Firm Size as it Relates to Federal Contracting
Generally speaking medium sized businesses have the hardest time holding their own during more competitive federal spending environments. This is because small business has some level of protection because 23% of all federal contracting is budgeted by congressional mandate to small business. In the past large businesses control many of the multi year legacy systems that keep them protected from an immediate downturn in spending.
Therefore the firms in the middle are the ones that often take the hit. In the past it is not unheard of for a medium sized federal contractor to see a plunge from several hundred million dollars in revenue to half that amount in a single year (a Reston Virginia based firm went from $560 million in revenue to $350 million in a single year).
Things have changed a bit in the current federal environment for mediums sized businesses the advantages they possess over larger firms that being cost savings and the speed in which they are able to innovate is winning the day against their larger competitors. Therefore we are currently advising clients to take a look at medium sized firms for subcontracting opportunities. Below is how the three different sized firms typically behave in a federal contracting environment.
|Medium Sized Companies||
$1 Billion Plus
44% of Federal Spending
33-35% of Federal Spending
Under $25 million
22-23% of Federal Spending
|Large companies focus in part on major prime contract awards and are very successful at winning the largest of federal contracts. These companies themselves are bureaucratic in nature, largely in part to protect the large organization from moving too quickly in a new area, this makes them slower to market and not as well equipped to handle projects that require faster implementation.||Medium sized firms that specialize in certain industries can become major players in their respective markets. In the federal space these firms are best positioned for innovative areas where due to their ability to be agile and quick to market can often times offer better solutions. Usually lack the capabilities to take the lead on a new major marque federal system.||Small companies in the federal space are generally niche players and they tend to stay focused in a tight well defined market space. Often times these companies have solutions that focus on one particular agency’s needs. Often times when these firms build a capability within an agency that is deemed strategic to a Medium Sized business they are partnered with or purchased for those relationships or capabilities.|
|CEO Duties: Traditional CEO role serving as strategic thinkers guiding the organization as a whole.||CEO Duties: Generally the CEOs are spending a great deal of time managing relationships with key government buyers. They do this not to provide solutions but to serve as facilitators as well as to help guide the strategic direction of their business, keeping them aware of trends in the market place.||CEO Duties: The CEO is often the project lead or manager, engages with the customers and is often the primary point of contact on major contracts. This often times builds a very strong bond between the firm and a particular agency.|
Medium sized firms in IT are achieving advantages due to their ability to be effective in agile computing, mobility, security and cloud computing. Often times these medium size companies can deliver solutions to the federal government that can be implemented and used in just a few months’ time. These quicker to implement solutions are becoming more popular with federal buyers as that project can provide meaningful mission time savings which helps the project's payback period be much shorter in duration.