Business for 8(a) firms continues to dwindle
Procurement reform has made it easier than ever for federal agencies to purchase information technology. That's good news for feds, but not necessarily so for vendors in the Small Business Administration's 8(a) program.
The development of fast, easy acquisitions has taken its toll on the small, disadvantaged business development program, said officials from companies on Federal Computer Week's Top 10 8(a) list for fiscal 2000.
"The 8(a) program has lost a lot of its value to an agency," said Joe Koenig, corporate vice president and general manager of World Wide Technology Inc., which topped the list for the second consecutive year. "We have definitely seen a major downturn in 8(a) contracts in the last few years."
Clearly, new contracting options that have sprung up in the past 10 years have dwarfed the 8(a) program, said Gary Shumaker, chief operating officer and executive vice president of Multimax Inc.
"Back in 1991, when Multimax entered the 8(a) program, about the only option a federal government agency had if it wanted to get a contractor to support it was the 8(a) program," Shumaker wrote in an e-mail message to FCW. "Since then, the growth of availability of precompeted [governmentwide acquisition contracts] and the [General Services Administration] schedule has provided other alternatives that have eroded the value of the 8(a) status. There is still demand for 8(a) services because agencies have socioeconomic goals to meet, but the erosion is decidedly there."
"If somebody asked me if I wanted to be an 8(a) eight years ago or now, I'd say eight years ago," said Koenig, whose company joined the program in 1992 and graduated in February. At the time World Wide Technology joined, agencies looking for quick sole-sourced work mainly had only 8(a) firms to turn to, he said.
With all the new options available today, things have changed. It's much harder for a young, developing firm to break into an agency and build working relationships without the 8(a) program commanding as much attention as it used to, he said.
However, "there are still some advantages [to being in the program], just not as many as there used to be," Koenig said. "It just takes hard work" to make participation pay off.
Multimax, which graduated from the program in November 2000, has pursued some alternative contracting opportunities. The company is on the GSA schedule and holds contracts through the agency's Seat Management and Federal Acquisition Services for Technology programs, as well as the Commerce Department's Commerce Information Technology Solutions (Commits) program and others. In addition, Multimax performs work in the commercial and state and local markets, outside the 8(a) program's scope.
The idea is to not be dependent on 8(a) work alone for survival, Shumaker said. In addition, on 8(a) contracts Multimax does hold, "we think we have a valid approach that will carry that work forward for at least another five years beyond the current contract term."
Rodney Hunt, president and chief executive officer of RS Information Systems Inc., said a number of contracting officials, including those with Commits, are negotiating with SBA to enable agencies to get 8(a) credit when work on those contracts is funneled to participating firms.
"I think the SBA is recognizing that the dollars that have previously been set aside for 8(a) contracts are dwindling," Hunt said.
Moving Beyond 8(a)
Koenig agreed that performing useful 8(a) work is critical for businesses to successfully grow beyond the program. No longer can company officials expect to receive work simply because of a firm's 8(a) status.
"They have got to have a capability that meets the expectations of the agency," he said. "There has to be a value that the 8(a) is portraying to the agency."
Darryl Hairston, deputy associate deputy administrator for government contracting and business development at SBA, echoed the need for 8(a) firms to broaden their horizons early.
"They should look at the program for what it is," he said. "The 8(a) program is just a tool. It's an opportunity to level the playing field. When you go into this program, there's no guarantee you're going to get a contract."
When World Wide Technology joined the program, the company earned about $8 million in revenue annually; by 2000, revenue had reached $810 million. Early on, the company poured much of its earnings back into creating opportunities beyond the 8(a) program, including commercial pursuits and government blanket purchase agreements, Koenig said. That's something other companies may want to emulate, he added.
Firms should also seek out specialty work that could arise from large prime contracts, such as the $6.9 billion Navy Marine Corps Intranet award to Electronic Data Systems Corp., Koenig said.
"There are always little niches that need to be filled," he said. "8(a)s need to take advantage of these contracts and do their homework well before they're awarded."
Although the number of definitive contract actions has decreased by about 50 percent over the past several years, the federal government as a whole fell just shy of meeting its small-business contracting goal of 23 percent last year, Hairston said.
That's impressive, given the "reduced pool of com.panies receiving contracts," said Della Ford, SBA's associate administrator for business development, adding that IT products and services still capture a significant portion of 8(a) dollars.
Although agency officials' desire to buy the latest technology has subsided, the "services end of things has stayed steady, and that's good business," Hunt said.
"In the Washington area especially, government IT business is where it's at," he said.
It's just that getting that business takes a little more effort these days, Koenig said. "I think 8(a) [companies] have their work cut out for them, just like any business does," he said. "You have to work hard and prove yourself and show the commitment you have."
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