High-Tech 8(a) Companies Face Tougher Government Market.

Companies making this year's Top 25 8(a) companies are raking in annual revenue in the tens of millions of dollars, but the competition for government information technology contracts is becoming increasingly fierce.Consequently, company executives view the 8(a) program as just one step ? albeit an important one ? to achieving success."The 8(a) program has been excellent for us," said Frank Islam, president of QSS Group Inc. of Lanham, Md., which holds the No. 1 spot on the list. "But you don't develop the business skills you need if you concentrate only on 8(a) sole-source contracts."QSS had $91.3 million in federal revenue as a prime contractor to capture the top spot on the 2001 list. Of that revenue, $60.5 million came from 8(a) contracts, according to research conducted for by Federal Sources Inc., McLean, Va., and Eagle Eye Publishers Inc., Fairfax, Va.The companies on the Top 25 8(a) list are ranked by overall IT prime contracting dollars and not by 8(a) dollars. To qualify for the list, each company must have at least $1 million in 8(a) business and not have graduated before Sept. 1.Islam's company graduated from the 8(a) program Sept. 9, and is pursuing a two-pronged strategy of hanging on to its 8(a) work while it moves to win more work through full and open competition, he said.Building viable, independent small businesses is a primary goal of the 8(a) program, which helps small, minority-owned businesses through preferential contracting opportunities. Companies can participate in the program for nine years, but some graduate early when they surpass size and revenue limits.The Small Business Administration oversees the program, and during fiscal 2000 more than 6,400 companies held certifications as 8(a)s, according to SBA documents.Several years ago, being in the 8(a) program meant easy contracts and little competition, but changes in procurement rules from laws, such as the Federal Acquisition Streamlining Act of 1994 and the Clinger-Cohen Act of 1996, have put a squeeze on small businesses."People say it is a lot tougher than it was 10 years ago," said Tom Caffrey, executive vice president of SMF Systems Corp., San Ramon, Calif. "But you know what? It's a lot tougher everywhere in the IT business." The company, which provides manufacturing as well IT services, is ranked No. 10 with $30.8 million in total IT dollars, of which about $4 million comes from 8(a) contracts.In the government marketplace, the tougher environment has come in the form of governmentwide acquisition contracts and contract bundling, which is the practice of wrapping together many small contracts into a single, large contract.  These contracts are almost always won by large systems integrators, which then manage teams of contractors. But small businesses can and do bid on the large governmentwide contracts, which can have scores of winners that then compete with each other for task orders. QSS, for example, has been selected to compete for task orders on contracts such as the General Services Administration's Millennia Lite, the Transportation Department's Information Technology Omnibus Procurement II deal and Commerce Department's Commerce Information Technology Solutions, which is only for small businesses.Winning a spot on as many task order contracts as possible is key to success, QSS' Islam said.And so to compete in this environment, many 8(a) companies have been building marketing and proposal-writing capabilities."These vehicles can be very helpful, but you really need to go to your customers and sell your capabilities," said Brij Koolwal, president of Systems Plus Inc., Rockville, Md. The company is ranked No. 22 on the list, with $9.8 million in overall IT dollars, of which $6.5 million comes from 8(a) work.For firms such as Indus Corp., Vienna, Va. ? No. 18 on the list with $11.9 million in total IT and $6.8 million in 8(a) ? the focus is on what the company does best: database work, geographic information systems and telecommunications."We don't position ourselves as the be all and end all," said Shiv Krishnan, Indus president. "We have a clear focus on the specific technologies where we have experience and expertise."The procurement environment also has increased the competition between 8(a) companies and large businesses. "That has been difficult," Krishnan said. "But it has forced people to learn to compete."The result has been better 8(a) companies and a better chance of survival after graduation, Islam said. "[But] a lot of 8(a)s don't have the resources or the skills," he said.Getting on the GSA schedule also is helpful to 8(a) companies, but nearly every company doing business with the government is on the schedule. The task order contracts can be more important than the schedule, because they narrow the field of competitors, Islam said."You know who the players are at all times," he