Hey, small business, ready to leave the 8(a) world?

To survive graduation, small businesses need to prepare for tougher competition

Kathy Carrier’s office overlooks the Eagle Marsh Woods, a 41-acre nature preserve in Fort Wayne, Ind. The woods are home to all sorts of birds and animals, such as the black-crowned night heron and blue-spotted salamander.

But there’s another preserve that Carrier, president and CEO of Briljent LLC, and other small-business executives like her are overlooking. It’s home to ferocious other-than-small businesses and corporations. Her company is ranked No. 15 on Washington Technology's 2010 list of the top 25 8(a) small businesses. The list ranks the most successful 8(a) small businesses according to their overall government contracts.

“We’re going into the lion’s den,” said Paresh Ghelani, CEO of 2020 Company LLC, ranked No. 10 on the list. “And I would be lying if I said it doesn’t make me nervous.”

Briljent and 2020 Company, both professional services contractors, are graduating from the Small Business Administration’s 8(a) Business Development Program within a year. From there, they head from the protected world of small-business set-aside contracts into the wild world of full-time, full-and-open competitions with other companies, including the biggest government contractors.

While in the 8(a) program, they’ve done all they could to prepare for their launch into the full-and-open world. They have set up strong business infrastructures, such as accounting systems that meet government standards and company ethics rules, and they’ve received numerous certifications to meet federal regulations. Further, they’ve hired employees who know the ropes of the federal procurement system, and they worked to develop relationships throughout the contracting community.

“We spent so much time and money, I was hell-bent on getting a contract,” Carrier said. And the Centers for Medicare and Medicaid Services awarded Briljent its first contract, which was worth $139 million.

SBA’s 8(a) program helps socially and economically disadvantaged small businesses gain access to federal contracts. To participate, firms must be at least 51 percent owned and controlled by someone who meets the criteria of being disadvantaged. The firms must also qualify as small businesses. Once certified, 8(a) firms are eligible to receive sole-source and set-aside contracts of various sizes for as long as nine years.

To succeed in the program, company executives had to do much more than get a contract. They had to look into the heart of their firms. Executives repeatedly emphasized that companies must live by a certain creed to prepare for what’s ahead for growing small companies.

A small business cannot think of itself as small, experts say. Instead, its leadership needs to present the company as what it intends to become next: a successful, midtier business.

For instance, a company needs to be flexible like only small ones can be but move forward with a different frame of mind.

“You’ve got to be nimble like you’re small but act like you’re big,” Ghelani said.

Leading firms also said 8(a) companies should not live on 8(a) set-asides alone. Companies must stretch beyond SBA’s program before they even leave the program. They must prove to themselves and the agencies and prime contractors that they will be dealing with that they can survive in the lion’s den.

However, many 8(a) companies see dollar signs and contracts galore because they’re in the program, experts say. But that thinking will be their downfall. Businesses need to work hard to get contracts, even if they’re competing for contracts that are set aside only for small businesses.

Consequently, some companies give up when they’re hit with the reality of how much work goes into winning a contract, or they simply take in no extra business, many executives say.

“It’s not welfare; you’ve got to work,” said Pete Von Jess, owner and CEO of USfalcon Inc., a national security company, ranked No. 3 on this year's list.

To help with the work, companies ask employees to canvass the community, develop partnerships and relationships, and learn about that marketplace. Business development is at the core of earning contracts. Companies need to play all sides by talking to people inside agencies that are potential customers. And they should also scout prime contractors to find companies that are in need of particular services.

While building potential business relationships, a small business needs to find its niche.

When Ghelani was developing those partnerships and seeking opportunities, “we simply said we can add value,” he said.

The program does its part by attempting to match small businesses with big companies that can help them survive in the bigger and tougher contracting world.

“It’s a marriage, but it’s a marriage that is not going to last forever,” said Von Jess, a retired Army colonel.

While reaching out to mentors, small businesses should not forget about their own. Businesses can join with other small businesses in joint ventures and other teaming arrangements to get larger contracts, such as the National Institutes of Health’s Chief Information Officer Solutions and Partners 3 governmentwide acquisition contract. The indefinite-delivery, indefinite-quantity IT GWAC will have a set-aside for small businesses.

Jess put the canvassing into perspective.

Developing business doesn’t mean simply going out to lunch with a few clients, he said. “It means swapping invoices.”

With their relationships, new companies should tap into their customers' and partners’ knowledge and experience to learn more about the complexities of the procurement world and its many continual legislative and regulatory changes.

“A major roadblock for us is our own ignorance,” Carrier said. “We didn’t know what we didn’t know.”

