IT contract bundling pinches out small firms

Investment banking firm Boles Knop & Co. LLC this month released a report that confirms what many industry observers have suspected - that federal spending on information technology is increasing slowly, but less of that money is going to small business.

The bundling of previous IT contracts into new, larger contracts within agencies has made it difficult for small firms to compete with large firms, according to Thomas Meagher, author of the report, which covered the second quarter of calendar 1999. "I think the small-business community is getting creamed out there," he said.

The Boles Knop study, citing figures from McLean, Va.-based marketing and research firm Federal Sources Inc., reports IT spending within the federal government moving upward to an expected $54.5 billion in fiscal 2000, vs. $53.2 billion in the current year. The figures include estimated spending by intelligence, civilian and defense agencies.

Judith Roussel, associate administrator for government contracting at the Small Business Administration, agreed that small businesses are feeling the negative effects from bundling. "The trend I think is moving toward larger contracts, and that is overall as well as in IT," she said. "Certainly from our interaction with small businesses, there is much concern on their part." SBA works with agencies to craft "innovative strategies" to include small business when they bundle contracts, she said.

Small-business owner Nasser Bassir, president of Planned Systems International Inc., said competition is tight for small businesses. "Although there have been a number of high-visibility small-business awards recently, today's IDIQ GWAC [indefinite-delivery, governmentwide acquisition contract] environment continues to hurt small, minority [and women-owned] businesses," he said. "The mega-vehicles require significant marketing force to make anything out of them, and there are few businesses - small businesses and minority businesses - that have that kind of capability. Also, with some large task orders being offered to a chosen few under these vehicles, it creates an almost overwhelming barrier for entry into a new agency, particularly for small companies."

For larger businesses, however, opportunities abound - especially on the General Services Administration schedule, which in recent years has expanded to include IT services, not just hardware and software. Meagher said many companies are seeing a significant amount of business coming through the sale of services on the schedule.

Roy Chisholm, director of GSA's IT Acquisition Center, said that so far this fiscal year, $3.3 billion in services has been bought off of the schedule, compared with a total of $1 billion last year.

But a jolt in GSA sales for some companies does not necessarily mean that there are more dollars to be had. "The agencies don't have any more money than they had before. It's just that people go where it's easier," said Ron Knecht, senior vice president for business development at Science Applications International Corp.

Meagher said the GSA schedule may present a problem for some companies, in that agencies might not follow competitve-search guidelines. "I think there's some feeling that there's some abuse going on in terms of the GSA schedule," he said.

But Alan Jackson, senior vice president at BTG Inc., said competition abounds with the GSA schedule. "I never got a job that I didn't compete for, and I'm talking about a sole-source job," he said.

GSA's Chisholm said the agency publishes guidelines to encourage the proper use of the GSA schedule. "We can put out regulations. We can have guidelines out there," he said. "Somebody may abuse it. You can't regulate honesty, integrity."

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