said. "You can figure out what their strengths and weaknesses are compared to your strengths and weaknesses."The change in the procurement environment has raised concerns that small businesses are being unfairly hurt. Of the hundreds of billions the government spends each year, 23 percent is supposed to go to small businesses, a group which includes 8(a)s, veteran-owned businesses, women-owned businesses and businesses located in historically underused business zones, known as HUBZone businesses.A General Accounting Office report found the percentage of contracts going to small businesses had dropped from 25 percent between fiscal 1993 and fiscal 1997 to 23 percent in 1998 and 1999.Congress also is scrutinizing practices such as contract bundling. Richard Carter, a spokesman for the House Small Business Committee, said legislation may be proposed following hearings held Sept. 6 looking at Defense Department procurement practices."Small businesses just aren't getting enough of the share," he said.The argument in favor of contract bundling is it is easier for an agency to manage one prime contractor rather than a dozen or so, but the committee, chaired by Rep. Don Manzullo, R-Ill., isn't convinced, Carter said."Our belief is that small businesses can be more efficient and more cost effective," he said.Islam agreed. Bundled contracts "are not flexible, there is a lack of responsibility, and they are not cost effective," he said.Even with congressional scrutiny, some observers see little easing of the squeeze on small businesses."There is a slow contraction of the marketplace for small businesses," said John Jensen, a partner in the government contracts practice at ShawPitman, a McLean, Va., law firm. "It has been going on for several years, and there doesn't seem to be an end in sight."Part of the problem is the number of government procurement officials is dropping. "The consequence is that it is necessary to award fewer contracts for larger volumes," he said.The large, bundled contracts have given rise to a concept called direct pay, where agencies pay small-business subcontractors directly rather than through the prime contractor, said Olga Grkavac, executive vice president of the trade group Information Technology Association of America in Arlington, Va.The concept is part of the $6.9 billion Navy-Marine Corps Intranet contract won by Electronic Data Systems Corp. of Plano, Texas. But wider adoption is problematic, because prime contractors fear a loss of control of projects if they are not the one paying their subcontractors, she said. Another positive for small businesses is that SBA has become more of an advocate and has been helping agencies set small-business goals, Jensen said.For example, GSA, which worked closely with SBA, exceeded the 23 percent mandate, said E. Tracy Lewis, deputy associate administrator in GSA's Office of Enterprise Development. His office is responsible for small-business programs at GSA.During fiscal 2000, GSA purchased more than $11 billion in goods and services, of which 40 percent went to small businesses, he said.Like many of the small-business owners, Lewis said he believes the marketplace has changed, but not necessarily for the worse. "Small businesses are more sophisticated today," he said. "For those who are prepared, the opportunities are greater than ever."Part of that preparation is to use the 8(a) program, but not overly rely on it, executives said."You can't build your business just as an 8(a)," said Systems Plus' Koolwal. "That's the wrong way to build a business."The program can be a good entry to new customers, but performance is the key, SMF's Caffrey said. The attitude has to be: "Give me a try, if I don't perform, don't use me again," he said.XXXSPLITXXX- $91,270,000$60,479,000 Frank Islam 1994 800 Sept. 9, 2001 A provider of enterprise network management, scientific mission, instrumentation and aerospace engineering support, and financial management and business systems development and maintenance. $76,265,000 $16,935,000 Rodney P. Hunt 1992 1,000 Jan. 27, 2003 A provider of advanced technical and business solutions in information technology, science, engineering and management consulting. $66,056,000 13,901,000 Young Y. Lee 1988 More than 800 April 5, 2002 A provider of information technology and computer services. $56,731,000 $2,346,000 Rajiv Bajwa 1990 350 Jan. 12, 2004 A provider of professional services support in information technology, logistics systems engineering, training technology, program management, and intelligence analysis and investigative services. $44,952,000 $1,732,000 Rocky Cintron 1991 140 Sept. 7, 2003 Networking solutions including custom network design, hardware procurement, system installation, remote network management and project management. $41,244,000 $7,204,000 Angela Mason 1991 400 Jan. 27, 2003 A professional services company providing information technology solutions