8(a) small businesses take a tumble

Richard Rea, president of the telecommunications and information technology company R Rea, was one of 197 small-business owners whose companies the General Services Administration delisted in June from a governmentwide acquisition contract for minority-owned small businesses. Like the 196 other companies, R Rea did not reach a mandatory $100,000 sales benchmark during the contract’s three-year base period. Despite extensive marketing efforts by the companies and GSA, which administers the contract, agencies were slow to use the Streamlined Technology Acquisition Resources for Services (STARS) GWAC, leaving many small businesses below the sales threshold and soon without a spot on the contract. Rea chalked up his loss to agencies’ habit of seeking out larger companies for IT and telecom work and using the same contracts rather than branching out, even if it means getting a better deal. “That’s a mystery to me,” Rea said. Under GSA’s STARS contract, agencies can buy software and services from 8(a) minority-owned small businesses. Agencies spent nearly $800 million on 1,300 task orders during the first three years of the contract. Despite all that spending, GSA did not renew the contract options for 197 companies last month because they did not meet the contract’s sales threshold, said Mary Parks, GSA’s director of small-business GWACs. A contract clause states that if companies fail to reach $100,000 in sales during the contract’s three base years, GSA will not exercise the option years, Parks said. “The contract itself was developed to allow firms to self-market and basically eat what they kill,” Parks said. Although 172 of the 197 companies dropped from the contract reported no sales, those that did had average sales of $49,097 during the first three years of the contract.  Those sales ranged from $3,853 to $98,935, Parks said. The delisting attracted the attention of the Small Business Administration. An SBA spokesperson said the agency would like to review the matter with GSA to determine whether a pattern exists. “Small businesses spend a considerable amount of time, money and energy to obtain GWAC contracts, and we want to be sure they are being fairly utilized,” the spokesperson said. Parks and several contractors said the biggest challenges for small businesses come from agencies simply not using the contract and the difficulty of breaking into the federal market. Bryan Crittenton’s technology company, 6K Systems, is still on the STARS contract because its major customer, the Treasury Department, started using the contract just in time. “What saved us was when Treasury jumped on board.” If a small business’ primary customer “wasn’t playing on STARS, they were kind of hosed,” he added. Despite disappointing returns for some, GSA’s marketing efforts on behalf of STARS small businesses were extensive, Parks said. GSA contacted more than 650 contracting officers and had 17 departments and 19 other agencies as STARS customers. GSA also helped the contract holders with their marketing efforts. GSA assisted with training and ordering information and followed up on leads, Parks said. However, companies that do business with the federal government say the time lag between following up on a lead and receiving an order is often one to two years, leaving companies with only a short time to reach the sales benchmark. Parks said she checked with GSA’s legal counsel to see if the agency could avoid dropping the small businesses from the STARS contract, but the legal office said that would be tantamount to a breach of contract.