Small Partners, Big Business

The U.S. Army Corps of Engineers, comprised of military and civilian engineers, scientists and other specialists, is also considering combining more than 250 contracts into one omnibus contract, which one large business will administer. This trend follows on the heels of the government's two previous multibillion-dollar awards to single systems integrators. The U.S. Navy awarded its multibillion-dollar Navy Marine Corps Internet to EDS, and the Transportation Security Administration awarded Unisys its billion-dollar Information Technology Managed Services contract.

While the government can gain efficiencies by consolidating contract vehicles, it significantly changes the playing field for small businesses, which, of course, are simply not poised to compete as prime contractors for such large programs. However, the government still maintains aggressive goals to utilize small businesses. Some federal organizations, in fact, have small-business utilization goals exceeding one-third of their annual spending. With today's contract consolidation efforts, the government must increasingly rely on its large-business prime contractors to engage small businesses and meet utilization goals. Now, new partnerships are being forged like never before--with some large businesses enjoying benefits beyond what they've ever contemplated.

So what have these large businesses figured out that others have not? Four important facts--all of which can significantly impact the bottom line.

• First, it is easier to win new government contracts if large businesses have successfully met small-business goals in the past, because the government is giving more weight to achieving those goals when evaluating proposals.
• Second, the government factors small-business-subcontracting goal attainment into its award fees for certain types of contracts. For example, the government has implemented programs, such as the Buy Indian Act, which can provide prime contractors a 5 percent rebate for every dollar subcontracted to a qualified tribal or Alaska-native-owned firm under eligible Department of Defense (DoD) contracts. The DoD is the only government agency that has allocated funds to this Act so far. On the flip side, if goals aren't met, full award fees may be withheld.
• Third, the government still manages to set aside a large number of procurements for small businesses, even given today's contract-consolidation efforts. Even though small businesses must use their own personnel to perform certain percentages of work under these "set-asides," they often rely on support from large-business partners for what remains.
• Fourth, many large businesses have discovered that their small-business partners, which typically have relatively few layers of management and simple organizational structures, can make important decisions rapidly and react to changes and problems quickly and efficiently. Large businesses are increasingly finding that they can accomplish their objectives through their small-business subcontractors more easily than through internal resources from large, cross-functional departments.

The overriding challenge is finding the right small businesses with which to partner. One or two, even for a single federal contract, often isn't enough given the government's diversity of goals for small, small disadvantaged, 8(a)-certified, Historically Underutilized Business Zone-based, women-owned, veteran, disabled-veteran-owned and other classifications of small businesses. Also, if large businesses need to subcontract 40 percent of a billion-dollar contract to small business, for example, they will need a cadre of them. A few large businesses have discovered an innovative solution to the challenges of identifying, qualifying and managing many small-business subcontractors under their large federal programs: Employ a qualified small business to administer all the small-business subcontracting.

Jim Dunn is COO for Eyak Technology (EyakTek), an Alaska-based government service provider and Alaska Native village Corp.