Proposed changes in small business Federal contracting

Washington Technology has two good articles regarding proposed contract reporting requirements for small businesses. Primarily, it will require small businesses to report on money spent to subcontractors for government contracts.

One article reviews how proposed changes will expose “trade secrets” of small businesses. This is true, however one of these dirty little secrets for IT contractors is that many of these “small businesses” that win these set-aside contracts subcontract out the majority of the business to larger businesses aren’t supposed to be able to bid on these set-asides.

These set-asides have produced an interesting problem. In order to win the business, often times small companies partner with large companies to use the larger company’s resources and experience to win these contracts. This makes the small company attractive to the Federal Government and they win the contract. The small business then subcontracts much of the work to the larger company. The net effect is that a small business - standing alone - can’t win these set-asides. They often lack the resources of the larger companies and also charge more for their services because they are smaller.

Now I know this isn’t true for all set-asides and not every small business partners with a large company. But having just gone through the recompete process where I work, the smaller companies that won 70% (my estimate) of the business had partnered with a larger company. They even beat out the incumbant, taking their staff and charging the government less.

A difficult problem that needs a better solution.

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