In the past two years, Congress and the Obama administration have changed many parts of small-business contracting. A new law, signed in September, might allay concerns that prime contractors won't stick to their subcontracting plans and send business to their small partners.

Some executives have a less optimistic view on those changes. First, the changes are not likely to concern small businesses for several years. They said the regulatory process is slow. Second, some experts say any oversight changes largely depend on how well and tenaciously federal officials enforce the programs and regulations.

As successful small businesses leave the program, they are moving into a tough world that is already feeling pressure on both sides. Executives at midtier companies have said they are stuck between small businesses and big corporations, two strong and growing forces in the marketplace.

But leading 8(a) companies are striding proudly into the middle. One of the Top 25 8(a) companies, which graduated from the program in March, turned down an interview request because, as a spokesman said, it didn’t want to be seen as a small business any longer. It had instead turned its attention to the issues that midtier companies are dealing with and was done with the past.

Despite competition and other pressures, many small-business owners are not afraid to go to the next level.

Carrier’s Briljent is prepared to leave the small-business nature preserve for a harsher world.

“We’ve had significant federal work,” she said. “The program worked.”

Read the story: Washington Technology - Hey, small business, ready to leave the 8(a) world?

GSA acquisition team gets down to business

Steve Kempf wants FAS to be the No. 1 brand in acquisition

Some agency leaders can inspire employees with a vision of the future and motivate them to work hard to achieve it. Those leaders enter as if they rode in on a white stallion.

Other leaders arrive on a workhorse. They aren’t hailed with cheers or thunderous applause. Instead, they make people realize that it’s time to get down to business.

Steve Kempf has been commissioner of the General Services Administration’s Federal Acquisition Service since July, and he arrived leading a workhorse. In an interview before taking on that role, Kempf said his strategy “will largely be in the context of this administration, GSA’s current thinking and then finally where FAS wants to take the [Multiple Award] Schedules program.”

Kempf gave his first speech as commissioner Nov. 2 at the Coalition for Government Procurement’s annual Fall Conference. The gathering lacked an atmosphere of excitement or lavish praise for Kempf.

“He’s not making a lot of waves, and there are no big steps,” said John Howell, a partner at the Sullivan and Worcester law firm, after the speech.

It seems that the leaders on white stallions are already here and have cast their grand visions. Kempf specifically referenced Obama administration officials “who see GSA as an asset” and GSA Administrator Martha Johnson. Johnson has enthused GSA employees since 2009 with her vision of customer intimacy, innovation and operational excellence.

Kempf’s vision is simple, and it’s about work. “It’s very important for us to meet our obligations and our commitments” to make FAS the No. 1 brand, he said.

He said that in the next decade, FAS will become agencies’ first choice when they need to make a purchase because FAS will offer easy-to-use tools, fast service and a wealth of options.

Kempf is moving ahead on many fronts by taking the infrastructure that was already in place and making it work. He is launching new Web-based tools, including eOffer/eMod, which allows companies to electronically submit new offers and requested modifications to their schedule contracts. Early in 2011, GSA officials plan to enable government customers to manage their contracts online with such tools.

Kempf also said he recognizes the growing importance of data in this era of transparency. He said FAS customers need to have easy access to data about sales and pricing so they can see whether they’re getting the best deal for their money. And he plans to get that information for them.

A Knack for Getting Things Done

Roger Waldron, new president of the Coalition for Government Procurement and a retired GSA official, said Kempf is working on projects that started during Waldron’s tenure at the agency.

“He’s carrying them to fruition,” Waldron said, adding that the projects are important building blocks.

Although Kempf is not making waves, Howell and others are quick to say he was a good choice for FAS commissioner.

A GSA employee who attended the conference said Kempf knows FAS well. He joined GSA in 1992 as a marketing coordinator at the Office of Technology Assistance and has since held leadership positions at the Federal Systems Integration and Management Center, the Office of Integrated Technology Services and FAS.

Kempf knows FAS' challenges because he has been on the front lines for years and has worked on the operational and strategic sides, said the employee, who spoke on condition of anonymity.

The employee added that Kempf couples experience with research. Kempf marshals his resources well and can often point employees to research that is relevant to their particular projects.

Kempf’s success as FAS commissioner will likely center on collecting more data about pricing and transparency. He will also be a leader in the emerging world of green procurement, the employee said.

Furthermore, Kempf is down to earth and doesn’t think of himself as above everyone else. “He’s not in an ivory tower or on a high horse,” the employee said.

