Large companies get larger, smaller firms smaller

Large information technology companies’ share of federal contracting dollars is increasing, and small and midsize IT firms are losing market share, according to a new Input market research report.

The percent of federal IT prime contract dollars going to large companies increased from 50 percent in 2003 to 65 percent in 2005, according to the Input report. The growth in spending among small and midsize businesses slipped by 15 percent during the same period.

“We have seen a dramatic shift in the way the U.S. federal government acquires technology in favor of the GSA Multiple Award Schedule and major task order-based contracts,” said Kevin Plexico, executive vice president for operations at Input.

GSA has flexibility in selecting prime contractors, and the agency's contract data shows a strong preference for larger businesses, Plexico said.

Other federal contract data reflects a more positive trend for smaller businesses as a group. The number of companies participating in the federal market has increased at all levels, according to the Input report. The number of firms earning less than $10 million in spending on prime contracts has increased from 11,000 companies in 2003 to 18,000 in 2005.

Despite small businesses’ declining market share, the number of companies participating in the federal IT market increased by 63 percent, Plexico said.

“The money spent by the federal government is getting spread over a significantly larger number of companies, which demonstrates that the barriers to entering the market have decreased,” he said.

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