I recently made a comment using the analogy of how sausage is made in response to the signing of the 2017 NDAA and the language regarding MDAP subcontracting obligations being counted as set-aside dollars. The small business community missed this one and it will have far-reaching consequences for American small businesses, the communities they support and our Nation as a whole.
This post looks at how FY2016 obligated dollars got to small business concerns based on solicitation type and the award instrument used to help small businesses minimize lost dollars and lost time in government contracting when it comes to identifying prospective customers and opportunities.
– Guy Timberlake, Chief Visionary
Have you ever taken a good look at how contracting dollars flow? I mean a substantive snapshot of how the dollars that could be addressed by your company’s offering are competed, solicited and ultimately obligated via a contract or an order placed against a contract vehicle? This is something The American Small Business Coalition leverages and teaches on a daily basis in programs like our Competitive Intelligence Launch Pad™, Competitive Intelligence Bootcamp™ and others facilitated under our B2G Essentials™ offerings. For the majority of participants, it’s a revealing and strategy-altering experience based on showing them how to understand the context of information they likely see every day.
My hope is this article provides new knowledge to help provide a more clear view of the opportunity landscape in government contracting.
How Dollars Are Obligated: Contract vs. Contract Vehicle
At a high-level, the way obligations move is contrary to common belief. What I mean is, the average person associated with government contracting believes a majority of fiscal obligations occur as orders placed against contract vehicles, and they do not. As of this article, reported obligations for Fiscal Year 2016 are $452B with $224B of that awarded as or against Indefinite Delivery Vehicles or IDVs. The other dollars that represent the majority of FY16 (YTD) fiscal obligations are obligated as awards that are not orders placed against a BOA, BPA, FSS, GWAC or IDC, the current array of established contract vehicles (IDVs) used by federal agencies, boards and commissions.
How do your current and prospective customers buy what you sell, and how do you know?
How Dollars Are Obligated: When Contract Vehicles Are Used
Trying to make a play for the latest agency-wide or government-wide multiple award contract? These are what you see in the headlines constantly and they do represent a big chunk of the spend when it comes to established contract vehicles, but not the most. Of the FY2016 obligations made to established contract vehicles, $26B more of those dollars made it to single-award contract vehicles. Keep in mind that the GSA and VA Schedules and GWACs (like ALLIANT, SEWP, STARS II, etc.) are only multiple-award vehicles. That dynamic shifts when it comes to small business. Over $12B more of the $62B in IDV obligations made to small business were made to multiple-award contract vehicles.
How much do you know about the single-award mechanisms your customers and prospects use to fulfill requirements?
How Dollars Are Obligated: IDV Champion for Small Business is…
Hands down, it’s Indefinite Delivery Contracts (IDC) of the Indefinite Quantity (IQ) variety, better known as IDIQs. They account for 2/3 of all IDV dollars going to small business concerns with $42B reported to FPDS-NG for FY16 YTD. For single-award versus multiple-award, it’s a pretty even split with single-award dollars close to $1B ahead of multiple-award obligations to small business concerns.
On that note, let me divert your attention to the language in the 2017 NDAA that will allow DoD to count first and second tier subcontract dollars the same as dollars where the contracts were awarded to small business. Based on my very conservative estimate of this rule’s impact on small business, if you wipe out all of the FY2016 dollars obligated to small business concerns via BOA, BPA, GWAC and FSS (just over $20B according to FPDS-NG), we would still need to borrow dollars from Indefinite Delivery Contracts (IDDQ, IDIQ and IDR).
How Dollars Are Obligated: Impact of Solicitation Procedures on Small Business
How would a $250,000 contract or task order impact your company today? Would it be a big deal or just another notch? For FY2016, all but $3B of the dollars obligated to small business went to companies capturing at least $250K in contract dollars. This means $95B was split among nearly 19,000 small businesses. Here’s a look at how that played out based on the top 5 Solicitation Procedure types by total fiscal obligations for each solicitation procedure along with the prevailing Award or IDV Type for each. For the record, the Solicitation Procedures are how agencies issue requests for proposal, requests for quotation or invitations for bid, and directly impacts who can (and cannot) see and respond to information requests that can result in an agreement, contract or delivery or task order.
Subject To Multiple Award Fair Opportunity
When agencies placed orders against established multiple-award agreements and contract vehicles during FY2016, $37.8B went to 5,975 small business concerns. This procedure applies when only the companies awarded multiple-award contract vehicles have an opportunity to submit a response.
Award/IDV Impact: Indefinite Delivery Contracts (IDC) account for $20.8B.
When contracting officers want to retain the ability to discuss offeror’s bids with them during the RFP/RFQ process, they leverage these procedures for competitive and non-competitive buys. In FY2016, 6,992 small businesses were obligated $31.5B via this method.
Award/IDV Impact: Indefinite Delivery Contracts (IDC) account for $17B followed by Definitive Contracts* (DC) at $13B.
*’Definitive Contract’ is an FPDS term that refers to reported contracts other than an indefinite delivery vehicle (IDV).
Only One [Responsible] Source
If the Government believes only one or a limited number of offerors can satisfy a particular requirement without causing substantial delays or considerable increased costs, they can turn to ‘other than full and open competition.’ This procedure accounted for $11B in obligations to 3,968 small business concerns in FY2016.
Award/IDV Impact: Definitive Contracts (IDC) account for $6.5B.
Most that know me will recognize this procedure as one of my personal favorites because of the opportunity and impact it creates for the small business community across the board. It is the only acquisition procedure that can boast consistent and substantive increased spending since FY2009, growing from $13B to $21B during a period that saw overall reported obligations drop by $100B. During FY2016, when small businesses won at least $250K this way, 6,418 of them shared $9.3B in agency obligations. More small businesses positively impacted with less than one-third of the spend in ‘Multiple Award Fair Opportunity’ and a lower cost of doing business for both vendors and agencies.
Award/IDV Impact: Purchase Orders (PO) account for $5.2B.
Received an ‘Invitation for Bid’ lately? If so, you participated in the acquisition procedure that invokes no discussions with offerors and public bid openings, essentially the opposite of the tactics leveraged for Negotiated RFPs and RFQs. $3.2B in agency obligations made it to 906 small businesses under this procedure during FY2016.
Award/IDV Impact: Definitive Contracts (DC) account for $2.9B.
Additionally, 957 small business concerns saw $2.3B come their way when agencies leveraged the other solicitation procedures spelled out in FPDS-NG to include:
- Basic Research
- Two Step
- Architect-Engineer FAR 6.102, and;
- Alternative Sources
Award/IDV Impact: Definitive Contracts (DC) account for $1.3B.
Which Solicitation Procedure has the greatest impact on the goods and/or services your company provides? Current and prospective customers?
How Dollars Are Obligated: What It All Means
If you are not intimately familiar with how agencies solicit and award contracts as it relates to the agencies you’re pursuing and the products and services you are selling, you are very likely working too hard and spending too much time and money on your efforts. It starts with being able to identify the specific contracting and funding organizations that matter to you. Gleaning insights from the efficient capture and cultivating of data and information can shorten the course to effective decision-making and have positive near and long-term impacts on your top and bottom lines as a contractor and subcontractor.
“The person who says it cannot be done should not interrupt the person doing it.”