Almost 18 years after Congress mandated that government channel contracts to small businesses, some agencies still struggle with finding partners with the skill set and operational expertise to handle large information technology projects.
The Small Business Act mandate stipulates that small businesses have the maximum practical opportunity to participate in providing goods and services to the government. Yet small businesses and agencies often find it difficult to establish that initial relationship.
A General Services Administration tutorial for small businesses highlights one problem: "Your business must be well established with funding and delivery solutions in place before you approach the government."
That's not easy, especially for the startups that comprise a large part of the market. The upshot: The mandate has generated a matrix of creative partnerships between small and large IT providers that benefits all the parties involved.
As one an example, CDW Government Inc. started the Small Business Consortium (SB Consortium) in 2003 by seeking partnerships with woman-, minority- and veteran-owned companies, certified small and disadvantaged businesses, and companies located in federal HUBZones. (A HUBZone is an area designated by the Small Business Administration as an "historically underutilized business zone.")
Through a competitive request for proposals, CDWÂG has selected 20 small businesses to participate in the consortium. Each competes for federal contracts by providing its own niche services and products, while leveraging CDWÂG's electronic-commerce, service, product and distribution capabilities.
Take Betis Group of Arlington, Va., for example. The 8(a) HUBZone information security, networking and enterprise management service provider found it difficult to get high-service levels from large technology distributors.
"While there are a great many small firms, small firms by their nature have limits. It is a challenge for agencies to find reliable, stable companies that are prepared to do business with the federal government," says HernÃ¡n CortÃ©s, president of Betis Group. "Thanks to CDWÂG, we are able to provide agencies the flexibility to purchase from a small business with the support of a Fortune 500 company."
Before partnering with CDWÂG in 2000 and then becoming a charter member of the consortium in 2003, Betis Group had 15 employees after five years in business. Due to consortium contracts, CortÃ©s has grown Betis Group to 57 employees after landing federal contracts with CDWÂG's backing. One recent project in San Antonio with the Defense Department prompted Betis Group to open an office there.
"When an agency makes a large buy, that introduces a warehousing challenge," he says. "Holding large amounts of product in a warehouse is costly. In several contracts with DOD, CDWÂG supplies the products while we provide the integration and support. Time and labor between the supplier and the end user are reduced. It's a winning situation for the agency as well as our firm."
CortÃ©s also appreciates the mentoring—in areas such as standards processes, quality assurance and best practices—that CDWÂG has offered to support Betis' government sales. "Without the Small Business Consortium, we wouldn't have had the exposure or skills that have led to our successes."
Another example of the SB Consortium in action comes from T3 in Centreville, Va. The security and networking specialist, a certified disadvantaged small business, generates more than $13 million annually from government sales.
"Federal agencies and prime contractors appreciate CDWÂG's backing, making T3 more likely to win contracts than if we were bidding on our own," says Wendell Norton, vice president of sales and marketing for T3. "Agencies get the small-business credit from working with T3, but they also get CDWÂG's guarantee of delivery."
Agencies benefit from the innovation provided by small businesses and the positive impact on their preference goals.
Bringing small businesses into the fold gives the larger companies niche expertise and a competitive edge when competing for contracts. Association with larger, more stable companies enhances the small businesses' credibility, and they gain national exposure. And the country benefits when such partnerships help small businesses garner a fair share of federal spending.
"If a six-person small business wants to bid on a $10 million federal contract, from an agency's perspective they are an unlikely choice," says Robert Collins, president of Collins Consulting, a small business technology provider and charter member of CDWÂG's Small Business Consortium. "If you team that small business with a Fortune 500 company like CDWÂG, everyone wins because you've improved the probability of success."
Few would disagree with the program's value.
To help small businesses prosper, the Small Business Administration negotiates annual procurement preference goals with each agency and reviews each agency's results.
Governmentwide, the target is 23 percent of all prime contracts to small business, with smaller percentages of prime and subcontracts set aside by type of small business: disadvantaged, woman-owned, HUBZone and service-disabled veteran-owned.
In addition, when the government awards a prime contract worth more than $500,000 ($1 million in construction) to a large business, the prime must provide a subcontracting plan that includes small business goals.
Though the program has been largely successful, agencies aren't always able to meet their goals. In addition to the challenges of getting acquainted with federal agencies, small businesses must also pass federal audit requirements.
"Unless you understand the government's needs in areas such as financial accountability, legal requirements and even security clearances, getting government business is going to be difficult at best," says Mark Amtower, president of Amtower & Company. The Highland, Md., company is a marketing consultant to government contractors.
Agency personnel can face information overload when faced with the large number of small businesses, making it difficult to locate the right company for the job. Even when a small business appears qualified, there can be questions about its financial stability and staying power.
It is also challenging for agencies to find sufficient numbers of qualified companies in specific categories such as disadvantaged businesses, woman-owned businesses, HUBZone small businesses and service-disabled veteran-owned small businesses.
"We provide a logistics engine to our consortium partners," says Kevin Adams, vice president of federal contracts for CDWÂG, who spearheaded the Small Business Consortium for CDWÂG two years ago. "Knowing that a $5.7 billion partner is involved and providing best-practice training and distribution takes a lot of the risk out of handing a large-scale project over to a small service provider."
Partnerships involving the CDWÂG Small Business Consortium aren't limited to federal agencies. Its members add value to many relationships, such as a recent partner agreement involving Collins Consulting, CDWÂG and $7.2 billion federal integrator Science Applications International Corp. of San Diego.
"We are excited to enter into this leading-edge agreement with SAIC," Adams adds. "Integrating the Small Business Consortium into this agreement is a win for everyone. SAIC benefits from working with small businesses, and the small business receives maximum exposure. And CDWÂG is able to satisfy the needs of both its customers and partners."
Different units within SAIC sell approximately $30 million annually in computer products to fulfill government contracts. To reduce costs and streamline operations, the company wanted to source all such products from a single distributor. CDWÂG proposed that SAIC utilize the consortium. SAIC put out a request for proposals to the consortium members and selected Collins.
SAIC and the agencies it deals with receive low aggregate prices backed by CDWÂG's e-commerce, service and distribution capabilities; SAIC and the agencies also receive coveted small-business credits.
"It is SAIC's procurement practice to implement and, wherever possible, to exceed the intent of the government's small-business objectives," says Kristine Petka, assistant vice president and director of strategic spending at SAIC. "We are eager to help small businesses grow, and this contract allows us to integrate them into the process and provide the best prices to our customers at the same time."
SAIC plans to add additional SB Consortium members to the contract in the near future, Petka adds.
Collins says he expects the new agreement will boost his company's revenue by 500 percent.
"The agreement gives us the ability to expand our IT services, work with federal agencies and gain experience working with major contractors—both SAIC and CDWÂG," he says. "At the same time, it allows SAIC to work toward its goals for contracting with service-disabled veteran-owned small businesses—with a high probability of success."