Read the story: FCW.com - GSA acquisition team gets down to business

DOD drives deeper wedge between feds and contractors

Defense contractors worry about maintaining the delicate balance of the federal workforce

Federal employees probably wouldn't be surprised to see a contractor arrive at the office in an orange jumpsuit. Nor would a contractor blink if feds were to show up in Tommy Bahama shirts from the new Tropical Temptation collection.

The outfits would match the image that each holds of the other: Contractors are greedy enough to shoot their mother for a dollar, and feds treat work like a day at the beach.

As funny as those old stereotypes might sound, they reflect the often-bitter cultural divide between contractors and feds that, depending on whom you ask, is about to get wider.

Under a Defense Department rule that went into effect in September, contractor employees are required to identify themselves as such in all forms of communications, whether in person, on the phone or in e-mail messages.

At a time when contractors outnumber feds in some offices, the rule is intended to ensure that DOD managers do not inadvertently involve contractors in sensitive work that should be set aside for feds. The rule, in short, will show who’s on which side.

But some contractors fear that the rule could undermine the teamwork that's essential in a blended workforce, in which feds and contractors must work side by side on a daily basis. “How do you maintain unity of community when segregation is forced?” a reader named Skully asked in a comment posted at FCW.com.

It’s a tough question, especially given the existing distrust between feds and contractors in many government offices.

Bob Woods, a retired federal official and now president of Topside Consulting, said the rule only exacerbates the situation. Worse yet, it’s not even necessary, because feds know who the contractors are. If not, they’re not being diligent, he said. “The rule creates an awkward situation for everybody,” he said.

Another reader commenting on the story pointed out that the pink badges contractors wear are already pretty conspicuous. The lack of identification is not the problem — it is the “cries of ‘unclean!’ when the contractors pass through federal workspace that is distracting.”

As some contractors see it, DOD might just as well post a scarlet letter on their foreheads, marking them as people whose loyalties are not to the customer or the mission but to the bottom line.

But as touchy as the issue might be, contract employees know who is writing their checks.

“Some people would be very offended by that statement,” but it’s true, said Peter Tuttle, a former Army contracting officer and now senior procurement policy analyst at Distributed Solutions. He also said federal employees need that “healthy bit of skepticism.”

The rule isn’t bad, said Kevin Carroll, retired program executive officer of DOD’s Enterprise Information Systems office and now president of the Kevin Carroll Group, a consulting company. It will let other contractors and officials know whom they’re talking to.

The identity question is especially a problem outside federal offices — where badges are not required —in e-mail, and on the phone.

The lack of identification by contractors “clouds the water on a daily basis and causes delays and delivery of substandard technology and products to the DOD,” a federal employee wrote, adding: “Anyone not seeing this as a problem with the current procurement system is a victim of ‘.mil’ envy.”

There are ways to curtail segregation.

When Carroll worked in government, he included contractors in all of his office’s work and even invited them to social events. Overall, he tried to make them teammates. Over time, contractors usually became more loyal to the office than their companies, he said.

“It is just a matter of leadership and inclusion, with a careful eye on preventing conflicts within the workplace,” Carroll said.

Likewise, the mutual stereotypes need not be a problem.

Many people are good workers, and managers need to attend first to the motivated people in the office, Woods said. Then managers should deal separately with the select few who match the contractor and federal employee stereotypes. They'll soon find their motivated employees will want the unproductive people out of the office.

Read the story: FCW.com DOD drives deeper wedge between feds and contractors

6 small-business issues too important to ignore

Small businesses face a tough market, but there are a few bright spot

It's rough out there for contractors. Everyone is holding on to pennies when they would have willingly spent dollars a few years ago.

For federal contractors, agencies are also adjusting to the tough times, double-checking costs against necessity before spending the slightest bit of money. And small businesses might be getting the worst of it. On top of the recession, government officials are cutting out contractors whenever possible.

And more problems exist for small businesses that already must scale a mountain of issues when trying to win government contracts. But don’t get depressed. There are at least a few bright spots. Some changes might make life at least more bearable for small businesses.

The Efficiency Squeeze

Agency officials face tighter budgets. Their goal is to spend less money while squeezing as much out of contractors as they previously received. Some agencies are considering chopping programs that don’t advance core priorities.

Defense Secretary Robert Gates recently announced a plan to make the Defense Department more efficient. Although insourcing hasn’t produced the savings that the Obama administration imagined, Gates said he’s taking another approach. He plans to hit contractors in the pocketbook.

“The problem with contractors is — and what we’ve learned over the past year — you really don’t get at contractors by cutting people,” Gates said in August. “So the only way, we’ve decided, that you get at the contractor base is to cut the dollars.”

Gates’ overall goal is to cut DOD’s spending by $100 billion in the next five years, while cutting contractor support by 10 percent per year for the next three years.

