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The Department of Homeland Security's FirstSource contract, worth $3 billion over the next five years, is designed to give small IT solution providers access to a lucrative government opportunity ordinarily reserved for large integrators.
Is FirstSource a level playing field? Not necessarily, say some of the participating small businesses. Of the 11 solution providers on the contract, three are joint ventures between small and large companies.
"Under the FirstSource contract, those large businesses are able to set up a new joint venture in partnership with a small company in order to secure a position on the contract," says Sean Burke, president of Govplace. The Irvine, Calif.-based solution provider is among the small businesses awarded the FirstSource contract. "It completely disrupts the program."
FirstSource was open to solution providers with fewer than 150 employees. Under the Small Business Administration's 8(a) Mentor-Protégé program, a joint venture qualifies as small as long as the protégé firm meets the size requirements. The following are the three joint ventures awarded the FirstSource contract.
• EG Solutions: A joint venture between Alaska-based Eyak Technology (employees: fewer than 150) and Chantilly, Va.-based GTSI (employees: 700; 2006 revenue: $850 million).
• ST Net Apptis: A joint venture between Gaithersburg, Md.-based St Net Inc. (employees: about 20) and Chantilly, Va.-based Apptis (employees: 1,500; 2006 revenue: about $700 million).
• MultimaxArray: A joint venture between Greenbelt, Md.-based Array Information Technology (employees: fewer than 150) and Herndon, Va.-based Multimax (employees: more than 1,000; 2006 revenue: about $300 million). Multimax was acquired by Harris on June 1. Harris reported $3.5 billion in revenue in 2006.
The other eight FirstSource solution providers unsuccessfully protested the presence of all three joint ventures. The SBA determined that none of the joint ventures violated the rules, given that the protégé firms fell within the size requirement.
"Bottom line, allegations were addressed to the Small Business Administration, [and] the companies who filed on this topic lost their case with the SBA--end of the DHS story," says Larry Orluskie, senior spokesperson for DHS.
In the case of EG Solutions, the SBA stated in a memo that "there is no evidence of affiliation between [Eyak] and GTSI outside of the mentor-protégé agreement." This is prior to confirmation in the same memo that GTSI owns a 37 percent interest in Eyak, thanks to a purchase agreement dated Aug. 15, 2002--three months after the SBA approved Eyak's entry into the 8(a) program and two weeks after approval of the mentor-protégé arrangement between the two companies. GTSI declined comment for this story.
Kim Roman, vice president of marketing and communications at Apptis, promptly canceled a scheduled interview with the protégé company ST Net and declined to comment on Apptis' behalf. Representatives from ST Net declined requests to reschedule the interview.
Multimax couldn't be reached for comment.
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