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.
For our 2010 Top 25 8(a) rankings, click here.
“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.”
Matthew Weigelt is a former FCW senior writer who covered acquisition and procurement.