Looking Ahead: Trends in Small Business Contracting Three leading industry-watchers — epipeline, Synchris and Set-Aside Alert — joined forces to analyze the major trends in the small business federal market. With the controversy regarding Katrina and Iraq contracts going to large businesses via sole-source awards, we found some good news on the small business front. The findings were presented in this white paper by Tom Johnson, publisher of Set-Aside Alert; Tim Walsh, CEO of epipeline; and Ron Smith, CFO of Synchris. Tim Walsh and Federal Research Manager Kathleen Sievers of epipeline spent many hours reviewing their databases of federal opportunities and contract awards. Their effort focused on three categories of contracts: information technology, operations & maintenance (O&M), and architect/engineering/construction/environmental (AEC). Some very interesting results evolved: “We found that the share of pre-request for proposal (pre-RFP) contracting opportunities set-aside for small businesses in these three market segments jumped to 52% in 2007, up from 40% in 2002, while the share of opportunities using full and open competition dropped to 55%, from 65%, over the same period, based on the researched opportunities tracked by epipeline. “While O&M federal contracting for small business is up sharply, full and open competitions still hold on to the biggest part of the federal IT contracts. However, the overall shift is clear in the data, and it favors small-business contractors.” “So in these three key areas, the small-business piece of the action in federal contracting rose to more than half of the total while those available to large contractors fell by 10 percentage points.” (The total percentages here add up to more than 100 since some contracts include provisions for both large and small contractors.) However, just because these opportunities are out there does not mean that everyone begins the foot race at the same starting line. The smartest small businesses know that they only really get a shot at big things in the critical “pre-RFP” timeframe. “Just because there is a bigger piece of the pie out there for small businesses does not relieve us of the duty to work our tails off to get it,” Walsh said. Set-Aside Alert, epipeline and Synchris identified five major trends affecting the federal market available to small businesses: 1. The decline of sole-source contracting and a resulting focus on heightened competition will mean more opportunities for small business. Federal agencies are being forced to reduce sole sourcing and to put more actions out to bid, where small business can find them. While some of this may end up flowing to limited competition situations – such as 8(a) contractors and HUBZones — the overall effect will be a hefty increase in opportunities for small businesses. 2. In a reversal of prior trends, big federal contracts are being unbundled. For example, NASA and other agencies have embarked on a course of breaking up some of the mega-contracts, creating more manageable opportunities for small business teams. 3. Veteran-owned businesses are getting moved to the front of the line. In addition to service-disabled veteran-owned businesses, federal agencies and prime contractors are deliberately seeking out veteran-owned small businesses. It’s another means of differentiating your company from the pack while helping federal agencies meet new socio-economic goals. 4. More woman-owned and minority-owned firms are being sought out as partners by big contractors. Increased small business goals at federal agencies are being pushed down on big prime contractors, who are becoming surrogates for the government’s shrinking acquisition workforce. For small businesses, this means a greater need to find not only the new opportunities but also the right contacts within the prime contractors that will be outsourcing the work. 5. Coming changes in size standards will impact the playing field for small contractors. Changes in the definition of “small contractor” will allow fast-growing federal IT contractors to stay in the “small” category longer. This means they will be able to continue to compete for the small business set-asides for another day. So what do these five trends mean? These trends outline both growing opportunities and competitive pressures facing small business contractors working for Uncle Sam. The good news is that small businesses are now in advantageous positions on significant portions of the federal contracting world. However, the bad news is that the competition is tougher than ever – including competition among their peers. Small business owners need tools to identify the small business liaison offices and business development officials in the primes, and tools to manage teaming partners and subs when serving as a prime contractor. Tools to research opportunities, find partners, narrow the competition, promote strengths and qualifications, and produce better proposals are essential in order to support and exploit small business status. “We are seeing some small businesses left in the dust by competitors that are taking advantage of software and other tools on major IDIQ and governmentwide acquisition contracts to manage task order responses, subcontractors and past performance data,” said Smith, CFO of Synchris. “There’s no room left for ‘amateur hour’ operations.”