Some programs will dodge the bullet; others won’t. Programs that avoid elimination will support critical needs, although DOD officials have not identified those programs, according to Deltek, a research and consulting company.

In the same way, some contractors will emerge unscathed, Deltek said in a white paper released in September. Larger firms invest heavily in advocacy in an attempt to influence decisions such as budget and program cuts, the white paper states.

“To the extent those efforts are successful in deflecting funding cuts, smaller firms will be left to absorb the impact,” Deltek writes.

Insourcing Threats

Administration officials also are taking a stand against the private sector’s influence in agencies.

Officials say contractors are getting too close to agencies’ inherently governmental work and influencing decisions toward their advantage. The result is a push for insourcing. Procurement officials have proposed guidelines on inherently governmental work and closely associated tasks. They also created a new category of work, called critical functions, which applies to jobs that aren't inherently governmental but are sensitive enough that agency officials want federal employees to do the work. In short, agencies don't want to rely on the private sector.

Small businesses fear that initiative because they feel they are in the cross hairs. In September, the Interagency Task Force on Federal Contracting Opportunities for Small Businesses, a group of senior government officials, heard small businesses’ outcry against the insourcing initiative.

The “rebalancing efforts will not only limit new opportunities for small businesses but also take existing contracts away from them,” the task force wrote in its report to the president.

Some companies already have had their contracts brought in-house. Robert Burton, former deputy administrator of the Office of Federal Procurement Policy, said the government has insourced some work that isn't inherently governmental or considered to be a critical function.

Burton and other industry groups say the government is secretive about its process for deciding which jobs to insource, and without transparency, no one can be sure about the validity of decisions.

In addition, some federal agencies, such as DOD, must be aggressively pushed before they hand over their calculations and comparisons on pricing, experts say. Small businesses have done that, but it took time and a lot of persistence.

Poached Employees

Related to insourcing, businesses have complained that government agencies are also taking their employees when they move jobs in-house. One official said in September that DOD, for instance, went to the open marketplace to find employees.

Ashton Carter, undersecretary of Defense for acquisition, technology and logistics, denied that characterization. However, he said DOD is seeking employees in places where they can be found. He added that people are interested in joining DOD because it offers the opportunity to play a role in protecting the United States, which is a unique job with a unique mission.

But let’s not get bogged down in the difficulties. There are a few positive trends.

Unwrapped Bundles

Agencies can combine several smaller procurements into one large contract, a process called bundling. The technique puts less pressure on an agency’s employees because there are fewer contracts to manage. However, those bundled contracts are often out of small businesses’ reach.

The interagency task force said officials should tighten regulations to prevent unjustified bundling. And when there’s no way around a bundled contract, agencies need to find other ways to incorporate small businesses into the mix.

In addition, the Small Business Jobs and Credit Act, which became law in September, lowers the governmentwide bundling limit for contracts to $2 million, down from the $10 million limit. It also creates a five-year small-business teaming pilot program to assist small businesses in forming teams and joint ventures to help them compete for larger or bundled contracts.

HUBZone Equality

With President Barack Obama's signature, that new law simply changed a “shall” to a “may” regarding small-business set-asides. In effect, it ended the battle over one small-business program having an advantage over other small-business programs for set-aside contracts.

The new law puts all the Small Business Administration’s small-business programs on equal footing. SBA programs let agencies set aside contracts and compete them among certain types of small businesses, such as those owned by service-disabled veterans or minorities.

Until Sept. 27, companies in economically depressed regions, or Historically Underutilized Business Zones, had priority over other types of businesses because the law that created HUBZones said the government shall use businesses in HUBZones, while other small-business laws used the word "may." The Government Accountability Office and several federal judges ruled numerous times that HUBZones should get the priority because "shall" meant agencies had to use them, while "may" in the other laws meant the use of those small businesses was optional. Now the new law replaces the "shall" with "may." A contracting officer who wants to set aside a contract may choose which category of small companies to use.

Subcontracting Scrutiny

That same law also puts pressure on prime contractors to pay attention to their subcontracting plans or risk a bad mark on their public record.

The statute requires prime contractors to provide a written explanation when they fail to use subcontractors as they describe in their subcontracting plans. The reason had better be good, too. If the explanation doesn’t satisfy a contracting officer, a low grade could hurt the prime contractor’s performance evaluation, which agencies use when awarding new work.

A contractor with a history of failing to meet its subcontracting plan would be identified as such in the Federal Awardee Performance Integrity Information System.

So although business is bad, there are bright spots — at least a few.

Read the story: Washington Technology 6 small-business issues too important to ignore