Rise in government contracts is boost for small firms

The Substance Abuse and Mental Health Services Administration (SAMHSA) has noticed a problem sneaking into the American psyche.

The Substance Abuse and Mental Health Services Administration (SAMHSA) has noticed a problem sneaking into the American psyche.

Individuals with mental or substance abuse disorders are experiencing a high rate of marginalization and are often excluded from their communities. The best way to change this behavior is to implement a national outreach effort that will change perceptions.

However, SAMHSA won't be turning to a large PR firm to handle the effort this spring; rather it is looking to partner with a small agency.

The administration is not the only federal agency granting small firms multimillion- dollar contracts. It is increasingly becoming common practice throughout the federal government for contracts to be deemed as "small business set asides." For instance, at the end of fiscal year 2011, 32% of government communications contracting went to small businesses, according to the trade group, Small Business Government Communicators Network, compared to 21% of all federal contracts.

Small agency wins
"Government agencies are increasingly realizing that small businesses can actually do the work and have the same capabilities as a larger firm," says the network's executive director James Krol.

This does not mean doom and gloom for larger international agencies such as Edelman and Ogilvy PR. There are provisions in place that allow small firms to hire larger companies as subcontractors. Krol's organization launched three years ago, in part to facilitate these sorts of partnerships. It now has more than 50 members.

Anxious to stay in the lucrative federal contracting arena, small firms such as Reingold have noticed mega agencies increasingly courting them. It won a coveted spot in October on a roster established by The Agency for Healthcare Research and Quality. Placement on this list makes it eligible to compete for up to $150 million in assignments in the next five years. In the past, only large firms had been eligible to be on the list.

Challenging hard

Garry Curtis

While there is a growing appreciation of small firms among federal agencies, sometimes there is uncertainty about smaller agencies' ability to do the work needed.

As a result, there is an increasing prevalence of "sources sought" notices in which firms must submit the capabilities of its staff.

"They are making sure there will be enough fair competition among small businesses for the account," says Hager Sharp CEO Garry Curtis.

Curtis is eager to point out that in addition to more small business set asides and "sources sought" notices, there are still plenty of instances in which small firms are beating big ones in open competitions for contracts.

A win is a win, he adds, "We don't take an extra candle off the cake if the contract was a small business set aside. We are still going to be excited if we win something."

"[Large agencies] tend to center around offering bench strength. Whereas a small firm may have people working on several topics, large agencies might have eight people dedicated to working on one subject," says Kevin Miller, a partner at the firm. "The value is in subject expertise, which helps to create a more rounded out team."

Big firms also respect boundaries and tend to not become aggressive backseat drivers, he adds. "We're upfront in establishing we're the prime contractor and that the government is expecting us to do the majority of the work," adds Miller.

Increased focus
Federal provisions also protect against a large firm from attempting to take over an account.

"If it's a small business set aside that means that company has to do at least 51% of the work," says Kris Tremaine, SVP and head of ICF Strategic Communications and Marketing Division. The increased focus on smaller companies is positive as it "helps them grow" she adds.

Large firms such as Fleishman-Hillard have no problem not being the star player on an account, according to CEO David Senay. "These are opportunities for partnerships," he says. "Sometimes you're the leader, sometimes you're a supporting player, but the important thing is that you're a team player."

A decision by the US Small Business Administration (SBA) in spring 2012 to double what it considers to be a small business - going from under $7 million in annual revenue to under $14 million - is credited by some as the reason there is increased work for small companies. It was the first time there had been an increase in small business definition since the 1970s. The change came after years of outcry from small companies across sectors that size standards had not kept pace with changes in the economy.

"We know more must be done," says John Shoraka, associate administrator of government contracting and business development, SBA. "We have increased our efforts with federal agencies to provide more opportunities for small business to compete for and win federal contracts."

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