Report predicts big opportunities for small contractors

by Heather B. Hayes
for Virginia Business
June 2007

Small government contractors are about to get a bonanza of new work, according to a study conducted by three Washington-area companies. But authors of the report warn that companies must be prepared to handle the demands of being a federal contractor.

“It can’t be business as usual, and you can’t put off making the necessary investments in technology and infrastructure,” says Ron Smith, CFO of Synchris, one of the study’s sponsors, which provides proposal management software.

The other two sponsors are Set-Aside Alert, which publishes a contracting newsletter for small contractors, and epipeline, an online source for federal contracting opportunity research and business intelligence.

Their recent study of emerging federal contracting trends found that the share of “pre-request for proposal” (pre-RFP) contracts set aside for small businesses (including those owned by women, minorities and disabled veterans) jumped from 40 percent in 2006 to 52 percent in 2007. At the same time, the share of opportunities using competitive vehicles open to large and small firms dropped from 65 percent to 55 percent.

The report noted that the shift is largely the result of a backlash against the federal government’s recent reliance on sole-source contracts with large companies in Afghanistan and Iraq and for the Hurricane Katrina cleanup.

With great opportunity, though, comes great responsibility. Smith says many small businesses are being “left in the dust by competitors” by not taking the necessary organizational, financial or personnel steps to win a prime contracting role.

“With these types of contracts, small businesses can grow very, very quickly in terms of billings and revenues,” he says. “We’ve seen companies go from $3 million or $4 million to $10 million to $60 million in a very short period of time. So you’ve got to pay attention to your infrastructure, your resources, your team and the quality of the people you’ve got, and you need to have a plan for how you’re going to staff up quickly.”