pursuing federal contracts who are literally standing by while someone eats your lunch. Too many dollars were left on the table for ‘other than small drill-instructorbusinesses’ to snatch up and you not showing up for billions in viable opportunities is part of the reason.

Needless to say, I’m a little ticked.

Congress and the White House are still looking for ways to help small federal contractors through overly-complicated and ineffective legislation and policies and most of us have grown accustomed to the annoying buzz of recurring lip service. The point is, they’re not the cavalry and they’re not coming to anyone’s rescue, especially yours.

But this isn’t a political post, rather, I hope the intended audience sees it as a roadmap to limit future lost revenues. I hope what I share here ignites a 28907678_l money on the tablefirestorm of small companies taking the initiative to make themselves ‘viable and visible‘ to contracting organizations across government.

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 6911798_ml low hanging fruitway 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 and $250,000 reaching the coffers of small businesses. Based on 16217555_ml growthinitial 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. What would be the impact to your small business if you were to receive $250K or $500K in awards this fiscal year just through a method that requires a lower cost of doing business?

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. iStock_000015943882Medium stinksThese 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:

2015-04-02_22-04-40So 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:

2015-04-02_22-08-53Blanket Purchase Agreements were the way to go! A quick search in FPDS-NG would tell you every company, every issuing agency (of the contract vehicle) and more.

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:

2015-04-02_22-17-50Truthfully, 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 13677937_ml market researchcompanies 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 17266302_l money garbage trashsmall 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 and 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.

Did I mention the House has included language in their version of the 2016 NDAA to increase the Simplified Acquisition Threshold to $500K? This means the proverbial bucket could jump to as much as $70 billion dollars being obligated under a purchasing method that prefers small federal contractors.

Tally-Ho and Peace!

Guy Timberlake, The Chief Visionary
http://www.theasbc.org/visionary

“The person who says it cannot be done should not interrupt the person doing it.”

About Editor-in-Chief Visionary

Go-To-Guy Timberlake is the Editor-in-Chief Visionary of GovConChannel and oversees the creation and curation of relevant and timely 'News And Information That Matters To Small Government Contractors.'

Discussion

4 thoughts on “$5 Billion to 20,000 American Small Businesses

  1. Interesting…as someone fairly new to the government bidding process, you lost me in the weeds a bit on the numbers but the “Role of Two” caught my interest. Thank you for the info. Most of our government contracts are on the state and local level, however we do have a few on a military base and this has given my food for thought.

    Like

    Posted by Erin Twitty | June 16, 2015, 15:24

Trackbacks/Pingbacks

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