and managed services. $36,088,000 $15,993,000 Denise Robinson 1990 260 May 20, 2003 The firm designs and implements computing infrastructure that provides the most highly available resources to support mission-critical applications. $33,735,000 $15,375,000 Allan J. Camaisa 1990 500 Sept. 17, 2001 A provider of information technology and technical services to the federal government, various state and local governments, and private industry customers. $33,640,000 $18,092,000 James Cheng 1985 475 March 31, 2004 A diversified computer services firm. $30,839,000 $3,963,000 Ruby L. Caffrey 1982 More than 150 June 13, 2003 A provider of technical solutions, from equipment sales and service to comprehensive development and support. $23,542,000 $9,039,000 Chutachai (Gary) Khanijao Early 1990s Unavailable Aug. 7, 2006 Networking, training, systems engineering and management consulting services. $22,054,000 $17,875,000 John StallworthFounded: 1986 500 Nov. 12, 2001 A provider of engineering and information technology services to government and commercial clients. $21,253,000 $2,580,000 Robert Rutherford 1993 64 May 23, 2004Business: A data and voice systems integrator and value-added reseller specializing in local and wide area networking for campus and enterprise environments. $18,499,000 $16,668,000 Matthew Novick 1997 1,100 March 14, 2006 A provider of staffing services, management of records and other administrative functions. $14,165,000 $4,750,000 J. Calvin Glover 1985 250 June 7, 2002 A provider of products and services for training, information systems, Internet services, business and engineering services for commercial, education and government customers. $12,501,000 $6,965,000 James E. Jardon II 1990 573 Feb. 23, 2005 Design and development of custom CD-ROMs, video productions and Web-based products for training and marketing purposes. $12,111,000 $12,111,000 Herb Smelcer 1975 160 Aug. 24, 2003 Operations and maintenance $11,852,000 $6,817,000 Shiv Krishnan 1993 200 April 29, 2003 A company that Web-enables clients' information resources and provides e-government solutions. $11,384,000 $6,686,000 Richard J. Martin 1994 120 March 26, 2005 A small business assisting customers in government, industry and academia in creating solutions to manage high-technology programs. $11,052,000 $7,053,000 Robert Hill 1988 50 July 19, 2002 A provider of computer and information technology services. $10,620,000 $4,063,000 G.P. Singh 1985 218 June 28, 2002 A high-technology systems engineering, and research and development company. $9,811,000 $6,475,000 Brij Koolwal 1991 135 March 20, 2002 A provider of electronic government, ERP implementations, network management, information assurance and emerging technologies such as e-mail management. $9,394,000 $3,802,000 Anita Williams 1992 397 Jan. 12, 2004 A provider of systems and design capabilities. $9,093,000 $8,998,000 Suzanne M. Burke 1995 20 Jan. 24, 2006 A firm specializing in military facilities and infrastructure planning. $9,084,000 $5,447,000 Daniel R. Prado 1992 75 Dec. 16, 2007 A provider of professional services in engineering, manufacturing and computer-related technologies to government and commercial clients.XXXSPLITXXX-The Top 25 8(a) list is compiled using data from the Federal Procurement Data Center. The market research firms Federal Sources Inc., McLean, Va., and Eagle Eye Publishers Inc., Fairfax, Va., analyzed the data using 66 product service codes that represent information technology, systems integration and telecommunications work.Agencies report contract obligations worth more than $25,000 to prime contractors. FSI and Eagle Eye used the product service codes to analyze this data and rank the companies.The companies were ranked according to their total IT prime contracting dollars and not just 8(a) dollars. Washington Technology and the analysts at FSI and Eagle Eye believe this is the best way to judge the progress and success of 8(a) companies, because the goal of the program is to help create companies that remain viable after graduating from the program.The procurement center only collects reports on spending with prime contractors, so the list does not reflect subcontracting revenue. Also, spending by intelligence agencies, the U.S. Postal Service, congressional agencies and judicial branch agencies are not reported to the center, so the list does not reflect those expenditures.XXXSPLITXXX-Advice from executives who have built successful 8(a) companies:• Stick to specific technologies.• Don't market your company strictly as an 8(a).• Use the 8(a) program to gain entry to a new customer.• After winning work, concentrate on performance and customer satisfaction.• Develop close relationships with core customers and larger business partners.• Build marketing and proposal writing infrastructures.• Get on as many governmentwide task order contracts as possible.• Focus on employee satisfaction.