Guest column: Top100 companies are born hunters

Ray Bjorklund

The annual arrival of the Washington Technology Top 100 list of federal prime contractors gives us a yardstick for measuring the changes since last year for the players looming largest in the federal IT scene.

As we watch large contract vehicles such as Alliant, Networx and the Homeland Security Department's Eagle struggle through gestation, it can be instructive to measure how important indefinite-delivery, indefinite-quantity contracts are to federal IT companies' success.

The federal government's $78.5 billion in IT contract spending for fiscal 2005 was spread across a field of about 10,500 active players. Adding up the revenue for the companies on the Top 100 list, we see that those 100 garnered more than 70 percent of the $78.5 billion in IT spending. (All figures here are based on 117 product services codes picked by Washington Technology for the Top 100 list.)

Why do the Top 100 do so well? Obviously, size matters. The greater resources that accompany greater size help the largest companies increase their multiple-award win rates. The IT space alone encompasses hundreds of multiple-award programs, including the General Services Administration's multiple-award schedules and other IDIQ contracts. Literally, thousands of contracts are awarded each year.

But I want to focus on multiple-award programs. The distinction is significant, because a multiple-award contract winner has gained only the privilege to compete ? this type of selling takes a lot of work.

Will the proliferation of IDIQ programs favor those companies with the resources to compete for new programs and task orders within those programs? The percentage of Top 100 companies that won spots on multiple-award contract vehicles was about the same for 2005 as it was for 2004. In fiscal 2005, the federal government awarded about $21.7 billion in task orders, delivery orders and modifications from multiple-award vehicles, up 12 percent from fiscal 2004.
The Top 100 received IDIQ and federal schedule awards to the tune of $14 billion in fiscal 2005, or about 65 percent of the available $21.7 billion. As impressive as that sounds, that $14 billion equates to a solid 25 percent of the cumulative revenues of those companies.

As dominant as most of these Top 100 companies are, one-quarter of their IT revenues come from using a hunting license to compete with other companies for orders under a multiple-award scenario. A more remarkable measure is the number of new task orders, delivery orders and schedule orders.

In fiscal 2005, the Top 100 won more than 32,800 orders, an average of 328 per company. The rest of the players in the federal IT market won about 55,000 new orders, a simple average of five per company. It's jarring to realize the internal effort that must be exerted to win more than one order each business day.

Did the changes of the past two years prove the rich got richer because of task order contracting? Probably not, because relative percentages stayed the same. But the numbers illustrate that bigger companies, with their greater resources and infrastructure, can take on the business of task order selling more easily than many smaller companies. Smaller companies, with their shallower resources, are often reluctant to bid against bigger companies on IDIQ work.

As the federal IT market growth rate slows to just a couple of percentage points over the next few years, competition on these IDIQ contracts will, inevitably, grow fiercer. Just as inevitably, absent some new government socioeconomic procurement policy, smaller companies' slice of the IDIQ pie will shrink at a far greater rate than that of large companies.

Ray Bjorklund is senior vice president and chief knowledge officer of Federal Sources Inc. of McLean, Va. E-mail him at bjorklundr@fedsources.com.

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